Document:

Exhibit
10.2

CONFORMED
COPY

EQUITY
COMMITMENT AGREEMENT

February 12, 2007

J.P. Morgan Securities
Inc.

270 Park Avenue

New York, New York  10017

Ladies and Gentlemen:

Subject to the approval
of this Agreement by the Bankruptcy Court (as defined in the second paragraph
of this Agreement), Northwest Airlines Corporation, a Delaware corporation (as
a debtor-in-possession and a reorganized debtor, as applicable, the “Company”),
proposes to offer and sell 27,777,778 shares of its new common stock, par value
$0.01 per share, to be issued pursuant to the Amended Plan (as defined below in
this paragraph) (together with any associated share purchase rights other than
the Rights (as defined below in this paragraph), “New Common Stock”), of
which 23,611,111 shares, (the “Shares”), will be offered pursuant to a
rights offering (the “Rights Offering”) whereby each holder of an Allowed
Class 1D Claim (other than a Subordinated Claim) (each an “Eligible Holder”),
as of the record date fixed by the Bankruptcy Court for the solicitation of
acceptances and rejections of the Amended Plan, shall be offered the right
(each, a “Right”) to purchase up to its pro rata share of 23,611,111
Shares of New Common Stock, at a purchase price of $27.00 per Share (the “Purchase
Price”).  Each capitalized term used
but not defined in this letter (this “Agreement”) shall have the meaning
given to it in the Debtors’ Joint and Consolidated Plan of Reorganization under
Chapter 11 of the Bankruptcy Code filed on January 12, 2007 (the “Existing
Plan”).  The Existing Plan as amended
or supplemented at the time of its approval by the Bankruptcy Court is
hereinafter referred to as the “Amended Plan.”

The Company will conduct the Rights Offering as part
of the implementation of a plan of reorganization for the Company, as a
debtor-in-possession under chapter 11 of the United States Bankruptcy Code, 11
U.S.C.§§101 et seq. (the “Bankruptcy Code”),
and its affiliates who are also debtors and debtors-in-possession in the
chapter 11 cases pending and jointly administered in the Bankruptcy Court for
the Southern District of New York (the “Bankruptcy Court”) under Case
No. 05-17930.  The Amended Plan shall be
the Existing Plan with only those revisions, modifications, supplements and
amendments to the Existing Plan as are necessary to incorporate the terms in
the term sheet attached hereto as Exhibit A (the “Term Sheet”) and such
other revisions, modifications, supplements and amendments that the Company and
the other Debtors deem necessary or appropriate and that shall not
(i) materially adversely affect the obligations or rights of the Investor
hereunder or as the Rights Offering Sponsor, as a holder of New Common Stock or
as the Initial Purchaser (as defined in the Syndication Agreement, defined in
the fifth paragraph of this Agreement), (ii) cause any representation or
warranty contained herein to be incorrect or (iii) be inconsistent with
the terms of the Term Sheet.

In order to facilitate the Rights Offering, pursuant
to this Agreement, and subject to the terms, conditions and limitations set
forth herein, J.P. Morgan Securities Inc. (the “Investor”) agrees to
purchase on the Closing Date (as defined in Section 2(e)), and the Company
agrees to sell, for the Purchase Price times the number of shares so purchased,
a number of shares of New Common Stock equal to the aggregate number of Shares
minus the number of shares of New Common Stock offered pursuant to the Rights
Offering and purchased on or before the Expiration Time (as defined in
Section 1(b)), including shares purchased pursuant to oversubscription
rights (such Shares to be purchased by the Investor in the aggregate, the “Unsubscribed
Shares”).

In addition, pursuant to this Agreement, and subject
to the terms, conditions and limitations set forth herein, the Investor agrees
to purchase on the Closing Date, and the Company agrees to sell, for the
Purchase Price times the number of Shares so purchased, 4,166,667 additional
shares of New Common Stock, (the “Purchased Shares”).  The Unsubscribed Shares and the Purchased
Shares are herein collectively referred to as the “ECA Shares.”

Simultaneously with the delivery of this Agreement,
certain persons (the “Ultimate Purchasers”) and the Investor are
entering into a syndication agreement (the “Syndication Agreement”),
pursuant to which the Ultimate Purchasers are agreeing to purchase from the
Investor certain ECA Shares purchased by the Investor.  In the Syndication Agreement, each Ultimate
Purchaser has represented and warranted that it is not a Competitor (as defined
below) of the Company and that it will not assign its rights and obligations
thereunder to such a Competitor.  “Competitor”
means an airline, a commercial air carrier, an air freight forwarder, an entity
engaged in the business of parcel transport by air or a corporation or other
entity controlling, controlled by or under common control with such an airline,
commercial air carrier, air freight forwarder or entity engaged in the business
of parcel transport by air.  Notwithstanding
the foregoing, to the extent the 4.75% limitation referred to in Section 2(a) becomes
applicable, the Company may require the Ultimate Purchasers to purchase the ECA
Shares they have agreed to purchase under the Syndication Agreement directly
from the Company.

The Company hereby waives the restrictions contained
in any confidentiality agreement between 
the Company and the Investor or the Company and any Ultimate Purchaser
that was entered into in contemplation of an equity investment in the Company
and not in contemplation of the Investor or such Ultimate Purchaser’s agreement
to act as a backstop provider (a “Prior Confidentiality Agreement”), but
only to the extent such restrictions would otherwise restrict or impair the
ability of the Investor or such Ultimate Purchaser to perform its obligations under
this Agreement or the Syndication Agreement, as applicable; provided, however,
that the foregoing waiver shall not apply to any provision in any Prior
Confidentiality Agreement that restricts the ability of a party thereto to acquire
in excess of 4.75% of any class of securities of the Company or, to the extent
covered by the Investor’s or such Ultimate Purchaser’s Prior Confidentiality
Agreement, claims relating to the Company’s and its subsidiaries’ voluntary petitions
for relief under the chapter 11 of the Bankruptcy Code unless and only to the
extent such provision is waived by the Company pursuant to Section 2(a) of this
Agreement.

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In consideration of the foregoing, and the
representations, warranties and covenants set forth herein, and other good and
valuable consideration, the Company and the Investor agree as follows:

1.             The Rights Offering.  The Rights Offering will be conducted as
follows:

(a)           Subject to the terms and conditions
of this Agreement (including Bankruptcy Court approval), the Company hereby
undertakes to offer Shares for subscription by holders of Rights pursuant to
the Amended Plan as set forth in this Agreement.

(b)           Ballot form(s) (the “Ballots”)
will be distributed in connection with the solicitation of acceptance of the
Amended Plan.  Subscription form(s) (the “Subscription
Forms”) will simultaneously be delivered pursuant to which each Eligible
Holder may exercise its Rights.  The
Rights may be exercised during a period (the “Rights Exercise Period”)
to be specified in the Amended Plan, which period will commence on the date the
Ballots are distributed and will end at the Expiration Time.  “Expiration Time” means 5:00 p.m., New
York City time, on the 30th calendar day (or if such day is not a Business Day,
the next Business Day) after the date the Ballots are distributed under the
Amended Plan, or such later date as the Company, subject to the approval of the
Investor, may specify in a notice provided to the Investor before 9:00 a.m.,
New York City time, on the Business Day before the then-effective Expiration
Time.  “Business Day” means each
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York City are generally authorized or obligated by
law or executive order to close.  Subject
to the approval of this Agreement by the Bankruptcy Court, the Amended Plan
shall provide that in order to exercise a Right, each Eligible Holder shall,
prior to the Expiration Time, (i) return a duly executed Subscription Form to
the Subscription Agent (as defined in Section 1(d)), and (ii) pay an
amount equal to the full purchase price of the number of shares of New Common
Stock elected to be purchased by such Eligible Holder by wire transfer or bank
or cashier’s check delivered to the Subscription Agent with the Subscription
Form no later than the Expiration Time.

(c)           The Company will issue the Shares to
the Eligible Holders with respect to which Rights were validly exercised by
such holders upon the effective date of the Amended Plan (the “Effective
Date”).  If the exercise of a Right
would result in the issuance of a fractional share of New Common Stock, then
the number of shares of New Common Stock to be issued in respect of such Right
will be rounded up or down to the next whole share.

(d)           If the subscription agent under the
Amended Plan ( the “Subscription Agent”) for any reason does not receive
from a given holder both a timely and duly completed Subscription Form and
timely payment for the Shares being purchased by such holder, the Amended Plan
shall provide that the holder shall be deemed to have relinquished and waived
its right to participate in the Rights Offering.

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(e)           The Company hereby agrees and
undertakes to give the Investor by electronic facsimile transmission the
certification by an executive officer of the Company conforming to the
requirements specified herein for such certification of either (i) a true and
accurate calculation of the number of Unsubscribed Shares and the aggregate
Purchase Price therefor (a “Purchase Notice”) or (ii) in the absence of
any Unsubscribed Shares, the fact that there are no Unsubscribed Shares and
that the Backstop Commitment (as defined in Section 2(a)) is terminated (a
“Satisfaction Notice”), as soon as practicable after the Expiration Time
and, in any event, at least four (4) Business Days prior to the Effective Date
(the date of transmission of confirmation of a Purchase Notice or a Satisfaction
Notice, the “Determination Date”).

(f)            There will be over-subscription
rights provided in connection with the Rights Offering, provided that
the right of any creditor to oversubscribe will not exceed 200% of the number
of Shares such creditor is entitled to purchase without giving effect to any
oversubscription right.

(g)           In the event the Expiration Time has
not occurred by May 15, 2007, on May 16, 2007, the Company will pay
to the Investor a nonrefundable fee of $1,875,000, and in the event the
Expiration Time has not occurred by May 31, 2007, on June 1, 2007,
the Company will pay to the Investor an additional nonrefundable fee of
$1,875,000.  The fees payable pursuant to
this Section 2(g) are hereinafter referred to as the “Expiration Time
Fee.”

2.             The Backstop Commitment and
Purchased Shares.

(a)           On the basis of the representations
and warranties contained herein, but subject to the conditions set forth in
Section 7 (including without limitation the entry of the Agreement Order (as
defined in Section 5(a)) and the Agreement Order becoming a Final Agreement
Order (as defined below in this Section)), the Investor agrees to purchase on
the Closing Date, and the Company agrees to issue and sell, at the aggregate
Purchase Price therefor, all Unsubscribed Shares (the “Backstop Commitment”)
and all Purchased Shares.  “Final
Agreement Order” shall mean the Agreement Order, which has not been
reversed, stayed, modified or amended, and as to which (a) the time to appeal,
seek certiorari or request
reargument or further review or rehearing has expired, and no appeal, petition
for certiorari or request for
reargument or further review or rehearing has been timely filed, or (b) any
appeal that has been or may be taken or any petition for certiorari or request for reargument or
further review or rehearing that has been or may be filed has been resolved by
the highest court to which the order or judgment was appealed, from which certiorari was sought or to which the
request was made, and no further appeal or petition for certiorari has been or can be taken or
granted.  Notwithstanding the foregoing,
in the event the Investor is obligated to purchase a number of Unsubscribed
Shares and Purchased Shares which would cause its ownership interest in the
Company (including the shares of New Common Stock, if any, received by the
Investor, in any capacity, pursuant to the Amended Plan), as determined for the
purposes of Section 382 of the Code, to exceed 4.75% of the total number of
shares of New Common Stock to be outstanding on the Closing 

 4
 

Date, the
Investor will immediately notify the Company in writing of such determination,
and the Company will either (i) reduce the Investor’s purchase obligation such
that its ownership of New Common Stock would not exceed 4.75% or (ii) permit
the Investor to purchase shares in excess of 4.75% to comply with its purchase
obligations hereunder; provided that, in the latter case, the Board of
Directors of the Company shall waive all restrictions, including those
contemplated by Sections 5.7 and 9.12 of the Existing Plan, on the Investor’s
ability to dispose of a number of Shares equal to the number of Unsubscribed
Shares owned by it.  In addition, in the
event any Ultimate Purchaser is obligated under the Syndication Agreement to
purchase a number of ECA Shares which could cause its ownership interest in the
Company (including the shares of New Common Stock, if any, received by such
Ultimate Purchaser, in any capacity, pursuant to the Amended Plan), as
determined for the purposes of Section 382 of the Code, to exceed 4.75% of the
total number of shares of New Common Stock to be outstanding on the Closing
Date, the Board of Directors of the Company shall waive all restrictions,
including those contemplated by Sections 5.7 and 9.12 of the Existing Plan, on
such Ultimate Purchaser’s ability to dispose of a number of shares of New
Common Stock equal to the number of ECA Shares owned by it.

(b)           On the basis of the representations
and warranties herein contained, but subject to the entry of the Agreement
Order, the Company will pay to the Investor a backstop fee equal to $20,625,000
(the “Backstop Fee”) to compensate the Investor for the risk of its
undertaking herein.  The Backstop Fee, as
well as all other amounts payable hereunder, will be paid in U.S. dollars, and
the Backstop Fee will be paid on the first Business Day after the tenth day after
the entry of the Agreement Order; it being understood that in the event the
Agreement Order is appealed, and the highest court to which the Agreement Order
was appealed issues a final order vacating or reversing the Agreement Order and
further orders disgorgement of all or a portion of the Backstop Fee, the
Investor shall promptly return to the Company the portion of the Backstop Fee
required to be so disgorged.  Payment of
the Backstop Fee will be made by wire transfer of immediately available funds to
the account specified by the Investor to the Company at least 24 hours in
advance; provided, that if the Investor receives the Backstop Fee, the
Investor shall waive any of its rights to receive punitive damages in
connection with this Agreement and the transactions contemplated hereby.  Except as set forth in this subsection (b),
the Backstop Fee will be nonrefundable when paid.

(c)           Upon the entry of the Agreement
Order, the Company will reimburse or pay, as the case may be, the out-of-pocket
expenses reasonably incurred by the Investor with respect to the transactions
contemplated hereby, including the filing fee, if any, required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and
expenses related thereto and all Bankruptcy Court and other judicial and
regulatory proceedings related to such transactions (collectively, “Transaction
Expenses”), including all reasonable fees and expenses of both Cahill
Gordon & Reindel LLP and
Cronin & Vris, LLP, counsels to the Investor, and Stroock & Stroock
& Lavan LLP, counsel for the Ultimate Purchasers, and reasonable fees and
expenses of any other professionals retained by the Investor with the prior
approval of the Company  

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in connection
with the transactions contemplated herein and those contemplated by the Term
Sheet.  Such reimbursement or payment
shall be made by the Company within ten (10) days of presentation of an invoice
approved by the Investor, without Bankruptcy Court review or further Bankruptcy
Court order, whether or not the transactions contemplated hereby are
consummated; it being understood that in the event the Agreement Order is
appealed, and the highest court to which the Agreement Order was appealed
issues a final order vacating or reversing the Agreement Order and further
orders disgorgement of all or a portion of the Transaction Expenses, the
Investor shall promptly return to the Company the portion of the Transaction
Expenses required to be so disgorged. 
These obligations are in addition to, and do not limit, the Company’s
obligations under Section 8.

(d)           On the Closing Date (as defined in
Section 2(e)), the Investor will purchase, and the Company will sell, only such
number of Unsubscribed Shares as are listed in the Purchase Notice, without
prejudice to the rights of the Investor to seek later an upward or downward
adjustment if the number of Unsubscribed Shares in such Purchase Notice is inaccurate.

(e)           Delivery of the ECA Shares will be
made by the Company to the account of the Investor (or to such other accounts
as the Investor may designate) at 9:00 a.m., New York City time, on the
Effective Date (the “Closing Date”) against payment of the aggregate
Purchase Price for the ECA Shares by wire transfer of immediately available
funds to the account specified by the Company to the Investor at least 24 hours
in advance.

(f)            All ECA Shares will be delivered
with any and all issue, stamp, transfer or similar taxes or duties payable in
connection with such delivery duly paid by the Company to the extent required
under the Confirmation Order or applicable law.

(g)           The documents to be delivered on the
Closing Date by or on behalf of the parties hereto and the ECA Shares will be
delivered at the offices of Cadwalader, Wickersham & Taft LLP, One World
Financial Center, New York, New York 10281 on the Closing Date.

(h)           Notwithstanding anything to the
contrary in this Agreement, the Investor, in its sole discretion, may designate
that some or all of the ECA Shares be issued in the name of, and delivered to,
one or more of its affiliates or to any other Person, including any Ultimate
Purchaser, so long as such person is not a Competitor.

3.             Representations and Warranties
of the Company.  The Company
represents and warrants to, and agrees with, the Investor as follows:

(a)           Incorporation and Qualification.  The Company and each of its subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of their respective jurisdictions of incorporation, with the
requisite power and authority to own its properties and conduct its business as
currently conducted. 

 6
 

Each of the
Company and its subsidiaries has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except to the extent the failure
to be so qualified or be in good standing has not had or could not reasonably
be expected to have, individually or in the aggregate, a material adverse
effect on the business, results of operations, property or financial condition
of the Company and its subsidiaries taken as a whole, as such business is
proposed to be conducted as contemplated by the Term Sheet, Disclosure
Statement (as defined in Section 5(b)) and the Amended Plan, or on the ability
of the Company, subject to the approvals and other authorizations set forth in
Section 3(g), to consummate the transactions contemplated by this Agreement or
the Amended Plan (a “Material Adverse Effect”).

(b)           Corporate Power and Authority.

(i)      The Company has the requisite corporate
power and authority to enter into, execute and deliver this Agreement and,
subject to entry of the Agreement Order and the Confirmation Order (together,
the “Court Orders”) and the expiration, or waiver by the Bankruptcy
Court, of the 10-day period set forth in Rules 6004(g) and 3020(e) of the
Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), respectively,
to perform its obligations hereunder and thereunder, including the issuance of
the Rights and Shares and Purchased Shares. 
The Company has taken all necessary corporate action required for the
due authorization, execution, delivery and performance by it of this Agreement,
including the issuance of the Rights and Shares and Purchased Shares, other
than board of directors’ approval of, or other board action to be taken with
respect to, the documents to implement the Rights Offering.

(ii)     When executed and delivered, (A) the
Company will have the requisite corporate power and authority to enter into,
execute and deliver the Registration Rights Agreement (as defined in Section
5(m)); and (B) all necessary corporate action required for the due
authorization, execution and delivery and, subject to the entry of the Court
Orders and the expiration, or waiver by the Bankruptcy Court, of the 10-day
period set forth in Bankruptcy Rules 6004 (g) and 3020(e), respectively,
performance of the Registration Rights Agreement will have been taken by the
Company.

(iii)    The Company will have the requisite
corporate power and authority to execute the Amended Plan and to file the
Amended Plan with the Bankruptcy Court and, subject to entry of the
Confirmation Order and the expiration, or waiver by the Bankruptcy Court, of
the 10-day period set forth in Bankruptcy Rule 3020(e), to perform its
obligations thereunder, and will have taken all necessary corporate action required
for the due authorization, execution, delivery and performance by it of the
Amended Plan.

(c)           Execution and Delivery;
Enforceability.

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(i)      This Agreement has been and the
Registration Rights Agreement will be duly and validly executed and delivered
by the Company, and, upon the entry of the Agreement Order and the expiration,
or waiver by the Bankruptcy Court, of the 10-day period set forth in Bankruptcy
Rule 6004(g), such documents will constitute the valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms.

(ii)     The Amended Plan will be duly and validly
filed with the Bankruptcy Court by the Company and, upon the entry of the
Confirmation Order and the expiration, or waiver by the Bankruptcy Court, of
the 10-day period set forth in Bankruptcy Rule 3020(e), will constitute the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.

(d)           Authorized Capital Stock.  Upon the Effective Date, the authorized
capital stock of the Company will conform to the authorized capital stock set
forth in the Disclosure Statement, and the issued and outstanding shares of
capital stock of the Company will conform to the description set forth in the
Term Sheet.

(e)           Issuance.  Subject to the issuance of the Final
Agreement Order, the distribution of the Rights and issuance of the Shares,
including the Unsubscribed Shares to be issued and sold by the Company to the
Investor hereunder, and issuance of the Purchased Shares to be issued and sold
by the Company to the Investor hereunder, at the Closing Date will have been
duly and validly authorized and, when the Shares and the Purchased Shares are
issued and delivered against payment therefor will be duly and validly issued,
fully paid and non-assessable, and free and clear of all taxes, liens,
pre-emptive rights, rights of first refusal, subscription and similar rights.

(f)            No Conflict.  Subject to the entry of the Court Orders and
the expiration, or waiver by the Bankruptcy Court, of the 10-day period set
forth in Bankruptcy Rules 6004(g) and 3020(e), as applicable, the distribution
of the Rights, the issuance, sale and delivery of Shares upon exercise of the
Rights and the consummation of the Rights Offering by the Company, the
issuance, sale and delivery of the Unsubscribed Shares and the Purchased Shares
and the execution and delivery (or, with respect to the Amended Plan, the
filing) by the Company of this Agreement and the Amended Plan and compliance by
the Company with all of the provisions hereof and thereof and the consummation
of the transactions contemplated herein and therein (including compliance by
the Investor with its obligations hereunder and thereunder) (i) will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under or result in the acceleration of,
or the creation of any lien under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, (ii) will not result in any violation of the
provisions of the Certificate of Incorporation or Bylaws of the Company included
in the Amended Plan and as applicable to the Company from and after the Effective
Date and (iii) will not result in any violation of, or any termination or
material 

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impairment of
any rights under, any statute or any license, authorization, injunction,
judgment, order, decree, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its subsidiaries or any
of their properties, except in any such case described in subclause (i) or
(iii) as will not have or could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

(g)           Consents and Approvals.  No consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their properties is required for the distribution of the Rights, the issuance,
sale and delivery of Shares upon exercise of the Rights and to the Investor
hereunder, the issuance, sale and delivery of the Purchased Shares to the
Investor hereunder and the consummation of the Rights Offering by the Company
and the execution and delivery by the Company of this Agreement, the
Registration Rights Agreement and the Amended Plan and performance of and compliance
by the Company with all of the provisions hereof and thereof, including without
limitation the payment of the Backstop Fee, the Expiration Time Fee, the
Termination Fee (as defined in Section 10(d)) and the Transaction Expenses
as provided for herein, and the consummation of the transactions contemplated
herein and therein, except (i) the entry of the Court Orders and the
expiration, or waiver by the Bankruptcy Court, of the 10-day period set forth
in Bankruptcy Rules 6004(g) and 3020(e), as applicable, (ii) the registration
under the Securities Act (as defined in Section 3(i)) of resales of the ECA
Shares, (iii) filings with respect to and the expiration or termination of the
waiting period under the HSR Act relating to the sale of ECA Shares to the
Investor hereunder, (iv) the filing with the Secretary of State of the State of
Delaware of the Certificate of Incorporation to be applicable to the Company
from and after the Effective Date and (v) such consents, approvals, authorizations,
registrations or qualifications (x) as may be required under the New York Stock
Exchange (“NYSE”) or the Nasdaq Global Market (“Nasdaq”) rules
and regulations in order to consummate the transactions contemplated herein,
(y) as may be required under state securities or Blue Sky laws in connection
with the purchase of ECA Shares by the Investor or (z) the absence of which
will not have or could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.

(h)           Arm’s Length.  The Company acknowledges and agrees that the
Investor is acting solely in the capacity of an arm’s length contractual
counterparty to the Company with respect to the transactions contemplated
hereby (including in connection with determining the terms of the Rights
Offering and the purchase of the ECA Shares) and not as a financial advisor or
a fiduciary to, or an agent of, the Company or any other person.  Additionally, the Investor is not advising
the Company or any other person as to any legal, tax, investment, accounting or
regulatory matters in any jurisdiction in respect of the transactions
contemplated hereby.  The Company shall
consult with its own advisors concerning such matters and shall be responsible
for making their own independent investigation and appraisal of the
transactions contemplated hereby, and the Investor shall have no responsibility
or liability to the Company with respect thereto.  Any review by the Investor of the Company,
the transactions contemplated 

 9
 

hereby or
other matters relating to such transactions will be performed solely for the
benefit of the Investor and shall not be on behalf of the Company.

(i)            Financial Statements.  The financial statements and the related
notes thereto of the Company and its consolidated subsidiaries included or
incorporated by reference in the Exchange Act Documents (as defined in
Section 3(j)), the Registration Statement (as defined in
Section 5(i)) and the Prospectus (as defined in Section 3(k)) comply
or will comply, as the case may be, in all material respects with the
applicable requirements of the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission (the “Commission”)
thereunder (collectively, the “Securities Act”) and the Securities
Exchange Act of 1934 and the rules and regulation of the Commission thereunder
(the “Exchange Act”), as applicable, and present fairly or will present
fairly, as the case may be, in all material respects the financial position of
the Company and its consolidated subsidiaries as of the dates indicated and the
results of their operations and the changes in their cash flows for the periods
specified; such financial statements have been or will have been, as the case
may be, prepared in conformity with generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods covered thereby (except as
disclosed in the Exchange Act Documents), and the supporting schedules included
or incorporated by reference in the Exchange Act Documents, and to be included
or incorporated by reference in the Registration Statement and the Prospectus,
present fairly or will present fairly, as the case may be, in all material
respects, the information required to be stated therein; and the other
financial information included or incorporated by reference in the Exchange Act
Documents, and to be included or incorporated by reference in the Registration
Statement and the Prospectus, has been or will have been, as the case may be,
derived from the accounting records of the Company and its subsidiaries and
presents fairly or will present fairly, as the case may be, the information
shown thereby; and any pro forma financial information and related notes
thereto to be included in the Registration Statement and the Prospectus will
have been prepared in accordance with the applicable requirements of the
Securities Act, and will be based on assumptions that management of the Company
believes are reasonable and which will be set forth in the Registration
Statement when it becomes effective and the Prospectus as of its date.

(j)            Exchange Act Documents.  The documents filed under the Exchange Act
with the Commission prior to the date of this Agreement (the “Exchange Act
Documents”), when they became effective or were filed with the Commission,
conformed in all material respects, to the requirements of the Securities Act
or the Exchange Act, as applicable, and none of such Exchange Act Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and any further documents so filed and incorporated by reference in
the Registration Statement or the Prospectus, as the case may be, when such
documents become effective or are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act, and will not
contain any untrue statement of a material fact or omit to state a material

 10

fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

(k)           Preliminary Prospectus.  Each Preliminary Prospectus, at the time of
filing thereof, will comply in all material respects with the Securities Act
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, the Company makes no representation
and warranty with respect to any statements or omissions made in reliance upon
and in conformity with information relating to the Investor or the Ultimate
Purchasers furnished to the Company in writing by the Investor or the Ultimate
Purchasers expressly for use in any Preliminary Prospectus.  The term “Preliminary Prospectus”
means each prospectus included in such registration statement (and any
amendments thereto) before it becomes effective, any prospectus filed with the
Commission pursuant to Rule 424(a) under the Securities Act and the prospectus
included in the Registration Statement, as of their date or at the time of its
effectiveness, as the case may be, that omits information deemed pursuant to
Rule 430A under the Securities Act to be part of such Registration Statement,
and the term “Prospectus” means the prospectus in the form first used to
confirm sales of the ECA Shares.

(l)            Registration Statement and
Prospectus.  As of the effective date
of the Registration Statement, the Registration Statement will comply in all
material respects with the Securities Act and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; and as of the applicable filing date of the Prospectus and any
amendment or supplement thereto and as of the Closing Date, the Prospectus and
any amendment or supplement thereto will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided
that  the Company makes no representation
and warranty with respect to any statements or omissions made in reliance upon
and in conformity with information relating to the Investor or the Ultimate Purchasers
furnished to the Company in writing by the Investor or the Ultimate Purchasers
expressly for use in the Registration Statement and the Prospectus and any
amendment or supplement thereto.

(m)          No Material Adverse Change.  Since September 30, 2006, (i) there has
not been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries, or any dividend or distribution of any kind declared,
set aside for payment, paid or made by the Company on any class of its capital
stock, or any material adverse change, or any development involving a material
adverse change, that has had individually or in the aggregate a Material
Adverse Effect; provided, however, that none of the following
shall be deemed, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be a material adverse change: 
(a) changes in conditions in the 

 11
 

U.S. or global
economy or capital or financial markets generally, including changes in
interest or exchange rates, (b) changes in the airline industry taken as a
whole, (c) changes in general legal, tax, regulatory, political or
economic conditions affecting the airline industry, (d) changes in GAAP,
(e) the commencement, occurrence, continuation or intensification of any
war, sabotage, armed hostilities or acts of terrorism, or (f)  any failure
by the Company to meet internal or published projections, forecasts or revenue
or earnings predictions (provided that this clause (f) shall not
exclude any underlying effect, event, development, change or occurrence which
gave rise to or contributed to such failure or change), provided  further
that, with respect to clauses (a), (b), (c) and (e), the impact on the
Company is not disproportionate to the impact on other comparable entities in
the airline industry; (ii) neither the Company nor any of its subsidiaries has
entered into any transaction or agreement that is material to the Company and
its subsidiaries taken as a whole or incurred any liability or obligation, direct
or contingent, that is material to the Company and its subsidiaries taken as a
whole; and (iii) neither the Company nor any of its subsidiaries has sustained
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or
arbitrator or governmental or regulatory authority, except in each case (x) as
otherwise disclosed in the Exchange Act Documents and (y) the transactions
contemplated hereby or by the Term Sheet.

(n)           Descriptions of the Transaction
Documents.  The descriptions contained
in the Registration Statement and the Prospectus of this Agreement, the Registration
Rights Agreement, the Syndication Agreement, the Amended Plan, the Agreement
Order and the Confirmation Order (collectively, the “Transaction Documents”)
will conform in all material respects to the Transaction Documents.

(o)           No Violation or Default.  Neither the Company nor any of its subsidiaries
is in violation of its charter or by-laws or similar organizational
documents.  Neither the Company nor any
of its subsidiaries is:  (i) except as a
result of any Proceedings, in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject; or
(ii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of clauses (i) and (ii) above, for any such default or
violation that would not, individually or in the aggregate, have a Material Adverse
Effect.

(p)           Legal Proceedings.  Except as described in the Exchange Act Documents,
there are no legal, governmental or regulatory investigations, actions, suits
or proceedings pending to which the Company or any of its subsidiaries is or
may be a party or to which any property of the Company or any of its
subsidiaries is or may be the subject that, individually or in the aggregate,
if determined adversely to the Company 

 12
 

or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under the Transaction Documents, no such investigations, actions,
suits or proceedings are threatened or, to the best knowledge of the Company,
contemplated by any governmental or regulatory authority or threatened by
others; and (i) there are no current or pending legal, governmental or
regulatory actions, suits or proceedings that are required under the Exchange
Act to be described in the Exchange Act Documents that are not so described and
(ii) there are no statutes, regulations or contracts or other documents that
are required under the Exchange Act to be filed as exhibits to the Exchange Act
Documents or described in the Exchange Act Documents that are not so filed or
described.

