Document:

QuickLinks
 -- Click here to rapidly navigate through this document

  

*** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 

Exhibit 10.28  

 
  COLLABORATION AND LICENSE AGREEMENT    
  

        This COLLABORATION AND LICENSE AGREEMENT (the "Agreement"), effective as of the 25th day of February
2002 (the "Effective Date"), is made by and between 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 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
eight (8) Lead Series and for Organon to develop market and sell Collaboration Products. 

        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  "Assay" collectively refers to the Primary Assay and the Secondary Assay. 

        1.3  "Assay Improvements" have the meaning set forth in Section 2.3. 

        1.4  "Collaboration Product" means any therapeutic or prophylactic product that contains a Lead Compound or Derivative
Compound thereof. 

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

        1.6  "Combination Product" means (1) a Collaboration Product that comprises two (2) or more active ingredients,
at least one of which is a Lead Compound or a Derivative Compound thereof. 

        1.7  "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, which if disclosed in written, graphic or electronic form, is marked or otherwise 

-1-

 

designated as "confidential" or "proprietary" and, if disclosed orally, is summarized and designated as "confidential" or "proprietary" in a writing provided to the Party receiving it no later than
thirty (30) days from such disclosure. 

        1.8  "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. 

        1.9  "Derivative Compound" means a compound which is a chemical modification of a Lead Compound or other active structure
disclosed by Pharmacopeia to Organon, having activity against the same Target as such Lead Compound or other active structure, which (i) results from a chemical synthesis program based on Lead
Compound or other active structure disclosed by Pharmacopeia to Organon, or (ii) is based on structure-function data relating thereto, or (iii) is based on Developed Technology. For
clarification purposes it is understood that Organon can independently find compounds against the Target from its own discovery activities. These compounds will not be designated as Derivative
Compounds if Organon, as shown by contemporaneous documentation, has developed these compounds independently of the intellectual property described in subsections (i)-(iii) above. Further, it
is understood that Derivative 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. 

        1.10 "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 to develop, make, use or sell Collaboration Products based thereon, and
(ii) which was conceived or reduced to 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. 

        1.11 "Development Candidate" means any Lead Compound or Derivative Compound with respect to which Organon has elected to
pursue a GLP Toxicity Study. 

        1.12 "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. 

        1.13 "Exclusivity Period" has the meaning set forth in Section 4.1. 

        1.14 "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. 

        1.15 "FDA" means the U.S. Food and Drug Administration, any successor thereto, or any corresponding foreign registration or
regulatory authority. 

        1.16 "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. 

        1.17 "FTE" means a full-time equivalent Pharmacopeia or Organon scientist. 

        1.18 "Fully Allocated Manufacturing Cost" means the cost of direct materials, direct labor (which includes fringe benefits),
other direct manufacturing costs, including but not limited to, factory costs and indirect costs, such as supervisory and support labor, supplies, utilities, machinery and equipment maintenance costs
(including associated depreciation) and plant operating and maintenance costs (including associated depreciation). 

-2-

 

        1.19 "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. 

        1.20 "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. 

        1.21 "Initial Research Term" means the period commencing on the Effective Date and ending five (5) years thereafter. 

        1.22 "Joint Research Committee" or "JRC" means the entity organized to
supervise the Research Collaboration and acting pursuant to Article 3. 

        1.23 "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. 

        1.24 "Lead Compound" means a Pharmacopeia Compound 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 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 1.9(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. 

        1.25 "Lead Series" has the meaning set forth in Section 2.4. 

        1.26 "Library" means any chemical compound library prepared by or on behalf of Pharmacopeia and screened during the Research
Term, excluding any chemical compound library used in Pharmacopeia's collaboration with Schering-Plough 

        1.27 "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. 

        1.28 "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 application, registration or certification. 

        1.29 "Net Sales" as to Organon, means the amount invoiced and any other amounts or rebates received by Organon, its
Affiliates or Sublicensees for the worldwide sale of Collaboration Products to bona fide independent Third Parties and as to Pharmacopeia, the amount invoiced and any other amounts or rebates received
by Pharmacopeia or its Affiliates for the worldwide sale of Collaboration Products to bona fide independent Third Parties less to the extent paid, allowed or given: (i) outer packing, freight
or transportation charges and insurance relating thereto, (ii) sales, value added and excise taxes or customs duties paid by the selling party, and any other governmental charges (excluding
income taxes) actually imposed upon the sale of the Collaboration Products, (iii) reasonable distributors' fees, rebates or allowances, actually granted, allowed or incurred, (iv) trade
and prompt payment discounts, quantity discounts, cash discounts or reasonable charge-backs actually granted, allowed or incurred in the ordinary course of business in connection with the sale of the
Collaboration Products, and (v) reasonable allowances or credits to customers, not in excess of the selling price of the Collaboration
Products, on account of rejection, outdating, recalls or return of, or price adjustments regarding the Collaboration Products. 

-3-

 

        A
"sale" as to Organon shall include any transfer or other disposition for consideration of a Collaboration Product, and Net Sales shall include the fair market value of all other
consideration received by Organon, its Affiliates or its Sublicensees from the sale or distribution of a Collaboration Product, whether such consideration is in cash, payment in kind, exchange or
another form. In the event that a Collaboration Product is packaged with other Organon products, any discount applied to such Collaboration Product to determine Net Sales shall be no greater than the
average discount of the entire package. A "sale" as to Pharmacopeia shall include any transfer or other disposition for consideration of a Collaboration Product, and Net Sales shall include the fair
market value of all other consideration received by Pharmacopeia or its Affiliates from the sale or distribution of a Collaboration Product, whether such consideration is in cash, payment in kind,
exchange or another form. In the event that a Collaboration Product is packaged with other Pharmacopeia products, any discount applied to such Collaboration Product to determine Net Sales shall be no
greater than the average discount of the entire package 

        The
sale of a Collaboration Product between Organon, its Affiliates or Sublicensees solely for the research or clinical testing of such Collaboration Product or for indigent or similar
public support or compassionate use programs shall be excluded from the computation of Net Sales. All sales of Collaboration Products between Organon and its Affiliates or its Sublicensees shall be
disregarded for purposes of computing Net Sales, unless such a purchaser is the end-user of such Collaboration Product. The sale of a Collaboration Product between Pharmacopeia or its
Affiliates solely for the research or clinical testing of such Collaboration Product or for indigent or similar public support or compassionate use programs shall be excluded from the computation of
Net Sales. All sales of Collaboration Products between Pharmacopeia and its Affiliates or its Sublicensees shall be disregarded for purposes of computing Net Sales, unless such a purchaser is the
end-user of such Collaboration Product. 

        To
calculate the value of Net Sales of Combination Products, the gross sales of such Products will be multiplied by the fraction A/(A + B) where A is the fair market
value of the Lead Compound or Derivative Compound when sold separately, and B is the fair market value of the other active ingredient when sold separately. Allowed deductions may then be subtracted
from the proportion of gross sales attributable to the Lead Compound or Derivative Compound to compute Net Sales. 

        1.30 "Non-Designated Lead Compound" has the meaning set forth in Section 2.4(c). 

        1.31 "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) which is necessary to conduct the Research Collaboration, and (ii) which Organon owns or Controls as of the
Effective Date
or during the Research Term, and conceives or reduces to practice outside the Collaboration, without any intellectual contribution from Pharmacopeia. 

        1.32 "Organon Compound" has the meaning set forth in Section 2.5. 

        1.33 "Party" means Pharmacopeia or Organon. Pharmacopeia and Organon shall be collectively referred to as the Parties. 

        1.34 "Patent Committee" means that committee to be formed pursuant to Section 3.5. 

        1.35 "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 owned or Controlled by Pharmacopeia or Organon, that claim a Lead
Compound or Derivative Compound, or method of use or process for the synthesis thereof or composition of matter containing such Lead Compound or Derivative Compound and the divisions, continuations,
confirmations, re-examinations, any provisional applications, supplementary protection certificates or the like of any such patents and patent applications. 

-4-

 

        1.36 "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. 

        1.37 "Pharmacopeia Compound" means a Library Compound or a compound identified by Pharmacopeia in the Research Collaboration. 

        1.38 "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. 

        1.39 "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) which is necessary to conduct the Research Collaboration, to make or use Lead Compounds, or to develop,
make, use or sell Collaboration Products, and (ii) which Pharmacopeia owns or Controls as of the Effective Date or during the Research Term, and conceives or reduces to practice outside the
Collaboration, without any intellectual contribution from Organon. Pharmacopeia Base Technology shall not include Excluded Technology. 

        1.40 "Potential Lead Compound" has the meaning set forth in Section 2.4. 

        1.41 "Primary Assay" means on a Target-by-Target basis, the primary assay provided by Organon for
screening in the Research Collaboration. 

        1.42 "Proposed Target" has the meaning set forth in Section 2.2. 

        1.43 "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. 

        1.44 "Regulatory Approval" means any and all approvals (including price reimbursement approvals), licenses, registrations, or
authorizations of any Regulatory Agency, necessary for the manufacture, use, storage, import, transport or sale of a Collaboration Product. 

        1.45 "Research Collaboration" means the research activities undertaken by the Parties pursuant to Article 2. 

        1.46 "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. 

        1.47 "Research Term" is defined in Section 15.2. 

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

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

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

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

        1.52 "Reverted Lead Compound" has the meaning set forth in Section 5.4.2. 

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

-5-

 

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

        1.55 "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." 

        1.56 "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 sublicense initiation fees, milestones and royalties paid by each Sublicensee to
Pharmacopeia. 

        1.57 "Target" has the meaning set forth in Section 2.2. 

        1.58 "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. 

        1.59 "Territory" means all the countries of the world. 

        1.60 "Third Party" means any Person other than Organon, its Affiliates or Sublicensees and Pharmacopeia or its Affiliates. 

        1.61 "Wind-Down Phase" means the period commencing at the end of Research Year Four and ending six
(6) months thereafter. 

 
 

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 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. 

-6-

 

        2.1.2    Activities of Pharmacopeia.    In consideration for the funding provided by Organon, Pharmacopeia shall
utilize the appropriate screening and optimization resources to screen an average of not less than five (5) Targets per Research Year and to deliver to Organon not less than eight
(8) Lead Series, each series against a distinct Target by the end of the Research Term, such delivery to begin on or about the end of Research Year One. (The delivery of both an antagonist
series and agonist series against the same Target they shall be considered two separate Lead Series, to the extent requested by Organon and agreed by Pharmacopeia). It is expected that the foregoing
can be accomplished through the screening of Pharmacopeia Compounds against no more than thirty (30) Targets to be supplied by Organon as provided herein. In addition to the foregoing,
Pharmacopeia shall 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. 

        2.1.3    Activities of Organon.    During the Research Term, Organon shall identify and make available to Pharmacopeia
at least thirty (30) targets to enable Pharmacopeia to select a subset of such targets that shall become the focus of the activities of Pharmacopeia hereunder. Organon shall begin making such
targets available by making available to Pharmacopeia no less than six (6) targets on or about the Effective Date and making available to Pharmacopeia five (5) more targets, prior to the
end of the Start-Up Phase. Following the Start-Up Phase, Organon shall continue making available to Pharmacopeia at least eight (8) targets per Research Year, at the
rate of no less than two (2) targets per calendar quarter. 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 concurrently apply its resources to conduct all essential testing and confirmation of Pharmacopeia Compounds provided by Pharmacopeia to
assist Pharmacopeia in determining whether such Pharmacopeia Compounds potentially meet the criteria for a Lead Compound. 

        2.2    Selection of Targets.    As provided in Section 2.1.3, in the course of the Research Collaboration, Organon
shall make available to Pharmacopeia at least thirty (30) targets, 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 such targets in multiples at any one time for consideration by Pharmacopeia. 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 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. 

-7-

 

        2.3    Assay Development.    It is anticipated that the Assay has been developed and validated by Organon prior to
validation by Pharmacopeia. An Assay shall be considered validated if it meets the criteria set in Exhibit A. On a Target-by-Target basis, Pharmacopeia shall provide up
to one (1) FTE month without additional charge to Organon for validation of the Assay for a particular Target. 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 mutually agree on the payment of additional fees pursuant to Section 6.2. 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 Parties agree that the criteria set
forth in Table 1 are consistent with the criteria that Organon applies in its internal programs. 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 the 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 ***	 	 
	***	 	***

        (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 provide to
Pharmacopeia technical support, including any and all in vivo testing of a potential Lead Compound, that is reasonably required to enable such Potential
Lead Compound to be designated as a Lead Compound. To enable Organon to provide such technical support, Pharmacopeia will provide Organon sufficient quantities of each such Potential Lead Compound.
The transfer of such Potential Lead Compound to Organon is solely for the purpose of conducting its activities hereunder and for no other purpose. Following the receipt of a Potential Lead Compound,
Organon agrees not to conduct or have conducted any chemical analysis of such Potential Lead Compound and not to use any Potential Lead Compound for any purpose except as set forth herein. Organon
shall communicate to Pharmacopeia on an on-going basis, the results of its testing 

-8-

 

or confirmation activities. The Parties agree that if Organon is unable to provide feedback to Pharmacopeia in connection with its confirmation or testing activities relating to a specific Lead
Compound criteria within a period of time consistent with the nature of the assay or activities to be conducted by Organon (typically on the order of two (2) months), the Parties shall identify
a Third Party to carry out such confirmation or testing activities, at the sole expense of Organon. If no Third Party is able to be identified, such criteria will not apply in the designation of the
Lead Compound. 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 acquire no license or other rights with
respect to such Potential Lead Compounds and the exclusivity set forth in Section 4.1 with respect to such Target shall expire. Such Potential Lead Compounds shall be referred to as
"Non-Designated Lead Compounds" *** In addition, the provisions of Section 5.6.1 shall apply to such Non-Designated Lead Compounds. 

        2.5    Organon Compounds.    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 develop one or more of its own compounds having activity against such Target, then such compounds 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 preempt the designation of a Lead Compound. 

-9-

  

        2.6    Development Candidate.    During the period that Organon has a license under Section 5.4 to a Lead
Compound, Organon may designate any Lead Compound or Derivative Compound as a Development Candidate. Organon shall provide written notice to Pharmacopeia to such effect and such designation 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. 

 
 

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 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 for each Target pursuant to section 2.4, (iii) resolving any conflicts between the Parties,
(iv) approving and administering the Research Plan, and (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. 