(q)           Independent Accountants.  Ernst & Young LLP (“E&Y”), who
have certified certain financial statements of the Company and its consolidated
subsidiaries, are an independent registered public accounting firm with respect
to the Company and its consolidated subsidiaries as required by the Securities
Act.

(r)            Title to Intellectual Property.  The Company and its subsidiaries own or
possess adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses,
except where the failure to own or possess any such rights could not reasonably
be expected to have a Material Adverse Effect; and, except as could not
reasonably be expected to have a Material Adverse Effect, the conduct of their
respective businesses will not conflict in any material respect with any such
rights of others, and the Company and its subsidiaries have not received any
notice of any material claim of infringement or conflict with any such material
rights of others.

(s)           No Undisclosed Relationships.  No relationship, direct or indirect, exists
between or among the Company or any of its subsidiaries, on the one hand, and
the directors, officers, stockholders, customers or suppliers of the Company or
any of its subsidiaries, on the other, that is required by the Exchange Act to
be described in the Exchange Act Documents and that are not described.

(t)            Investment Company Act.  The Company is not and, after giving effect
to the offering and sale of the Shares and the Purchased Shares and the
application of the proceeds thereof as described in the Prospectus, will not be
required to register as an “investment company” or an entity “controlled” by an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission thereunder.

(u)           Licenses and Permits.  The 
Company and its subsidiaries possess all licenses, certificates, permits
and other authorizations issued by, and have made all declarations and filings
with, the appropriate federal, state, local or foreign governmental 

 13
 

or regulatory
authorities that are necessary for the ownership or lease of their respective
properties or the conduct of their respective businesses as described in the
Disclosure Statement and the Exchange Act Documents, except where the failure
to possess or make the same would not, individually or in the aggregate, have a
Material Adverse Effect; and except as described in the Exchange Act Documents
and except as would not reasonably be expected to have a Material Adverse
Effect, neither the Company nor any of its subsidiaries has received notice of
any revocation or modification of any such license, certificate, permit or
authorization or has any reason to believe that any such license, certificate,
permit or authorization will not be renewed in the ordinary course.

(v)           Compliance With Environmental Laws.  The Company and its subsidiaries (i) are in
compliance with any and all applicable federal, state, local and foreign laws,
rules, regulations, decisions and orders relating to the protection of human
health and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, “Environmental Laws”); (ii)
have received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or release
of hazardous or toxic substances or wastes, pollutants or contaminants, except,
in the case of each of the clauses (i), (ii) and (iii), as would not,
individually or in the aggregate, have a Material Adverse Effect.

(w)          Compliance With ERISA.  Each employee benefit plan, within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), that is maintained, administered or contributed to by
the Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in compliance with its terms and
the requirements of any applicable statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Internal Revenue Code of 1986, as
amended (the “Code”), except where the failure to comply with such
applicable statutes, orders, rules and regulations would not, individually or
in the aggregate, have a Material Adverse Effect; as of the date hereof, no
prohibited transaction, within the meaning of Section 406 of ERISA or Section
4975 of the Code, has occurred with respect to any such plan, excluding transactions
effected pursuant to a statutory or administrative exemption, except such
transactions that would not, individually or in the aggregate, have a Material
Adverse Effect; and for each such plan that is subject to the funding rules of
Section 412 of the Code or Section 302 of ERISA, except as disclosed in
Business Plan 3.1 of the Company (consisting of the following documents: Investor
Presentation dated January 2007, Labor Presentation dated January 2007 and
Passenger Revenue Support BP 3.0 dated January 19, 2007) (the “Business Plan”),
as of the date hereof, no “accumulated funding deficiency” as defined in
Section 412 of the Code and Section 402 of the Pension Protection Act of 2006
exists, and, as of December 31, 2006, the aggregate present value of all
benefits accrued under such plans determined using actuarial assumptions
consistent with Section 402 of the Pension Protection Act of 2006 exceeded
the 

 14
 

aggregate fair
market value of the assets of such plans (excluding for these purposes accrued
but unpaid contributions) by approximately $277 million.

(x)            Accounting Controls.  The Company and its subsidiaries maintain systems
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to assets
is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

(y)           Insurance.  The Company and its subsidiaries have
insurance covering their respective properties, operations, personnel and
businesses, including business interruption insurance, which insurance is in
amounts and insures against such losses and risks as are customary for
companies whose businesses are similar to the Company and its subsidiaries;
and, as of the date hereof, neither the Company nor any of its subsidiaries has
(i) received notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be made in
order to continue such insurance or (ii) any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage at reasonable cost from similar insurers
as may be necessary to continue its business.

(z)            No Unlawful Payments.  Neither the Company nor any of its subsidiaries
nor, to the best knowledge of the Company, any director, officer, agent,
employee or other person associated with or acting on behalf of the Company or
any of its subsidiaries has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds, (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977 or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.

(aa)         No Restrictions on Certain Dividends
and Other Payments.  Subject to the
Bankruptcy Code, Northwest Airlines, Inc., which is an indirect wholly owned
subsidiary of the Company, and any of its direct or indirect parent entities
which are subsidiaries of the Company, are not currently prohibited, directly
or indirectly, under any agreement or other instrument to which it is a party,
other than any credit agreement to which it is a party or is subject, from
paying any dividends to its parent, from making any other distribution on such
subsidiary’s capital stock, from repaying to the Company or any other subsidiary
of the Company any loans or advances to such subsidiary from the Company or
from any other subsidiary of the Company or from transferring any of such
subsidiary’s properties or assets to the Company or any other subsidiary of the
Company.

 15
 

(bb)         No Broker’s Fees.  Except for Seabury Transportation Advisors
LLC, neither the Company nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person (other than this
Agreement) that would give rise to a valid claim against the Company or any of
its subsidiaries or the Investor for a brokerage commission, finder’s fee or
like payment in connection with the offering and sale of the Rights or the
Shares or the Purchased Shares.

(cc)         No Registration Rights.  Except for registration rights granted to a
purchaser of New Common Stock as contemplated by Section 5(j)(iv), as of
the Effective Date, no person (other than the Investor and the Ultimate
Purchasers) will have the right to require the Company or any of its
subsidiaries to register any securities for sale under the Securities Act by
reason of the filing of the Registration Statement with the Commission or by
reason of the issuance and sale of the Rights and the ECA Shares.  Notwithstanding the foregoing, members of
management of the Company who receive shares of New Common Stock or stock
options pursuant to the transactions contemplated herein may have such shares
of New Common Stock and the shares of New Common Stock issuable upon the
exercise of such stock options registered on a Form S-8 under the Securities
Act.

(dd)         No Stabilization.  The Company has not taken, directly or
indirectly, any action designed to or that could reasonably be expected to
cause or result in any stabilization or manipulation of the price of the New
Common Stock.

(ee)         Margin Rules.  Neither the issuance, sale and delivery of
the Rights or the Shares or the Purchased Shares nor the application of the
proceeds therefrom by the Company as to be described in the Registration
Statement and the Prospectus will violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board
of Governors.

4.             Representations and Warranties
of the Investor.  The Investor
represents and warrants to, and agrees with, the Company as set forth
below.  Each representation, warranty and
agreement is made as of the date hereof and as of the Closing Date:

(a)           Incorporation.  The Investor has been duly incorporated and
is validly existing as a corporation in good standing under the laws of Delaware.

(b)           Corporate Power and Authority.  The Investor has the requisite corporate
power and authority to enter into, execute and deliver this Agreement and to perform
its obligations hereunder and has taken all necessary corporate action required
for the due authorization, execution, delivery and performance by it of this
Agreement.

(c)           Execution and Delivery.  This Agreement has been duly and validly
executed and delivered by the Investor and constitutes its valid and binding
obligation, enforceable against it in accordance with its terms, and the
execution and delivery by the Investor of this Agreement (i) will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, any agreement 

 16
 

or instrument
to which the Investor is a party or by which the Investor is bound or to which
any of the Property or assets of the Investor is subject and (ii) will not
result in any violation of any applicable law, except in any such case described
in subclause (i) or (ii) as will not have or could not be reasonably
expected to have a material adverse effect on the ability of the Investor to
consummate the transactions contemplated by this Agreement.

(d)           Securities Laws Compliance.  The ECA Shares will not be offered for sale,
sold or otherwise transferred by the Investor except pursuant to a registration
statement or in a transaction exempt from or not subject to registration under
the Securities Act and any applicable state securities laws.

(e)           Consents and Approvals.  No consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency or
body having jurisdiction over the Investor is required in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, other than (i)  the registration under
the Securities Act of resales of the ECA Shares, (ii) filings with respect
to and the expiration or termination under the HSR Act relating to the sale of
ECA Shares to the Investor hereunder and (iii) as may be required under
state securities or Blue Sky laws in connection with the purchase of ECA Shares
by the Investor.

(f)            Information.  The Investor acknowledges that it has been
afforded the opportunity to ask questions and receive answers concerning the
Company and to obtain additional information that it has requested to verify
the accuracy of the information contained herein.  Notwithstanding the foregoing, nothing
contained herein will operate to modify or limit in any respect the
representations and warranties of the Company or to relieve it from any obligations
to the Investor for breach thereof or the making of misleading statements or
the omission of material facts in connection with the transactions contemplated
herein.

(g)           Purchase Intent.  The Investor is not acquiring the ECA Shares
with a view to distributing or reselling such ECA Shares or any part thereof
except pursuant to an effective registration statement under the Securities Act
or an exemption from such registration. 
The Investor understands that the Investor must bear the economic risk
of this investment indefinitely, unless the ECA Shares are registered pursuant
to the Securities Act and any applicable state securities or Blue Sky laws or
an exemption from such registration is available, and further understands that
the Company has no present intention of registering the resale of any ECA
Shares other than pursuant to the Registration Rights Agreement.  Nothing contained herein shall be deemed a representation
or warranty by the Investor to hold the ECA Shares for any period of time.

(h)           Investor Status.  The Investor is as of the date hereof, and
will be as of the Closing Date, an “accredited investor” as defined in Rule
501(a) under the Securities Act.

 17
 

(i)            Reliance on Exemptions.  The Investor understands that the ECA Shares
are being offered and sold to the Investor in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the ECA Shares.

(j)            Experience of the Investor.  The Investor, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the ECA Shares.  The Investor understands and is able to bear
any economic risks associated with such investment (including without
limitation the necessity of holding such ECA Shares for an indefinite period of
time) and is able to afford a complete loss of its investment in the ECA
Shares.

(k)           Access to Information.  The Investor is knowledgeable, sophisticated
and experienced in making, and is qualified to make, decisions with respect to
investments in securities representing an investment decision like that
involved in the purchase of the ECA Shares. 
The Investor acknowledges that it has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the ECA Shares and the merits and risks of investing in the ECA
Shares; (ii) access to information about the Company and its subsidiaries and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to the investment.  Neither such
inquiries nor any other investigation conducted by or on behalf of the Investor
or its representatives or counsel shall modify, amend or affect the Investor ‘s
right to rely on the truth, accuracy and completeness of the Exchange Act
Documents and the Company’s representations and warranties contained in the
Transaction Documents.  The Investor
understands that the Investor’s investment in the ECA Shares involves a high degree
of risk.

5.             Additional Covenants of the
Company.  The Company agrees with the
Investor:

(a)           Agreement Motion and Agreement
Order.  Not later than
February 15, 2007, the Company will file a motion and supporting papers
(the “Agreement Motion”) (including an order in form and substance
satisfactory to each of the Company and the Investor) seeking an order under
sections 105 and 363 of the Bankruptcy Code approving this Agreement, the
Syndication Agreement, the Registration Rights Agreement, the payment, on the
terms and at the time specified herein, of the Backstop Fee, the Expiration
Time Fee and the Termination Fee, the reimbursement, on the terms and at the
time specified herein, of Transaction Expenses and the release and 

 18
 

exculpation of
the Investor, its affiliates, the Ultimate Purchasers, their affiliates, representatives
and advisors from any liability for participation in the transactions contemplated
hereby by the Registration Rights Agreement, the Amended Plan and the
Syndication Agreement to the fullest extent permitted under applicable law and
authorizing the Company to enter into this Agreement and the Registration
Rights Agreement (the “Agreement Order”).  The Company agrees that it shall use its commercially
reasonable efforts, subject to any applicable fiduciary duties, to
(i) fully support the Agreement Motion and any application seeking
Bankruptcy Court approval and authorization to pay the fees and expenses
hereunder, as an administrative expense of the estate, including, but not
limited to, filing supporting affidavits on behalf of the Company and/or its
financial advisor and providing the testimony of the affiants if needed and
(ii) obtain approval of the Agreement Order as soon as practicable
following the filing of the motion therefor.

(b)           Term Sheet, Disclosure Statement
and Amended Plan.  As soon as
practicable after the date of this Agreement, the Company and the other Debtors
will file a disclosure statement (the “Initial Disclosure Statement”)
and seek Bankruptcy Court approval thereof under section 1125 of the Bankruptcy
Code.  The disclosure statement in the
form approved by the Bankruptcy Court is hereinafter referred to as the “Disclosure
Statement”.  The Company will seek
confirmation of the Amended Plan as soon as practicable after the end of the
solicitation period.  Prior to filing or
disseminating the Initial Disclosure Statement or any revisions, supplements,
modifications or amendments to the Initial Disclosure Statement or the Existing
Plan, the Company will provide to the Investor and its counsel a copy of such
filing, revision, modification, supplement or amendment and a reasonable
opportunity to review and comment on such documents prior to being filed or
disseminated; provided that such review and comment shall not constitute a
presumption or other determination that the documents constitute (and comply
with the definition of) either an Amended Plan or a Disclosure Statement, as applicable.
In addition, the Company will provide to the Investor and its counsel a copy of
a draft of the Confirmation Order and a reasonable opportunity to review and
comment on such draft prior to such order being filed with the Bankruptcy
Court.

(c)           Rights Offering.  To effectuate the Rights Offering as provided
herein and to use commercially reasonable efforts to seek entry of an order of
the Bankruptcy Court, prior to the commencement of the Rights Offering,
authorizing the Company to conduct the Rights Offering pursuant to the
securities exemption provisions set forth in section 1145(a) of the Bankruptcy
Code.

(d)           Listing.  To use commercially reasonable efforts to
list and maintain the listing of the New Common Stock (and any applicable
associated share purchase rights) on the NYSE or the quotation of the New
Common Stock (and any applicable associated share purchase rights) on Nasdaq.

(e)           Notification.  To notify, or to cause the Subscription Agent
to notify, on each Friday during the Rights Exercise Period and on each
Business Day during the 

 19
 

five (5)
Business Days prior to the Expiration Time (and any extensions thereto), or
more frequently if reasonably requested by the Investor, the Investor of the
aggregate number of Rights known by the Company or the Subscription Agent to
have been exercised pursuant to the Rights Offering as of the close of business
on the preceding Business Day or the most recent practicable time before such
request, as the case may be.

(f)            Unsubscribed Shares.  To determine the number of Unsubscribed
Shares, if any, in good faith, and to provide a Purchase Notice or a
Satisfaction Notice that accurately reflects the number of Unsubscribed Shares
as so determined and to provide to the Investor a certification by the
Subscription Agent of the Unsubscribed Shares or, if such certification is not
available, such written backup to the determination of the Unsubscribed Shares
as Investor may reasonably request.

(g)           Stock Splits, Dividends, etc.  In the event of any stock split, stock dividend,
stock combination or similar transaction affecting the number of issued and outstanding
shares of New Common Stock, the Purchase Price and the number of ECA Shares to
be purchased hereunder will be proportionally adjusted to reflect the increase
or decrease in the number of issued and outstanding shares of New Common Stock.

(h)           HSR.  To promptly prepare and file all necessary
documentation and to effect all applications that are necessary or advisable
under the HSR Act so that the applicable waiting period shall have expired or
been terminated thereunder with respect to the purchase of ECA Shares
hereunder, and not to take any action that is intended or reasonably likely to
materially impede or delay the ability of the parties to obtain any necessary
approvals required for the transactions contemplated by this Agreement.

(i)            Effectiveness of the Registration
Statement.  To prepare and file, in cooperation
with the Investor, a shelf registration statement (the “Registration Statement”)
covering resales of New Common Stock held by the Investor and the Ultimate
Purchasers as soon as practicable after the date hereof, but in no event later
than April 2, 2007, and provide the Investor with a reasonable opportunity to
review and propose changes to the Registration Statement before any filing with
the Commission; to advise the Investor, promptly after it receives notice
thereof, of the time when the Registration Statement has been filed or has
become effective or any prospectus or prospectus supplement has been filed and
to furnish the Investor with copies thereof; to advise the Investor promptly
after it receives notice thereof of any comments or inquiries by the Commission
(and to furnish the Investor with copies of any correspondence related
thereto), of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any prospectus, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
prospectus or for additional information. 
The Company shall use its commercially reasonable efforts to cause such

 20

 

Registration
Statement to become effective not later than June 30, 2007.  The foregoing provisions shall be set forth
in the Registration Rights Agreement.

(j)            Clear Market.  For a period of 180 days after the Closing
Date (the “Restricted Period”), the Company will not (i) offer,
pledge, announce the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for capital stock of the
Company or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the capital
stock of the Company, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of capital stock of the Company or
such other securities, in cash or otherwise, without the prior written consent
of the Investor, except for (i) Rights and New Common Stock issuable upon
exercise of Rights, (ii) stock options, stock and restricted stock granted
to members of management of the Company on or after the Effective Date and shares
of New Common Stock issued upon the exercise of any such stock options and
issued upon the exercise of any stock options outstanding as of the Effective
Date, (iii) the issuance of New Common Stock and other equity interests as
set forth in the Term Sheet and pursuant to the Amended Plan and (iv) the
issuance of up to $150,000,000 of New Common Stock to one or more parties on
the list provided to the Investor prior to the date hereof (hereinafter
referred to collectively as the “Third Party Purchaser”) at a purchase
price per share not less than the Purchase Price.  Notwithstanding the foregoing, if
(1) during the last 17 days of the Restricted Period, the Company
issues an earnings release or material news or a material event relating to the
Company occurs; or (2) prior to the expiration of the Restricted Period,
the Company announces that it will release earnings results during the 16-day
period beginning on the last day of the Restricted Period, the restrictions imposed
by this Agreement shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of
the material news or material event.

(k)           Use of Proceeds.  The Company will apply the net proceeds from
the sale of the Shares and the Purchased Shares as provided in the Term Sheet.

(l)            No Stabilization.  The Company will not take, directly or
indirectly, any action designed to or that could reasonably be expected to
cause or result in any stabilization or manipulation of the price of the New
Common Stock.

(m)          Registration Rights Agreement.  The Company will file with the Bankruptcy
Court as soon as practicable after the date hereof, but in no event later than
February 15, 2007, a form of a registration rights agreement (the “Registration
Rights Agreement”) in form and substance reasonably satisfactory to the
Company and the Investor and which shall include the terms set forth in Exhibit
B hereto.  The Company and the Investor
shall use commercially reasonable efforts to negotiate and execute,

 21
 

 

and seek
Bankruptcy Court approval of, the Registration Rights Agreement as promptly as
practicable.

6.             Additional Covenants of the
Investor.  The Investor agrees with
the Company:

(a)           Information.  To provide the Company with such information as
the Company reasonably requests regarding the Investor for inclusion in the
Registration Statement and the Disclosure Statement.

(b)           HSR Act.  To use reasonable best efforts to promptly
prepare and file all necessary documentation and to effect all applications
that are necessary or advisable under the HSR Act so that the applicable
waiting period shall have expired or been terminated thereunder with respect to
the purchase of ECA Shares hereunder, and not to take any action that is
intended or reasonably likely to materially impede or delay the ability of the
parties to obtain any necessary approvals required for the transactions
contemplated by this Agreement.

(c)           Entry of the Agreement Order.  To use commercially reasonable efforts to
facilitate the entry of the Agreement Order.

(d)           No Action in Bankruptcy Court.  To not file any pleading or take any other
action in the Bankruptcy Court with respect to this Agreement, the Amended
Plan, the Disclosure Statement or the Confirmation Order of the consummation of
the transactions contemplated hereby or thereby that is inconsistent in any
material respect with this Agreement or the Company’s efforts to obtain the
entry of court orders consistent with this Agreement.

(e)           Transfer Restrictions.  The Investor covenants and agrees that ECA
Shares will only be disposed of by it pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act and in compliance with any
applicable state securities or Blue Sky laws. 
The Investor agrees to the imprinting, so long as is required by this
Section 6(e), of the following legend on any certificate evidencing the ECA
Shares:

THE
SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER ANY STATE SECURITIES (“BLUE SKY”) LAWS.  THE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW
TO DISTRIBUTION OR RESALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION AND IN
COMPLIANCE WITH APPLICABLE BLUE SKY LAWS. 
THE SHARES MAY NOT BE SOLD, ASSIGNED, MORTGAGED, PLEDGED, ENCUMBERED,
HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF (EXCEPT PURSUANT TO THE SYNDICATION
AGREEMENT DATED AS OF FEBRUARY 12,

 22
 

 

2007
BETWEEN J.P. MORGAN SECURITIES INC. AND THE BACKSTOP PURCHASERS REFERRED TO
THEREIN) UNLESS EITHER (I) A REGISTRATION STATEMENT WITH RESPECT TO THE SHARES
IS EFFECTIVE UNDER THE ACT OR (II) UNLESS WAIVED BY THE CORPORATION, THE
CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION THAT NO VIOLATION OF THE ACT WILL BE INVOLVED IN SUCH TRANSACTION
OR A NO ACTION LETTER WITH RESPECT TO SUCH TRANSACTION FROM THE STAFF OF THE
COMMISSION.

Certificates
evidencing ECA Shares shall not be required to contain such legend or any other
legend (i) while a Registration Statement covering the resale of the ECA Shares
is effective under the Securities Act, or (ii) following any sale of ECA Shares
pursuant to Rule 144, or (iii) if ECA Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements
issued by the Staff of the Commission). 
Following the Effective Date or at such earlier time as a legend is no
longer required for certain ECA Shares, the Company will, promptly, following
the delivery by the Investor to the Company of a legended certificate
representing such ECA Shares, deliver or cause to be delivered to the Investor
a certificate representing such ECA Shares that is free from all restrictive
and other legends.

In the event
the above legend is removed from any of the ECA Shares and thereafter the
effectiveness of a registration statement covering such ECA Share is suspended
or the Company determines that a supplement or amendment thereto is required by
applicable securities laws, then the Company may immediately place a
stop-transfer order against the certificates with respect to the sale of any
ECA Share pursuant to such registration statement, and upon reasonable advance
notice to the Investor, the Company may require that the above legend be placed
on any such ECA Share that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and the Investor shall cooperate in
the replacement of such legend.  Such
legend shall thereafter be removed when such ECA Share may again be sold
pursuant to an effective registration statement or under Rule 144.

7.             Conditions to the Obligations of
the Investor.  The obligation of the
Investor to purchase the ECA Shares pursuant to this Agreement on the Closing
Date are subject to the following conditions:

(a)           Agreement
Order.  The Agreement Order shall
have been entered by the Bankruptcy Court in the form satisfactory to each of
the Company and the Investor, and the Agreement Order shall have become a Final
Agreement Order.

(b)           Inconsistent
Transaction.  Subject to the approval
of this Agreement by the Bankruptcy Court, the Company and the other Debtors
shall not have made a public

 23
 

 

announcement, entered into an agreement or filed any pleading or
document with the Bankruptcy Court evidencing its intention to support, or
otherwise supported, any transaction inconsistent with this Agreement or the
Amended Plan, shall not have filed any plan that is not the Amended Plan and
shall not have been agreed to, consented to, provided any support to, solicited
or encouraged, participated in the formulation of, or voted for any transaction
or plan of reorganization or liquidation other than the Amended Plan, or any
motion or other filing seeking dismissal of the Debtors’ chapter 11 cases, the
appointment of a trustee or examiner in the Debtors’ chapter 11 cases or the
conversion of the Debtors’ chapter 11 cases to cases under chapter 7 of the Bankruptcy
Code (a “Competing Transaction”).

(c)           Confirmation
Order.  An order of the Bankruptcy
Court confirming the Amended Plan (the “Confirmation Order”) shall have
been entered and such order shall be non-appealable, shall not have been
appealed within ten (10) days of entry or, if such order is appealed, shall not
have been stayed pending appeal, and there shall not have been entered by any
court of competent jurisdiction any reversal, modification or vacatur, in whole
or in part, of the Confirmation Order.

(d)           Disclosure
Statement, Amended Plan and Confirmation Order.  (i) The Disclosure Statement and the Amended
Plan shall not conflict with and shall be consistent with the Term Sheet and
the representations, warranties and covenants made by the Company hereunder and
(ii) the financial conditions to closing set forth in the Term Sheet shall have
been satisfied.

(e)           Conditions to Confirmation.  The conditions to confirmation and the
conditions to the Effective Date of the Amended Plan shall have been satisfied
or waived by the Investor and the Company in accordance with the Amended Plan,
and the Effective Date shall have occurred or will occur on the Closing Date.

(f)            [Reserved]

(g)           Rights Offering.  The Expiration Time shall have occurred.

(h)           Purchase Notice.  The Investor shall have received a Purchase
Notice in accordance with Section 1(e) from the Company, dated as of the
Determination Date, certifying as to the number of Unsubscribed Shares to be
purchased pursuant to the Backstop Commitment.

(i)            Valid Issuance.  The New Common Stock shall be, upon payment
of the aggregate Purchase Price as provided herein, validly issued, fully paid,
non-assessable and free and clear of all taxes, liens, pre-emptive rights,
rights of first refusal, subscription and similar rights.

(j)            No Restraint.  No judgment, injunction, decree or other
legal restraint shall prohibit the consummation of the Amended Plan, the Rights
Offering or the transactions contemplated by this Agreement.

 24
 

 

(k)           HSR Act.  If the purchase of ECA Shares by the Investor
pursuant to this Agreement is subject to the terms of the HSR Act, the
applicable waiting period shall have expired or been terminated thereunder with
respect to such purchase.

(l)            Enforceability.  This Agreement shall be valid and enforceable
against the Company and the Company shall not be in breach of this Agreement.

(m)          NYSE/Nasdaq.  The New Common Stock issuable upon exercise
of the Rights shall be approved for trading on the NYSE or Nasdaq, subject to
official notice of issuance.

(n)           Comfort Letters.  If the effective date of the Registration
Statement has occurred on or prior to the Closing Date, E&Y shall have
furnished to the Investor letters dated such Effective Date and the Closing
Date and addressed to the Investor, in form and substance reasonably
satisfactory to the Investor, containing statements and information of the type
customarily included in accountants’ “comfort letters” to underwriters with
respect to the financial statements and certain financial information contained
or incorporated by reference in the Registration Statement and the Prospectus;
provided, that such letters shall use a “cut-off” date no more than three (3)
Business Days prior to the date of delivery thereof.

(o)           Opinion of Counsel for the Company.  Cadwalader, Wickersham & Taft LLP,
counsel for the Company, and Michael Miller, Vice President—Legal of the
Company, shall have each furnished to the Investor their written opinion, dated
the Closing Date and addressed to the Investor, in form and substance
reasonably satisfactory to the Investor.

(p)           No Legal Impediment to Issuance.  No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issued in each by
any federal, state or foreign governmental or regulatory authority that, as of
the Closing Date, prohibits the issuance or sale of the Rights or the Shares or
the Purchased Shares or the resale of the ECA Shares pursuant to the
Syndication Agreement; and no injunction or order of any federal, state or
foreign court shall have been issued that, as of the Closing Date, prohibits
the issuance or sale of the Rights or the Shares or the Purchased Shares or the
resale of the ECA Shares pursuant to the Syndication Agreement.

(q)           Good Standing.  The Investor shall have received on and as of
the Closing Date satisfactory evidence of the good standing of the Company and
its significant subsidiaries (as such term is defined in Article 1, Rule 1-02
of Regulation S-X promulgated pursuant to the Securities Act) in their respective
jurisdictions of organization, in each case in writing or any standard form of
telecommunication from the appropriate governmental authorities of such jurisdictions.

(r)            Representations and Warranties
and Covenants.  The representations
and warranties of the Company in paragraphs (a)-(l), (n), (q), (t), (u) and
(aa)-(ee) of

 25
 

 

Section 3
shall be true and correct on the date hereof and as if made on the Closing
Date, the representations and warranties of the Company in paragraphs (m), (o),
(p), (r), (s) and (v)-(z) of Section 3 shall be true and correct on the date
hereof (and shall not be required to be true on any subsequent date), and the
Company shall have complied in all material respects with all covenants in this
Agreement and in the Registration Rights Agreement.

(s)           Officer’s Certificate.  The Investor shall have received on and as of
the Closing Date a certificate of the chief financial officer or chief
accounting officer of the Company and one additional senior executive officer
of the Company who is satisfactory to the Investor (i) confirming that the
Company has satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date, (ii) to the effect set forth
in Sections 7(f) and 7(r) and (iii) if the Registration Statement has been
declared effective at or prior to the Closing Date, confirming that such
officers have carefully reviewed the Registration Statement and the Prospectus
and, to the best knowledge of such officers, the information set forth therein
is true and correct.

(t)            Bankruptcy Court Approval.  The Registration Rights Agreement shall have
been approved by the Bankruptcy Court in a final order and shall have been executed
by the parties thereto in substantially the same form as the forms thereof
filed with the Bankruptcy Court.

(u)           Fees, Etc.  All fees and other amounts required to be
paid or reimbursed to the Investor as of the Closing Date shall have been paid
or reimbursed.