        3.2    Membership.    The JRC shall include three (3) voting representatives 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 at least quarterly, 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 

-10-

 

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 by unanimous vote, and each Party shall have a single
vote. In the event that unanimity is not achieved within the JRC, the matter shall be referred to Pharmacopeia's Executive Vice President, Chief Operating Officer (or designee of similar rank) and the
Research Director (or designee of similar rank) of Organon, who shall promptly meet and endeavor in good faith to resolve such matter in a timely manner. In the event such individuals are unable to
resolve such dispute, the matter shall be referred to the Chief Executive Officer of Pharmacopeia and the Managing Director, Research and Development, of Organon, who shall promptly meet and endeavor
to reach consensus in a timely manner. In the event that such individuals are unable to resolve such dispute, the matter shall be referred to the Chairman of Pharmacopeia and the President of Organon,
who shall promptly meet and endeavor to reach consensus in a timely manner. 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 at least one chemist and one patent attorney or
equally qualified legally trained personnel, 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 agreed by the Parties, the Patent Committee shall meet at least
semiannually. 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 bear the expense of providing the other Party with copies of all Patent Rights filed pursuant to this Agreement
including all correspondence with U.S. and foreign patent offices. 

 
 

ARTICLE 4    
    
    EXCLUSIVITY    
  

        4.1    Target.    During the Exclusivity Period for each Target, Pharmacopeia shall not screen any Library Compound on
its own behalf or on behalf of any Third Party against such Target. On a Target-by-Target basis, the "Exclusivity Period" shall
mean the period beginning when Pharmacopeia initiates screening against the Target which has been designated pursuant to Section 2.2, and ending ***. 

        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 the 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. 

-11-

 

        4.4    Development.    For as long as Organon is using due diligence with respect to the further optimisation and/or
development of a Lead Compound or Derivative Compound, Pharmacopeia agrees not to pursue any optimisation and/or development of such Lead Compound or Derivative Compound or compounds falling under
Patent Rights within the Developed Technology (i) claiming such Lead
Compound or Derivative Compound or methods of making or using the same, and (ii) disclosing the utility of such Lead Compound or Derivative Compound against the Target. 

 
 

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, Organon shall own all rights,
title and interest in and to all Organon solely invented Developed Technology and an undivided one-half interest in jointly invented Developed Technology. Pharmacopeia shall own all
rights, title and interest in and to all of Pharmacopeia solely invented Developed Technology and an undivided one-half interest in jointly invented Developed Technology. 

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

        5.4.    Licenses and Maintenance Payments.    

        5.4.1    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, Pharmacopeia grants Organon, and Organon accepts, an exclusive, worldwide license
under the Pharmacopeia Base Technology and Pharmacopeia's interest in Developed Technology and a non-exclusive, worldwide license under Pharmacopeia's interest in Assay Improvements, to
make, have made, and use Lead Compounds in order to make, have made, use, import, offer for sale and sell Collaboration Products based on such Lead Compounds. The foregoing license provides Organon no
license under the Pharmacopeia Base Technology and Pharmacopeia's interest in the Developed Technology that relates to targets other than the applicable Target. 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 Organon has made all payments required
hereunder. 

        5.4.2    License Maintenance Payment. Abandonment.    

        (a)  If
Organon has not initiated GLP Toxicity Studies with respect to any Lead Compound or corresponding Derivative Compound within *** from the designation of such a Lead
Compound, Organon shall, if it so chooses, be entitled to a one-year extension to initiate GLP toxicity studies by making a payment to Pharmacopeia in the amount of *** for such extension; 

        (b)  If
Organon has not initiated Phase I clinical trials with respect to any Lead Compound or corresponding Derivative Compound within *** from the initiation of GLP
toxicity studies with respect thereto, Organon shall, if it so chooses, be entitled to a one year extension to initiate Phase I clinical trials, by making a payment to Pharmacopeia in the amount of
*** for such extension; 

        (c)  If
Organon has not initiated Phase III clinical trials with respect to any Lead Compound or corresponding Derivative Compound within *** from the initiation of Phase I
clinical trials with respect thereto, Organon shall, if it so chooses, be entitled to a one-year extension to initiate Phase III clinical trials, by making a payment to Pharmacopeia in the 

-12-

 

amount of *** for such extension, or, if Organon deems it necessary to repeat Phase II trials and has demonstrated appropriate diligence, Organon shall be entitled to an extension of *** at no
additional cost; and 

        (d)  If
Organon has not initiated NDA approval within *** from the initiation of Phase III clinical trials with respect to any Lead Compound or corresponding Derivative
Compound, Organon shall, if it so chooses, be entitled to a *** extension to initiate NDA approval by making a payment to Pharmacopeia in the amount of *** for such extension. 

        If,
at the end of any of the extensions provided in Sections 5.4.2.(a), 5.4.2(b), 5.4.2(c) or 5.4.2(d), Organon has not yet met the applicable development milestone, subject to
(1) a review of Organon's progress, and (2) demonstration by Organon of appropriate diligence and commitment to future efforts in connection therewith, Pharmacopeia will agree to extend
the applicable extension period to enable Organon to complete its activities upon payment of the applicable fees below. If the parties elect not to extend the respective extension period, or Organon
has not diligently pursued development of a program, Pharmacopeia shall have the right to terminate all licenses with respect to the particular Lead Compound and the rights to such 

        Lead
Compound, together with any corresponding Derivative Compounds and any Know-how associated therewith (cumulatively, a "Reverted Lead Compound"), shall revert back to
Pharmacopeia, subject to the provisions of Section 5.6.2. The payments set forth in each of Sections 5.4.2(a), 5.4.2(b), 5.4.2(c) and 5.4.2(d) shall be non-refundable but fifty
percent (50%) thereof shall be creditable against the milestone payment due upon actual accomplishment of such milestone. 

        (e)  If
Organon has not initiated GLP Toxicity Studies with respect to any Lead Compound or corresponding Derivative Compound, Organon shall be entitled to a *** year
extension to initiate GLP toxicity studies by making a payment to Pharmacopeia in the amount of *** for such extension; 

        (f)    If
Organon has not initiated Phase I clinical trials with respect to any Lead Compound or corresponding Derivative Compound, Organon shall be entitled to a *** year
extension to initiate Phase I clinical trials by making a payment to Pharmacopeia in the amount of *** for such extension; 

        (g)  If
Organon has not initiated Phase III clinical trials with respect to any Lead Compound or corresponding Derivative Compound, Organon shall be entitled to a *** year
extension to initiate Phase III clinical trials by making a payment to Pharmacopeia in the amount of *** for such extension; and 

        (h)  If
Organon has not initiated NDA approval with respect to any Lead Compound or corresponding Derivative Compound, Organon shall be entitled to a *** year extension to
initiate NDA approval by making a payment to Pharmacopeia in the amount of *** for such extension. 

        The
payments set forth in each of Sections 5.4.2.(e), 5.4.2(f), 5.4.2(g) or 5.4.2(h) will not be creditable against any milestone payments. 

        5.5    Research License.    Subject to the terms and conditions of this Agreement, Organon grants Pharmacopeia a
nonexclusive, royalty-free license, in the United States, without the right to sublicense, under all its rights in Developed Technology and Organon Base Technology useful for the conduct
of Pharmacopeia's activities pursuant to the Research Plan or as otherwise provided herein. 

Subject
to the terms and conditions of this Agreement, Pharmacopeia grants Organon a nonexclusive, royalty-free license without the right to sublicense, under all its rights in Developed
Technology and 

-13-

 

Pharmacopeia Base Technology useful for the conduct of Organon's activities pursuant to the Research Plan or as otherwise provided herein. 

        5.6    Other Licenses.    

        5.6.1    License to Non-Designated Lead Compounds and corresponding Products.    Subject to the terms and
conditions of this Agreement, Organon grants Pharmacopeia a worldwide, non-exclusive, royalty-free license with the right to sublicense under the Organon Base Technology and a
worldwide, exclusive,
royalty-free license with the right to sublicense under Organon's interest in the Developed Technology to make, have made, and use Non-Designated Lead Compounds in order to
make, have made, use, import, offer for sale and sell products based thereon. 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 any rights to any tangible material which are deemed to be the Confidential Information of Organon and which are transferred to
Pharmacopeia by Organon pursuant to the terms of this Agreement. In exchange for the licenses granted by Organon in this Section, in the event that Pharmacopeia seeks to out-license to a
third party the rights to any Non-Designated Lead Compound, Pharmacopeia shall notify Organon that it seeks to license such rights (although Pharmacopeia shall not be required to identify
any such third party). If a third party has offered Pharmacopeia commercial terms for such a license which Pharmacopeia is prepared to accept, Pharmacopeia shall notify Organon in writing of such
terms. Organon shall have the right to obtain such license for itself (and thereby preclude such third party from obtaining such license), if Organon agrees, within fifteen (15) days after
receiving such written notice from Pharmacopeia, to match the terms. If Organon does not agree within such fifteen-day period, to match the terms, then Organon shall have no further rights
under this Section with respect to such Non-Designated Lead Compound, and Pharmacopeia shall have no obligation to provide any further notice of commercial terms of such license to
Organon, and may grant such license to any third party on terms comparable or more favorable to Pharmacopeia than the terms disclosed to Organon. 

        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, Organon grants Pharmacopeia a worldwide, exclusive, license with the right to
sublicense under the Organon Base Technology, Organon's interest in the Developed Technology and any other enabling technology Controlled by Organon to make, have made, and use Reverted Lead Compounds
in order to make, have made, use, import, offer for sale and sell products based thereon. Such a license shall be subject to the payment obligations provided in Section 8.2.2. 

        (b)  If
Organon is unable to directly license or sublicense certain enabling technology to Pharmacopeia, Organon will use reasonable efforts to assist Pharmacopeia in
obtaining the applicable license from a Third Party. To the extent that there will be an additional financial burden on Pharmacopeia due to the need to obtain from Third Parties such licenses to any
enabling technology, the Parties will discuss reducing Pharmacopeia's payment obligations under Section 8.2.2. To the extent that there will be an additional financial burden on Organon due to
a (sub)license from Third Parties to any enabling technology, the Parties will discuss increasing Pharmacopeia's payment obligation under Section 8.2.2. 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.    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 

-14-

 

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. 

        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. 

        5.8    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 rights after the Effective Date to acquire licenses for compounds derived from such libraries similar to Organon's
rights under this Article 5. Notwithstanding the licenses granted to Organon hereunder, a Third Party may acquire rights from Pharmacopeia with respect to one or more compounds of which
Pharmacopeia is a sole or joint owner, which compounds were identified independently of Pharmacopeia's activities and knowledge gained under the Research Collaboration. Accordingly, Pharmacopeia's
grant of rights under Section 5.4 shall be limited, and shall be subject to any grant of rights to a Third Party, to the extent that (i) such Third Party (either alone or jointly with
Pharmacopeia) has filed a patent application with respect to such a compound prior to the filing by Organon (either alone or jointly with Pharmacopeia) of a patent application with respect to such a
compound, or (ii) Pharmacopeia has previously granted such Third Party a license or other rights with respect to such a compound. 

        5.8.2    No Liability.    It is understood and agreed that, even if Pharmacopeia complies with its obligations under
this Agreement, compounds provided to Third Parties in the course of Pharmacopeia's other business activities may result in Third Party patent rights, including patent rights owned by such Third
Parties, or owned jointly by Pharmacopeia and such Third Parties, which could conflict with Patent Rights owned by Organon, or jointly owned by Organon and Pharmacopeia hereunder. Pharmacopeia shall
use its reasonable efforts to avoid such conflict. Notwithstanding the foregoing, it is understood that, unless Organon is damaged as a proximate result of a material breach by Pharmacopeia of
Section 4.1, or of any of the representations and warranties contained herein, then Pharmacopeia shall have no liability under this Agreement with respect to any such conflict. 

        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 of any amount due Third Parties
under such licenses. 

-15-

 

        5.10    Third Party Royalties with respect to Reverted Compounds.    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 semi-annually providing Pharmacopeia 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. 

 
 

ARTICLE 6    
    
    FUNDING    
  

        6.1    Funding.    In consideration for Pharmacopeia's activities set forth herein, Organon agrees to pay Pharmacopeia
at the rate of *** per Lead Series for a total of ***. Such payments shall be non-refundable and shall be made in *** quarterly installments of ***, on a quarterly basis, following a first
installment of *** due within fifteen (15) business days from the Effective Date. In addition, to compensate Pharmacopeia for its efforts to make available resources to be used in the
Collaboration in a timely manner, and to fund the start-up costs of the initial three (3) months of the Collaboration, Organon agrees to pay Pharmacopeia a
non-refundable one time payment of *** due within fifteen (15) business days from the Effective Date. In the event that, before the end of the Research Term,
Pharmacopeia completes its performance hereunder and is able to deliver all eight (8) Lead Series, the remaining payments due pursuant to this Section shall accelerate and shall be due promptly
upon completion of performance by Pharmacopeia. 

        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 development multiplied by Pharmacopeia's FTE Rate for the agreed period
of such 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    No Withholding.    All amounts paid to Pharmacopeia pursuant to Section 6.1 shall be made without
withholding for taxes or other charges. 

 
 

ARTICLE 7    
    
    MILESTONE PAYMENTS    
  

        7.1    Milestone Payments.    

        7.1.1    Milestone Payments for a Lead Compound.    

        (a)  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 

-16-

 

Lead Compound, corresponding Derivative Compound (and each corresponding Collaboration Product) with respect to each Target: 

	Milestones for a Lead Compound
	 	Amount

	***	 	$***
	***	 	$***
	***	 	$***
	***	 	$***

        (b)  It
is understood and agreed that Organon shall not be required to pay the milestone payments set forth in this Section more than once for each Target, even if such
milestone is achieved with respect to more than one Lead Compound with activity against such Target. 

        7.1.2    Delivery Payments.    Organon shall pay to Pharmacopeia the following delivery payments in additions to all
the payments accrued hereunder as follows: At the time that Pharmacopeia delivers to Organon the *** Lead Series, Organon shall pay Pharmacopeia a delivery payment of ***, due within thirty
(30) days following such delivery. At the time that Pharmacopeia delivers to Organon each of the ***, *** and *** Lead Series, Organon shall pay to Pharmacopeia a delivery payment 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. 