8.             Indemnification.

(a)           Subject to the approval of this
Agreement by the Bankruptcy Court, whether or not the Rights Offering is
consummated or this Agreement or the Backstop Commitment is terminated, the
Company (in such capacity, the “Indemnifying Party”) shall indemnify and
hold harmless the Investor and Ultimate Purchasers, their respective affiliates
and their respective officers, directors, employees, agents and controlling
persons (each an “Indemnified Person”) from and against any and all
losses, claims, damages, liabilities and reasonable expenses, joint or several,
to which any such Indemnified Person may become subject arising out of or in
connection with any claim, challenge, litigation, investigation or proceeding
with respect to the Rights Offering, the Backstop Commitment, the Transaction
Documents, the Registration Statement or the Prospectus or the transactions
contemplated thereby, including without limitation, payment of the Transaction
Expenses, Backstop Fee or Termination Fee, if any, distribution of Rights,
purchase and sale of Shares in the Rights Offering and purchase and sale of ECA
Shares pursuant to this Agreement, or any breach of the Company of this
Agreement or the Registration Rights Agreement, regardless of whether any of
such Indemnified Persons is a party thereto, and to reimburse such Indemnified
Persons for any reasonable legal or other reasonable out-of-pocket expenses as
they are incurred in connection with investigating, responding to or defending
any of the foregoing, provided that the foregoing indemnification will not, as
to any Indemnified Person, apply

 26
 

 

to losses,
claims, damages, liabilities or expenses to the extent that they are finally judicially
determined to have resulted from (i) bad faith, gross negligence or willful misconduct
on the part of such Indemnified Person or (ii) statements or omissions in the
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
or supplement thereto made in reliance upon or in conformity with information
relating to the Investor or the Ultimate Purchaser furnished to the Company in
writing by or on behalf of the Investor or the Ultimate Purchaser expressly for
use in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment or supplement thereto or (iii) any statement or omission in the
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
or supplement thereto that is corrected in any subsequent prospectus that was
delivered to the Investor or the Ultimate Purchaser at least two Business Days
prior to the relevant sale or sales by the Investor or Ultimate Purchaser.  If for any reason the foregoing
indemnification is unavailable to any Indemnified Person or insufficient to
hold it harmless, then the Indemnifying Party shall contribute to the amount
paid or payable by such Indemnified Person as a result of such loss, claim,
damage, liability or expense in such proportion as is appropriate to reflect
not only the relative benefits received by the Indemnifying Party on the one hand
and such Indemnified Person on the other hand but also the relative fault of
the Indemnifying Party, on the one hand, and such Indemnified Person, on the
other hand, as well as any relevant equitable considerations.  It is hereby agreed that the relative
benefits to the Indemnifying Party on the one hand and all Indemnified Persons
on the other hand shall be deemed to be in the same proportion as (i) the total
value received or proposed to be received by the Company pursuant to the sale
of Shares and Purchased Shares contemplated by this Agreement bears to (ii) the
fee paid or proposed to be paid to the Investor in connection with such sale
plus the difference between the price paid by the Investor for the purchase of
the Purchased Shares and the market value of the Purchased Shares on the
Closing Date.  The Indemnifying Party
also agrees that no Indemnified Person shall have any liability based on their
exclusive or contributory negligence or otherwise to the Indemnifying Party,
any person asserting claims on behalf of or in right of any of the Indemnifying
Party, or any other person in connection with or as a result of the Rights
Offering, the Backstop Commitment, the Transaction Documents, the Registration
Statement, the Prospectus or the transactions contemplated thereby, except as
to any Indemnified Person to the extent that any losses, claims, damages,
liability or expenses incurred by the Company are finally judicially determined
to have resulted from (i) bad faith, gross negligence or willful misconduct of
such Indemnified Person in performing the services that are the subject of this
Agreement or the Registration Rights Agreement or (ii) statements or omissions
in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment or supplement thereto made in reliance upon or in conformity with
information relating to the Investor or the Ultimate Purchaser furnished to the
Company in writing by or on behalf of the Investor or the Ultimate Purchaser
expressly for use in the Preliminary Prospectus, Registration Statement or
Prospectus or any amendment or supplement thereto or (iii) any statement or
omission in the Preliminary Prospectus, Registration Statement or Prospectus or
any amendment or supplement thereto that is corrected in any subsequent
prospectus that was delivered to the Investor or the Ultimate

 27
 

 

Purchaser at
least two Business Days prior to the relevant sale or sales by the Investor or
Ultimate Purchaser; provided, however, that in no event shall an Indemnified
Person or such other parties have any liability for any indirect, consequential
or punitive damages in connection with or as a result of any of their
activities related to the foregoing.  The
indemnity, reimbursement and contribution obligations of the Indemnifying Party
under this Section 8 shall be in addition to any liability that the Indemnifying
Party may otherwise have to an Indemnified Person and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Indemnifying Party and any Indemnified Person.

(b)           Promptly after receipt by an
Indemnified Person of notice of the commencement of any claim, litigation,
investigation or proceeding relating to the Transaction Documents, the  Registration Statement, the Prospectus or any
of the transactions contemplated thereby (“Proceedings”), such
Indemnified Person will, if a claim is to be made hereunder against the
Indemnifying Party in respect thereof, notify the Indemnifying Party in writing
of the commencement thereof; provided that (i) the omission so to notify the
Indemnifying Party will not relieve it from any liability that it may have
hereunder except to the extent it has been materially prejudiced by such
failure and (ii) the omission so to notify the Indemnifying Party will not
relieve it from any liability that it may have to an Indemnified Person
otherwise than on account of this Section 8. 
In case any such Proceedings are brought against any Indemnified Person
and it notifies the Indemnifying Party of the commencement thereof, the Indemnifying
Party will be entitled to participate therein, and, to the extent that it may
elect by written notice delivered to such Indemnified Person, to assume the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Person, provided that if the defendants in any such Proceedings include both
such Indemnified Person and the Indemnifying Party and such Indemnified Person
shall have concluded that there may be legal defenses available to it that are
different from or additional to those available to the Indemnifying Party, such
Indemnified Person shall have the right to select separate counsel to assert
such legal defenses and to otherwise participate in the defense of such
Proceedings on behalf of such Indemnified Person.  Upon receipt of notice from the Indemnifying
Party to such Indemnified Person of its election so to assume the defense of
such Proceedings and approval by such Indemnified Person of counsel, the
Indemnifying Party shall not be liable to such Indemnified Person for expenses
incurred by such Indemnified Person in connection with the defense thereof
(other than reasonable costs of investigation) unless (i) such Indemnified
Person shall have employed separate counsel in connection with the assertion of
legal defenses in accordance with the proviso to the next preceding sentence
(it being understood, however, that the Indemnifying Party shall not be liable
for the expenses of more than one separate counsel, approved by Investor,
representing the Indemnified Persons who are parties to such Proceedings), (ii)
the Indemnifying Party shall not have employed counsel reasonably satisfactory
to such Indemnified Person to represent such Indemnified Person within a
reasonable time after notice of commencement of the Proceedings or (iii) the
Indemnifying Party shall have authorized in writing the employment of counsel
for such Indemnified Person.

 28
 

 

(c)           The Indemnifying Party shall not be
liable for any settlement of any Proceedings effected without its written consent
(which consent shall not be unreasonably withheld).  If any settlement of any Proceeding is
consummated with the written consent of the Indemnifying Party or if there is a
final judgment for the plaintiff in any such Proceedings, the Indemnifying Party
agrees to indemnify and hold harmless each Indemnified Person from and against
any and all losses, claims, damages, liabilities and expenses by reason of such
settlement or judgment in accordance with, and subject to the limitations of,
the provisions of this Section 8.  The
Indemnifying Party shall not, without the prior written consent of an
Indemnified Person (which consent shall not be unreasonably withheld), effect
any settlement of any pending or threatened Proceedings in respect of which
indemnity has been sought hereunder by such Indemnified Person unless (a) such
settlement includes an unconditional release of such Indemnified Person in form
and substance satisfactory to such Indemnified Person from all liability on the
claims that are the subject matter of such Proceedings and (b) does not include
any statement as to or any admission of fault, culpability or a failure to act
by or on behalf of any Indemnified Person.

9.             Survival of Representations and
Warranties, Etc.  Notwithstanding any
investigation at any time made by or on behalf of any party hereto, all
representations, warranties and covenants made in this Agreement will survive
the execution and delivery of this Agreement and the Closing Date, except that
the representations and warranties made in Sections 3(n), (o) (p), (r), (s) and
(w)-(z) will only survive for a period of three (3) years after the Closing
Date.

10.           Termination.

(a)           This Agreement shall automatically
terminate:

(i)      If the Company has not filed the Agreement
Motion with the bankruptcy Court by February 15, 2007;

(ii)     If the Bankruptcy Court has not entered the
Agreement Order by March 30, 2007, but in no event later than the date the
Bankruptcy Court approved the Disclosure Statement; or

(iii)    If the purchase and sale contemplated by
Section 2(a) have not occurred by June 30, 2007.

(b)           The Investor may terminate this
Agreement:

(i)      If the Backstop Fee has not been paid by
the first Business Day after the tenth day following the entry of the Agreement
Order;

(ii)     If any Expiration Time Fee has not been
paid as required by Section 1(g);

 29
 

 

(iii)    Upon the failure of any of the conditions
set forth in Section 7 to be satisfied, which failure is incapable of cure by
June 30, 2007;

(iv)    If the Company makes a public announcement, enters
into an agreement or files any pleading or document with the Bankruptcy Court
evidencing its intention to support, or otherwise supports, any Competing
Transaction; or

(v)     If there shall have occurred any act of
terrorism, or a credible threat, attempt or conspiracy with respect to an act
of terrorism, relating to a major commercial airport in the United States,
Western Europe or on the Company’s route system or with respect to a United
States, Western European or Asian commercial aircraft on the Company’s route
system, which act, threat, attempt or conspiracy causes the Federal Aviation
Administration (or other applicable non-U.S. regulatory entity) to (i) close
any major United States, Western European or Asian commercial airport on the Company’s
route system for a period of at least 48 hours, (ii) ground United States domestic
commercial flights for a period of at least 48 hours or (iii) ground Northwest
Airlines commercial flights for a period of at least 48 hours, and the Investor
concludes in its reasonable judgment that it is inadvisable to proceed with the
purchase of the ECA Shares or the reoffer thereof.

(c)           The Company may terminate this
Agreement at any time prior to the entry of the Agreement Order, by giving
written notice to the Investor of its determination not to proceed with the
transactions contemplated hereby, whereupon this Agreement will terminate.

(d)           If this Agreement is terminated by
the Company pursuant to Section 10(c), or if this Agreement terminated
automatically pursuant to Section 10(a)(i) or (ii) and at the time of such
termination the Investor is in compliance in all material respects with its
obligations under this Agreement, then, subject to the approval of the
Bankruptcy Court, the Company shall pay the Investor $7,500,000 (the “Termination
Fee”), and, in any event, the Company shall pay to the Investor any
Transaction Expenses and any other amounts certified by the Investor to be due
and payable hereunder that have not been paid theretofore.  Payment of the amounts due under this Section
10(d) will be made by wire transfer of immediately available funds to the account
or accounts specified by the Investor at least 24 hours in advance to the Company.  The provision for the payment of the
Termination Fee is an integral part of the transactions contemplated by this
Agreement, and without this provision the Investor would not have entered into
this Agreement and shall, subject to the approval of the Bankruptcy Court,
constitute an administrative expense of the Company under section 364(c)(1) of
the Bankruptcy Code.  Accordingly, if
payment shall become due and payable pursuant to this Section, and suit is
commenced which results in a final judgment against the Company no longer
subject to appeal, the Company shall pay to the Investor its costs and
expenses, including attorneys’ fees, in connection with collecting or enforcing
its rights and remedies hereunder.

 

 30

(e)           In no event will the Termination Fee,
if any, be refundable upon termination of this Agreement pursuant to this
Section 10.

(f)            Upon termination under this Section
10, the covenants and agreements made by the parties herein under Sections
1(g), 2(b), 2(c), 8, 9, 10(d) and 11 through 19 will survive indefinitely in
accordance with their terms.

11.           Notices.  All notices and other communications in
connection with this Agreement will be in writing and will be deemed given (and
will be deemed to have been duly given upon receipt) if delivered personally,
sent via electronic facsimile (with confirmation), mailed by registered or
certified mail (return receipt requested) or delivered by an express courier
(with confirmation) to the parties at the following addresses (or at such other
address for a party as will be specified by like notice):

(a)           If to Investor, to:

(i)            J.P.
Morgan Securities Inc.

c/o JPMorgan Chase Bank,
N.A.

270 Park Avenue, 17th Floor

New York, New York  10017

Attention: Neelima Veluvolu

Telephone: (212) 270-2150

Telecopy No. (646)-792-3855

neelima.veluvolu@jpmorgan.com

and

J.P. Morgan Securities
Inc.

c/o JPMorgan Chase Bank, N.A.

270 Park Avenue, 17th Floor

New York, New York  10017

Attention: Karoline Kane

Telephone: (212) 270-0033

Telecopy No. (646)-792-3855

Karoline.kane2@jpmchase.com

with copies to:

Cahill Gordon
& Reindel LLP

80 Pine Street

New York, New York  10005

Attention:  Gerald S. Tanenbaum
                   Stephen A. Greene

Fax:  (212) 269-5420

and to:

 31
 

Cronin & Vris,
LLP

380 Madison Avenue, 24th Floor

New York, New York  10017

Attention:  Denis F. Cronin
                    Jane Lee Vris

Fax:  (212) 883-1314

(b)           If to the Company, to:

Northwest Airlines
Corporation

2700 Lone Oak Parkway

Eagan, Minnesota 55121

Attention: Neal Cohen
      Executive Vice President and Chief Financial
Officer

Fax:  (612) 72-4041

Attention: Michael Miller
       Vice President—Law and Secretary

Fax:  (612) 726-7123

with a copy to:

Cadwalader, Wickersham
& Taft LLP

One World Financial Center

New York, New York 10281

Attention: Dennis J. Block

Fax: (212)-504-6666

12.           Assignment; Third
Party Beneficiaries.  Neither this
Agreement nor any of the rights, interests or obligations under this Agreement
will be assigned by any of the parties (whether by operation of law or
otherwise) without the prior written consent of the other party.
Notwithstanding the previous sentence, this Agreement, or the Investor’s
obligations hereunder, may be assigned, delegated or transferred, in whole or
in part, by the Investor to any Affiliate (as defined in Rule 12b-2
under the Exchange Act) of the Investor over which the Investor or any of its
Affiliates exercises investment authority, including, without limitation, with
respect to voting and dispositive rights; provided, that any such assignee
assumes the obligations of the Investor hereunder and agrees in writing to be
bound by the terms of this Agreement in the same manner as the Investor.  Notwithstanding the foregoing or any other
provisions herein, no such assignment will relieve the Investor of its
obligations hereunder if such assignee fails to perform such obligations.
Except as provided in the sixth paragraph of this Agreement and the last
sentence of Section 2(a) with respect to Ultimate Purchasers, and except as
provided in Section 8 with respect to the Indemnified Parties, this Agreement
(including the documents and instruments referred to in this Agreement) is not
intended to and does not confer upon any person other than the parties hereto
any rights or remedies under this Agreement. 
Notwithstanding the foregoing, the Investor may direct the Company, by
notice given to the Company at least one Business Day prior to the Closing 

 32
 

Date, to deliver the number of ECA Shares to be
purchased by an Ultimate Purchaser to such Ultimate Purchaser, in which case
payment for such ECA Shares will be made directly to the Company by such
Ultimate Purchaser; provided that in no such case shall the Investor be relieved
of its obligation to pay for such ECA Shares in the event the Ultimate Purchaser
does not so pay, and no Ultimate Purchaser shall obtain any rights of the
Investor under this Agreement.  Notwithstanding
the foregoing or any other provisions hereof, the Investor may not assign any
of its rights or obligations under this Agreement to the extent such assignment
would violate applicable securities laws.

13.           Prior Negotiations; Entire
Agreement.  This Agreement (including
the exhibits hereto and the documents and instruments referred to in this Agreement)
constitutes the entire agreement of the parties and supersedes all prior
agreements, arrangements or understandings, whether written or oral, between
the parties with respect to the subject matter of this Agreement, except that
the parties hereto acknowledge that any confidentiality agreements heretofore
executed among the parties will continue in full force and effect.

14.           GOVERNING LAW; VENUE.  THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.  THE INVESTOR HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF, AND VENUE IN, THE UNITED STATES BANKRUPTCY COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS.

15.           Counterparts.  This Agreement may be executed in any number
of counterparts, all of which will be considered one and the same agreement and
will become effective when counterparts have been signed by each of the parties
and delivered to the other party (including via facsimile or other electronic
transmission), it being understood that each party need not sign the same
counterpart.

16.           Waivers and Amendments.  This Agreement may be amended, modified, superseded,
cancelled, renewed or extended, and the terms and conditions of this Agreement
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance, and subject, to the extent
required, to the approval of the Bankruptcy Court.  No delay on the part of any party in
exercising any right, power or privilege pursuant to this Agreement will
operate as a waiver thereof, nor will any waiver on the part of any party of
any right, power or privilege pursuant to this Agreement, nor will any single
or partial exercise of any right, power or privilege pursuant to this
Agreement, preclude any other or further exercise thereof or the exercise of
any other right, power or privilege pursuant to this Agreement.  The rights and remedies provided pursuant to
this Agreement are cumulative and are not exclusive of any rights or remedies
which any party otherwise may have at law or in equity.

17.           Headings.  The headings in this Agreement are for
reference purposes only and will not in any way affect the meaning or
interpretation of this Agreement.

 33
 

18.           Specific Performance.  The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable harm for
which money damages would not be an adequate remedy, and, accordingly, the
parties agree that, in addition to any other remedies, each will be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy and
without the necessity of posting bond.

19.           Guarantee of Company Obligations.  All obligations of the Company hereunder are
hereby unconditionally guaranteed by Northwest Airlines, Inc., a Minnesota corporation
(the “Guarantor”).

[Signature Page Follows]

 34
 

If the foregoing is in accordance with your
understanding, please sign and return to us a counterpart hereof, and upon the
acceptance hereof by you, this letter and such acceptance hereof will
constitute a binding agreement between you and (subject to the approval of the
Bankruptcy Court) the Company and the Guarantor.

	
   

  	
  Very truly yours,

  
	
   

  	
  NORTHWEST AIRLINES CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neal Cohen

  
	
   

  	
   

  	
  Name: Neal Cohen

  
	
   

  	
   

  	
  Title: Executive Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  NORTHWEST AIRLINES, INC.,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neal Cohen

  
	
   

  	
   

  	
  Name: Neal Cohen

  
	
   

  	
   

  	
  Title: Executive Vice President and

  
	
   

  	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
  Accepted as of
  the date hereof:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  J.P.
  MORGAN SECURITIES INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John Abate

  	
   

  	
   

  
	
   

  	
  Name: John Abate

  	
   

  	
   

  
	
   

  	
  Title: Managing Director

  	
   

  	
   

  

 

 35

Exhibit A

Term Sheet

	
  Key
  parameters:

   

  	
  Disclosure Statement

   

  The
  Disclosure Statement (as defined in Section 5(b) of the Equity Commitment
  Agreement (the “ECA”)) shall:

   

  n  be
  consistent with the Business Plan (as defined in Section 3(w) of the ECA);

   

  n  reflect
  EBITDARF in excess of $5.4 billion for fiscal year 2007;

   

  n  not
  be inconsistent with the conditions to confirmation, and the effectiveness of
  the Amended Plan and any waivers of such conditions shall not be inconsistent
  with the provisions of the ECA and this Term Sheet;

   

  n  not
  differ in any material respect from the draft Disclosure Statement provided
  to the Investor on February 9, 2007.

   

  Financial Conditions to Closing

   

  n  Pro
  forma unrestricted Cash Liquidity at emergence must be greater than $2.0 billion.

   

  n  The
  sum of Company (i) Indebtedness; (ii) 1-year forward GAAP aircraft rents
  multiplied by 7.0; and (iii) preferred equity must not exceed $9.5 billion,
  on a consolidated basis, at emergence.

   

  n  The
  fully diluted share count at the Closing Date after giving effect to the sale
  of the ECA Shares shall not exceed 271,977,778 unless the Company sells up to
  $150 million of shares to the Third Party Purchaser for an amount not less
  than the Purchase Price, which when included implies an aggregate share count
  that shall not exceed 277,533,333.

   

  n  The
  Company will use the net proceeds from the sale of the ECA Shares for general
  corporate purposes.

   

  n  The
  Final Agreement Order will provide for the release and exculpation of the
  Investor and the Ultimate Purchasers and their affiliates, representatives
  and advisors as set forth in Section 5(a) of the ECA.

   

  	
   

   

  

 

Fully
diluted share count parameters:

	
   

  	
   

  	
  Share count

  	
   

  
	
  n Pre
  offering

  	
   

  	
  244,200,000 

  	
  (1)

  
	
  n Sale of
  ECA Shares

  	
   

  	
  27,777,778

  	
   

  
	
  n Pro forma total

  	
   

  	
  271,977,778 

  	
  (1)

  

(1)
Both the pre-offering total share count of 244,200,000 (which is available to
unsecured creditors under the Amended Plan and to employees, management and
directors as stock grants) and the pro forma total share count of 271,977,778
include shares to be issued on the Effective Date pursuant to the Amended Plan
plus "Calculated Option Shares" issued or issuable as of such date. 

"Calculated
Option Shares" means all shares issued or issuable pursuant to options
(not to include options granted to employ-ees, management and directors of the
Company, which are addressed below), warrants and convertible or exchangeable
se-curities, and the number of Calculated Option Shares shall be determined by
dividing (i) the aggregate Black-Scholes Formula valuation (using the average
100 day trailing volatility for publicly traded mainline carriers including AMR
Corporation, US Airways Group, Inc., Continental Airlines, Inc. and UAL
Corporation, to the extent that it is publicly traded on the NYSE or NASDAQ at
the time of calculation) of all of such options, warrants and convertible or
exchangeable securities by (ii) $30.00.  

Neither
the pre-offering total share count nor the pro forma total share count includes
(i) up to $150,000,000 of New Com-mon Stock that may be issued to a Third Party
Purchaser at a price not less than $27.00 per share and (ii) shares underlying
options granted to employees, management and directors of the Company, which
shall be issued with market strike prices.

 

	
   

  	
   

  
	
  Definitions:

  	
  n  Capitalized
  undefined terms have the meanings set forth in the Equity Commitment Agreement.

   

  n  “Cash
  Liquidity” means, at any time, the sum of (a) unrestricted cash and cash
  equivalents of the Company and its Subsidiaries at such time and (b)
  unrestricted short-term investments of the Company and its Subsidiaries at
  such time.

   

  n  “EBITDARF”
  means, for any period, without duplication, the consolidated operating income
  of the Company and its Subsidiaries for such period (calculated in accordance
  with GAAP and in a manner consistent with the consolidated financial
  statements of the Company and its Subsidiaries) plus:

   

  (i)
  consolidated aircraft operating rental expenses of the Company and its
  Subsidiaries that were deducted in arriving at the amount of such consolidated
  operating income for such period;

   

  (ii)
  amortization and depreciation that were deducted in arriving at the amount of
  such consolidated operating income for such period;

   

  (iii)
  interest income of the Company and its Subsidiaries during such period;

   

  (iv)
  all government reimbursements in cash received during such period for losses
  incurred as a result of developments affecting the aviation industry
  (including, without limitation, terrorist acts and epidemic diseases);

   

  (v)
  any non-recurring non-cash charges of the Company and its Subsidiaries
  recorded during such period (excluding any such charge incurred in the
  ordinary course of business that constitutes an accrual of or a reserve for
  cash charges for any future period), all as determined on a consolidated
  basis in accordance with GAAP; provided, however, that cash payments made in
  such period or in any future period in respect of such non-cash charges
  (excluding any such charge incurred in the ordinary course of business that
  constitutes an accrual of or a reserve for cash charges for any future
  period) shall be subtracted in calculating EBITDARF in the period when such
  payments are made;

   

  (vi)
  non-cash non-recurring charges during such period resulting from the Company’s
  fleet restructuring and professional fees and other direct bankruptcy costs
  related to the Proceedings; provided, however, that cash payments made in
  such period or in any future period in respect of such noncash charges (excluding
  any such charge incurred in the ordinary course of business that constitutes
  an accrual of or a reserve for cash charges for any future period) shall be
  subtracted in calculating EBITDARF in the period when such payments are made,
  and provided further that EBITDARF shall be calculated without giving effect
  to any acceleration of flight equipment rental expense after the Closing Date
  required as a result of the Company’s decision to remove an aircraft or
  aircraft class from the operating fleet of the Company; and

   

  (vii)
  mainline fuel expenses for such period, consistent with the “Aircraft, fuel
  and taxes” line item of the Company’s regulatory filings, not to include
  regional carrier fuel expenses.

   

  n  “Indebtedness”
  means, as to any person, without duplication:

   

  (i)
  all indebtedness (including principal, interest, fees and charges) of such
  person for borrowed money or for the deferred purchase price of property or
  services but excluding trade accounts payable and accrued expenses incurred
  in the ordinary course of business;

   

  (ii)
  all indebtedness of the types described in clause (i), (iii) or (iv) of this
  definition secured by any lien on any property owned by such person, whether
  or not such indebtedness has been assumed by such person (to the extent of
  the value of the respective property);

   

  (iii)
  capital lease obligations; and

   

  (iv)
  all hedging obligations under any interest rate protection agreement.

   

  n   “Subsidiary”
  means (i) any corporation more than 50% of whose stock having by the terms
  thereof ordinary voting power to elect a majority of the directors of such
  corporation (irrespective of whether or not at the time stock of any other
  class or classes of such corporation shall have or might have voting power by
  reason of the happening of any contingency) is at the time owned by such
  person and/or one or more Subsidiaries of such person and (ii) any partnership,
  limited liability company, association, joint venture or other entity in
  which such person and/or one or more Subsidiaries of such person has more
  than a 50% equity interest at the time; provided, however, that LAX Two Corp.
  and its Subsidiaries shall be deemed not to be Subsidiaries of the Company or
  any of its Subsidiaries for purposes of this Term Sheet.

   

  

 

Exhibit B

Registration
Rights Agreement:

(i) all shares of New
Common Stock acquired pursuant to the Equity Commitment Agreement by the
Investors, the Ultimate Purchasers and their successors, assigns and
transferees (collectively, “Holders”) on the Closing Date and all shares of New
Common Stock acquired pursuant to the Amended Plan, to the extent such shares
are required to be registered under the Securities Act in connection with the
resale thereof, shall constitute “registrable securities”;

(ii) the initial shelf
registration statement shall be kept effective until two years after the later
of the date on which it becomes effective and the Closing Date;

(iii) in addition to such
initial shelf registration statement, the Holders shall have unlimited demand
and piggyback registration rights (subject to reasonable minimum amounts to be
included in any demand);

(iv) the Company shall
provide reasonable cooperation and assistance of the type described in a
registration rights agreement for registered offerings if any of the Holders
elects to sell its shares pursuant to a private placement or similar
transaction (including providing due diligence access);

(v) provide for
underwritten offerings; and

(vi) representations and
warranties and indemnities and contribution of the type made in a customary
underwriting agreements for an underwritten public offering.Exhibit 10.1

Portions of this Exhibit were
omitted and filed separately with the Secretary of the Commission pursuant to
an application for confidential treatment filed with the Commission pursuant to
Rule 406 under the Securities Act of 1933. Such omissions are designated as
***.

COLLABORATION AND LICENSE AGREEMENT

This
COLLABORATION AND LICENSE AGREEMENT (the “Agreement”),
effective as of the 25th day of February 2002 (the “Effective Date”), as
modified by the Addendum effective December 22, 2003 and the Second Addendum
effective December 1, 2004, and as further amended and restated effective as of
February 8th, 2007 (the “Amendment Date”), is made by and between Pharmacopeia Drug Discovery, Inc. (as
successor in interest to Pharmacopeia, Inc.), a Delaware corporation,
having a principal place of business at 3000 Eastpark Boulevard, Cranbury, New
Jersey 08512 (“Pharmacopeia”), and N.V. Organon, a Dutch Company limited by
Shares, having a principal place of business at Kloosterstraat 6, 5342 AB Oss,
The Netherlands (“Organon”).

BACKGROUND

WHEREAS, Pharmacopeia has internal expertise in the screening
and optimization of compounds;

WHEREAS, Organon is interested in utilizing the expertise of
Pharmacopeia in the identification of Lead Compounds and Optionable Development
Candidates against certain Targets; and

WHEREAS, Organon and
Pharmacopeia wish to enter into a Research Collaboration the objective of which
will be for Pharmacopeia to deliver Lead Series (as defined herein); for
Pharmacopeia and Organon to collaboratively optimize certain of these Lead
Series into Optionable Development Candidates; for Organon to develop market
and sell Collaboration Products; and for Pharmacopeia to have certain
co-development and co-commercialization rights.

NOW THEREFORE, in consideration of the mutual covenants and
conditions hereinafter set forth in this Agreement, the Parties hereto agree as
follows:

ARTICLE 1

DEFINITIONS

As
used herein, the following terms shall have the meanings set forth below:

1.1                                 “Affiliate”
means any Person controlled by, controlling, or under common control with a
Party. For the purpose of this Section 1.1 only, “control” shall refer to (a)
the possession, directly or indirectly, of the power to direct the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, or (b) the ownership,

directly or indirectly,
of at least fifty percent (50%) (or, if less, the maximum ownership interest
permitted by law) of the voting securities or other ownership interest of a
Person.

1.2                                 “Acquired
Program” has the meaning set forth in Section 2.9(c1).

1.3                                 “Assay”
collectively refers to the Primary Assay and the Secondary Assay.

1.4                                 “Assay
Improvements” have the meaning set forth in Section 2.3.

1.5                                 “Back-up
Program” has the meaning set forth in Section 2.2(b)(iii).

1.6                                 “Buy-up”
has the meaning set forth in Section 2.9.

1.7                                 “Collaboration
Product” means any therapeutic or prophylactic product that contains a
Second Research Term Lead Compound or Derivative Compound thereof or an Optionable
Development Candidate.

1.8                                 “Columbia
License” means that certain license agreement effective as of July 16,
1993, as amended and restated as of October 6, 1995, and as further amended and
restated effective as of July 1, 2003, entered by and between Pharmacopeia and
the Trustees of Columbia University in the City of New York and the Cold Spring
Harbor Laboratory.

1.9                                 “Combination
Product” means any therapeutic or prophylactic product that comprises two
(2) or more active ingredients, at least one of which is a Second Research Term
Lead Compound or a Derivative Compound thereof or an Optionable Development
Candidate.

1.10                           “Confidential
Information” as to each Party, means such Party’s confidential information,
Patent Rights and Know-how, all the data and materials of that Party relating
to the Research Collaboration, the Target Information, Lead Compounds, Organon
Compounds, Derivative Compounds thereof and Collaboration Products, and
including without limitation, all research, technical, clinical development,
manufacturing, marketing, financial, personnel, and other business information
and plans of such Party.