        7.2    Due Diligence.    For each Lead Compound and corresponding Derivative Compound, Organon will use its diligent
efforts, consistent with the usual practices followed by Organon in pursuing the commercialization and marketing of its other compounds of similar market potential, at a similar stage of its product
life and deemed to have comparable commercial value by the Parties, at its own expense, 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 dedication of at least ten (10) FTE's at each stage of the development of such Lead Compound. In
the event that Organon decides to out-license the applicable Lead Compound, rather than proceed with the development activities described in this Section, Organon agrees that Pharmacopeia
shall have the right of first refusal to develop and commercialize such Lead Compound as a Reverted Lead Compound. For the avoidance of doubt, out-license shall mean providing a license to
a Third Party by which Organon shall have no influence on the further development of the applicable Lead Compound. 

	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: Dr. T. de Boer (Research Alliance Manager)

-17-

 
 
 

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, on
a country-by-country basis, 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
(i) ten (10) years from the date of such First Commercial Sale, or (ii) the expiration of the last to expire Patent Rights within the Pharmacopeia Base Technology or the Developed
Technology containing any claim which would be infringed by the making, using and selling of the applicable Collaboration Product in the applicable country. 

        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, on a country-by-country basis, 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 (i) ten (10) years from the date of such First Commercial Sale, or (ii) if Pharmacopeia has an
exclusive license to the applicable Patent Rights, the expiration of the last to expire Patent Rights within the Organon Base Technology or the Developed Technology containing any claim which would be
infringed by the making, using and selling of the applicable Collaboration Product in the applicable country. 

        8.1.3    Paid-Up License.    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, such license shall be converted to fully paid-up, nonexclusive, royalty-free licenses, with the right to sublicense, under any Developed Technology,
Pharmacopeia Base Technology or Organon Base Technology, as the case may be, necessary to make, have made, use and sell the applicable Collaboration Product on a
country-by-country and Collaboration Product-by-Collaboration Product basis. 

        8.2    Royalty Rate.    

        8.2.1    Royalties on Collaboration Product based on a Lead Compound.    Organon shall pay to Pharmacopeia royalties
on Net Sales of each Collaboration Product based on a Lead Compound or Derivative Compound thereof according to the following schedule: 

        (a)  for
that portion of such Net Sales of a Collaboration Product which is less than or equal to ***, Organon shall pay to Pharmacopeia a royalty rate of ***. 

        (b)  for
that portion of such Net Sales of a Collaboration Product which is greater than *** and less than or equal to ***, Organon shall pay to Pharmacopeia a royalty rate
of ***. 

        (c)  for
that portion of such Net Sales of a Collaboration Product which is greater than ***, Organon shall pay to Pharmacopeia a royalty rate of ***. 

        8.2.2    Royalties of Collaboration Product based on a Reverted Lead Compound.    

        (a)  In
the event Pharmacopeia sells any Collaboration Product, then Pharmacopeia shall pay to Organon royalties on Net Sales of each Collaboration Product based on a
Reverted Lead Compound. according to the following schedule: 

          (i)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia prior to initiation of GLP Toxicity Studies with respect
thereto, Pharmacopeia shall pay to Organon a royalty rate of ***. 

-18-

 

        (ii)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of GLP Toxicity Studies with respect
thereto, but prior to initiation of Phase I clinical trials, Pharmacopeia shall pay to Organon a royalty rate of ***. 

        (iii)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of Phase I clinical trials, but
prior to initiation of Phase II clinical trials, Pharmacopeia shall pay to Organon a royalty rate of ***. 

        (iv)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of Phase II clinical trials, but
prior to initiation of Phase III clinical trials, Pharmacopeia shall pay to Organon a royalty rate of ***. 

        (v)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of Phase III clinical trials,
Pharmacopeia shall pay to Organon a royalty rate of ***. It is understood by both Parties that the royalty rates subject to this section 8.2.2.a reflect the fact that on the Effective Date
Pharmacopeia does not have the financial resources for up-front and milestone payments. If in future the financial resources of Pharmacopeia will allow Pharmacopeia to pay
up-front and milestone payments, and upon the request of Pharmacopeia, both Parties will enter into good faith negotiations to re-negotiate the financial compensation to
Organon, which compensation on balance will not be lower than the compensation described in this section 8.2.2.(a) 

        (b)  In
the event Pharmacopeia sublicenses its rights pursuant to the provisions of Section 5.6.2, then Pharmacopeia shall pay to Organon a royalty on Sublicense
Income of each Collaboration Product based on a Reverted Lead Compound. according to the following schedule: 

          (i)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia prior to its designation as a Development Candidate,
Pharmacopeia shall pay to Organon an amount equal to *** of Sublicense Income received; 

        (ii)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following its designation as a Development Candidate, but
prior to initiation of Phase
I clinical trials, Pharmacopeia shall pay to Organon an amount equal to *** of sublicense Income received; 

        (iii)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of Phase I clinical trials, but
prior to initiation of Phase II clinical trials, Pharmacopeia shall pay to Organon an amount equal to *** of Sublicense Income received; and 

        (iv)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of Phase II clinical trials, but
prior to initiation of Phase III clinical trials, Pharmacopeia shall pay to Organon an amount equal to *** of Sublicense Income received; and 

        (v)  for
a Collaboration Product which is based on a Reverted Lead Compound which has reverted back to Pharmacopeia following initiation of Phase III clinical trials,
Pharmacopeia shall pay to Organon an amount equal to *** of Sublicense Income received. 

-19-

 

        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 quarterly calendar basis within ninety (90) days after
the end of the calendar quarter to which such royalty report applies. Each such report shall state, separately for the paying Party, and each Affiliate and Sublicensee, the number, description, and
aggregate Net Sales, on a country- by- country basis, and product-by-product basis during the calendar quarter during which a royalty is payable. Contemporaneously
with the submission of the royalty reports, the paying Party shall pay to the other Party all royalties due. 

        8.3.2    Records Retention.    Each Party shall keep, and require its Affiliates and Sublicensees to keep, for a
period of not less than seven (7) years, 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 more often than once a year; and (ii) shall not
cover any records which date prior to the date of the last examination, and further provided that, such accountants shall report only as to the accuracy
of the royalty statements and payments and the amount of any underpayment. Copies of such reports shall be supplied to the paying Party. In the event that the report demonstrates that the paying Party
has underpaid royalties, the paying Party shall promptly pay such royalties together with interest at the prime rate as stated in the Wall Street Journal Europe  under "Money Rates" plus two percent (2%)
("Prime Plus 2") applied to the amount unpaid from the date due to the date paid. If the paying Party has overpaid royalties, the
paying party may credit such overpayments against future royalties owed to the other Party. 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. 

-20-

  

        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 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 rate provided by the Wall Street
Journal Europe, for the last business day of each calendar quarter, into United States Dollars. 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 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. 

-21-

 

        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)    Prosecution by Organon.    For as long as its license rights have not expired or been terminated, Organon shall
be responsible, at its sole discretion and expense, for preparing, filing, prosecuting and maintaining in such countries it deems appropriate, Patent Rights within the Developed Technology claiming
Lead Compounds, Organon Compounds, or methods of making or using the same, and conducting any interferences, re-examinations, reissues and oppositions relating to such Patent Rights. It is
understood and agreed that in such Patent Rights Organon may claim any or all Pharmacopeia Compounds with activity against the same Target as the Lead Compound, or based on the Organon Compounds;  provided,
however, that if such Patent Rights include one or more Inactive Compound, Pharmacopeia shall
have the right to require that Organon not disclose nor claim any Inactive Compound and shall provide notice to Organon to that effect. Organon shall have a period of ninety (90) days from the
receipt of such notice during which to provide Pharmacopeia with evidence reasonably demonstrating that such Pharmacopeia Compound was in fact synthesized and tested by Organon, and has in fact the
utility which is to be disclosed or claimed. In the event that Organon fails to provide such evidence, and Organon claims such Inactive Compound, then Organon agrees to grant, and hereby grants to
Pharmacopeia, an exclusive (even as to Organon), worldwide, royalty-free right and license, with the right to grant and authorize sublicenses, under Organon's interest in the Patent Rights
claiming such Inactive Compound, to make, have made, use, import, offer for sale, have sold and sell products based thereon, for the life of the applicable Patent Rights. 

        (b)    Prosecution by Pharmacopeia.    Except as otherwise provided in Section 10.2.3(a), Pharmacopeia shall be
responsible, at its sole discretion and expense, for preparing, filing, prosecuting and maintaining in such countries it deems appropriate, Patent Rights within the Developed Technology and conducting
any interferences, re-examinations, reissues and oppositions relating to such patent applications and patents. 

        (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). 

-22-

 

        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 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 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. 

        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 or concedes that any 

-23-

 

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 first to reimburse the Party for expenses (including
attorneys, professional and expert fees) incurred in such suit, and any remainder shall be treated as Net Sales.. 

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

        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 exclusive right to defend and control the defense of any such claim, suit or proceeding, at its own expense,
using counsel of its own choice; provided, however, it shall not enter into any agreement or settlement which admits or concedes that any aspect of the Developed Technology, the Pharmacopeia Base
Technology, the Organon Base Technology or the Excluded Technology is invalid, unenforceable or not infringed, without the prior written consent of the other Party. 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. 

 
 

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 Representatives except as 

-24-

 

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. 

        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. 

-25-

 

        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 will discuss and review proposed publications describing the scientific
results of the Research Collaboration. Either Party may, in its sole discretion, decide not to permit publication by the other Party of any scientific results related to any results of the Research
Collaboration. 

 
 

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. 

        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 

-26-

 

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

 
 

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. 

-27-

  

        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. 

        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 survive the Research Term and the completion of the other actions set forth herein and shall remain in full force and effect. 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: (i) the inaccuracy of any representation or the
breach of any warranty, covenant or agreement of Pharmacopeia contained in this Agreement or in any other agreement or instrument delivered by Pharmacopeia pursuant to this Agreement; (ii) any
failure by Pharmacopeia, its Affiliates or designee to conduct the research pursuant to the Research Plans in a diligent and professional
manner and in accordance with applicable laws and regulations; (iii) any negligence or intentional wrongdoing by Pharmacopeia, its Affiliates or designees in the performance of the research
hereunder (except in each case to the extent that any Organon Loss is due to the negligence or willful misconduct of Organon Indemnitees); or (iv) the development, preclinical and clinical
testing, manufacture, distribution, sale and/or use (including but not limited to product liability claims) of any Reverted Lead Compound or non-Designated Lead Compound (except in each
case to the extent that any Organon Loss is due to the negligence or willful misconduct of Organon Indemnitees). 

        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: (i) the
inaccuracy of any representation or the breach of any warranty, covenant or agreement of Organon contained in this Agreement or in any other agreement or instrument delivered by Organon pursuant to
this Agreement; (ii) any failure by Organon, its Affiliates or designee to conduct the research pursuant to the Research Plans in a diligent and professional manner and in accordance with
applicable laws and regulations; (iii) the use of any Target, or any Assay, including but not limited to patent infringement claims in 

-28-

 

connection with the use of any Assay, any Target or of any materials relating to any Assay or any Target, (iv) any negligence or intentional wrongdoing by Organon, its Affiliates or designees
in the performance of the research hereunder; or (v) the development, preclinical and clinical testing, manufacture, distribution, sale and/or use (including but not limited to product
liability claims) of any Lead Compound, Derivative Compound or Collaboration Product (except in each case to the extent that any Pharmacopeia Loss is due to the negligence or willful misconduct of
Pharmacopeia Indemnitees). 

        14.4    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 Research Collaboration shall commence on the Effective Date and terminate on the last
day of the Initial Research Term, unless extended by mutual agreement of the Parties, upon twelve (12) months written notice from Organon before the last day of the Initial Research Term, in
which case the Research Collaboration shall terminate on the last day of such extension. 

        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 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 

-29-

 

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 each of Research Year One, 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 each 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 of that Organon elects to terminate the Research Collaboration as provided in this Section, 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)  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 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 

-30-

 

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. 

        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, all exclusivity periods, rights and licenses granted hereunder shall terminate, and any licenses granted by Organon to Pharmacopeia hereunder shall
terminate, except for any license granted to Pharmacopeia under Sections 10.2.3(a) and 5.6, which shall remain in effect, subject to the terms and conditions of this Agreement applicable thereto,
including the applicable provisions of Articles 4, 8 and 9, which shall survive and be applicable to such licenses in addition to the provisions which survive pursuant to Section 15.5. 

        (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, the licenses granted by Organon hereunder shall terminate concurrently, except for any license under Sections 5.6.1 and 10.2.3(a) which shall remain in effect,
and any licenses granted by Pharmacopeia hereunder shall remain in effect, subject to the terms and conditions of this Agreement applicable thereto, including the applicable provisions of Articles 4,
7, 8 and 9, which shall survive and be applicable to such licenses in addition to the provisions which survive pursuant to Section 15.5. 

        (c)    Termination Pursuant to Section 15.3.3.    In the event of termination by either Party pursuant to
Sections 15.3.3, the licenses granted by Organon hereunder shall terminate concurrently, except for any license under Sections 10.2.3(a) and 5.6 which shall remain in effect, and any licenses granted
by Pharmacopeia hereunder shall remain in effect, subject to the terms and conditions of this Agreement applicable thereto, including the applicable provisions of Articles 4, 6 (as applicable), 7, 8
and 9, which shall survive and be applicable to such licenses in addition to the provisions, which survive pursuant to Section 15.5. 

        15.5    Survival.    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. 

-31-

 
 
 

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:	 	If to Organon:
	

Pharmacopeia, Inc.

CN 5350

Princeton, NJ 08543-5350

Attn: Chief Executive Officer	
 	

N.V. Organon

Kloosterstraat 6

5349 AB Oss

The Netherlands

Attn: President

Fax #: 31-412-646293
	

With a copy to:	
 	

with a copy to:
	

Pharmacopeia, Inc.

CN 5350

Princeton, NJ 08543-5350

Attn: General Counsel

Fax: (609) 452-3655	
 	

Akzo Nobel Nederland B.V.

Wethouder va Eschstraat 1

5342 AV Oss

The Netherlands
	 	 	Attn: Legal Affairs Department

Fax#: 31-412-666373

        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. 

        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; provided however, that either Party may assign this Agreement
without the consent of the other Party to its Affiliates, if the assigning Party guarantees the full performance of its Affiliates obligations hereunder, or in connection with the sale or transfer of
all or substantially all of its assets relating to this Agreement, whether by merger, sale of stock, operation of law or otherwise. Any purported 

-32-

 

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. 

        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 Exhibit 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. 

-33-

 

        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. 

        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 

-34-

 

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. 

        (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. 