1.11                           “Controls”
or “Controlled” means possession of the ability to grant licenses or
sublicenses without violating the terms of any agreement or other arrangement
with, or the rights of, any Third Party.

1.12                           “Derivative
Compound” means a compound which is a chemical modification of a Lead Compound
or other active structure disclosed by one Party to the other with respect to a
particular Target, having potency at a level to be determined by the JRC with
respect to such Target, which (i) results from a chemical synthesis program
based on a Lead Compound or other active structure disclosed by one Party to
the other, or (ii) is based on structure-function data relating thereto, or
(iii) is based on Developed Technology. For clarification purposes, subject to
***. These compounds will ***. Further, it is understood that Derivative
Compounds ***.

1.13                           “Developed
Technology” means any and all data or information whether tangible or
intangible, including without limitation the Parties’ Know-how and Patent
Rights, which (i) is necessary to make or use Lead Compounds or Development
Candidates, or to develop, make, use or sell Collaboration Products based
thereon, and (ii) which was conceived or reduced to

 2
 

practice during and in
the course of the Research Collaboration, by employees or agents of Organon,
Pharmacopeia and any of their respective Affiliates, either alone or jointly.
Developed Technology shall not include Pharmacopeia Base Technology, Organon
Base Technology or Excluded Technology.

1.14                           “Development
Candidate” means any Lead Compound or Derivative Compound with respect to
which Organon has elected to pursue a GLP toxicity study.

1.15                           “Development
Program” has the meaning set forth in Section 2.9(b).

1.16                           “Economic
Interest” means the ***.

1.17                           “EMEA” means the European Medicines
Evaluation Agency and any successor entity thereto.

1.18                           “Excluded
Technology” means any and all technical data or information, whether
tangible or intangible, including without limitation Know-how and Patent Rights
owned or Controlled by Pharmacopeia or its Affiliates relating to the Columbia
License, the creation or use of encoded combinatorial chemical compound
libraries, tag or marker compound engineering and decoding, computer software,
or high throughput screening assays.

1.19                           “Exclusivity
Period” has the meaning set forth in Section 4.1.

1.20                           “Fair
Market Value” means the cash consideration, which a willing seller would
realize from an unrelated willing buyer in an arm’s length sale of an identical
item sold in the same quantity and at the same time and place of the
transaction.

1.21                           “FDA”
means the U.S. Food and Drug Administration, or any successor thereto.

1.22                           “First
Commercial Sale” means, with respect to a Collaboration Product in any
country, the first sale for use or consumption by the general public of such
Collaboration Product in such country after all Regulatory Approvals have been
obtained in such country.

1.23                           “FTE” means a ***.

1.24                           “Inactive
Compound” means a Pharmacopeia Compound that was screened in the Research
Collaboration against a Target and was not found to show activity against such
Target. This activity can be agonistic or antagonistic or modulatory in nature.

1.25                           “IND”
means an Investigational New Drug Application, as defined in the U.S. Food,
Drug and Cosmetic Act and the regulations promulgated thereunder for initiating
clinical trials in the United States, or any corresponding foreign application,
registration or certification.

1.26                           “Initial
Research Term” means the period commencing on the Effective Date and ending
on the earlier of (i) the designation of the eighth (8th) Lead Compound pursuant to Section 2.4,
2.2(c)(i)(4) or 2.2(c)(i)(5), or (ii) February 25, 2007.

 3
 

1.27                           “Initial
Research Term Lead Compound” or “Initial Research Term Lead Series”
means any Lead Compounds designated during the Initial Research Term pursuant
to Section 2.4, 2.2(c)(i)(4) or 2.2(c)(i)(5). Such Lead Compounds shall be
considered Transferred Programs as defined in this Agreement. Notwithstanding
the preceding sentences, “Initial Research Term Lead Compounds” shall exclude
any Lead Compound selected for Lead Optimization pursuant to Section 2.2(b) hereof.
Promptly following the conclusion of the Initial Research Term, the JRC’s
meeting minutes shall be updated to reflect all Lead Series identified during
the Initial Research Term.

1.28                           “Joint
Research Committee” or “JRC” means the entity organized to supervise
the Research Collaboration and acting pursuant to Article 3.

1.29                           “Know-how” means all inventions,
technology, or other information discovered or developed by or for a Party as
of the Effective Date, or in connection with and during the Research Collaboration,
whether or not patentable, constituting materials, methods, processes,
techniques or data, necessary for the development, manufacture or use of Lead
Compounds or Derivative Compounds, or for the manufacture, use or sale of a
Collaboration Product.

1.30                          “Lead Compound” means a
Pharmacopeia Compound, other than a Non-Designated Lead Compound or
Non-Designated Development Series, which meets the criteria set forth in
Section 2.4 and is available for license to Organon pursuant to the terms and conditions
of this Agreement. For clarification purposes, subject to Section 4.5.3, it is
understood that Organon can independently find compounds against the Target
from its own discovery activities. These compounds will not be designated as
Lead Compounds if Organon, as shown by contemporaneous documentation, has
developed these compounds independently of the intellectual property described
in Section 1.12(i) - (iii). Further, it is understood that Lead Compounds with
respect to a Target shall not include a compound if information about such
compound’s activity against the Target already was in the public domain.

1.31                           “Lead
Optimization” means the work carried out by the Parties to produce
Optionable Development Candidates from Lead Compounds as per Section 2.2(b).

1.32                           “Lead
Series” has the meaning set forth in Section 2.4.

1.33                           “Library”
means any chemical compound library prepared by or on behalf of Pharmacopeia
and screened pursuant to the Research Collaboration.

1.34                           “Library
Compound” means any compound that was, prior to the Effective Date, or is,
at any time during the Research Term, contained in a Library.

1.35                           “Major
Market Country” means the U.S., U.K., Germany, France, Spain, Italy, The
Netherlands, or Japan.

1.36                           “Manhour”
shall mean the ***. Manhours shall
include ***.

1.37                           “Manhour
Tariff” shall mean the ***. The ***. It is understood and agreed that the
***.

 4
 

1.38                           “NDA”
means a New Drug Application, as defined in the U.S. Food, Drug and Cosmetic
Act and the regulations promulgated thereunder, or any corresponding foreign
equivalent with a Regulatory Agency.

1.39                           “Net
Sales” means the ***.

A
“sale” ***. In the event that a ***. A “sale” ***. In the event that a ***

The sale of a ***. All
sales of ***. The sale of a ***. All sales of ***.

To calculate the ***.

1.40                           “Non-Active Compound” means any compound jointly conceived by
the Parties during the Second Research Term, which is not a Second Research
Term Lead Compound, Derivative Compound or Development Candidate, and with
respect to which the JRC has explicitly decided not to pursue research and
development against the Target. It is understood and agreed that if ***.

1.41                           “Non-Designated
Development Series” has the meaning set forth in Section 2.2(b)(viii)(A).

1.42                           “Non-Designated
Lead Compound” has the meaning set forth in Section 2.4(c).

1.43                           “Option
Fee” has the meaning set forth in Section 2.9.

1.44                           “Opt-out”
has the meaning set forth in Section 2.9(d).

1.45                           “Optionable
Development Candidate” means a compound that was the subject of Lead
Optimization work under this Agreement as per Section 2.2(b) that meets the
Development Candidate criteria defined by the JRC for the specific Target.

1.46                           “Organon Base Technology”
means any and all technical data or information, whether tangible or
intangible, including without limitation Organon’s Know-how and Patent Rights
(i) ***, and (ii) ***.

1.47                           “Organon
Compound” has the meaning set forth in Section 2.5.

1.48                           “Party”
means Pharmacopeia or Organon. Pharmacopeia and Organon shall be collectively
referred to as the Parties.

1.49                           “Patent
Committee” means that committee to be formed pursuant to Section 3.5.

1.50                           “Patent Rights”
means any and all patents and patent applications (which shall be deemed to
include certificates of invention and applications for certificates of
invention) which as of the Effective Date or during the term of this Agreement
are ***.

 5
 

1.51                           “Person” means any
natural person, corporation, firm, business trust, joint venture, association,
organization, company, partnership or other business entity, or any government
or agency or political subdivision thereof.

1.52                           “Pharmacopeia
Compound” means a Library Compound or a compound identified by Pharmacopeia
in the Research Collaboration.

1.53                           “Phase I,” “Phase
II” and “Phase III” means Phase I (or Phase I/II), Phase II (or
Phase II/III) and Phase III clinical trials, respectively, in each case as
prescribed by applicable FDA IND Regulations, or any corresponding foreign
statutes, rules or regulations.

1.54                           “Pharmacopeia Base
Technology” means any and all technical data or information, whether
tangible or intangible, including without limitation Pharmacopeia’s Know-how
and Patent Rights (i) ***, and (ii) ***.

1.55                           “Pivotal Trial” means a clinical trial designed to establish
efficacy sufficient to allow Regulatory Approval for marketing authorization.

1.56                           “Potential Lead Compound” has the meaning set forth in Section
2.4(b).

1.57                           “Primary
Assay” means on a Target-by-Target basis, the primary assay provided by
either Party for screening in the Research Collaboration.

1.58                           “Program Development Costs” means,
with respect to any ***.

1.59                           “Project Team” has the meaning set
forth in Section 3.1.

1.60                           “Proposed
Target” has the meaning set forth in Section 2.2(a).

1.61                           “Regulatory
Agency” means the FDA or the applicable department, bureau or other
governmental regulatory authority in each country in the Territory involved in
the granting of Regulatory Approvals.

1.62                           “Regulatory
Approval” means any and all approvals (including price reimbursement
approvals), licenses, registrations, or authorizations of any Regulatory
Agency, necessary for the commercial marketing of a Collaboration Product.

1.63                           “Research
Collaboration” means the research activities undertaken by the Parties
pursuant to Article 2.

1.64                           “Research
Plan” on a Target-by-Target basis, means all information relating to the
Parties’ respective activities with respect to a Target, including but not
limited to the Target Information. Minutes of JRC meetings, if signed by a JRC
representative of each Party, shall be deemed included within the Research
Plan.

1.65                           “Research
Term” is defined in Section 15.2.

 6
 

1.66                           “Research
Year One” means the period commencing at the end of the Start-Up Phase and
ending twelve (12) months thereafter.

1.67                           “Research
Year Two” means the period commencing at the end of Research Year One and
ending twelve (12) months thereafter.

1.68                           “Research
Year Three” means the period commencing at the end of Research Year Two and
ending twelve (12) months thereafter.

1.69                           “Research
Year Four” means the period commencing at the end of Research Year Three
and ending twelve (12) months thereafter.

1.70                           “Reverted
Lead Compound” has the meaning set forth in Section 7.2.

1.71                           “Second
Research Term” means the period commencing on the day after the end of the
Initial Research Term, and ending five (5) years thereafter, unless earlier
terminated pursuant to Section 15.3.3(c).

1.72                           “Second
Research Term Lead Compound” or “Second Research Term Lead Series”
means any Lead Compound other than an Initial Research Term Lead Compound.

1.73                           “Secondary
Assay” means on a Target-by-Target basis, one or more assays provided by
either Party, such as, for example, an assay for the characterization of
selectivity or in vitro efficacy of a Pharmacopeia Compound against a Target.

1.74                           “Start-Up
Phase” means the period commencing on the Effective Date and ending six (6)
months thereafter.

1.75                           “Sublicensee”
as to each Party means a Person other than an Affiliate of a Party to whom has
been granted sublicense rights under the license granted each Party hereunder,
which rights include at least the right to sell a Collaboration Product. As
used in this Agreement, “Sublicensee” shall also include a Third Party to whom
a Party has granted a sublicense under this Agreement to distribute such
Collaboration Product, provided that such Third Party has the primary
responsibility for marketing and promotion, at its expense, of such
Collaboration Product within countries in the Territory for which such
distribution rights are granted, which marketing and promotional activities are
not subsidized directly or indirectly by that Party, such as, without
limitation, through a specific allowance or a guaranteed selling margin for
such Third Party meant to cover its expenses. Third Parties that are permitted
to manufacture or finish Collaboration Products for supply to a Party, its
Affiliates or Sublicensees are not “Sublicensees.”

1.76                           “Sublicense
Income” means, as it relates to Pharmacopeia, any consideration paid to
Pharmacopeia by each Sublicensee gaining rights pursuant to the provisions of
Section 5.6.2, such consideration including, without limitation, any income or
compensation received from Third Parties either as upfront payments, signing
fees, milestone payments, as well as the Fair Market Value of any quid product
or other non-cash consideration paid by each Sublicensee to Pharmacopeia.

 7
 

1.77                           “Target”
has the meaning set forth in Section 2.2.

1.78                           “Target
Information” means on a Target-by-Target basis, all information relating to
the identity of the Target, any modifications that Organon proposes to the
standard criteria for a Lead Compound set forth in Table 1, the chemistry and
protocol of the Primary Assay, any reference standards and Secondary Assay to
be run at Organon or transferred to Pharmacopeia as the case may be, and any
other enabling information relevant to the conduct of the activities of the
Parties hereunder. “Target Information” shall also include on a
Target-by-Target basis, any relevant Organon or Third Party patent application
or patent of which Organon is aware, as well as the status of Organon’s efforts
in connection with its development of compounds against a Target. For the
avoidance of doubt, compound structure information shall not be part of Target
Information.

1.79                           “Territory”
means all the countries of the world.

1.80                           “Third
Party” means any Person other than Organon, its Affiliates or Sublicensees
and Pharmacopeia or its Affiliates.

1.81                           “Transferred
Programs” means those compounds referred to in Section 2.2(c)(i) for which
Pharmacopeia has agreed, pursuant to this Agreement, to forgo milestone and
royalty payments from Organon as set forth in Section 2.2(d). A list of the
targets applicable to such Transferred Programs as of the Amendment Date is
attached hereto as Exhibit B.

ARTICLE 2

RESEARCH COLLABORATION

2.1                                 Goals
of Research Collaboration.

2.1.1                        General.
Each Party shall (i) undertake an interactive, cooperative role in the Research
Collaboration with the other Party as set forth in the Research Plan, and such
other activities which from time to time, the JRC decides are necessary for the
continuing success of the Research Collaboration; (ii) use commercially
reasonable efforts to diligently perform its activities pursuant to the
Research Plan, including, without limitation, by using personnel with
sufficient skills and experience together with sufficient equipment and
facilities, to carry out such Party’s obligations under the Research
Collaboration and to accomplish the objectives of the Research Collaboration;
and (iii) conduct the Research Collaboration in good scientific manner, and in
compliance in all material respects with all requirements of applicable laws,
rules and regulations, and all other requirements of any good laboratory
practices to attempt to achieve its objectives efficiently and expeditiously.

2.1.2                        Activities
of Pharmacopeia. In consideration for the funding provided by Organon,
Pharmacopeia shall:

(a)
utilize the appropriate screening and optimization resources to screen ***,
with the ***,

 8
 

(b)
utilize the appropriate screening and optimization resources to screen ***.
(The delivery of ***). It is expected that the foregoing can be accomplished
through the screening of Pharmacopeia Compounds against *** as provided herein.

(c)
during the Second Research Term, at any one time, pursue an ***, selected by
the Parties as set forth in Section 2.2(b) below, ***, these to be referred to
as “Optionable Development Candidates”.

(d)
provide Organon with the necessary feedback on the progress of its screening
and optimization efforts to enable Organon to provide Pharmacopeia the support
it requires to conduct its activities hereunder.

(e)
subject to Section 15.3.3(c), continue to perform diligently under the
Agreement during the Second Research Term even after achievement of the goals
specified in Section 2.1.2(b) and (c).

(f) at
its sole discretion, suggest and contribute Targets for consideration by the
JRC under the terms of this Agreement.

2.1.3                        Activities
of Organon. Organon Shall:

(a)
during the Initial Research Term, identify and make available to Pharmacopeia
***

(b)
during the Second Research Term, identify and make available to Pharmacopeia
***, to enable Pharmacopeia to select a subset of such targets that shall
become the focus of the screening activities of Pharmacopeia hereunder. Organon
shall make available to Pharmacopeia ***. With each such target, Organon shall also
provide to Pharmacopeia all pertinent Target Information and key reagents
essential to run the Assay. In addition, with respect to each Target, Organon
shall make available to Pharmacopeia any Secondary Assay that (i) is required
to confirm that a Pharmacopeia Compound potentially meets the criteria for a
Lead Compound and (ii) is not already in Pharmacopeia’s possession. In addition
to the foregoing, Organon shall support the Research Collaboration, by making
available to Pharmacopeia any other information, except for the structure
information regarding Organon Compounds (as defined in Section 2.5) that is
essential for Pharmacopeia to continue its activities hereunder, and if
requested by Pharmacopeia, Organon shall ***.

(c)
with respect to each Lead Compound or Lead Series selected by the Parties for
Lead Optimization as set forth in Section 2.2(b) below, ***.

 9
 

2.1.4                        Subcontracting. A Party (hereinafter the “Subcontracting
Party”) may engage Third Party subcontractors (including contract research
organizations) to perform certain of its obligations under this Agreement. Any
Third Party subcontractor to be so engaged to perform a Party’s obligations set
forth in this Agreement shall have sufficient expertise to meet the
qualifications typically required by such Subcontracting Party for the
performance of work similar in scope and complexity to the subcontracted
activity. The activities of any such Third Party subcontractors shall be
considered activities of the Subcontracting Party under this Agreement. A
Subcontracting Party shall be responsible for ensuring compliance by its Third
Party subcontractors, if any, with the terms of this Agreement, including
obligations of confidentiality. Further, the Subcontracting Party shall ensure
in any subcontracting arrangement that it obtains sole ownership of all
inventions, data and related intellectual property rights made or developed by
such Third Party subcontractor involving the manufacture or use of any Target,
Lead Compound, Derivative Compound, Optionable Development Candidate, or
Collaboration Product.

2.2                                 Selection
of Targets.

(a)                                  Selection
of Targets for Screening. As provided in Section 2.1.3, during the Initial
Research Term and the Second Research Term, Organon shall make available to
Pharmacopeia respective sets of ***, from which Pharmacopeia shall select a
subset that will become the focus of the Parties’ activities in the Research
Collaboration. At any one time, Organon shall make available ***. Each target
made available to Pharmacopeia shall be referred to as a “Proposed Target.”
Pharmacopeia shall inform Organon if it has previously screened against a
Proposed Target, or is prevented from screening a Proposed Target pursuant to
Third Party obligations. For each Proposed Target, Organon shall make available
to Pharmacopeia the Target Information, and such other information as
Pharmacopeia may reasonably request. For each Proposed Target, Pharmacopeia
shall review and, if need be, discuss with Organon the Target Information. For
each Proposed Target, Pharmacopeia shall assess whether the criteria for Lead
Compound designation set forth in Section 2.4(a) is applicable to such Proposed
Target and shall determine whether such criteria need to be modified to enable
Pharmacopeia to accomplish the goals of the Research Collaboration with respect
to such Proposed Target. If the Target Information for any given Proposed
Target requires a modification of the criteria in Table 1, the JRC shall
discuss such modification and shall redefine such criteria. Following such
modification, if any, Pharmacopeia shall notify Organon whether it accepts the
Proposed Target, and following such acceptance, the Proposed Target shall be
deemed a “Target” for purposes of this Agreement. Any target which is not
selected by Pharmacopeia as it is made available by Organon may be selected at
a later date by Pharmacopeia subject to approval by Organon, which approval
shall not be unreasonably withheld, and subject to the procedure set forth in
this Section.

(b)                                 Selection of
Lead Compounds for Lead Optimization. During the
Second Research Term, Organon shall propose to Pharmacopeia Lead Optimization
programs based on Lead Series designated pursuant to Section 2.4, with the goal
of optimizing such Lead Series so as to be suitable for designation as
Optionable Development Candidates, provided that ***. Organon shall endeavor to
enable Pharmacopeia to ***. If ***. If Organon is unable to enable Pharmacopeia
to conduct any Lead Optimization as set forth above, this shall not result in
any change in the payments due from Organon to Pharmacopeia under this
Agreement.

 10
 

(i)
 Development Candidate Criteria. For
any program which is selected for Lead Optimization activities under this
Agreement, specific Development Candidate criteria shall be discussed and
approved by the JRC. The Development Candidate Criteria will, in general,
include the items shown in Exhibit D. The JRC may, at any time, review the
progress of the specific Lead Optimization program. In such an event, the JRC
may determine that the Research Collaboration with respect to a particular
compound has, notwithstanding the express criteria set forth and approved by
the JRC, on balance achieved a stage of development consistent with such
criteria, and therefore, such compound shall be designated as an Optionable
Development Candidate.

(ii)  Pharmacopeia Co-development / Co-promotion
Option. With respect only to the Optionable Development Candidates, Section 2.9
will apply.

(iii)  Back-up Development Candidates. After
Pharmacopeia has exercised the Buy-up with respect to an Optionable Development
Candidate pursuant to Section 2.9, the Parties may further agree to initiate a
program, independently of any Lead Optimization program, to produce a back-up
development candidate with respect to the same Target as such Optionable
Development Candidate (a “Back-up Program”). Prior to reaching such agreement,
the Parties shall have a good faith discussion concerning the strategy for such
proposed Back-up Program, including a review of all potential starting
compounds. The Parties will agree where and how the work with respect to such
Back-up Program will be carried out. Any such Back-up Program (a) shall be ***;
(b) shall be ***; but (c) shall not be *** under this Agreement.

(iv)  Pharmacopeia Co-development / Co-promotion of
Back-up Development Candidates. In the event that a Back-up Program results in
the designation of a back-up Development Candidate pursuant to Section
2.2(b)(iii), further development and commercialization of such back-up
Development Candidate shall be handled in accordance with Section 2.9 (i.e.,
*** pursuant to Section 2.9), except that such back-up Development Candidate
shall ***.

(v)  Pharmacopeia’s Decision not to Pursue Back-up
Program. If Pharmacopeia decides not to participate in a Back-Up Program
pursuant to Section 2.2(b)(iii) with respect to a particular Target, then
Organon may either, at Organon’s sole option:

(A)  ***.  In the event such
***. ***; or

(B) ***. It is understood
and agreed that any decision by Pharmacopeia not to exercise the Buy-up with
respect to such a back-up Development Candidate pursuant to Section 2.2(b)(v)
shall not affect Pharmacopeia’s continued joint development and promotion, with
Organon, of the previous Optionable Development Candidate active against the
same Target pursuant to Section 2.9.

(vi)  INTENTIONALLY OMITTED.

(vii)  INTENTIONALLY OMITTED.

 11
 

(viii)  Discontinuation
of a Lead Optimization Program.

(A)  The JRC may, at any time, agree to terminate
a Lead Optimization program. For a ***. During the ***. If ***. In
the event that ***. In the event that ***.

(B)  In the event the JRC fails to reach agreement
to terminate a particular Lead Optimization program, ***. In such case, the
Lead Series associated with such program shall be considered and treated as
“Non-Designated Lead Compounds” pursuant to Section 2.4(c), except that any
such *** shall be subject to the following special conditions: (1) ***; and (2)
***. Notwithstanding
the foregoing, at any time beginning ***.  If ***. The Parties
may also discuss including the program under Section 2.2(b).

(C)  Research
Uses After Termination of a Lead Optimization Program. Each Party may
retain in its internal compound collection samples of any compound that was (1)
jointly conceived by the Parties and (2) synthesized in the course of a Lead Optimization
program with respect to any Target. After the termination of such Lead
Optimization program, either Party may *** pursuant
to the Research Collaboration. For example, such ***.
Notwithstanding the foregoing, neither Party shall be obligated to supply
samples of any such compound to the other Party. Further, neither Party grants
to the other Party any rights under any intellectual property Controlled by
such Party with respect to the research and development contemplated by this
Section 2.2(b)(viii)(C). For the avoidance of doubt, reference to the ***.

(c)                                  Ongoing
Status of Targets Screened by Pharmacopeia during the Initial Research Term.
Effective as of the Amendment Date,

(i)  The following will be considered Transferred
Programs:

(1)
All Lead Series transferred under programs for the Targets specifically
identified in Exhibit B, for which the ***;

(2)
Those compounds disclosed or physically transferred under programs for the
targets specifically identified on Exhibit B as ***;

(3)
The *** compounds identified by Pharmacopeia during the Initial Research Term;

 12

(4)  Subject to the terms of this Agreement, in
the event that (i) Pharmacopeia has *** and (ii) the ***. Organon shall have
the right to *** under this Section.

(5)  Subject to the terms of this Agreement, in
the event that (i) Pharmacopeia has *** and (ii) the ***

(x) ***; or

(y) ***.

(z)  ***.

(6) Any programs transferred under Section
15.3.3(c).

(ii)
Should any current Research Collaboration program  be subject to issue resolution pursuant to Sections
3.4 or 16.19, any decision under Section 2.2(c)(i)(4) or 2.2(c)(i)(5) will be
delayed until resolution of the issue with respect to such program.

(iii)  On a Target-by-Target basis, and subject to
the terms of this Agreement, including 2.2(c)(ii), all Targets screened by
Pharmacopeia during the Initial Research Term, with respect to which no Lead
Compound “delivery payment” has been paid pursuant to Section 7.1.2, and which
Pharmacopeia is continuing to investigate as of the end of the Initial Research
Term, may continue to be the subject of Pharmacopeia’s activities under the
Agreement during the Second Research Term, unless Organon provides Pharmacopeia
with written notice to the contrary within five (5) business days following the
end of the Initial Research Term.

(d)  Transferred Programs. 
Effective as of the Amendment Date, Pharmacopeia hereby waives its right to
receive further compensation with respect to Transferred Programs or any
compounds derived therefrom made by Organon based on a Transferred Program,
subject to the following terms:

(i)
 Pharmacopeia shall have no further obligation to make any further
expenditures with respect to the Transferred Programs.

(ii)
Pharmacopeia agrees that it shall have no further rights to use the Transferred
Programs or to file any patent applications with respect thereto.

(iii)
All such programs are hereby transferred to Organon, and Organon shall be
relieved of any obligation with respect to Transferred Programs under this or
any other previous agreement.

(iv) 
Pharmacopeia shall provide Organon with any information, materials or data
reasonably available and reasonably necessary for Organon to continue the
development or commercialization of the Transferred Programs.

(v)
Organon’s licenses to the Transferred Programs under the agreements listed in
Exhibit B are hereby replaced by the following:  Subject to Section
2.2(d)(vii), Pharmacopeia hereby grants to Organon a ***.

(vi)  Pharmacopeia further agrees ***.

 13
 

(vii) The only license
granted to Organon with respect to the Transferred Programs is that set forth
in Section 2.2(d)(v), above. The only *** is that set forth in Section
2.2(d)(vi), above. Nothing in this Section 2.2(d) shall be construed to grant
***.

2.3                                 Assay Development.  It
is anticipated that the Assay has been developed and validated by Organon,
Pharmacopeia or a Third Party prior to validation by Pharmacopeia. An Assay
shall be considered validated if it meets the criteria set forth in Exhibit A.
On a Target-by-Target basis, Pharmacopeia shall provide ***. Insofar as the
Assay requires additional development by Pharmacopeia or the use of any key
reagents that have not been supplied by Organon, the Parties shall ***. The
Parties agree that all improvements and modifications directly relating to the
Assay (collectively the “Assay Improvements”) made solely by Pharmacopeia shall
be owned by Pharmacopeia. All Assay Improvements that are made jointly by the
Parties shall be jointly owned by the Parties. Each Party agrees to grant to
the other Party license rights in its interest in Assay Improvements as provided
herein.

2.4                                 Lead Compounds.

(a)                                  For each Target, Pharmacopeia will
endeavor to identify those Pharmacopeia Compounds that meet the criteria set
forth in Table 1. The Lead Compound criteria in Table 1 shall apply uniformly
on a Target-by-Target basis. If the characteristics of the Proposed Target
warrant it, the criteria in Table 1 may be amended by the JRC to accommodate
such characteristics, provided, however, that on balance the set
of criteria for any Lead Compound for a Proposed Target shall not be made more
stringent than the criteria set forth in Table 1. In addition, the JRC will
determine which criteria are considered to be essential and which criteria need
to be substantially met. For those criteria that need to be substantially met,
the JRC will define the boundaries within which certain material
characteristics of a Lead Compound at least should fall. It is understood by
both Parties that the boundaries of one of the criteria might depend on the
other criteria. The Parties agree that if a Pharmacopeia Compound meets all the
criteria set forth in Table 1 (as it may have been amended by the JRC), such
Pharmacopeia Compound shall be automatically designated as a “Lead
Compound.”  Without limitation of the
foregoing, the JRC may, at any time, review the progress of the Research
Collaboration. In such an event, the JRC may determine that, with respect to
any Pharmacopeia Compound, the Research Collaboration with respect to such
Pharmacopeia Compound has, notwithstanding the express criteria set forth in
Table 1, on balance achieved a stage of development consistent with such
criteria, and therefore, such Pharmacopeia Compound shall be designated as a
Lead Compound.

Table 1

	
  Criteria

  	
   

  	
   

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  

 

 14
 

(b)                                 On an on-going basis, throughout the
Research Term,  Pharmacopeia shall
conduct screening of its Libraries and optimization efforts to identify Pharmacopeia
Compounds that have the potential to meet the criteria for a Lead Compound
(each such Pharmacopeia Compound a “Potential Lead Compound”). On an on-going
basis, Organon shall ***. To enable Organon to ***. The *** and for no other purpose. Following the receipt of a *** for any purpose except as set forth
herein. Organon shall ***. The Parties agree that if Organon is unable to provide ***. If no ***. On an as needed basis, the Parties may agree on a
commercially reasonable set of additional activities to be carried by either or
both Parties to enable the designation of one or more such Potential Lead
Compounds as a Lead Compound. If a Potential Lead Compound is designated as a
Lead Compound, following such designation, Pharmacopeia shall deliver to
Organon the structure and enabling synthetic information with respect to such
Lead Compound. In addition, Pharmacopeia will provide all data it has developed
in the course of developing such Lead Compound which is reasonably required to
enable Organon to further optimize such Lead Compound. On a Target-by Target
basis, the series of Potential Lead Compounds having activity with respect to a
particular Target and that have been designated as a Lead Compound shall form a
“Lead Series.”

(c)                                  At
any time during the Research Term, Pharmacopeia may elect to discontinue its
activities with respect to a particular Target, and may elect to proceed with
its activities with respect to the remainder of the Targets. If Pharmacopeia
elects to discontinue its activities with respect to a particular Target, it
will notify Organon of its decision not to continue, the reason for
discontinuing and the stage of the project at the moment of discontinuation. In
the event that prior to discontinuing its activities, Pharmacopeia has
identified one or more Potential Lead Compounds with respect to a particular
Target and such Potential Lead Compounds failed to meet the criteria for a
“Lead Compound,” Organon shall ***

 15
 

Such Potential Lead
Compounds shall be referred to as “Non-Designated Lead Compounds” and ***. In
addition, the provisions of ***.

2.5                                 Organon
Compounds. Subject to Section 4.5.3, it is understood that Organon may be
conducting its own internal screening and optimization activities with respect
to one or more targets which have been selected as a Target as provided
hereunder. Organon shall keep Pharmacopeia informed on a consistent basis of
the foregoing activities. If Organon elects to *** shall be designated as an
“Organon Compound”. On a Target-by-Target basis, the Parties agree that the
designation of an Organon Compound shall not be a factor in the designation of
a Lead Compound. Further, such designation shall not, by itself, cause, nor be
a factor in the decision for, Pharmacopeia to cease activities with respect to
a Target pursuant to Section 2.4(c).

2.6                                 Designation
of Development Candidates other than Optionable Development Candidates.
During the period that Organon has a license under Section 5.4 to a Lead
Compound, Organon may designate any Second Research Term Lead Compound or
Derivative Compound, that is not the subject of a Lead Optimization program, as
a Development Candidate and may commence GLP toxicity studies. Organon shall
provide written notice to Pharmacopeia to such effect and such initiation of
GLP toxicity studies shall trigger the milestone payment for initiation of GLP
toxicity studies set forth in Section 7.1.

2.7                                 Third
Party Licenses. Pharmacopeia may request that Organon acquire rights from
Third Parties to technology necessary for the conduct of the activities of the
Parties with respect to a particular Target. The JRC shall endeavor to minimize
the need for such licenses; provided, however, if the JRC is
unable to agree whether a particular license is necessary to conduct the
activities of the Parties with respect to a particular Target, Pharmacopeia may
decline to screen against such Target. If Pharmacopeia declines to screen
against such Target, this shall not be considered a breach of this Agreement by
Pharmacopeia or a ground for termination of the Research Collaboration by
Organon.

2.8                                 Records
and Reports. Each Party shall maintain records in sufficient detail and in
good scientific manner appropriate for patent and FDA purposes and so as to
properly reflect all work done and results achieved in the performance of this
Agreement (including all data in the form required under any applicable
governmental regulations and as directed by the JRC). Such records shall
include applicable books, records, reports, research notes, charts, graphs,
comments, computations, analyses, recordings, photographs, computer programs
and documentation thereof, samples of materials and other graphic or written
data generated in connection with the Research Collaboration, including any
data required to be maintained pursuant to applicable governmental regulations.
During the Research Term, each Party shall respond to reasonable requests from
the other for information based on such records.

2.9                                 Pharmacopeia
Co-development / Co-promotion Option.     With
respect to ***. The ***. With respect to each Optionable Development Candidate
for which Pharmacopeia *** hereunder, the following provisions shall apply:

(a)  Pharmacopeia shall ***;

 16
 

Milestone
and Royalties:  Subject to Section
2.9(d), once Pharmacopeia has ***, Pharmacopeia will ***.

(b)  Activities. During the period after
Pharmacopeia *** pursuant to this Section 2.9, Organon will ***.

(c)  Financial
Support. The Parties shall ***, as follows. Organon shall ***.
Pharmacopeia shall ***.

The
Parties shall ***.

(c1)
At any time after ***.

(c2)  Pharmacopeia’s Prior Decision not to ***. If
Pharmacopeia did not ***.

(d)  *** by Pharmacopeia. At any time after ***. For the avoidance
of doubt, Pharmacopeia shall ***. Notwithstanding the foregoing, the provisions
specified in Section ***.

(e)  *** by
Pharmacopeia. At any time after ***.

(f)  Cessation of Development ***. In the
event ***. This Provision shall not apply to an Optionable Development
Candidate against a Target in which the parties are ***.

(g)  Co-Promotion. In the event that
Pharmacopeia has not ***. Any additional terms of such ***. Further, all ***. The Parties agree that the Development Program
should continue even in case a ***, but the Parties shall use ***. In the event
that such ***.

(h)  Governance
and Diligence. *** relating to development and commercialization of the applicable
Optionable Development Candidate (or corresponding Collaboration Product) shall
be made ***, which shall ***, and shall ensure that its Affiliates,
Sublicensees and subcontractors ***. *** shall provide *** with ***. At all
times during such joint development and commercialization, each Party shall
have the right to ***. Such right to *** shall be subject to ***.

ARTICLE 3

JOINT RESEARCH COMMITTEE; JOINT PATENT COMMITTEE

3.1                                 Joint Research
Committee. Organon and Pharmacopeia agree to establish a Joint Research
Committee (“JRC”) to oversee, review, manage and direct the Research
Collaboration, and, in coordination with the Patent Committee, provide advice
in connection with intellectual property issues relating to the Developed
Technology. The responsibilities of the JRC shall

 17
 

include: (i) monitoring
and reporting the progress of the Research Collaboration and ensuring open and
frequent exchange between the Parties; (ii) establishing criteria for the
selection of Lead Compounds and/or Optionable Development Candidates for each
Target pursuant to Section 2.4, (iii) resolving any conflicts between the
Parties, (iv) approving and administering the Research Plan, (v) coordinating
with the Patent Committee all patent activities as they relate to the results
of the Research Collaboration, and in keeping with the overall patent strategy
delineated by the Patent Committee, (vi) selecting Lead Compounds for Lead
Optimization during the Second Research Term, (vii) appointing a project team
to coordinate the day-to-day conduct of each Lead Optimization program (in each
case, the “Project Team”), with oversight by the JRC and subject to JRC
approval of all key Project Team decisions, (viii) designating Optionable
Development Candidates, and recording each such designation in the JRC’s
meeting minutes, (ix) deciding whether/when to terminate a Lead Optimization program without designating an Optionable
Development Candidate, and planning in advance for a successor Lead
Optimization program, and (x) setting a *** with respect to each Target.

3.2                                 Membership. The
JRC shall include *** of each of the Parties, and each Party’s representatives
shall be selected by that Party. Each Party may replace its representatives at
any time, upon written notice to the other Party. From time to time, the JRC
may establish subcommittees, to oversee particular projects or activities, and
such subcommittees will be constituted as the JRC determines, in its sole
discretion.

3.3                                 Meetings and
Minutes. During the Research Term, unless otherwise agreed to by the
Parties, the JRC shall meet ***, or more frequently as agreed by the Parties,
at such locations or by such teleconferencing means as the Parties may
determine from time to time. In addition to regularly scheduled meetings, the
JRC representatives will communicate regularly by telephone, electronic mail,
facsimile and/or videoconference. Other representatives of Pharmacopeia or
Organon may attend JRC meetings as nonvoting observers. Each Party shall be
responsible for all of its expenses associated with attending the JRC meetings.
Pharmacopeia shall prepare written minutes of each JRC meeting and shall
prepare a written record of all JRC voting and decisions, whether made at a JRC
meeting or otherwise. The written minutes of each JRC meeting and the written
record of all JRC voting and decisions shall be submitted to Organon for
review, and upon signature by Organon, shall become final.

3.4                                 Decision-Making.
Decisions of the JRC shall be made ***, and ***. In the event that *** within
the JRC, the matter shall be referred to ***. In the event ***. In the event
that ***. If such individuals cannot resolve such dispute, then such dispute
shall be subject to the dispute resolution provisions set forth in Section
16.19.

3.5                                 Patent Committee.
Upon recommendation of the JRC, the Parties shall form a patent committee
(“Patent Committee”) to be in existence as long as Patent Rights within the
Developed Technology are being filed and/or prosecuted. Each Party shall
designate ***, as its representatives on the Patent Committee. The Patent
Committee shall be responsible for recommending patent filings and coordinating
patent-related matters, including, but not limited to, the determination of
inventorship according to U.S. Patent Law, and the preparation, filing and
prosecution of patent applications. Any disputes of the Patent Committee during
the Research Term shall be handled pursuant to Section 3.4. Any disputes of the
Patent Committee after the end of the Research Term shall be handled pursuant
to Section 16.19. Unless otherwise

 18
 

agreed by the Parties,
the Patent Committee shall meet ***. Such meetings shall be held at mutually
agreed times and locations. Each Party shall bear its own expenses associated
with such meetings and the activities of the Patent Committee; provided,
however, that each Party shall ***.

ARTICLE 4

EXCLUSIVITY

4.1                                 Target.
Subject to Section 4.5.2, during the ***. On a Target-by-Target basis, the ***.
Further, Pharmacopeia ***.

4.2                                 Use
of Libraries. Except as provided herein, Organon shall have no exclusivity
with respect to any Library or any Pharmacopeia Compound. It is understood that
the Libraries are and will be regularly used by Pharmacopeia and may have been
or may be provided to Third Parties for screening. Pharmacopeia shall have the
right to screen the Libraries during the Research Term or thereafter on its own
behalf or on behalf of Third Parties, subject to the exclusivity provisions in
Section 4.1 above.

4.3                                 Physical
Ownership. Pharmacopeia shall retain physical ownership of the tangible
property embodied in all Libraries. Organon shall retain physical ownership of
all tangible material provided by Organon to Pharmacopeia hereunder. Any
tangible material provided by Organon to Pharmacopeia shall only be used for
the purposes of the Research Collaboration.

4.4                                 Development.

4.4.1  For as long as Organon is ***, Pharmacopeia
agrees ***.

4.4.2  For as long as Organon or the Parties are
***.

4.4.3  For purposes of clarity, it is understood
that the restrictions set forth in Sections 4.4.1 and 4.4.2 shall not apply to
any ***, and further shall not apply to any activities permitted under Section *** above.

4.5                                 Other
Restrictions on Targets.

4.5.1   General Restrictions. Pharmacopeia shall
not use Organon Base Technology relating to any Target for any purpose other
than fulfillment of Pharmacopeia’s responsibilities with respect to Lead
Compounds and Collaboration Products under this Agreement. Organon shall not
use Pharmacopeia Base Technology relating to any Target for any purpose other
than fulfillment of Organon’s responsibilities with respect to Lead Compounds
and Collaboration Products under this Agreement.

4.5.2   General
Research Use of Targets. Subject to Section 4.5.1, both Organon and
Pharmacopeia shall be free to use any Target for general research purposes
(e.g., basic biological research, performance of counterscreens and the like)
outside the scope of this

 19
 

Agreement,
provided that such use does not materially impair the commercial value of any
program conducted pursuant to the Research Collaboration.

4.5.3  Further
Obligations During Lead Optimization . Subject to Section 4.5.2, during
such time as any Lead Optimization activities are being conducted in the
Research Collaboration pursuant to a Research Plan with respect to any Target, neither Pharmacopeia nor Organon shall, ***.
If, at the time of initiation of Lead Optimization activities with respect to a
particular Target, either Party is ***. Notwithstanding the preceding
sentences, if, in the course of a Party’s work outside the Research
Collaboration on a target not included in the Research Collaboration, a ***.
If, at any time during the course of such optimization with respect to the
combination of the Target and the non-Research Collaboration target, the primary
activity of any of the compounds is found to be ***. If the Party wishes to
continue to *** pursuant to this Agreement.

ARTICLE 5

LICENSES

5.1                                 Organon
Base Technology; Regulatory Filings. Organon shall own all rights, title
and interest in and to Organon Base Technology and in all Regulatory Filings.

5.2.                              Developed
Technology. Subject to the licenses expressly granted hereunder, ***.
Pharmacopeia shall own ***.

5.3                                 Pharmacopeia
Base Technology. Pharmacopeia shall own all rights, title and interest in
and to Pharmacopeia Base Technology.

5.4.                              Licenses.
Subject to the terms and conditions of this Agreement, upon the designation of
a Lead Compound, on a Lead Compound-by-Lead Compound basis, and
Target-by-Target basis, ***. The foregoing license provides Organon ***. Unless
earlier terminated pursuant to this Agreement, this license grant shall remain
in effect for the time period set forth in and subject to the provisions set
forth herein, and so long as *** hereunder.

5.5                                 Research
License. Subject to the terms and conditions of this Agreement, ***
provided herein.

Subject to the
terms and conditions of this Agreement, *** provided herein.

5.6                                 Other
Licenses.

5.6.1                        License
to Non-Designated Lead Compounds, Non-Designated Development Series and
corresponding Products. Subject to the terms and conditions of this
Agreement, ***. The provisions of this Section shall survive termination or
expiration of this Agreement. The license granted pursuant to this Section
under the Organon Base Technology shall not include *** pursuant to the terms
of this Agreement. In exchange for the licenses granted by Organon in this
Section, in the event that Pharmacopeia ***. Organon shall inform Pharmacopeia in writing of ***. If Organon ***.

 20
 

5.6.2                        License
to Reverted Lead Compounds and Corresponding Products.

(a)                                  Upon
the request of Pharmacopeia and subject to the terms and conditions of this
Agreement, ***. Such a license shall be subject to the payment obligations
provided in Section 8.2.2.

(b)                                 If
Organon is ***. To the extent that there will be an ***. To the extent that
there will be an ***. Upon Pharmacopeia’s written request, not to be
unreasonably denied by Organon, Organon shall allow Pharmacopeia access to all
data and information (including but not limited to its regulatory filings)
reasonably required by Pharmacopeia in connection with its development efforts
relating to such Reverted Lead Compound.

5.7                                 Sublicenses.

5.7.1                        Subject to
the terms and conditions of this Agreement and except as set forth herein,
Organon shall have the right to sublicense the rights granted to it in Section
5.4, provided that Organon shall provide Pharmacopeia with at least the
following information with respect to each Sublicensee: (i) the identity of the
Sublicensee; (ii) a description of the Collaboration Product, and the rights
granted to the Sublicensee; and (iii) the territory in which the Collaboration
Product will be sold. Each such sublicense shall be consistent with all the
terms and conditions of this Agreement, and shall be subject to the prior
consent of Pharmacopeia, which consent shall not be unreasonably withheld.
Organon shall remain primarily liable to Pharmacopeia for all of each such
Sublicensee’s applicable financial and other obligations under the sublicense.
No sublicense granted by Organon may be assigned, transferred or further
sublicensed to any Third Party without the prior written consent of
Pharmacopeia, which consent shall not unreasonably be withheld.

5.7.2                        Subject to
the terms and conditions of this Agreement and except as set forth herein,
Pharmacopeia shall have the right to sublicense the rights granted to it in
Section 5.6, provided that Pharmacopeia shall provide Organon with at least the
following information with respect to each Sublicensee: (i) the identity of the
Sublicensee; (ii) a description of the Collaboration Product, and the rights
granted to the Sublicensee; and (iii) the territory in which the Collaboration
Product will be sold. Each such sublicense shall be consistent with all the
terms and conditions of this Agreement, and shall be subject to the prior
consent of Organon, which consent shall not be unreasonably withheld.
Pharmacopeia shall remain primarily liable to Organon for all of each such
Sublicensee’s applicable financial and other obligations under the sublicense.
No sublicense granted by Pharmacopeia may be assigned, transferred or further
sublicensed to any Third Party without the prior written consent of Organon,
which consent shall not unreasonably be withheld.

5.7.3                        The
following procedure shall apply to a sublicense being granted by either Party
hereunder:  Following the granting of the
sublicense, the sublicensee shall covenant that it will fully perform the
applicable obligations of the sublicensor under this Agreement. In addition,
the sublicensee shall represent and warrant that it will comply with all
applicable laws and regulations in carrying out its obligations under this
Agreement, including all relevant antitrust and competition laws. Evidence of
such covenant and representation shall be provided to the non-sublicensing
party within ten (10) days following the effective date of the sublicense
grant.

 21
 

5.8                                 Third
Party Rights.

5.8.1                        Pharmacopeia Third Party
Activities. It is understood that Pharmacopeia is in the business of
providing libraries to Third Parties, and that Pharmacopeia will grant such
Third Parties ***. Notwithstanding the licenses granted to Organon hereunder,
***. Accordingly, Pharmacopeia’s grant of rights under Section 5.4 shall be
***. 

5.8.2                        No Liability. It is
understood and agreed that, even if Pharmacopeia complies with its obligations
under this Agreement, *** hereunder. Pharmacopeia shall ***. Notwithstanding
the foregoing, it is understood that, unless ***.

5.9                                 Third Party
Royalties. Organon shall be responsible for procuring such licenses as it
deems, in its sole discretion, appropriate for the manufacture, use, marketing,
sale or distribution of Collaboration Products by Organon, its Affiliates or Sublicensees
and the payment, subject to Section 2.9, of any amount due Third Parties under
such licenses.

5.10                           Third Party Royalties
with respect to Reverted Lead Compounds, Non-Designated Lead Compounds, or
Non-designated Development Series being developed by Pharmacopeia.
Pharmacopeia shall be responsible for procuring such licenses as it deems, in
its sole discretion, appropriate for the manufacture, use, marketing, sale or
distribution of Collaboration Products by Pharmacopeia, its Affiliates or Sublicensees
and the payment of any amount due Third Parties under such licenses.

5.11                           Commercialization
Status. During the period from the end of the Research Term to the First
Commercial Sale of a Collaboration Product, Organon or Pharmacopeia, as the
case may be, shall keep the other Party informed of its development activities
with respect to such Collaboration Product, including without limitation, the
achievement of the milestones set forth in Section 7.1 and the
commercialization of such Collaboration Product, by *** providing the other
Party with a written report stating the status of development of each such
Collaboration Product.

5.12                           No
Implied Licenses. Only the licenses granted pursuant to the express terms
of this Agreement shall be of any legal force or effect. No other license
rights shall be created by implication, estoppel or otherwise.

5.13                           Non-Active Compounds. Subject
to Section 4.5, Non-Active Compounds may be used for research, development and
commercialization, independently by each Party at its own option and expense,
against targets other than a Target, with the proviso that such use does not
(i) materially impair the value of any Lead Optimization program or
Collaboration Product or (ii) infringe any intellectual property Controlled by
the other Party.

ARTICLE 6

FUNDING

6.1                                 Funding.  In
partial consideration for Pharmacopeia’s activities set forth herein, Organon
agrees to pay Pharmacopeia at the rate of one million dollars (USD1,000,000) on
or

 22
 

before the first day of
the Second Research Term and then every three months thereafter throughout the
duration of the Second Research Term.

6.2                                 Assay Development.
In the event that that Pharmacopeia shall conduct any additional assay
validation as provided in Section 2.3, Organon shall pay to Pharmacopeia an
amount equal to the number of FTE’s to be utilized for such assay development
multiplied by Pharmacopeia’s FTE Rate for the agreed period of such assay
development program. Solely for purposes of this Section 6.2, Pharmacopeia’s
“FTE Rate” shall be ***. In addition, in the event Organon agrees to the
modification of an Assay, Organon shall reimburse Pharmacopeia for the cost of
any reagents that Pharmacopeia needs to obtain to conduct its activities
pursuant to this Section. Payments under this Section shall be made within
thirty (30) days of receipt of an invoice.

6.3                                 Amendment Payment to Pharmacopeia. Organon agrees to pay Pharmacopeia the
nonrefundable sum of fifteen million dollars (USD15,000,000), due within
thirty (30) days after the Amendment Date.

6.4                                 No
Withholding. All amounts paid to Pharmacopeia pursuant to Sections 6.1
through 6.3 shall be made without withholding for taxes or other charges.

6.5                                 Equity
Investment.                                           Pharmacopeia
shall have a one-time option to sell to Organon ***. Such sale of shares shall
be at the ***, and in accordance with other terms substantially as set forth in
the Stock Purchase Agreement attached
hereto as Exhibit C.

ARTICLE 7

MILESTONE PAYMENTS

7.1                                 Milestone
Payments.

7.1.1                        Milestone
Payments for Second Research Term Lead Compounds.

(a)                                  Milestone
payments based on Pharmacopeia’s delivery to Organon of each Second Research
Term Lead Compound. Organon shall pay to Pharmacopeia the following
nonrefundable amounts within thirty (30) days following the first achievement
by Organon, its Affiliates, Sublicensees or other designees, as the case may
be, of each of the following milestones with respect to any Second Research
Term Lead Compound or corresponding Derivative Compound (and each corresponding
Collaboration Product) with respect to each Target with respect to which
Pharmacopeia has not conducted Lead Optimization pursuant to this Agreement:

 23
 

 

	
  Milestones for a Lead Compound

  	
   

  	
  Amount

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  

 

(b)                                 Milestone
payments based on Pharmacopeia’s delivery to Organon of each Optionable Development
Candidate. Organon shall pay to Pharmacopeia the following nonrefundable
amounts within thirty (30) days following the first achievement by Organon, its
Affiliates, Sublicensees or other designees, as the case may be, of each of the
following milestones with respect to any Lead Compound or corresponding
Derivative Compound (and each corresponding Collaboration Product) with respect
to each Target with respect to which (i) Pharmacopeia has conducted Lead
Optimization pursuant to this Agreement and (ii) Organon has initiated GLP
toxicity studies with respect to any compound identified by Pharmacopeia
pursuant to the Research Collaboration (or any Derivative Compound thereof):

	
  Milestones for a Development Candidate

  	
   

  	
  Amount

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  

 

(c)                                  It
is understood and agreed that ***. Notwithstanding the preceding sentence, in
the event that ***.

7.1.2                        Delivery Payments under the Initial
Research Term.
Organon shall pay to Pharmacopeia the following delivery payments in addition
to all the payments accrued hereunder as follows: At the time that Pharmacopeia
delivers to Organon the *** due within thirty (30) days following such delivery. At the time that
Pharmacopeia delivers to Organon each of *** due within thirty (30) days following each such
delivery.

7.1.3                        No
Withholding. All amounts paid to Pharmacopeia pursuant to this Section 7.1
shall be made without withholding for taxes or other charges.

 24

7.2 Due
Diligence.  For each Lead Compound,
corresponding Derivative Compound, and Development Candidate, Organon will use
*** to develop and commercialize such Lead Compound and corresponding
Collaboration Product.  Without limiting
any of the foregoing, for each Lead Compound, Organon’s efforts shall include
without limitation the ***.  In the event
that Organon decides to out-license the applicable Lead Compound, corresponding
Derivative Compound, or Development Candidate, Organon shall ***.  Notwithstanding the foregoing, in the event
that ***.

7.3  Invoices. Unless otherwise specified
in writing, all payments required according to the sections 6 and 7 of this
Agreement shall be made by transfer to the bank account nominated by the
receiving Party upon timely receipt of an invoice.

If invoice to Organon:
N.V. Organon

Purchase
Accounting (KA1041)

P.O. Box 20

5340 BH Oss

The Netherlands

Attn:
***

ARTICLE 8

ROYALTY
PAYMENTS

8.1                                 Royalty Term.

8.1.1                        Royalty Term Organon.
Organon shall pay Pharmacopeia royalties on Net Sales of Collaboration
Products, ***, for a period from the date of First Commercial Sale of such
Collaboration Product in such country until the date which is the later of ***.

8.1.2                        Royalty Term Pharmacopeia.
Pharmacopeia shall pay Organon royalties on Net Sales or Sublicense Income, as
the case may be, of Collaboration Products, ***, for a period from the date of
First Commercial Sale of such Collaboration Product in such country until the
date which is the later of ***.

8.1.3                        ***. If the licenses
granted to either Party pursuant to Section 5.4 or Section 5.6, as the case may
be, are still in force with respect to a particular Lead Compound, at the end
of the period for which royalties on the corresponding Collaboration Product
are due pursuant to this Agreement, ***.

8.2                                 Royalty
Rate.

8.2.1                        Royalties
on Collaboration Product based on Pharmacopeia’s delivery to Organon of a
Second Research Term Lead Compound. 
Organon shall pay to Pharmacopeia royalties on Net Sales of each
Collaboration Product based on any Second Research Term Lead Compound or
corresponding Derivative Compound with respect to each Target with respect to 

 25
 

which Pharmacopeia has
not conducted Lead Optimization pursuant to this Agreement, according to the
following schedule:

(a)                                  ***.

(b)                                 ***.

(c)                                  ***.

(d)                                 ***.

8.2.2                        Royalties
on Collaboration Product based on a Reverted Lead Compound not Arising from a
Lead Optimization Program.

(a)                                  In
the event Pharmacopeia sells any Collaboration Product based on a Reverted Lead
Compound with primary activity against a Target with respect to which
Pharmacopeia has not conducted Lead Optimization pursuant to this Agreement,
then Pharmacopeia shall pay to Organon royalties on Net Sales of each such
Collaboration Product, according to the following schedule:

(i)                                     ***.

(ii)                                  ***.

(iii)                               ***.

(iv)                              ***.

(v)                                 ***.

It is understood by both Parties that the royalty
rates pursuant to this Section 8.2.2(a) reflect the fact that ***. If, in the
future, the ***.

(b)                                 In
the event Pharmacopeia sublicenses its rights pursuant to the provisions of
Section 5.6.2, then Pharmacopeia shall pay to Organon, in lieu of the royalties
due under 8.2.2(a) for any Collaboration Product, compensation based on
Sublicense Income for each Collaboration Product based on a Reverted Lead Compound
with primary activity against a Target with respect to which Pharmacopeia has
not conducted Lead Optimization pursuant to this Agreement, according to the
following schedule:

(i)                                     ***;

(ii)                                  ***;

(iii)                               ***;
and

(iv)                              ***.

 26
 

(v)                                 ***.

8.2.3                        Royalties
on Collaboration Product based on Pharmacopeia’s delivery to Organon of an
Optionable Development Candidate. 
Organon shall pay to Pharmacopeia royalties on Net Sales of each
Collaboration Product based on any Second Research Term Lead Compound or
corresponding Derivative Compound with respect to each Target with respect to
which (i) Pharmacopeia has conducted Lead Optimization pursuant to this
Agreement and (ii) Organon has initiated GLP toxicity studies with respect to
any compound identified by Pharmacopeia pursuant to the Research Collaboration
(or any Derivative Compound thereof):

(a)                                  ***.

(b)                                 ***.

(c)                                  ***.

(d)                                 ***.

(e)                                  ***.

8.2.4                        Royalties on Collaboration
Products based on a Non-Designated Lead Compounds.  In the event Pharmacopeia sells any
Collaboration Product based on a Non-Designated Lead Compound, then
Pharmacopeia shall pay to Organon a
royalty on Net Sales equal to ***.

8.2.5                        Royalties on Collaboration Products based on a Non-Designated
Development Series.  In the event Pharmacopeia sells any Collaboration
Product based on a Non-Designated Development Series, then Pharmacopeia shall
pay to Organon a royalty on Net Sales equal to ***.  In addition, ***.

8.2.6                        Royalties
on Collaboration Product based on a Reverted Lead Compound Arising from a Lead
Optimization Program.

(a)                                  In
the event Pharmacopeia sells any Collaboration Product based on a Reverted Lead
Compound with primary activity against a Target with respect to which
Pharmacopeia (x) has conducted Lead Optimization pursuant to this Agreement and
(y) has received milestone payments pursuant to Section 7.1.1(b), then
Pharmacopeia shall pay to Organon royalties on Net Sales of each such
Collaboration Product, according to the following schedule:

(i)                                     ***.

(ii)                                  ***.

(iii)                               ***.

 27
 

(iv)                              ***.

It is understood by both Parties that the royalty
rates pursuant to this Section 8.2.6(a) reflect the fact that ***. If, in the
future, the ***.

(b)                                 In
the event Pharmacopeia sublicenses its rights pursuant to the provisions of
Section 5.6.2, then Pharmacopeia shall pay to Organon, ***, according to the
following schedule:

(i)                                     ***;

(ii)                                  ***;

(iii)                               ***;
and

(iv)                              ***.

8.3                                 Payment of
Royalties.

8.3.1                        Royalty Report.  After the First Commercial Sale of a
Collaboration Product for which royalties are due and payable by either Party,
its Affiliates or Sublicensees hereunder, the paying Party shall provide the
other Party a royalty report on a ***. Each such report shall state, separately
for the paying Party, and each Affiliate and Sublicensee, ***.
Contemporaneously with the submission of the royalty reports, the paying Party
shall ***.

8.3.2                        Records Retention.  Each Party shall keep, and require its
Affiliates and Sublicensees to keep, for a period of not less than ***,
complete and accurate records of all Net Sales. Each Party shall have the
right, at its sole expense, through a certified public accountant reasonably
acceptable to the other Party, and following reasonable notice, to inspect such
records during regular business hours, during the life of the paying Party’s obligation
to pay royalties on Collaboration Products; provided, however,
that such inspection shall not (i) take place ***; and (ii) shall not ***, and further
provided that, ***.  Copies of such
reports shall be supplied to the paying Party. In the event that the report
demonstrates that ***.  If the paying
Party has ***. The interest available to each Party pursuant to this Section
shall in no way limit any other remedies available to each Party.

8.3.3                        Tax on Royalties.  Any tax paid or required to be withheld by a
Party for the benefit of the other Party on account of royalties payable under
this Agreement shall be deducted from the amount of royalties otherwise due.
Each Party shall secure and send to the other Party proof of any such taxes
withheld and paid for its benefit of and shall, at the request of the other
Party, provide reasonable assistance to other Party in recovering said taxes.

8.3.4                        Form of Payment.  All payments required according to this
Section 8 of the Agreement due Pharmacopeia hereunder shall be made in United
States dollars, for Pharmacopeia’s account, by wire transfer to a bank in the
United States designated in writing by Pharmacopeia; provided, however,
that where payments in respect of Net Sales are based on Net

 28
 

Sales in non-U.S. currencies,
the amount of Net Sales and any deductions used to calculate Net Sales, if any,
shall be converted by Organon, based on the average of the “bid” and “asked”
exchange rates provided by the Wall Street Journal Europe or other
recognized reference source agreed to by the Parties, for all the business days
of each calendar quarter, into United States Dollars, and otherwise in
accordance with the standard exchange rate conversion practices used by Organon
for financial accounting purposes.  All
payments required according to this Section 8 due Organon hereunder shall be
made in Euros, for Organon’s account, by wire transfer to a bank in the
Netherlands designated in writing by Organon. Any payments that are not paid on
the date such payments are due under this Agreement shall bear interest to the
extent permitted by applicable law at the prime rate as reported by the Chase
Manhattan Bank, New York, New York, on the date such payment is due, plus an
additional two percent (2%) calculated on the number of days such payment is
delinquent. The interest available to each Party pursuant to this Section shall
in no way limit any other remedies available.