-35-

 

        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, INC
	

By:	
 	

/s/  H J VERGOUWEN      
	
 	

By:	
 	

/s/  STEPHEN A. SPEARMAN      

	Name:	 	H J Vergouwen	 	Name:	 	Stephen A. Spearman
	Title:	 	Managing Director R&D	 	Title:	 	Executive Vice President and Chief Operating Officer
	

Date: February 13, 2002	
 	

Date: January 31, 2002
	

By:	
 	

/s/  C D NICHOLSON      
	
 	

 	
 	

 
	Name:	 	C D Nicholson	 	 	 	 
	Title:	 	Director Research	 	 	 	 
	

Date: February 13, 2002

	
 	

 	
 	

 

-36-

 
 
 

EXHIBIT A    
    
    Assay Validation Criteria    
  

Generic Validation Criteria for HTS Assays Developed by Organon  

        Assay validation is a process that Organon is responsible for conducting prior to delivery of a screen. All work related to assay validation is performed at
Organon, with the objective of demonstrating that assay performance meets or exceeds the criteria that has been mutually accepted by both companies. The following are generic validation criteria,
which will be dependent and may vary based on the actual assay to be developed. 

	1)
	***

***
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 

-37-

QuickLinks

COLLABORATION AND LICENSE AGREEMENT

BACKGROUND

ARTICLE 1 DEFINITIONS

ARTICLE 2 RESEARCH COLLABORATION

Table 1

ARTICLE 3 JOINT RESEARCH COMMITTEE; JOINT PATENT COMMITTEE

ARTICLE 4 EXCLUSIVITY

ARTICLE 5 LICENSES

ARTICLE 6 FUNDING

ARTICLE 7 MILESTONE PAYMENTS

ARTICLE 8 ROYALTY PAYMENTS

ARTICLE 9 REPORTS, BOOKS AND TAX MATTERS

ARTICLE 10 PATENTS

ARTICLE 11 CONFIDENTIALITY

ARTICLE 12 REPRESENTATIONS AND WARRANTIES OF PHARMACOPEIA

ARTICLE 13 REPRESENTATIONS AND WARRANTIES OF ORGANON

ARTICLE 14 SURVIVAL AND INDEMNIFICATION

ARTICLE 15 TERM, TERMINATION, AND EXPIRATION

ARTICLE 16 MISCELLANEOUS

EXHIBIT A Assay Validation CriteriaQuickLinks
 -- Click here to rapidly navigate through this document

  

 
 

Promissory Note    
  

	$1,092,757.84	 	Funding Date: December 20, 2001

        FOR VALUE RECEIVED, STARTEK CANADA SERVICES, LTD., a Canadian corporation, ("Maker"), promises to pay to the order of  KEY EQUIPMENT FINANCE CANADA LIMITED
("Holder"), the Sum of ONE MILLION NINETY-TWO THOUSAND SEVEN HUNDRED FIFTY SEVEN DOLLARS AND EIGHTYFOUR
CENTS ($1,092,757.84) in lawful money of Canada (the "Principal"), with interest thereon as hereafter provided ("Interest"), to be paid in the manner set forth herein. This Note is executed pursuant
to that certain security agreement (the "Security Agreement") dated as of December 6, 2001 between Maker and Holder. Capitalized terms used herein without definition shall have the meaning
given them in the Security Agreement. 

1. Interest Rate; Place of Payment. Interest on the balance of the Principal outstanding on this Note shall accrue from the Funding Date of this Note
and shall be due and payable at a fixed rate of five and forty-one hundredths (5.41%) per annum (the "Interest Rate"). Interest shall be calculated on the basis of a 360-day
year consisting of twelve 30-day months. Payment of the Principal and Interest hereunder shall be made to Holder at 66 South Pearl Street, Albany, NY 12207, or at such other place as
Holder may designate from time to time in writing. Holder reserves the right to require payment on this Note to be made by wired funds or other immediately available funds. 

2. Repayment Terms. The Principal and Interest shall be due and payable in forty-eight (48) consecutive monthly installments payable in arrears,
each in an amount equal to $25,368.90 commencing and payable on the same date which is one month after the Funding Date and on the same day of each
month thereafter. In addition, Maker will pay a late payment charge of five percent (5%) of any payment due hereunder that is not paid on or before the date due hereunder as a genuine
pre-estimate of damages of Holder and not as a penalty. 

3. Security. Payment of the Principal and Interest hereunder, and the performance and observance by Maker of all agreements, covenants and provisions
contained herein, is secured by a first priority security interest and hypothec in the Collateral. 

4. Prepayment. Except as contemplated by clause (3) of section 10 of the Security Agreement, Maker may not prepay, in whole or in
part, the principal outstanding hereunder; provided, however, that commencing on the date following the twelve month anniversary of the Funding Date, Maker may prepay, in whole but not in part, the
principal outstanding hereunder by paying to Holder such outstanding principal, together with all accrued and unpaid interest thereon, plus a prepayment premium ("Prepayment Premium") equal to a
percentage of the outstanding principal calculated as follows: 

	Months
 
	 	Prepayment Premium

	1-12	 	1%
	13-24	 	 1/2%
	25-End of Term	 	0%

5. Transfer or Assignment. Holder may at any time assign or otherwise transfer or negotiate this Note in whole or in part, without any notice to Maker.
The rights and obligations of Maker may not be assigned or delegated. 

6. Application of Payments. Prior to an Event of Default, each payment received on this Note shall be applied first to all costs of collection, then to
unpaid late payment charges (if any) and Prepayment Premium (if any) hereunder, then to Interest as of the payment due date and the balance, if any, to the outstanding Principal as of the date
received. Upon the occurrence, and during the continuance, of an Event of Default, any payments in respect of the Secured Obligations and any proceeds of the 

1

 

Collateral when received by Holder in cash or its equivalent, will be applied first to costs of collection and, thereafter, in reduction of the Secured Obligations in such order and manner as Holder
may direct in its sole discretion, and Maker irrevocably waives the right to direct the application of such payments and proceeds and acknowledges and agrees that Holder shall have the continuing and
exclusive right to apply any and all such payments and proceeds in the Holder's sole discretion, notwithstanding any entry to the contrary upon any of its books and records. 

7. Events of Default. (a) Maker shall be in default if any of the following happens (an "Event of Default"): (1) Maker fails to make any
installment of the Principal or Interest, or any other payment due and owing, under this Note within ten (10) days after the same becomes due and payable; or (2) Maker falls to perform
any other obligation required to be performed by Maker under this Note, the Security Agreement or any of the other Loan Documents for thirty (30) days after written notice from Holder of such
failure; or (3) any representation, warranty or other statement by or on behalf of Maker in connection with this Note is false or misleading in any material respect; or (4) an Event of
Default has occurred and is continuing under the Security Agreement. 

        (b)  Notwithstanding
anything to the contrary contained herein, upon the occurrence of an Event of Default: (i) Holder may declare the entire outstanding balance of
the Principal, together with all accrued and unpaid Interest thereon, immediately due and payable without notice or' demand which amounts shall, together with all other sums due hereunder, accrue
interest from such acceleration until I the date of actual payment at the Default Rate (provided, however, that should there occur an Event of Default,
and if a voluntary or involuntary petition in bankruptcy under Applicable Law is filed by or against Maker while such default remains uncured, the entire outstanding balance of the Principal
automatically shall be accelerated and due and payable with interest thereon at the Default Rate), and Holder may exercise any and all of its remedies hereunder, under the other Loan Documents and
under Applicable Law. The remedies of Holder provided herein, in the Security Agreement and under Applicable Law shall be cumulative and concurrent and may be pursued singly, successively or
concurrently at the sole discretion. of Holder and may be exercised as often as occasion therefore shall occur. The failure to exercise, or any delay in the exercise of, any right or remedy shall in
no event be construed as a waiver, release or exhaustion of any such remedies. 