ARTICLE 9

REPORTS, BOOKS AND
TAX MATTERS

9.1.                              Examination of Books.  Each of the Parties shall keep and maintain
complete and accurate books in respect of its activities during the Research
Term and the six month period following termination pursuant Section 15.3.3,
and with respect to books and records for which payment may be required, in
accordance with applicable accounting principles consistently applied and in
accordance with local law.  Each Party
shall provide the other the right to inspect such financial records, and shall
provide copies of all requested records, to the extent reasonably related to
the performance of the other Party’s obligations under this Agreement.  The Parties shall retain such records for so
long as the Parties shall mutually determine.

9.2                                 Tax
Matters.  Each Party agrees that the
other Party is entitled to all tax benefits, including in particular, tax
credits and/or tax deductions attributable to amounts the other Party has paid
hereunder.  Each Party shall file its
federal, state, and local tax returns on a basis consistent with this Agreement,
and shall not take any action inconsistent with the other Party’s entitlement
to such tax benefits. In the event that a Party, in its judgment, determines
that it must obtain information and verification regarding the use or
application of such expenditures in order to prepare its tax returns or to
respond to an inquiry during a tax audit or any other inquiry relating to such
treatment of its tax return, or to defend its tax position in any proceeding
including litigation, the Parties shall reasonably cooperate with each other
and provide such information as the other Party may reasonably require at the
request and expense of the requesting Party.

ARTICLE
10

PATENTS

10.1                           Disclosure by Employees,
Agents or Independent Contractors. 
Organon and Pharmacopeia agree that as to any employees, agents, or
independent contractors of Organon and Pharmacopeia presently in their employ
or who are hired or retained by Organon or Pharmacopeia to perform, manage
performance of, or participate in the research done pursuant to this Agreement,
Organon and Pharmacopeia will ensure that such employees, agents, or
independent contractors will promptly disclose and assign to the Party engaging
them any and all

 29
 

rights to inventions,
developments, or improvements, (whether patentable or not) conceived and/or
reduced to practice during the course of their duties.  Each Party will notify the other Party
promptly of any sole or joint inventions within the Developed Technology.

10.2                           Patent Prosecution and
Related Activities.

10.2.1                  Pharmacopeia
Base Technology.  Pharmacopeia shall
be responsible, at its sole discretion and expense, for preparing, filing,
prosecuting and maintaining in such countries it deems appropriate, by itself
or with Third Parties, Patent Rights within the Pharmacopeia Base Technology
and conducting any interferences, re-examinations, reissues and oppositions
relating to such Patent Rights.

10.2.2                  Organon Base
Technology.  Organon shall be
responsible, at its sole discretion and expense, for preparing, filing,
prosecuting and maintaining in such countries it deems appropriate, by itself
or with Third Parties, Patent Rights within the Organon Base Technology and
conducting any interferences, re-examinations, reissues and oppositions
relating to such Patent Rights.

10.2.3                  Developed
Technology.

(a)                                  ***.  For as long as its license rights have not
expired or been terminated, ***.  It is
understood and agreed that in such Patent Rights ***. Organon shall have a
period of ***.

(b)                                 ***.  Except as otherwise provided in Section
10.2.3(a), ***.

(c)                                  Cooperation; Request
to Responsible Party.  Each of
Organon and Pharmacopeia shall keep the other fully informed as to the status
of patent matters described in this Section 10.2.3 including, without
limitation, by providing the Patent Committee the opportunity to fully review
and comment on any documents which will be filed in any patent office as far in
advance of filing dates as feasible, and providing the other copies of any
documents that such Party receives from such patent offices promptly after
receipt, including notice of all interferences, reissues, re-examinations,
oppositions or requests for patent term extensions.  Organon and Pharmacopeia shall each
reasonably cooperate with and assist the other at its own expense in connection
with such activities, at the other Party’s request.  Either Party may request the other Party to
file a patent application claiming any invention within the Developed
Technology for which the other Party has responsibility as set forth in
Sections 10.2.3(a) or 10.2.3(b).

10.2.4                  Ownership.   Ownership of Patent Rights shall be
determined based upon US Patent Laws.

10.2.5                  Election Not
to Prosecute.  Upon ninety (90) days
written notice to the other Party, the responsible Party may elect to
discontinue the prosecution of any patent applications filed pursuant to
Sections 10.2.3(a) or (b) and/or not to file or conduct any further activities
with respect to the Patent Rights described in such Sections.  In the event the responsible Party declines
to file or, having filed, fails to further prosecute or maintain any Patent
Rights filed pursuant to this Agreement, which relate to the Developed
Technology, or to

 30
 

conduct any
interferences, re-examinations, reissues, oppositions with respect thereto, the
other Party shall have the right to prepare, file, prosecute and maintain such
Patent Rights in such countries as it may deem appropriate, and conduct any
interferences, re-examinations, reissues or oppositions at its sole
expense.  The other Party agrees to cooperate
in any manner reasonably requested in connection with any such actions by such
Party, at the expense of the requesting Party, and shall assign all right,
title and interest in and to such Patent Rights to the Party continuing such
activities.

10.3                           Permitted Disclosures.  Following a written notice from the other
Party hereto, the Parties shall in good faith grant each other permission, not
to be unreasonably withheld, to disclose in the specification of a patent
application filed by the other Party pursuant to this Agreement, any Pharmacopeia
Base Technology, Organon Base Technology, or Developed Technology necessary to
support and enable claims in such patent applications.

10.4                           Third Party Infringement.

10.4.1                  Developed
Technology.  Organon and Pharmacopeia
shall have the right to initiate legal action to enforce the Patent Rights
within the Developed Technology against infringement or misappropriation by
Third Parties or defend any declaratory judgment action relating thereto.  A Party shall have the initial right, but not
the obligation, to initiate and conduct legal proceedings to enforce against
any infringement or defend any declaratory judgment action involving a Patent
Right within the Developed Technology licensed to such Party hereunder at its
sole expense.  Notwithstanding the preceding
sentence, ***.

10.4.2                  Failure to
Enforce.  If within sixty (60) days
following receipt of written notice of an infringement or misappropriation of
Developed Technology which a Party has the right to enforce pursuant to Section
10.4.1 above (or written notice of a declaratory judgment action alleging
invalidity or unenforceability of such Developed Technology), the Party fails
to take action to halt such alleged infringement or misappropriation or defend
such a declaratory judgment action, the other Party may, at its expense, take
such legal action as it deems appropriate, in its own name, to halt such an
alleged infringement or misappropriation or defend such a declaratory judgment
action.  Each Party agrees to render such
reasonable assistance as the prosecuting Party may request.

10.4.3                  Base Technology.  In the event that any Pharmacopeia Base
Technology or Organon Base Technology is infringed or misappropriated by a
Third Party, or is subject to a declaratory judgement action arising from such
infringement or misappropriation, Pharmacopeia and Organon shall promptly
notify the other Party.  It is understood
and agreed that Pharmacopeia shall have the sole right to initiate and conduct
legal proceedings to enforce the Pharmacopeia Base Technology against any
infringement or misappropriation or defend any declaratory judgment action
relating thereto, at its sole expense, and that Organon shall have the sole
right to initiate and conduct legal proceedings to enforce the Organon Base
Technology against any infringement or misappropriation or defend any
declaratory judgment action relating thereto, at its sole expense.

10.4.4                  No Settlement Without Consent.  Neither Party shall enter into any settlement
of any claim, suit or proceeding under Sections 10.4.1, or 10.4.3 above which
admits

 31
 

or concedes that any
aspect of the Developed Technology or Base Technology licensed from the other
Party is invalid or unenforceable without the prior written consent of such
other Party.

10.4.5                  Cooperation.  Each Party shall keep the other reasonably
informed of the progress of any claim, suit or proceeding subject to this
Section 10.4 and cooperate reasonably in connection with such activities at the
request and expense of the Party involved in such claim, suit or proceeding.

10.4.6                  Division of Recoveries.

(a)                                  Any recovery received
in connection with a suit brought by a Party pursuant to Section 10.4.1 shall
be used ***.

(b)                                 Any recovery received
in connection with a suit brought by Organon or Pharmacopeia solely pursuant to
Section 10.4.3 shall be ***.

10.5                           Infringement Claims by
Third Parties.  If the manufacture,
sale or use of any Collaboration Product pursuant to this Agreement results in
any claim, suit or proceeding alleging patent infringement against a first
Party (or its Sublicensees), such first Party shall promptly notify the other
Party in writing setting forth the facts of such claim in reasonable detail.
The first Party shall have the ***. The first Party shall keep the other Party
reasonably informed of all material developments in connection with any such
claim, suit or proceeding, and the other Party shall have the right (but not
the obligation) to be separately represented, at its expense, by counsel of its
own choice and to advise the first Party on the defense of such claim, suit or
proceeding.   Notwithstanding the
preceding sentences, ***.

ARTICLE
11

CONFIDENTIALITY

11.1                           Confidentiality.

11.1.1.               Term of Confidentiality.  Except as otherwise provided in this Section
11.1, the Party receiving Confidential Information (the “Receiving Party”)
shall keep all Confidential Information disclosed to it by the disclosing Party
(the “Disclosing Party”) confidential for the Research Term and ten (10) years
thereafter.  Without the prior written
consent of the Disclosing Party, the Receiving Party shall not disclose any
Confidential Information to any Third Party, except to the officers, employees,
agents, or representatives of the Receiving Party or the Receiving Party’s
Affiliates (collectively the “Representatives”), who, in each case, have a need
to know any such Confidential Information for purposes of the implementation
and performance by the Receiving Party of its obligations pursuant to this
Agreement, and will use the Confidential Information provided by the Disclosing
Party only for such limited purposes.

11.1.2.               Warranty of Obligation.  Each Party warrants that each of its
Representatives to whom any Confidential Information is disclosed shall
previously have been informed of the confidential nature of the Confidential
Information and shall have agreed to be bound by the terms and conditions of
this Agreement.  The Receiving Party
shall ensure that the Confidential Information provided by the Disclosing Party
shall not be used or disclosed by such

 32
 

Representatives except as
permitted by this Agreement.  The
Receiving Party shall stand responsible for any breach by its Representatives
of the confidentiality provisions set forth in this Agreement.

11.1.3.               Ownership of Confidential Information.
Except as provided herein with respect to the ownership of Developed
Technology, all Confidential Information disclosed by the Disclosing Party
shall remain the property of the Disclosing Party.  Upon the written request of the Disclosing Party
(i) all tangible Confidential Information provided by the Disclosing Party
(including, but not limited to all copies thereof and all unused samples of
materials provided by the Disclosing Party) except for Confidential Information
consisting of analyses, studies and other documents prepared by or for the
benefit of the Receiving Party, shall be promptly returned to the Disclosing
Party, and (ii) all portions of such analyses, studies and other documents
prepared by or for the benefit of the Receiving Party (including all copies
thereof) which are within the definition of Confidential Information shall be
destroyed, and the Receiving Party shall certify such destruction in writing to
the Disclosing Party.

11.1.4.               Permitted Disclosures.  The obligations of confidentiality and
non-use set forth in this Agreement shall not apply to any portion of the
Confidential Information which:

(a)                                  is or becomes public
or available to the general public otherwise than through the wrongful act or
default of the Receiving Party or its Representatives; or

(b)                                 is obtained by the
Receiving Party from a Third Party who is lawfully in possession of such
Confidential Information and is not subject to an obligation of confidentiality
or non-use owed to the Disclosing Party; or

(c)                                  is previously known
to the Receiving Party prior to disclosure by the Disclosing Party, as shown by
written evidence, and is not obtained or derived directly or indirectly from
the Disclosing Party; or

(d)                                 is independently
developed by the Receiving Party without the use of or reliance on any Confidential
Information provided by the Disclosing Party hereunder, as shown by
contemporaneous written evidence.

11.1.5.               Legal Disclosure. The Receiving
Party may disclose the Confidential Information of the Disclosing Party to the
extent reasonably necessary in prosecuting or defending litigation, complying
with applicable laws, governmental regulations or court order, or otherwise
submitting required information to tax or other governmental authorities.  If the Receiving Party intends to so disclose
any such Confidential Information, the Receiving Party shall provide the
Disclosing Party prompt prior notice of such fact so that the Disclosing Party
may seek to obtain a protective order or other appropriate remedy concerning
any disclosure of such Confidential Information.  The Receiving Party will reasonably cooperate
with the Disclosing Party in connection with the Disclosing Party’s efforts to
obtain any such order or other remedy. 
If any such order or other remedy does not fully preclude the disclosure
of such Confidential Information, the Receiving Party will make such disclosure
only to the extent that such disclosure is legally required and will use its
reasonable efforts to have confidential treatment accorded to the disclosed
Confidential Information. Notwithstanding the foregoing,

 33
 

either Party may disclose
the terms of this Agreement and developments in connection with this Agreement
to the extent required, in the reasonable opinion of such Party’s legal
counsel, to comply with applicable laws, including, without limitation, the
rules and regulations promulgated by the U.S. Securities and Exchange
Commission (SEC) or the Dutch Authority of Financial Markets (AFM). In the
event either Party believes it must make a disclosure under this Section 11.1.5,
the provisions of prior notice, comment, and consent described in Section 16.12
should be followed to the extent possible. Non-limiting examples of such
developments include the promotion of a program from one clinical phase to a
more advanced clinical phase; the termination of a clinical stage program and;
whether or not a particular trial has met a specified end-point, in all cases
when Pharmacopeia has a financial interest in such program. Broader clinical
disclosure describing clinical trial results shall be governed by Section 11.2.

11.1.6.               No Warranty As To Reliability.  Each of the Parties acknowledges that neither
Party makes any representation or warranty as to the reliability, accuracy or
completeness of any of the Confidential Information disclosed hereunder, except
for any specific representation or warranty made in other sections of this
Agreement.  The Receiving Party agrees
that neither the Disclosing Party nor any of the Disclosing Party’s Representatives
shall have any liability to the Receiving Party arising from the disclosure of
Confidential Information by the Disclosing Party except as otherwise provided
herein.

11.1.7.               No Implied License.  Except as otherwise expressly set forth in
this Agreement, nothing herein shall be construed as giving the Receiving Party
any right, title and interest in and to the Confidential Information of the
Disclosing Party.

11.1.8.               Public Domain.  For the purpose of this Agreement, specific
information disclosed as part of the Confidential Information shall not be
deemed to be in the public domain or in the prior possession of the Receiving
Party merely because it is embraced by more general information in the public
domain or by more general information in the prior possession of the Receiving
Party.

11.2.                        Publications.  The Patent Committee and the JRC will discuss
and review proposed publications describing the scientific or clinical results
under the Agreement.  Subject to Section
11.1.5, either Party may, in its sole discretion, decide not to permit publication
by the other Party of any scientific or clinical results.

ARTICLE
12

REPRESENTATIONS AND WARRANTIES OF PHARMACOPEIA

12.1                           Pharmacopeia represents and
warrants to Organon as follows:

12.1.1                  Organization.  It is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

12.1.2                  Authority.  It has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.  All corporate acts
and other proceedings required to authorize such execution, delivery, and
consummation have been duly and properly taken and obtained.

 34
 

12.1.3                  Enforceability.  This Agreement has been duly executed and
delivered by Pharmacopeia and constitutes legal, valid, and binding obligations
of Pharmacopeia enforceable against Pharmacopeia in accordance with its terms.

12.1.4                  Approvals and Consents.  No approval, authorization, consent, or other
order or action of or filing with any court, administrative agency or other
governmental authority is required for the execution and delivery by
Pharmacopeia of this Agreement or the consummation by Pharmacopeia of the
transaction contemplated hereby (other than contemplated Collaboration Product
Regulatory Approvals).

12.1.5                  No Conflicts.  None of the execution, delivery, or
performance of this Agreement by Pharmacopeia (i) conflicts with or results in
a breach under the charter documents or any material contractual undertaking of
Pharmacopeia, or its Affiliates or (ii) conflicts with or results in a
violation of any of the laws of the jurisdiction of incorporation of
Pharmacopeia.  Pharmacopeia has not, to
the best of its knowledge entered into, nor will Pharmacopeia, after the
Effective Date, knowingly enter into any written or oral agreement that is or
would be inconsistent with its obligations under this Agreement or deprives or
would deprive Organon of the benefits of this Agreement.

12.1.6                  Title.  As of the Effective Date, it has good title
to or valid leases or licenses for all its properties, rights, and assets
necessary for the fulfillment of its obligations and responsibilities under
this Agreement.

12.1.7                  Disclaimer.  Except as provided herein, Pharmacopeia
specifically disclaims any guarantee that the Research Collaboration will be
successful, in whole or in part.  The
failure of Pharmacopeia to successfully identify Lead Compounds will not, of
itself, constitute a breach of any representation or warranty or other
obligation under this Agreement. 
Pharmacopeia does not make any representation or warranty or guaranty
that the Research Collaboration will be sufficient for the successful
completion of the research.  EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH HEREIN, PHARMACOPEIA MAKES NO REPRESENTATIONS AND
EXTENDS NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED,
WITH RESPECT TO THE DEVELOPED TECHNOLOGY, LEAD COMPOUNDS, ORGANON COMPOUNDS
PHARMACOPEIA COMPOUNDS OR LIBRARIES INCLUDING, BUT NOT LIMITED TO, WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PHARMACOPEIA
BASE OR DEVELOPED TECHNOLOGY, PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF
THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

12.1.8                              Sufficient
Rights. As of the Effective Date, it owns or Controls its Patent Rights, to
conduct the Research Collaboration and to grant the rights and licenses to
Organon, and to fulfill its duties and obligations pursuant to this
Agreement.  To the knowledge of
Pharmacopeia, as of the Effective Date the rights and licenses granted to
Organon hereunder do not violate the rights of any Third Party to which
Pharmacopeia has granted a license.

12.1.9                  No
Prior Grant or Patents.  As of the
Effective Date, Pharmacopeia has not (i) knowingly granted any licenses to
Third Parties, or (ii) knowingly filed any patent

 35
 

application, in either
case inconsistent with the licenses granted or to be granted to Organon
hereunder.

12.1.10            Patent
Rights Applicable to Transferred Programs. 
To the best of Pharmacopeia’s knowledge, as of the Amendment Date, the
Patent Rights identified in Exhibit F constitute all the Patent Rights
Controlled by Pharmacopeia relating to the Transferred Programs.

ARTICLE
13

REPRESENTATIONS AND WARRANTIES OF ORGANON

13.1                           Organon represents and
warrants to Pharmacopeia as follows:

13.1.1                  Organization.  It is a corporation duly organized, validly
existing and in good standing under the laws of the Netherlands.

13.1.2                  Authority.  It has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions contemplated
hereby.  All corporate acts and other
proceedings required to authorize such execution, delivery, and consummation
have been duly and properly taken and obtained.

13.1.3                  Enforceability.  This Agreement has been duly executed and
delivered by Organon and constitutes the legal, valid, and binding obligations
of Organon enforceable against Organon in accordance with its terms.

13.1.4                  Approvals and Consents.  No approval, authorization, consent, or other
order or action of or filing with any court, administrative agency or other
governmental authority is required for the execution and delivery by Organon of
this Agreement or the consummation by Organon of the transaction contemplated
hereby (other than contemplated Regulatory Approvals).

13.1.5                  No Conflicts.  None of the execution, delivery, or
performance of this Agreement by Organon (i) conflicts with or results in a
breach under the charter documents or any material contractual undertaking of
Organon, or its Affiliates or (ii) conflicts with or results in a violation of
any of the laws of the jurisdiction of incorporation of Organon.  Organon has not, to the best of its knowledge
entered into, nor will Organon, after the Effective Date, knowingly enter into
any written or oral agreement that is or would be inconsistent with its
obligations under this Agreement or deprives or would deprive Pharmacopeia of
the benefits of this Agreement.

13.1.6                  Title.  As of the Effective Date, it has good title
to or valid leases or licenses for all its properties, rights, and assets
necessary for the fulfillment of its obligations and responsibilities under
this Agreement.

13.1.7                  Sufficient
Rights. As of the Effective Date, it owns or Controls its Patent Rights, to
conduct the Research Collaboration and to grant the rights and licenses to
Pharmacopeia, and to fulfill its duties and obligations pursuant to this
Agreement.  To the knowledge of Organon,
as of the Effective Date the rights and licenses granted to Pharmacopeia
hereunder do not violate the rights of any Third Party to which Organon has
granted a license.

 36

13.1.8                  No Prior
Grant or Patents.  As of the
Effective Date, Organon has not (i) knowingly granted any licenses to Third
Parties, or (ii) knowingly filed any patent application, in either case
inconsistent with the licenses granted or to be granted to Pharmacopeia
hereunder.

ARTICLE
14

SURVIVAL AND INDEMNIFICATION

14.1                           Survival of
Representations, Warranties, Covenants, and Agreement.  The representations, warranties, covenants,
and agreements contained in this Agreement shall ***.  Except as expressly provided herein, the
Parties confirm that they have not relied upon any other representations,
warranties, covenants, and agreements as an inducement to enter into this
Agreement or the other agreements and instruments to be executed and delivered
by the Parties pursuant to this Agreement.

14.2                           Indemnification by
Pharmacopeia.  Pharmacopeia hereby
agrees to indemnify and hold Organon, its Affiliates and their respective
officers, directors, stockholders, employees, agents, and representatives
(collectively, the “Organon Indemnitees”) harmless on an after-tax basis from
and against any and all claims, liabilities, losses, damages, costs and
expenses in respect of claims against the Organon Indemnitees by Third Parties
other than the Organon Indemnitees, including fees and disbursements of counsel
and expenses of reasonable investigation (collectively, “Organon Losses”),
arising out of, based upon or caused by: ***.

14.3                           Indemnification by
Organon.  Organon hereby agrees to
indemnify and hold Pharmacopeia, its Affiliates, subcontractors and their
respective officers, directors, stockholders, employees, agents, and
representatives (collectively, the “Pharmacopeia Indemnitees”) harmless on an
after-tax basis from and against any and all claims, liabilities, losses, damages,
costs and expenses in respect of claims against the Pharmacopeia Indemnitees by
Third Parties other than the Pharmacopeia Indemnitees, including fees and
disbursements of counsel and expenses of reasonable investigation
(collectively, “Pharmacopeia Losses”), arising out of, based upon or caused by:
***.

14.4.                        ***.  With respect to any ***.

14.5                           ***.  In the event of an ***.

14.6.                        Insurance.  In
support of their indemnification obligations above, the Parties agree to
maintain at least the following insurance coverage and limits at the following
times after execution of this Agreement:

(a) Upon the ***.

(b)
Upon the ***.

 37
 

14.7                           Notices.  Each indemnified Party agrees to give the
indemnifying Party prompt written notice of any action, claim, demand, discovery
of fact, proceeding or suit (collectively, “Claims”) for which such indemnified
Party intends to assert a right to indemnification under this Agreement; provided
however, that failure to give such notification shall not affect the
indemnified Party’s entitlement to indemnification hereunder except to the
extent that the indemnifying Party shall have been prejudiced as a result of
such failure.  The indemnifying Party
shall have the initial right (but not the obligation) to defend, settle or
otherwise dispose of any Claim for which the indemnified Party intends to
assert a right to indemnification under this Agreement as contemplated in the
preceding sentence if and so long as the indemnifying Party has recognized in a
written notice to the indemnified Party provided within thirty (30) days of
such written notice its obligation to indemnify the indemnified Party for any
Pharmacopeia Losses or Organon Losses (as the case may be) relating to such
Claim; provided however that if the indemnifying Party assumes control of the
defense, settlement, or disposition of a Claim, the indemnifying Party shall
obtain the written consent of the indemnified Party prior to ceasing to defend,
settling or otherwise disposing of the Claim. 
If the indemnifying Party fails to state in a written notice during such
thirty (30) day period its willingness to assume the defense of such a Claim,
the Pharmacopeia or Organon Indemnitee, as the case may be, shall have the
right to defend, settle or otherwise dispose of such claim, subject to the
applicable provisions of Sections 14.2 and 14.3 above.

ARTICLE
15

TERM, TERMINATION, AND EXPIRATION

15.1.                        Term of Agreement.  The term of this Agreement shall commence on
the Effective Date and shall continue in full force and effect on a country-by-country
and Collaboration Product-by-Collaboration Product basis until Organon and its
Sublicensees have no remaining royalty obligations in a country, unless
terminated earlier as provided in this Article 15.

15.2                           Research Term. The
term of the Research Collaboration (the “Research Term”) shall commence on the
Effective Date and terminate on the last day of the Second Research Term,
unless extended by mutual agreement of the Parties, upon twelve (12) months
written notice from Organon before the last day of the Second Research Term, in
which case the Research Collaboration shall terminate on the last day of such
extension.  Such extension may take the
form of a limited wind-down period necessary to complete any ongoing Research
Collaboration activities specifically directed towards the designation of a
Lead Compound or Optionable Development Candidate.  The Parties will agree on
compensation to Pharmacopeia for such a wind-down period.

15.3                           Termination.

15.3.1                  Breach.  Except as provided in Section 15.3.3, if
either Party breaches, or defaults in the performance of, or fails to be in
compliance with, any material warranty, representation, agreement or covenant
of this Agreement, including any payment obligations, and such default or
noncompliance shall not have been substantially remedied, or steps initiated to
substantially remedy the same to the other Party’s reasonable satisfaction,
within sixty (60) days after receipt by the defaulting Party of a written
notice thereof and demand to cure such

 38
 

default from the other
Party (or, in the case of a failure to pay any amount due hereunder, within ten
(10) business days after receipt of such notice), the Party not in default or
breach may terminate this Agreement subject to the provisions herein.  Such termination shall be effective only
after submission of the dispute to arbitration as set forth in Section 16.19
and a determination by the arbitrators that there has been a material breach or
default.

15.3.2                  Bankruptcy.
Either Party may, subject to the provisions herein, terminate the Research
Collaboration and this Agreement if, at any time, the other Party shall file in
any court pursuant to any statute, a petition in bankruptcy or insolvency or
for reorganization in bankruptcy or for an arrangement or for the appointment
of a receiver or trustee of such Party or of its assets, or if such Party
proposes a written agreement of composition or extension of its debts, or if
such Party shall be served with an involuntary petition against it, filed in
any insolvency proceeding, and such petition shall not be dismissed within
sixty (60) days after the filing thereof, or if such Party shall propose or be
a party to any dissolution, or if such Party shall make an assignment for the
benefit of creditors.

15.3.3                  Termination
of Research Collaboration.

(a)                                  At
the end of Research Year Two and Research Year Three, the Parties shall meet to
review the progress of the Research Collaboration.  If the JRC determines that Organon and
Pharmacopeia have each exercised commercially reasonable efforts, but
Pharmacopeia has failed to deliver the following number of Lead Series per
Research Year, Organon shall have the right to terminate the Research
Collaboration at the end of Research Year Two or Research Year Three upon six
(6) months notice to Pharmacopeia in the event that (i) in the case of Research
Year Two, Pharmacopeia has failed to deliver one (1) Lead Series (with
demonstrated progress towards one additional Lead Series) by the end of
Research Year Two; or (ii) in the case of Research Year Three, Pharmacopeia has
failed to deliver a cumulative total of three (3) Lead Series (with
demonstrated progress towards one additional Lead Series) by the end of
Research Year Three.   In the event that
Organon elects to terminate the Research Collaboration as provided in this
Section 15.3.3(a), all payments made to Pharmacopeia as of the date of the
termination shall be non-refundable, provided, however, that
during the six (6) months notice period, Organon shall have no obligation to
provide further funding under Section 6.1, and Pharmacopeia shall provide
thirty (30) FTE-months of effort in the Research Collaboration, at its own
expense.

(b)                                 With
respect to the Initial Research Term, in the event that Pharmacopeia determines
that (1) Organon has not provided Pharmacopeia with targets in the number and
frequency set forth herein, (2) Pharmacopeia is not able to accept the targets
for screening in the Research Collaboration, provided that the inability of
Pharmacopeia is due to conditions relating to such targets which are outside of
Pharmacopeia’s control, or (3) Organon is not diligently carrying its
activities hereunder (including but not limited to, failing to provide
Pharmacopeia on a Target-by-Target basis with enabling Target Information, key
reagents and the Assay and providing the resources to conduct in vivo models),
then Pharmacopeia shall have the right upon six (6) months written notice to
Organon, to terminate the Research Collaboration or to continue its activities
hereunder on the Targets that have been accepted before the occurrence of any
of the foregoing.  In the event that
Pharmacopeia elects to terminate the Research Collaboration as provided in this
Section, all payments made to Pharmacopeia hereunder as of the date of the termination
shall be non-refundable, provided, however, that

 39
 

during the six (6) months
notice period, the Parties shall continue their respective activities in the
Research Collaboration.  In the event
that Pharmacopeia elects to continue its activities hereunder on the Targets
that have been accepted prior to the occurrence of any of the foregoing, then
Pharmacopeia’s obligation to provide Lead Series shall be reduced in proportion
to the reduction in the number of the targets made available to Pharmacopeia and
that Pharmacopeia is able to accept pursuant to the terms set forth
herein.  (By way of example, the number
of Lead Series to be delivered by Pharmacopeia is expected to be approximately
about 25% of the number of targets made available by Organon.  If the number of targets proposed by Organon
is reduced to twenty (20) targets, then Pharmacopeia shall deliver no more than
five (5) Lead Series to Organon).  The
Parties agree that notwithstanding any reduction in the Lead Series to be
delivered, Organon shall continue funding Pharmacopeia as provided herein.

(c)                                  Effective as of ***.  The Parties shall ***.  The Parties will ***.

(i) In the event ***.  In such case, on or about the effective date
of such termination, ***.  Further, in the event of any such termination
***.

(ii)
In the event ***.  Further, the
provisions of Section ***.

15.3.4                  Rights in Law or Equity.  Except as otherwise expressly provided
herein, termination by either Party pursuant to this Section 15.3 shall not
prejudice any other remedy that a Party might have in law or equity, except
that neither Party may claim compensation for lost opportunity or like
consequential damages arising out of the fact of such termination.

15.4                           Effect of Breach or
Termination.

15.4.1                  Accrued
Obligations.  Termination of this
Agreement for any reason shall not release any Party hereto from any liability
which, at the time of such termination, has already accrued to the other Party
or which is attributable to a period prior to such termination.

15.4.2                  Return of Materials.  Upon any termination of this Agreement,
Organon and Pharmacopeia shall promptly return to the other Party all
Confidential Information received from the other Party (except one copy of
which may be retained for archival purposes).

15.4.3                  Effect of
Termination of Research Collaboration. 
After the effective date of any termination of the Research
Collaboration, subject to the provisions of Sections 7.1.2, 15.3.3 and 15.3.4,
Organon shall have no obligation to fund further research activities in the
Research Collaboration, and Pharmacopeia shall have no further obligation to
conduct such research activities after such date.

15.4.4                  Licenses.

(a)                                  Termination
by Pharmacopeia Pursuant to Section 15.3.1 and 15.3.2. In the event of
termination by Pharmacopeia pursuant to Sections 15.3.1 or 15.3.2, ***.

(b)                               Termination
by Organon Pursuant to Sections 15.3.1 or 15.3.2.  In the event of termination by Organon
pursuant to Sections 15.3.1 or 15.3.2, ***.

 40
 

(c)                                  Termination
Pursuant to Section 15.3.3. In the event of termination by either Party
pursuant to Sections 15.3.3, ***.

15.5                           Survival.

(a)                                  General.  The provisions of Sections 3.5, 4.3, 5.6.1,
5.8, 5.9, 5.10, 8.3.2 and Articles 9, 10, 11, 14, 15, and 16 shall survive the
expiration or termination of this Agreement.

(b)                                 ***.  In the event of an ***, (i) the provisions of
Sections 8.3.2 and Articles 9, 10, 11, 14, 15 and 16 shall survive with respect
to the applicable Optionable Development Candidate and, (ii) ***.  Further, in the event of an ***.

ARTICLE
16

MISCELLANEOUS

16.1                           Notices.  Any notice or other communication required or
permitted to be given by either Party under this Agreement shall be effective
when delivered, if delivered by hand or by electronic facsimile or five days
after mailing if mailed by registered or certified mail, postage prepaid and
return receipt requested, and shall be addressed to each Party at the following
addresses or such other address an may be designated by notice pursuant to this
Section:

	
  If to Pharmacopeia:

  Pharmacopeia Drug
  Discovery, Inc.

  3000 Eastpark Boulevard

  Cranbury, NJ 08512-3516

  Attn:  Chief Executive Officer

  Fax: ***

   

   

  With a copy to:

   

  Pharmacopeia Drug
  Discovery, Inc.

  3000 Eastpark Boulevard

  Cranbury, NJ 08512-3516

  Attn:  General Counsel

  Fax: ***

  	
   

  	
  If to Organon:

  N.V. Organon

  Kloosterstraat 6

  5349 AB Oss

  The Netherlands

  Attn:  President

  Fax #:  ***

   

  with a copy to:

   

  Organon Biosciences B.V.

  Wethouder van Eschstraat 1

  5342 AV Oss

  The Netherlands

   

  Attn:  Legal Affairs Department

  Fax#:  ***

  

 

16.2                           Amendments.  No amendment, modification or addition hereto
shall be effective or binding on either Party unless set forth in writing and
executed by duly authorized representatives of both Parties.

 41
 

16.3                           Waiver.  No waiver of any rights under this Agreement
shall be deemed effective unless contained in writing signed by the Party
charged with such waiver, and no waiver of any breach or failure to perform
shall be deemed a waiver of any future breach or failure to perform or any
other right arising under this Agreement.

16.4                           Headings.  The section headings contained in this
Agreement are included for convenience only and form no part of the agreement
between the Parties.

16.5                           Applicable
Law.  This Agreement shall be
governed by, subject to and construed in accordance with the laws of the State
of Delaware and the Parties consent to the jurisdiction of the State and
Federal Courts of Delaware.

16.6                           Severability.  If any provision of this Agreement is held to
be invalid, void or unenforceable for any reason, it shall be adjusted, if
possible, rather than voided in order to achieve the intent of the Parties to
the maximal extent possible.  In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.

16.7                           Assignment:
Binding Effect.  Neither this
Agreement, nor any obligations or rights hereunder, shall be assignable by any
Party hereto without the prior written consent of the other Party; ***.  Any purported assignment in contravention of
this Section shall, at the option of the non-assigning Party, be null and
void and of no effect.

16.8                           No
Implied licenses.  Only the licenses
granted expressly herein shall be of legal force and effect.  No license rights shall be created hereunder
by implication, estoppel or otherwise.

16.9                           Further
Assurances.  Each Party agrees to
execute, acknowledge and deliver such further instruments, and to do all such
other acts as may be necessary or appropriate in order to carry out the
purposes and intent of this Agreement.

16.10                     Force
Majeure.  No Party shall be liable
for any failure or delay in performance under this Agreement to the extent such
failure or delay arises from Force Majeure. 
A Force Majeure is fire, explosion, earthquake, storm, flood, strike,
labor difficulties, war, insurrection, riot, act of God or the public enemy, or
any law, act, order, export or import control regulations, proclamation,
decree, regulation, ordinance, or instructions of local, state, federal or
foreign governmental or other public authorities, or judgment or decree of a
court of competent jurisdiction (but excluding a court injunction against a
Party’s performance) and not otherwise arising out of breach by such Party of
this Agreement.  In the event of the
occurrence of such an event, the Party so affected shall give prompt written
notice to the other Party, stating the period of time the occurrence is
expected to continue and shall use best efforts to end the failure or delay and
ensure that the effects of such Force Majeure are minimized.

16.11                     Negation
of Agency.  Nothing herein contained
shall be deemed to create an agency, joint venture, amalgamation, partnership,
or similar relationship between Organon and Pharmacopeia.  The relationship between the Parties
established by this Agreement is that of independent contractors.

 42
 

16.12                     Publicity.  No public announcement concerning the
existence or the terms of this Agreement shall be made, either directly or
indirectly, by Pharmacopeia or Organon, except as may be legally required by
applicable laws, regulations, or judicial order, without first obtaining the
approval of the other Party and agreement upon the nature, text, and timing of
such announcement, which approval and agreement shall not be unreasonably
withheld.  The Party desiring to make any
such public announcement shall provide the other Party with a written copy of
the proposed announcement in sufficient time prior to public release to allow
such other Party to comment upon such announcement, prior to public
release.  Neither Party shall issue any
press release or make any public announcement, which includes or otherwise uses
the name of the other Party in any public statement or document except with the
prior written consent of such Party.

16.13                     Registration
and Filing of the Agreement.  To
the extent, if any, that a Party concludes in good faith that it is required to
file or register this Agreement or a notification thereof with any governmental
authority, including without limitation the U.S. Securities and Exchange
Commission and the Competition Directorate of the Commission of the European
Communities, in accordance with applicable laws and regulations, such Party may
do so, and the other Party shall cooperate in such filing or notification and
shall execute all documents reasonably required in connection therewith at the,
expense of the requesting Party.  The
Parties shall promptly inform each other as to the activities or inquiries of
any such governmental authority relating to this Agreement, and shall cooperate,
to respond to any request for further information therefrom at the expense of
the requesting Party.

16.14                     Entire
Agreement.  This Agreement and the
Exhibits hereto may be amended from time to time in accordance with this
Agreement) contains the entire agreement between the Parties with respect to
the subject matter hereof.  Any prior
agreement, arrangement or undertaking, whether oral or in writing is hereby
superseded.

16.15                     Beneficiaries.  No person, other than Organon or Pharmacopeia
and their permitted assignees hereunder, shall be deemed an intended
beneficiary hereunder or have any right to enforce any obligation of this
Agreement.

16.16                     Affiliates
of Parties.  Each Party may perform
its obligations hereunder personally or through one or more Affiliates and
shall be responsible for the performance of such obligations, and any
liabilities resulting therefrom.  Neither
Party shall permit any of its Affiliates to commit any act (including any act
of omission) which such Party is prohibited hereunder from committing directly.

16.17                     Compliance
with Laws.  In exercising their
rights under this Agreement, the Parties shall fully comply with the
requirements of any and all applicable laws, regulations, rules and orders of
any governmental body having jurisdiction over the exercise of rights under
this Agreement.

16.18                     Patent
Marking.  Organon agrees to mark and
have its Affiliates and Sublicensees mark all Collaboration Products sold
pursuant to this Agreement in accordance with the applicable statute or
regulations relating to patent marking in the country or countries of
manufacture and sale thereof.

 43
 

16.19                     Dispute
Resolution.

(a)                                  Attempt to Settle.  The Parties agree to take all reasonable
efforts to resolve any and all disputes between them concerning diligence
obligations and/or questions of material breach and default in connection with
this Agreement in an amicable manner.

(b)                                 Binding Arbitration.  Except in the event of alleged breach,
default or lack of diligence by a bankrupt or insolvent Party, the Parties
agree that any such dispute that arises in connection with this Agreement and
which cannot be amicably resolved by the Parties shall be resolved by binding
arbitration as set forth in this Section, conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (AAA) by
three (3) arbitrators.

(c)                                  Written Notice.  If a Party intends to begin an arbitration to
resolve a dispute, such Party shall provide written notice to the other Party
informing the other Party of such intention and the issues to be resolved.  Within twenty (20) business days after its
receipt of such notice, the other Party may, by written notice to the Party
initiating arbitration, add additional issues to be resolved.

(d)                                 Selection of
Arbitrators.  Within forty-five (45)
days following the receipt of the notice of arbitration, the Parties shall
agree on the arbitrators, or if the Parties are unable to agree the arbitrators
shall be selected as provided in the AAA Commercial Arbitration Rules.  The arbitrators shall not be employees, directors
or shareholders of either Party or of an Affiliate and shall be selected in
accordance with AAA rules.  Where
applicable, the arbitrators shall be independent experts in pharmaceutical
product development (including clinical development and regulatory affairs) in
the U.S., Japan and Europe.

(e)                                  Hearings.  The arbitrators shall conduct one or more
hearings to allow the parties to present their positions regarding the dispute.

(i)                                     Discovery.  The arbitrators shall determine what
discovery will be permitted, consistent with the goal of limiting the cost and
time that the Parties must expend for discovery; provided the arbitrators shall
permit such discovery as they deem necessary to permit an equitable resolution
of the dispute.  Any written evidence originally
in a language other than English shall be submitted in English translation
accompanied by the original or a true copy thereof.  The arbitrators shall have sole discretion
with regard to the admissibility of any evidence.

(ii)                                  Proposed Ruling.  At least ten (10) business days prior to a
hearing, each Party must submit to the arbitrators and serve on the other Party
a proposed ruling on each issue to be resolved. 
Such writings shall be limited to not more than fifty (50) pages.

(iii)                               Time; Testimony.  Each Party shall be entitled to no more than
five (5) days of hearing to present testimony or documentary evidence.  Such time limitation shall include any
direct, cross or rebuttal testimony, but such time limitation shall only be
charged against the Party conducting such direct, cross or rebuttal
testimony.  It shall be the
responsibility of the arbitrators to determine whether the Parties have had the
five (5) days to which each is entitled.

 44
 

(iv)                              Representation by an
Attorney.  Each Party shall have the
right to be represented by counsel.

(v)                                 Location.  The arbitration shall take place in New York,
NY.

(f)                                    Costs.  The costs of the arbitration, including
administrative and arbitrator fees, shall be shared equally by the
Parties.  Each Party shall bear its own
costs and attorney and witness fees.

(g)                                 Written Decision.  The arbitrators shall render a written
decision with their resolution of the dispute. 
The decision of the arbitrators shall be final and not subject to appeal
and binding on the Parties hereto.

(h)                                 Remedy.  A disputed performance or suspended
performances pending the resolution of the arbitration must be completed within
thirty (30) days following the final decision of the arbitrators or such other
reasonable period as the arbitrators determine in a written opinion.

(i)                                     Final Decision
Within One Year.  Any arbitration
subject to this Section 16.19 shall be completed within one (1) year from the
filing of notice of a request for such arbitration.

16.20                     No
Trademark Rights.  Except as provided
herein, no right, express or implied, is granted by this Agreement to use in
any manner the name “Pharmacopeia,” “Organon” or any other trade name or
trademark of the other Party or its Affiliates in connection with performance
of this Agreement.

IN WITNESS
WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.

	
  N.V. ORGANON

  	
  PHARMACOPEIA DRUG

  
	
   

  	
   

  	
  DISCOVERY, INC.

  
	
   

  
	
  By:

  	
   

  	
  /s/ C.D. Nicholson

  	
   

  	
  By:

  	
   

  	
  /s/ Leslie J. Browne

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Dr. C.D. Nicholson

  	
  Name:

  	
  Leslie J. Browne, Ph.D.

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Executive Vice
  President

  	
  Title:

  	
  President and

  
	
   

  	
  Research &
  Development

  	
   

  	
  Chief Executive Officer

  
	
  Date:

  	
   

  	
  Date:

  	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ A.W.M. Rijnders

  	
   

  	
   

  
	
   

  
	
  Name:

  	
  Dr. A.W.M. Rijnders

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President
  Research

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
								

 

 45

EXHIBIT A

***

***.

 A-1

EXHIBIT B

Transferred Programs

***

 B-1

EXHIBIT C

Stock Purchase
Agreement

THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of the 8th day of February, 2007 (the “Effective Date”) by and between Pharmacopeia Drug Discovery,
Inc. (the “Company”), a corporation organized
under the laws of the State of Delaware, with its principal offices at 3000
Eastpark Boulevard, Cranbury, New Jersey 08512, and N.V. Organon, a Dutch
Company limited by shares, having a principal place of business at
Kloosterstraat 6, 5342 AB Oss, The Netherlands (the “Purchaser”).

RECITALS

A.                                   The Company and the Purchaser have
entered into that certain Collaboration
and License Agreement, effective as of the 25th day of February, 2002, as modified by the
Addendum effective December 22, 2003 and the Second Addendum effective December
1, 2004, and as further amended and restated effective as of the Effective Date
(the “Collaboration Agreement”), and, in
connection with, and as a condition to entering into the Collaboration
Agreement, the Company and the Purchaser (collectively, the “Parties”) desire to enter into this Agreement providing the
Company an option to sell shares of its capital stock to the Purchaser under
certain circumstances.

B.                                     The Company desires to have the option to
sell to the Purchaser, and the Purchaser, upon the exercise of such option by
the Company, desires to make a purchase from the Company of, the Shares (as
defined herein), in accordance with the terms and conditions set forth herein.

C.                                     As of the Effective Date, Purchaser owned
222,665 of the Company’s shares of Common Stock purchased in accordance with
the terms of that certain Common Stock Purchase Agreement between the Purchaser
and the Company (as successor in interest to Pharmacopeia, Inc.) dated as of
May 31, 1996 (the “1996 Shares”).

NOW, THEREFORE, in consideration of the foregoing
recitals and the mutual covenants and agreements contained in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Purchaser do hereby agree as
follows:

SECTION 1.                                Definitions. Unless otherwise defined herein in this Agreement,
all capitalized terms shall have the meanings assigned to them in the
Collaboration Agreement. As used in this Agreement, the following terms shall
have the following respective meanings:

1.1.                              “Affiliate”
shall mean, in regard to any Person (the “referent person”), any Person that
controls the referent person, any Person that the referent person controls, or
any Person that is under common control with the referent person. For purposes
of the preceding sentence, the term “control” shall mean the power, direct or
indirect, to direct or cause the direction of the management and policies of a
Person through voting securities, by contract or otherwise.

1.2.                              “Change of Control Transaction” means, with respect to the Company, an event in which: (a)
any person (as the term “person” is used for purposes of Section 13(d) or
14(d) of

 C-1
 

the Exchange Act) not then beneficially owning more than
fifty percent (50%) of the voting power of the outstanding securities of the
Company or any of its controlling Affiliates acquires or otherwise becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of securities of the Company or any of its controlling Affiliates
representing more than fifty percent (50%) of the voting power of the then
outstanding securities of the Company with respect to the election of directors
of the Company; (b) the Company (i) consummates a merger, consolidation or
similar transaction with another Person where the voting securities of the
Company or any of its controlling Affiliates outstanding immediately preceding
such transaction (or the voting securities issued with respect to the voting
securities of the Company or any of its controlling Affiliates outstanding
immediately preceding such transaction) represent less than fifty percent (50%)
of the voting power of the Company or any of its controlling Affiliates or
surviving entity, as the case may be, following such transaction, (ii) sells or
otherwise transfers to any Person(s) in one or more related transactions more
than fifty percent (50%) of its consolidated total assets, or assets from which
more than fifty percent (50%) of its consolidated operating income for its most
recent financial year was derived, or (iii) disposes by sale, assignment,
exclusive license or otherwise of all or substantially all of its intellectual
property rights, except for licenses under such intellectual property rights in
the ordinary course of business and any isolated sale or assignment of specific
items of intellectual property; or (c) in the event that the Company has equity
securities registered under the Exchange Act, any “person” (as the term
“person” is used for the purposes of Sections 13(d) or 14(d) of the Exchange
Act) other than the Purchaser acquires forty percent (40%) or more of the
voting power of the then-outstanding voting securities of the Company or any of
its controlling Affiliates. For the purposes of this definition, a “controlling
Affiliate” is an Affiliate that “controls” the Company, as such term is used in
the definition of “Affiliate” in Section 1.1.

1.3.                              “Closing” shall
mean the closing of the purchase and sale of the Shares.

1.4.                              “Collaboration Agreement”
shall have the meaning set forth in the Recitals.

1.5.                              “Commission”
shall mean the Securities and Exchange Commission.

1.6.                              “Common Stock”
shall mean the Company’s common stock, par value $0.01 per share.

1.7.                              “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

1.8.                              “Governmental Authority”
shall mean any nation or government, any state or other political subdivision
thereof, any central bank (or similar monetary or regulatory authority)
thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.

1.9.                              “Hard
Cap Limit” shall mean fourteen and nine-tenths percent (14.9%) of
the Company’s then outstanding Common Stock, as reported in the Company’s most
recent SEC Report.

1.10.                        “Legal Proceeding”
shall mean any action, suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative, governmental or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced, brought,
conducted or heard by or

 C-2
 

before, or otherwise
involving, any court or other Governmental Authority or any arbitrator or arbitration
panel.

1.11.                        “Operating
Documents” shall mean the Company’s amended and restated certificate of
incorporation, as filed with the State of Delaware, amended and restated
bylaws, and all modifications and amendments thereto.

1.12.                        “Parties” shall
have the meaning set forth in the Recitals.

1.13.                        “Person” shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization, limited liability company or government or other entity.

1.14.                        “Securities  Act” shall mean the Securities Act of 1933, as amended.

1.15.                        “Shares” shall
mean that number of shares of Common Stock calculated under Section 2.4 which
the Company shall sell to the Purchaser, and the Purchaser shall purchase from
the Company at the Closing, if any.

1.16.                        “Trading Days”
shall mean a day on which The NASDAQ Global Market is open for trading.

1.17.                        Other Defined Terms. In addition to the terms defined in the Introduction
and Recitals to this Agreement or preceding this in Section 1, the following
terms shall have the meanings defined for such terms in the Sections set forth
below:

	
  Term

  	
   

  	
  Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Buy-up”

  	
   

  	
  2.3

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Closing Date”

  	
   

  	
  3.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “DWAC”

  	
   

  	
  3.2

  	
  (b)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Form 10”

  	
   

  	
  4.2

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Intellectual Property”

  	
   

  	
  4.9

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Material Adverse
  Effect”

  	
   

  	
  4.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Option”

  	
   

  	
  2.2

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Option Notice”

  	
   

  	
  2.3

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Per Share Purchase
  Price”

  	
   

  	
  2.4

  	
  (a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Purchase Price”

  	
   

  	
  2.4

  	
  (a)

  
	
   

  	
   

  	
   

  	
   

  
	
  “Registration
  Statement”

  	
   

  	
  4.3

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “SEC Reports”

  	
   

  	
  4.13

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Written Disclosure”

  	
   

  	
  9

  	
   

  

 

 C-3
 

SECTION 2.                                Authorization and Issuance of the Shares.

2.1.                              Authorization. The Company has, or shall have prior to
the issuance, authorized the issuance and sale of the Shares pursuant to the
terms and conditions hereof.

2.2.                              Option of the Company. The Purchaser grants the Company an
option (the “Option”) to sell the Shares to the
Purchaser, on the terms and subject to the conditions described in this
Agreement.

2.3.                              Exercise of the Option. At such time as the Company ***. The
Company shall deliver to the Purchaser the Option Notice in accordance with
Section 10 hereof. Any such delivery of the Option Notice shall serve as an
exercise of the Option by the Company. For the avoidance of doubt, the Company
may not effect more than one Closing under this Agreement.

2.4.                              Number of Shares to be Issued at the
Closing.

(a)                                        Subject to the terms and conditions of
this Agreement, the per share purchase price (the “Per Share
Purchase Price”) to be paid by the Purchaser for the Shares to be
purchased from the Company on the Closing Date shall be equal to the average
closing sale price for the Company’s Common Stock as reported in The Wall
Street Journal for the thirty (30) business day period ending as of the
date three (3) business days prior to such Closing Date. The number of Shares
to be issued to the Purchaser at the Closing, if any, shall be equal to ***
(rounded up or down to the nearest whole share).

(b)                                 Conditional Limit on Ownership.  Notwithstanding anything to the
contrary contained in this Agreement, the total cumulative number of shares of
Common Stock of the Company (including the 1996 Shares) owned by the Purchaser
and its Affiliates shall at all times be equal to or less than the Hard Cap
Limit.  In the event that, together with its ownership of the 1996 Shares,
the purchase of Shares would cause the Purchaser and its Affiliates to be
holders of Common Stock greater than the Hard Cap Limit, the Purchaser shall be
relieved of its obligations to make such purchase but only to the extent that
the Shares to be acquired by the Purchaser pursuant to the Agreement would
cause the Purchaser and its Affiliates’ holdings to exceed the Hard Cap
Limit.  For clarification, the Hard Cap Limit ownership test shall be
calculated immediately prior to the Closing Date and it shall include any 1996
Shares that the Purchaser continues to own as of such time as well as the
number of Shares proposed to be purchased pursuant to this Agreement.

2.5.                                    Issuance, Sale and Pricing of the Shares. Subject to the terms and conditions of
this Agreement and to the Company’s voluntary exercise of the Option and
delivery of the Option Notice to the Purchaser, the Company shall issue and
sell to the Purchaser, and the Purchaser shall purchase from the Company, the
Shares for the Purchase Price on the Closing Date.

 C-4
 

SECTION 3.                                Closing; Delivery; Notice.

3.1.                              Closing. The Closing shall be held within thirty (30) days of
the date of the delivery of the Option Notice at 10:00 a.m., New York time, or
on such date as the Parties may mutually otherwise agree (the “Closing Date”).

3.2.                              Payment and Delivery of the Shares.

(a)                                  Payment. Subject to the terms and conditions of
this Agreement, on the Closing Date, the Purchaser shall pay the Purchase Price
by wire transfer in immediately available funds to the account of the Company,
in accordance with the wire instructions provided to the Purchaser by the
Company.

(b)                                 Delivery. Subject to the terms and conditions of
this Agreement, on the Closing Date, the Company shall issue instructions to
the Company’s stock transfer agent directing the Company’s transfer agent to
prepare and deliver to the account of the Purchaser, by an automated share
transfer through the Depository Trust Company system (“DWAC”),
that number of shares of the Company representing the Shares no later than the
Closing Date.

3.3.                              Location. The Closing shall be held at the principal offices
of Dechert LLP, 997 Lenox Drive, Building 3, Suite 210, Lawrenceville, New
Jersey, or at such other place as the Company and the Purchaser may agree.

SECTION 4.                                Representations, Warranties and Covenants of the
Company. The
Company hereby represents and warrants to, and covenants with, the Purchaser as
follows:

4.1.                              Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and the Company is qualified to do business as a foreign
corporation in each jurisdiction in which qualification is required, except
where failure to so qualify would not reasonably be expected to have a Material
Adverse Effect (as defined herein). The Company has no subsidiaries. For
purposes of this Agreement, the term “Material Adverse Effect”
shall mean a material adverse effect upon the business, financial condition,
properties or results of operations of the Company.

4.2.                              Authorized Capital Stock. As of the Effective Date, the
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, of which 21,276,051 shares
are outstanding, and 2,500,000 shares of preferred stock (5,000 shares of which
have been designated as Series A Junior Participating Preferred Stock), of
which no shares are outstanding. All of the issued and outstanding shares of
the Common Stock have been duly authorized and validly issued, are fully paid
and nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and conform to
the description thereof contained in the Company’s Form 10 registration
statement filed with the Commission on April 9, 2004, including any amendments
or reports filed by the Company with the Commission for the purpose of updating
such description (as amended, “Form 10”).
Except as disclosed in the SEC Reports, the Company does not have outstanding
any options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock or any
such options, rights, convertible securities or obligations. The description of
the Company’s

 C-5
 

stock, stock bonus and
other stock plans or arrangements and the options or other rights granted and
exercised thereunder, set forth in the Form 10 and the SEC Reports accurately
and fairly presents all material information with respect to such plans,
arrangements, options and rights.

4.3.                              Issuance, Sale and Delivery of the
Shares; Registration Statement.

(a)                                  The Shares have been, or prior to the
issuance will have been, duly authorized and, when issued, delivered and paid
for in the manner set forth in this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and free and clear of all pledges, liens,
restrictions and encumbrances (other than restrictions on transfer under state
and/or federal securities laws). No preemptive rights or other rights to
subscribe for or purchase exist with respect to the issuance and sale of the
Shares by the Company pursuant to this Agreement. No further approval or
authority of the stockholders or the Board of Directors of the Company will be
required for the issuance and sale of the Shares to be sold by the Company as
contemplated herein.

(b)                                 At the Effective Date, the Company
meets the requirements for use of Form S-3 under the Securities Act. The
Company hereby agrees to use commercially reasonable efforts (i) to file with
the Commission a registration statement on such form as the Company is then
eligible to use for registration under the Securities Act of the offering and
sale of the Shares (the “Registration Statement”)
and (ii) to have such Registration Statement be declared effective under the
Securities Act on or before the Closing Date.  When the Registration
Statement or any amendment thereof or supplement thereto is declared effective,
the Company will use its commercially reasonable efforts to ensure that it (x)
will comply, in all material respects, with the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the Commission
thereunder and (y) will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. On the
Closing Date no stop order preventing or suspending the effectiveness of the
Registration Statement will have been issued by the Commission and no
proceedings for that purpose will have been instituted or threatened under the
Securities Act.

4.4.                              Due Execution, Delivery and Performance
of this Agreement.
The Company has full legal right, corporate power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not violate any provision of the
Operating Documents and will not result in the creation of any lien, charge,
security interest or encumbrance upon any assets of the Company pursuant to the
terms or provisions of, and will not conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage of
time or both, a default under (a) any agreement, lease, franchise, license,
permit or other instrument to which the Company is a party or by which the
Company or any of its properties may be bound or affected and in each case
which would reasonably be expected to have a Material Adverse Effect, or (b)
any statute or any judgment, decree, order, rule or regulation of any
Governmental Authority applicable to the Company or any of its properties where
such conflict, breach, violation or default is likely to result in a Material
Adverse Effect. No consent, approval, authorization or other order of any
Governmental Authority is required for the execution and delivery of this
Agreement or the

 C-6
 

consummation of the
transactions contemplated by this Agreement, except for compliance with the
blue sky laws and federal securities laws applicable to the offering of the
Shares. Upon the execution and delivery of this Agreement, and assuming the
valid execution thereof by the Purchaser, this Agreement will constitute a
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

4.5.                              No Defaults. The Company is not in violation or
default of any provision of its Operating Documents, or in breach of or default
with respect to any provision of any agreement, judgment, decree, order, lease,
franchise, license, permit or other instrument to which it is a party or by
which it or any of its properties are bound which could reasonably be expected
to have a Material Adverse Effect and there does not exist any state of facts
which, with notice or lapse of time or both, would constitute an event of
default on the part of the Company as defined in such documents and which would
reasonably be expected to have a Material Adverse Effect.

4.6.                              No Actions. (a) There are no Legal Proceedings pending and (b)
there are no inquiries or investigations, nor, to the Company’s knowledge, are
there any Legal Proceedings threatened to which the Company is or may be a
party or of which property owned or leased by the Company is or may be the
subject, or related to discrimination matters, which Legal Proceedings,
individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect; and no labor disturbance by the employees of the
Company exists or, to the Company’s knowledge, is imminent which might
reasonably be expected to have a Material Adverse Effect. The Company is not
party to or subject to the provisions of any injunction, judgment, decree or
order of any court, regulatory body, administrative agency or other
Governmental Authority which might reasonably be expected to have a Material
Adverse Effect.

4.7.                              Properties. The Company has good and marketable title to all
properties and assets reflected as owned in the financial statements included
in the SEC Reports, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except (a) those, if any, reflected in the financial statements
included in the SEC Reports or otherwise in the SEC Reports, or (b) those which
are not material in amount and do not adversely affect the use of such property
by the Company. The Company holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation to
its business taken as a whole. The Company leases all such properties as are
necessary to its operations as now conducted.

4.8.                              No Material Change. Since December 31, 2006, and except as
described in the SEC Reports (a) the Company has not incurred any material
liabilities or obligations, indirect, or contingent, or entered into any
material oral or written agreement or other transaction which is not in the
ordinary course of business or which could reasonably be expected to result in
a material reduction in the future earnings of the Company; (b) the Company has
not sustained any material loss or interference with its businesses or
properties from fire, flood, windstorm, accident or other calamity not covered
by insurance; (c) the Company has not paid or declared any dividends or other
distributions with respect to its capital stock and the Company is not in
default in the payment of principal or interest on any outstanding debt
obligations; (d) there has not been any change in the capital stock of the
Company other than the sale of the Shares

 C-7
 

hereunder or shares
contributed as a matching contribution to participants’ accounts under the
Company’s 401(k) plan, shares or options issued pursuant to employee equity
incentive plans or purchase plans approved by the Company’s Board of Directors
and repurchases of shares or options pursuant to repurchase plans already
approved by the Company’s Board of Directors, or indebtedness not incurred in
the ordinary course of business that is material to the Company; and (e) there
has not been any other event which has caused, or is likely to cause, a
Material Adverse Effect.

4.9.                              Intellectual Property. (a) The Company owns or has obtained
licenses or options for the inventions, patent applications, patents,
trademarks (both registered and unregistered), trade names, copyrights and
trade secrets necessary for the conduct of the Company’s business as currently
conducted (collectively, the “Intellectual Property”);
and (b) (i) to the knowledge of the Company, there are no third parties who
have any ownership rights to any Intellectual Property that is owned by, or has
been licensed to, the Company for the products described in the SEC Reports
that would preclude the Company from conducting its business as currently
conducted and have a Material Adverse Effect, except for the ownership rights
of the owners of the Intellectual Property licensed or optioned by the Company;
(ii) there is no pending or, to the Company’s knowledge, threatened Legal
Proceeding or claim by others challenging the rights of the Company in or to
any Intellectual Property owned, licensed or optioned by the Company, other
than claims which would not reasonably be expected to have a Material Adverse
Effect; (c) there is no pending or, to the Company’s knowledge, threatened
Legal Proceeding or claim by others challenging the validity or scope of any
Intellectual Property owned, licensed or optioned by the Company, other than
non-material Legal Proceedings and claims; and (d) there is no pending or, to
the Company’s knowledge, threatened Legal Proceeding or claim by others that
the Company infringes or otherwise violates any patent, trademark, copyright,
trade secret or other proprietary right of others, other than non-material
Legal Proceedings and claims.

4.10.                        Compliance. The Company has not been advised, nor does the
Company have reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting its business, except where failure to be so in
compliance would not reasonably be expected to have a Material Adverse Effect.

4.11.                        Taxes. The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency
which has been or might be asserted or threatened against it which might
reasonably be expected to have a Material Adverse Effect.

4.12.                        Insurance. The Company maintains insurance of the types and in
the amounts that the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering all real and personal property
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against by similarly situated companies,
all of which insurance is in full force and effect.

4.13.                        Reporting Company. The Company is subject to the reporting requirements
of the Exchange Act and has filed all reports required thereby (collectively,
the “SEC Reports”).

4.14.                        Governmental Permits, Etc. The Company has all franchises,
licenses, certificates

 C-8
 

and other authorizations
from Governmental Authorities that are currently required for the operation of
the business of the Company as currently conducted, except where the failure to
possess currently such franchises, licenses, certificates and other
authorizations is not reasonably expected to have a Material Adverse Effect.
The Company has not received any notice of proceedings relating to the
revocation or modification of any such permit which, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected to have a
Material Adverse Effect.

4.15.                        Financial Statements. The financial statements of the Company and the
related notes contained in its SEC Reports present fairly, in accordance with
generally accepted accounting principles, the financial position of the Company
as of the dates indicated, and the results of its operations, cash flows and
the changes in stockholders’ equity for the periods therein specified, subject,
in the case of unaudited financial statements for interim periods, to normal
year-end audit adjustments. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods therein
specified, except that unaudited financial statements may not contain all
footnotes required by generally accepted accounting principles.

4.16                           Real Property Holding Corporation. The Company is not a “United States
real property holding corporation,” as that term is defined in the Internal
Revenue Code (“IRC”) Section 897(c)(2) and Treasury Regulation Section
1.897-2(b). If at any time in the future the Company shall become a “United
States real property holding corporation,” the Company shall notify the
Purchaser of such event as promptly as practicable. Within the thirty (30) days
after receipt of a request from the Purchaser, the Company shall prepare and
deliver to the Purchaser the statement required under Treasury Regulation
Section 1.897-2(h) and, subject to the succeeding sentence, either or both of
the following documents: (i) an affidavit in conformance with the requirements
of IRC Section 1445(b)(3) and the regulations thereunder or (ii) a notarized
statement, executed by an officer having actual knowledge of the facts, that
the shares of the Company stock held by the Purchaser are of a class that is
regularly traded on an established securities market, within the meaning of IRC
Section 1445(b)(6) and the regulations thereunder. If the Company is unable to
provide either of the documents described in (i) or (ii) above upon request, it
shall promptly, and in any event within thirty (30) days, notify the Purchaser
in writing of the reason for such inability. Finally, upon the request of the
Purchaser and without regard to whether either document described in (i) or
(ii) above has been requested, the Company shall reasonably cooperate with the
efforts of the Purchaser to obtain a “qualifying statement” within the meaning
of IRC Section 1445(b)(4) and the regulations thereunder or such other documents
as would excuse a transferee of the Purchaser’s interest from withholding of
income tax imposed pursuant to IRC Section 897(a).

SECTION 5.                                Representations, Warranties and Covenants of the
Purchaser.

5.1.                              The Purchaser represents and warrants to,
and covenants with, the Company that:

(a)                                  the Purchaser is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions
with respect to investments in shares representing an investment decision like
that involved in the purchase of the Shares, including investments in

 C-9

securities issued by the
Company and comparable entities, and has had the opportunity to request,
receive, review and consider all information it deems relevant in making an
informed decision to purchase the Shares;

(b)                                 the Purchaser is acquiring the number of
Shares set forth in Section 2 above in the ordinary course of its business and
for its own account for investment only and with no present intention of
distributing any of such Shares or any arrangement or understanding with any
other persons regarding the distribution of such Shares (this representation
and warranty not limiting the Purchaser’s right to sell in compliance with the
Securities Act and the rules and regulations promulgated thereunder);

(c)                                  the Purchaser has, in connection with its
decision to purchase the number of Shares set forth in Section 2 above, relied
solely upon the SEC Reports filed prior to the date of this Agreement and the
documents included therein or incorporated by reference and the representations
and warranties of the Company contained herein;

(d)                                 the Purchaser has had an opportunity to
discuss this investment with representatives of the Company and ask questions
of them;

(e)                                  the Purchaser is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act; and

(f)                                    the Purchaser agrees to notify the
Company immediately of any change in any of the foregoing information until
such time as the Purchaser has sold all of the Shares.

The Purchaser
understands that the Shares are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of the Securities Act,
the rules and regulations promulgated thereunder and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of the Purchaser to acquire
the Shares.

5.2.                              The Purchaser hereby represents and
warrants that as of the Effective Date, the Purchaser and its Affiliates
collectively own 222,665 shares of Common Stock of the Company.

5.3.                              Unless otherwise required by law,
including the Exchange Act, or by rules promulgated by the U.S. Securities and
Exchange Commission, the Parties hereby agree to keep confidential all
information concerning any sale by the Company of the Shares hereunder. The
Parties understand that the information contained in the Collaboration
Agreement and this Agreement (including the terms hereof) is strictly
confidential and proprietary. The Parties hereby acknowledges that they are
prohibited from reproducing or distributing the Collaboration Agreement, this
Agreement, or any other materials or other information exchanged in connection
with the Purchaser’s consideration of its investment in the Company, in whole
or in part, or divulging or discussing any of their contents, except to their
respective financial, investment or legal advisors in connection with its
proposed investment in the Shares. Further, unless otherwise required by law,
including the Exchange Act, or by rules promulgated by the U.S. Securities and
Exchange Commission, the Purchaser understands that the existence and nature of
all conversations and presentations, if any, regarding the Company and this
sale of Shares must

 C-10
 

be kept strictly
confidential. The Purchaser understands that the federal securities laws impose
restrictions on trading based on information regarding this offering and the
transactions contained in this Agreement and the Collaboration Agreement and
any other material nonpublic information of which the Purchaser may become
aware. In addition, the Purchaser hereby acknowledges that unauthorized
disclosure of information regarding this offering may result in a violation of
Regulation FD. The Parties’ obligations under this Section 5.3 will terminate
upon the filing by the Company of a press release or press releases (pursuant
to Section 9 herein) or a Current Report on Form 8-K describing this offering
and the transactions contained in this Agreement and the Collaboration
Agreement. The foregoing agreements shall not apply to any information that is
or becomes publicly available through no fault of either Party, or that a Party
is legally required to disclose; provided, however, that if the a Party is requested or ordered to disclose any such information
pursuant to any court or other government order or any other applicable legal
procedure, it shall provide the other Party with prompt notice of any such
request or order in time sufficient to enable such Party to seek an appropriate
protective order.

5.4.                              The Purchaser understands that its
investment in the Shares involves a significant degree of risk, including a
risk of total loss of the Purchaser’s investment, and the Purchaser has full
cognizance of and understands all of the risk factors related to the
Purchaser’s purchase of the Shares, including, but not limited to, those set
forth under the caption “Risk Factors” in the SEC Reports. The Purchaser
understands that the market price of the Common Stock has been volatile and
that no representation is being made as to the future value of the Common
Stock. The Purchaser has the knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Shares and has the ability to bear the economic risks of an investment in
the Shares.

5.5.                                    The Purchaser understands that no United
States federal or state agency or any other Governmental Authority has passed
upon or made any recommendation or endorsement of the Shares.

5.6.                              The Purchaser’s principal executive
offices are in the jurisdiction set forth immediately below the Purchaser’s
name on the signature pages hereto.

5.7.                              The Purchaser further represents and
warrants to, and covenants with, the Company that (a) the Purchaser has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
(b) the making and performance of this Agreement by the Purchaser and the
consummation of the transactions herein contemplated will not violate any
provision of the organizational documents of the Purchaser or conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which the Purchaser is a party, or any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other Governmental Authority
applicable to the Purchaser, (c) no consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body is required on the part of the Purchaser for the execution and
delivery of this Agreement or the consummation of the transactions contemplated
by this Agreement, (d) upon the execution and delivery of this Agreement, this
Agreement shall constitute a legal, valid and binding obligation of the

 C-11
 

Purchaser, enforceable in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and (e) there is not in effect any order enjoining or restraining the Purchaser
from entering into or engaging in any of the transactions contemplated by this
Agreement.

SECTION 6.                                Survival of Representations, Warranties
and Agreements.
Notwithstanding any investigation made by any Party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares being purchased and the payment
therefor and remain in full force and effect for period of one (1) year
following the Closing Date.

SECTION 7.                                Conditions of Closing.

7.1.                              Conditions to Obligations of Purchaser to
Consummate the Closing. The obligation of Purchaser to consummate the Closing and to purchase
and pay for the Shares being issued pursuant to this Agreement is subject to
the satisfaction or Purchaser’s waiver, on or prior to the Closing, of each of
the following conditions, as applicable:

(a)                                  Company’s representations and warranties
contained in this Agreement, as updated by Company’s SEC Reports filed prior to
the beginning of the relevant period of thirty (30) days referred to in Section
2.4 of this Agreement, are and will be true and correct in all material
respects as of the date of the Closing, as though made on and as of that date.

(b)                                 An officer’s certificate executed by Company’s
Chief Executive Officer or Chief Financial Officer shall have been delivered to
Purchaser certifying that the representations and warranties contained in this
Agreement are true and correct in all material respects as of the Closing Date, as
updated by Company’s SEC Reports filed prior to beginning of the relevant
period of thirty (30) days referred to in Section 2.4 of this Agreement,
subject to any required updated disclosure, as reflected in such officer’s
certificate.

(c)                                  There shall be no Legal Proceeding
challenging this Agreement or the transactions contemplated by this Agreement,
or seeking to prevent or delay the consummation of any Closing, instituted and
pending before any court or Governmental Authority.

(d)                                 The Common Stock of Company shall be
trading or listed on The NASDAQ Global Market or any other national public
securities exchange.

(e)                                  Company shall not be insolvent, have
filed a petition for voluntary bankruptcy or have become the subject of an
involuntary bankruptcy proceeding, have made an assignment for the benefit of
creditors, have been voluntarily or involuntarily dissolved or have had a
receiver, trustee or other court officer appointed for its property.

(f)                                    Purchaser shall have received an opinion
of Dechert LLP, dated as of the date of the Closing, in a form reasonably
satisfactory to Purchaser’s counsel.

 C-12
 

(g)                                 Company shall have promptly delivered to
Purchaser copies of any amendments or modifications to its Operating Documents
certified by the Secretary of State of Delaware, and, with respect to the
bylaws, the Secretary of Company.

(h)                                 The Company and the Purchaser shall have
executed the Collaboration Agreement of even date herewith.

(i)                                     The Collaboration Agreement shall be in
full force and effect and the Company shall not be in breach or default under
the Collaboration Agreement.

(j)                                     The Company ***.

7.2.                              Conditions to Obligations of Company to
Consummate the Closing. The obligations of Company to consummate the Closing and to sell and issue the
Shares is subject to the satisfaction or Company’s waiver, on or prior to the
Closing, of each of the following conditions, as applicable:

(a)                                  Purchaser’s representations and
warranties and covenants contained in this Agreement are true and correct as of
the date of the Closing, as though made on and as of that date.

(b)                                 There shall be no Legal Proceeding
challenging this Agreement or the transactions contemplated by this Agreement, or
seeking to prevent or delay the consummation of any Closing, instituted and
pending before any court or Governmental Authority.

(c)                                  The Company shall have exercised the
Option and shall have delivered to the Purchaser the Option Notice.

SECTION 8.                                Broker’s Fee. Each of the Parties hereto hereby represents that,
on the basis of any actions and agreements by it, there are no brokers or
finders entitled to compensation in connection with the sale of the Shares to
the Purchaser.

SECTION 9.                                Publicity. Neither Party shall originate any written publicity,
news release or other announcement or statement relating to the announcement or
terms of this Agreement (collectively, a “Written Disclosure”),
without the prompt prior review and written approval of the other Party, which
approval shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, either Party may make any public Written Disclosure it believes in
good faith based upon the advice of counsel is required by applicable law, rule
or regulation or any listing or trading agreement concerning its or its
Affiliates’ publicly traded securities; provided, however, that such Written Disclosure shall minimize to the
extent possible the financial information disclosed, and that prior to making
such Written Disclosure, the disclosing Party shall provide to the other Party
a copy of the materials proposed to be disclosed and provide the receiving
Party with an opportunity to promptly review the Written Disclosure and provide
comments within two (2) Trading Days of the proposed drafts of the Written
Disclosure.

SECTION 10.                          Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon delivery to the
Party to be notified; (ii) when received by confirmed facsimile or (iii) one
(1) business day after deposit with a nationally recognized overnight carrier,
specifying next business day delivery, with written verification of

 C-13
 

receipt. All
communications shall be sent to the Company and the Purchaser as follows or at
such other addresses as the Company or the Purchaser may designate upon ten
(10) days’ advance written notice to the other Party:

(a)                                  if to the Company, to:

Pharmacopeia
Drug Discovery, Inc.

3000
Eastpark Boulevard

Cranbury,
New Jersey 08512

Attn: General
Counsel

Facsimile:
(609) 452-3672

with a
copy to:

Ella
DeTrizio, Esq.

Dechert
LLP

Princeton
Pike Corporate Center

P.O.
Box 5218

Princeton,
NJ 08543-5218

Facsimile:
(609) 620-3259

(b)                                 if to the Purchaser, at its address as
set forth at the end of this Agreement,

with a copy to:

Organon International
Inc.

56 Livingston Avenue

Roseland, NJ 07068

Attn:  General Counsel

SECTION 11.                          Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.
No provision

 C-14
 

hereunder may be waived
other than in a written instrument executed by the waiving party.

SECTION 12.                          Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

SECTION 13.                          Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

SECTION 14.                          Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and the federal
law of the United States of America. THE COMPANY AND THE PURCHASER HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF TRENTON, COUNTY OF MERCER FOR THE ADJUDICATION OF
ANY DISPUTE BROUGHT BY THE COMPANY OR THE PURCHASER HEREUNDER, IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF THIS AGREEMENT), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR THE PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE
SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND THE PURCHASER HEREBY WAIVE ALL
RIGHTS TO A TRIAL BY JURY.

SECTION 15.                          Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each Party hereto
and delivered (including by facsimile) to the other Parties.

SECTION 16.                          Entire Agreement. This Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters.

SECTION 17.                          Parties. This agreement is made solely for the benefit of and
is binding upon the Purchaser and the Company, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
“successors and assigns” shall not include any

 C-15
 

subsequent purchaser, as
such purchaser, of the Shares sold to the Purchaser pursuant to this Agreement.

SECTION 18.                          Assignment. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
parties hereto and their respective permitted successors, assigns, heirs,
executors and administrators. The rights of the Purchaser to purchase the
Shares shall not be assigned without the consent of the Company.

SECTION 19.                          Further Assurances. Each Party agrees to cooperate fully with the other
Parties and to execute such further instruments, documents and agreements and
to give such further written assurance as may be reasonably requested by any
other Party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this Agreement.

[Remainder of Page Left Intentionally Blank]

 C-16
 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized representatives as of
the day and year first above written.

	
   

  	
  PHARMACOPEIA DRUG
  DISCOVERY, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Leslie J. Browne

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Leslie J. Browne,
  Ph.D.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: President and
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  N.V. ORGANON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C.D. Nicholson

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Dr. C.D.
  Nicholson

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Executive Vice
  President

  
	
   

  	
   

  	
   Research
  & Development

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ A.W.M. Rijnders

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Dr. A.W.M.
  Rijnders

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Senior Vice
  President Research

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telecopy:

  	
   

  
					

 

 C-17

EXHIBIT D

General Development Candidate
Criteria

***

 D-1

EXHIBIT E

Joint Commercialization Agreement
Terms

In the event an ***, the Parties agree that the Joint Commercialization
Agreement referenced in Section 2.9(g) of the Agreement shall include the terms
and principles set forth in this Exhibit E, It is understood that this Exhibit
E does not contain all matters upon which agreement must be reached in order
for the Joint Commercialization Agreement to be executed. The Parties will work
in good faith to conclude a commercially standard Joint Commercialization Agreement
within the time period and under the conditions set forth in Section 2.9(g) of
the Agreement.

1.
Additional Defined Terms. The Parties anticipate that terms not otherwise defined in the Joint
Commercialization Agreement shall be as defined in the Agreement.

1.1
“Allocable Overhead” means ***. Allocable Overhead ***.

1.2
“Allowable Commercialization Costs” means ***.

1.3
“Bundled Transaction” has the meaning specified in the definition of Net Sales
herein.

1.4
“Co-Commercialization Territory” means, subject to the Parties’ rights to
designate a Joint Marketing Collaborator in a particular jurisdiction or
region, all of the countries of the world.

1.5
“Commercialization” or “Commercialize” means any and all activities associated
with marketing, promoting, communicating (including medical communications and
publishing), distributing, importing, exporting or selling the Collaboration
Product as set forth in the applicable Commercialization Plan, including the
conduct of any activities (including any Post-approval Studies) directed to
obtaining pricing and reimbursement approvals and any other Post-approval
Studies not included in Development, in each case by a Party, its Affiliates or
(sub)licensees.

1.6
“Commercialization Plan” means the plan to be developed by the Joint
Commercialization Committee and, subject to Section 2.9(h) of the
Agreement,  approved by the Joint
Commercialization Committee for each Contract Year with respect to the
Collaboration Product in accordance with the terms of the Joint Commercialization
Agreement.

1.6A
“Contract Year” means (a) with respect to the first Contract Year, the period
beginning on the Effective Date and ending on December 31,       
(the “First Contract Year”), and (b) with respect to each subsequent
Contract Year, the twelve (12) month period beginning on the day following the
end of the First Contract Year and each succeeding twelve (12) month period
thereafter. Each

 E-1
 

Contract
Year (other than the First and last Contract Year, as applicable) shall be
divided into four (4) “Contract Quarters” comprised of successive three
(3) month periods. In the First Contract Year, the first Contract Quarter shall
begin on the Effective Date and end on       

1.7
“Cost of Goods Sold” means ***. It is understood that ***. For purposes of the
foregoing, ***. All ***. Under no circumstance shall ***.

1.8 “Detail”
means a sales presentation by a professional sales representative to a target
physician involved in prescribing the Collaboration Product in which the
primary purpose is to discuss the benefits and features of the Collaboration
Product. The Parties will agree in the Joint Commercialization Agreement how to
fairly apportion professional sales representatives’ time and effort with
respect to sales presentations in which more than only the Collaboration
Product is discussed.

1.9
“Detail Costs” means the ***.

1.10
“Distribution Costs” means ***. Notwithstanding the foregoing, Distribution
Costs shall ***. It is understood that ***.

1.11
“Economic Interest” means the ***.

1.12 “GAAP” means United States generally accepted
accounting principles or International Financial Reporting Standards (IFRS), as
they exist from time to time, consistently applied, and applicable based on the
standard that the Party incurring costs or invoicing sales customarily uses for
other similarly situated products.

1.13
“Joint Commercialization Committee” shall have the meaning more fully specified
in the Joint Commercialization Agreement. Subject to Section 2.9(h) of the
Agreement, the Joint Commercialization Committee shall oversee all aspects of
the Co-Commercialization activities and shall discuss and agree on the parties
respective roles within the Co-Commercialization activities.

1.14
“Manufacturing” or “Manufacture” means all activities set forth in the
applicable manufacturing plan associated with the production, processing,
filling, finishing, packaging, labeling, shipping and storage of Collaboration
Products, including stability testing, formulation, manufacturing process
development, process validation, manufacturing scale-up, preclinical, clinical
and commercial manufacture and analytical development and quality assurance and
quality control activities. Unless otherwise agreed, it is understood that ***.

1.15
“Net Sales” shall mean ***.

***. In the event that a ***. For the avoidance of
doubt, ***.

***.

 E-2
 

***.

***.

In the event that the
***.

***.

***.

1.16
“Operating Profit/Loss” means ***. For clarity, the ***.

1.17
“Post-approval Study” means a clinical trial conducted after Regulatory
Approval of the Collaboration Product for the applicable indication has been
obtained in the relevant country.

1.18
“Product Trademark” means one or more trademarks, slogans or logos that are
used for the Commercialization of the Collaboration Product in the Co-Commercialization
Territory.

1.19
“Regulatory and Licensing Costs” means the following costs and expenses
attributable to ***.

1.20
“Sales and Marketing Costs” means ***. For the avoidance of doubt, in no event
shall ***. Sales and Marketing Costs include the following, ***:

1.20.1
***;

1.20.2
***;

1.20.3
***;

1.20.4  ***, and

1.20.5
***.

2. General. The
Parties shall prepare a Commercialization Plan setting forth the Parties
respective activities within the joint commercialization effort related to the
Collaboration Products ***, and will update the Commercialization Plans ***. It
is intended that the ***. Each
party shall contribute to Allowable Commercialization Costs as specified in
Article 9.

2.1
Each annual Commercialization Plan shall be in writing and shall set forth with
reasonable specificity the ***.

 E-3
 

3. Marketing and Marketing Plans. The Joint Commercialization Committee
shall coordinate and implement the marketing and Detail strategies and tactics,
sales force training programs, sales forecasts and Post-approval Studies for
the Collaboration Product in the Co-Commercialization Territory.

4.
Sales Force. The
Joint Commercialization Committee shall determine the number of Details to be
performed by each Party. The Parties shall be responsible for providing Details
***. Notwithstanding the foregoing, it is understood that ***. If ***. For
clarity, the measurement of the provision of Details by each Party will be made
based on ***.

5.
Labeling and Promotion. Subject to Section 2.9(h) of the Agreement, or unless otherwise
agreed by the Parties: (a) the Collaboration Product will be marketed in each
country with one label and will bear one or more Product Trademarks; and (b)
all advertising and promotional material in respect of the Collaboration
Product in each country (including any Collaboration Product labeling or
packaging inserts to the extent permitted by law or required by any Regulatory
Authority and approved by the Joint Commercialization Committee) will include
both Parties’ respective name, address and logo, with the size and placement of
each such name, address and logo to be equally prominent, and as further
determined by the Joint Commercialization Committee.

6.
Regulatory and Other Inquiries. Upon the entry into a Joint Commercialization
Agreement for an Optionable Development Candidate, the following rights and
obligations will apply with respect to regulatory matters:  It is
understood that all regulatory applications, NDAs and Regulatory Approvals for
Collaboration Products shall be ***. Upon being contacted by any Regulatory Agency for
any regulatory purpose pertaining to this Agreement or to a Collaboration
Product, each Party shall promptly notify and consult with the other, and *** hereunder.

7.
Product Recall.
In the event that either Party determines that an event, incident or
circumstance has occurred that may result in the need for a recall or other
removal of the Collaboration Product, or any lot or lots thereof, from a market
in any country, it shall advise and consult with the other Party with respect
thereto. ***. The costs and expenses of such recall or removal in each country,
including expenses and other costs or obligations to Third Parties, the cost
and expense of notifying customers and costs and expenses associated with shipment
of the recalled Collaboration Product from a customer to either Party ***.

8.
Commercialization by Joint Marketing Collaborators. In the event the Joint
Commercialization Committee determines that a particular Collaboration Product
should be commercialized entirely by or through one or more Third Parties
(each, a “Joint Marketing Collaborator”) throughout the Territory or in one or
more particular countries or regions, then subject to the Parties’ entry, in
their respective sole discretion, into a definitive agreement with respect
thereto with the applicable Joint Marketing Collaborator(s).

8.1
The Parties shall ***; and

 E-4
 

8.2
Each Party shall take, or cause to be taken, all actions reasonably necessary
to consummate and make effective any such agreement with such Joint
Marketing/Development Collaborator.

9. Financial Terms.

9.1
Collaboration Cost and Revenue Sharing. Beginning with the first commercial sale of a
Collaboration Product and throughout the term of the Commercialization
Agreement, all Operating Profit/Loss shall be ***.

9.2
Reporting of Operating Profit/Loss and Detail Efforts.

9.2.1
Reports of Net Sales, Allowable Commercialization Costs and Details. During the term of the
Commercialization Agreement, each Party shall, within ***, furnish to the other
Party a written report showing in reasonable detail ***.

9.2.2
Consolidated Report of Operating Profit/Loss and Detail Efforts. During the term of the
Commercialization Agreement, Organon shall, ***, furnish to Pharmacopeia a
written report showing in reasonable detail and in United States Dollars: ***.

9.2.3
Payment of Operating Profit/Loss Amounts Owed. Amounts shown as owed by one Party to the other
Party under the report delivered in accordance with Section 9.2.2 shall be
payable within *** following the delivery of such report.

9.3
Exchange Rates.
Gross sales, Net Sales, Allowable Commercialization Costs and Operating
Profit/Loss attributable to countries other than the United States shall be
calculated as the average of the “bid” and “asked” exchange rates provided by
the Wall Street Journal Europe or other recognized reference source
agreed to by the Parties, for all the business days of each calendar quarter,
into United States Dollars, and otherwise in accordance with the standard
exchange rate conversion practices used by the reporting Party for financial
accounting purposes.

9.4
Records. The
Parties shall each keep accurate books and accounts of record in connection
with the Commercialization of the Collaboration Product in a manner consistent
with GAAP and in sufficient detail to permit accurate determination of all
figures necessary for verification of gross sales, Net Sales, Allowable
Commercialization Costs, Operating Profit/Loss and Details performed hereunder.

9.5
Audits. Upon the
written request of a Party, the other Party shall permit an independent
certified public accountant acceptable to the other Party selected by the
requesting Party and acceptable to the other Party (such acceptance not to be
unreasonably withheld, conditioned or delayed), to have access, at reasonable
times and during normal business hours, to such records of such other Party as
may be reasonably necessary to verify the accuracy of the reports described
herein

 E-5
 

(and,
if not included in such reports, the gross sales of the Collaboration Product
sold by such Party, its (sub)licensees and their respective Affiliates along
with the calculation of Net Sales from such gross sales, in each case, on a
country-by-country basis), in respect of ***. Each Party shall use commercially
reasonable efforts to schedule all such verifications within *** after the
requesting Party makes its written request. A verification of a Party’s books
and records shall be conducted not more than ***. The report of the requesting
Party’s independent certified public accountant shall be made available to both
Parties. ***. The fees charged by such independent certified public accountant
shall be paid ***. Each Party agrees that all information subject to review
under this section or under any agreement with a (sub)licensee of a Party is
confidential and that the Party receiving such information shall cause its
independent certified public accountant to retain all such information in
confidence. The requesting Party’s independent certified public accountant
shall only report to the requesting Party as to the ***, and shall not disclose
to the requesting Party any other information of the other Party or any
(sub)licensee of a Party.

9.6
Withholding Taxes.
In the event that any royalties or other payments due to a Party are subject to
withholding tax required by law to be paid to the taxing authority of any
foreign country, the amount of such tax may be withheld from the applicable
royalties or other payment due such Party. The Party owing such payment shall
promptly pay such tax on behalf of the Party to which such payment is owed and
shall furnish the Party to which such payment is owed with a certificate of
withholding tax so deducted for such Party’s avoidance of duplicate taxation in
multiple countries. The Party owing such payment may not deduct any other
withholding or any other governmental charges from the payments agreed upon
under this Agreement, except to the extent same are paid on behalf of, or for
the benefit of, the Party to which such payment is owed. The Party owing such
payment shall maintain official receipts of payment of any such withholding
taxes and shall forward such receipts to the Party to which such payment is
owed.

9.7
Blocked Currency.
If by Law or fiscal policy of a particular country, conversion into United
States dollars or transfer of funds of a convertible currency to the United
States is restricted or forbidden, the Party owing such payment shall give the
Party to which such payment is owed prompt written notice and shall make such
payment due under this section through such means or methods as are lawful in
such country as the Party to which such payment is owed may reasonably
designate. Failing the designation by the Party to which such payment is owed
of such lawful means or methods within thirty (30) days after such written
notice is given to such Party, the Party owing such payment shall deposit such
royalty payment in local currency to the credit of the Party to which such
payment is owed in a recognized banking institution designated by such Party,
or if none is designated by such Party within the thirty (30) day period
described above, in a recognized banking institution selected by the Party
owing such payment and identified in a written notice to other Party, and such
deposit shall fulfill all obligations of the Party owing such payment to the
other Party with respect to such payment.

 E-6
 

9.8
Interest on Late Payments. A Party to which payment is owed under this Agreement shall have the
right to seek to collect interest on any payments that are not paid on or
before forty-five (45) days after the date such payments are due under this
Agreement at an annual rate equal to the London Interbank Offered Rate, or the
maximum amount permitted by law, whichever is less, calculated on the total
number of days payment is delinquent.

9.9
Manner of Payment.
All payments due Pharmacopeia hereunder shall be made in United States dollars,
for Pharmacopeia’s account, by wire transfer to a bank in the United States
designated in writing by Pharmacopeia; provided, however, that
where payments in respect of Net Sales are based on Net Sales in non-U.S.
currencies, the amount of Net Sales and any deductions used to calculate Net
Sales, if any, shall be converted by Organon, using the average of the “bid”
and “asked” exchange rates provided by the Wall Street Journal Europe or
other recognized reference source agreed to by the Parties, for all the
business days of each calendar quarter, into United States Dollars, and
otherwise in accordance with the standard exchange rate conversion practices
used by the reporting Party for financial accounting purposes. All payments
required according to this Section 9 due Organon hereunder shall be made in
Euros, for Organon’s account, by wire transfer to a bank in the Netherlands
designated in writing by Organon. Any payments that are not paid on the date
such payments are due under this Agreement shall bear interest to the extent
permitted by applicable law at the prime rate as reported by the Chase Manhattan
Bank, New York, New York, on the date such payment is due, plus an additional
two percent (2%) calculated on the number of days such payment is delinquent.
The interest available to each Party pursuant to this Section shall in no way
limit any other remedies available.

 E-7
 

Schedule 1

***

 E-8

EXHIBIT
F

Patent
Rights Applicable to Transferred Programs

***

 F-1

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