8. Collection Costs. In addition to the Principal, Interest, Prepayment Premium (if any), and late payment charges (if any), Maker shall pay Holder on
demand, and Holder shall be entitled to collect all costs and expenses of collection, including, without limitation, reasonable legal f fees, incurred in connection with enforcement of its rights and
remedies hereunder and under the other Loan Documents, the protection or realization of the Collateral or in connection with Holder's collection efforts, or in connection with any bankruptcy or other
judicial proceeding, whether or not suit on this Note or any foreclosure proceeding is f filed. All such costs and expenses shall be payable on demand and, until paid, shall be Secured Obligations
secured by the security interest and hypothec granted under the Security Agreement and all other collateral, if any, held by Holder as security for Maker's obligations under this Note. 

9. Governing Law; Binding Agreement. The provisions of this Note shall be binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns. THIS NOTE IS BEING DELIVERED IN THE PROVINCE OF ONTARIO AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE
OF ONTARIO AND THE
FEDERAL LAWS OF CANADA APPLICABLE THEREIN, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAWS PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE PROVINCE OF ONTARIO.

2

 

10. More than One Signer. If more than one person or entity signs this Note as a Maker, the obligations contained herein shall be deemed joint and
several and all references to "Maker" shall apply both jointly and severally. 

11. General. Maker represents and warrants that this Note evidences a loan f or business or commercial purposes. Prior to signing this Note, Maker read
and understood the provisions hereof, and agrees to all terms and conditions contained herein. 

12. Waiver. MAKER AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF HEREBY JOINTLY AND SEVERALLY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF NONPAYMENT OR DISHONOR,
NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE OF PROTEST AND PROTEST OF THIS NOTE. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY HOLDER AND THE MAKER. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE AND THE OTHER LOAN DOCUMENTS.  

13. Usury; Partial Invalidity. (a) At no time shall the Interest Rate (or the Default Rate or other amounts paid or
collected hereunder) exceed the highest rate allowed by Applicable Law for this type of loan. Should Holder ever collect interest at a rate that exceeds such applicable legal limit, such excess will
be credited to the Principal. 

        (b)  Whenever
possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Note
shall be prohibited by or invalid under the laws of any applicable jurisdiction, such provision, as to such jurisdiction, shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this Note in any other jurisdiction. 

14. Notices. All notices and other communications under this Note shall be in writing and shall be addressed: (i) if to Maker, Key Equipment
Finance, 66 South Pearl Street, Albany, NY 12207; and (ii) if to Holder, Key Equipment Finance Canada Limited, 66 South Pearl Street, Albany, NY 12207, with a copy to Key Equipment Finance, 66
South Pearl Street, Albany, New York 12207, Attention: Canada Team, or such other address as either party hereto shall communicate to the other party at its address
specified above. All such notices and other communications shall be deemed to have been duly given if delivered by hand, overnight courier or if sent by certified mail, return receipt requested, to
the party to whom such notice is intended to be given, and shall be effective upon receipt. 

15. Funding Date. The Funding bate for this Note shall be the date on which Holder disburses funds hereunder. TO THE EXTENT THE
FUNDING DATE IS LEFT BLANK ABOVE, OR DOES NOTREFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN
THE CORRECT DATE AT THE TIME OF DISBURSEMENT.

16. Language. The parties hereto have expressly required that this Note and all other documents, agreements and notices related hereto and thereto be
drafted in the English language. Les parties aux presentes ont expressement exige' que le presente note et tous les autres documents, conventions et avis qui y sont afferents soient redigees en lanque
anglaise. 

        IN WITNESS WHEREOF, Maker, intending to be legally bound, has caused this Note to be duly executed on the day and year first above
written. 

3

 

MAKER:  

STARTEK CANADA SERVICES, LTD.  

	By:	 	/s/  WILLIAM MEADE      
	 	 
	Name:	 	William Meade
	 	 
	Title:	 	President / CEO
	 	 

4

 
 
  Security Agreement    
  

        THIS SECURITY AGREEMENT (this "Agreement" or "Security Agreement") dated as of December 6, 2001 is made by
and between STARTEK CANADA SERVICES, LTD., a corporation having its chief executive office at 100 Innovation Drive, Kingston, Ontario K7K7E7 (the
"Borrower"), and KEY EQUIPMENT FINANCE CANADA LIMITED, a Canadian corporation ("KEF"). 

 
 

W I T N E S S E T H:    
  

1. Grant of Security Interest in the Equipment. In consideration of one or more loans, advances or other financial accommodations at any time before, at
or after the date hereof, made or extended by KEF to or for the account of the Borrower, directly or indirectly, as principal, guarantor or otherwise and to secure the prompt payment and performance
in full when due, whether by lapse of time, acceleration or otherwise, of the Secured Obligations, the Borrower hereby pledges, assigns, transfers, hypothecates in favour of KEF and grants to KEF a
security interest in, and acknowledges and agrees that this Agreement shall create a continuing security interest in, all of Borrower's right, title and interest in and to the Collateral. For the
purposes of Quebec law, the hypothec shall be granted for the amount of $1,092,757.84. 

        The
Secured Obligations of the Borrower are absolute, irrevocable and unconditional under any and all circumstances whatsoever and shall not be subject to any right of
set-off, counterclaim, deduction, defense or other right which the Borrower may have for any reason against any vendor, supplier, manufacturer, KEF or any other party. All obligations of
Borrower hereunder shall survive the expiration, cancellation or other termination of this Agreement. 

2. Definitions. Unless the context otherwise requires, as used in this Agreement, the following terms shall have the respective meanings indicated below
and shall be equally applicable to both the singular and the plural forms thereof: 

"Alteration" shall have the meaning specified in Section 6 hereof 

"Applicable Law" shall mean all applicable federal, provincial, local and foreign laws, ordinances, judgments, decrees, injunctions, writs, rules,
regulations, orders, licenses and permits of any Governmental Authority. 

"Authorized" shall mean any officer of Borrower, set forth on an incumbency certificate (in form and substance satisfactory to KEF) delivered by
Borrower to KEF, who is authorized and empowered to execute the Loan Documents. 

"Certificate of Acceptance" shall mean a certificate of acceptance, in form and substance satisfactory to KEF, executed and delivered by Borrower in
accordance with Section 3 hereof. 

"Collateral" shall mean the Equipment and any and all substitutions, replacements or exchanges therefore, and any and all proceeds (both cash and
non-cash) receivable or received from the sale, lease, license, collection, use, exchange or other disposition of the Collateral, including insurance proceeds, thereof (including, without
limitation, claims of the Borrower against third parties for Loss or Damage to any such collateral). 

"Collateral Schedule" shall mean each collateral schedule now or hereafter attached hereto and made a part hereof, in substantially the form of
Schedule 1 hereto. 

"Default" shall mean any event or condition which, with the passage of time or the giving of notice, or both, would constitute an Event of Default. 

"Default Rate" shall mean an annual interest rate equal to 18% per annum. "equipment" shall mean an item
or items of personal or moveable property which are described on the Collateral Schedule, together with all replacement parts, additions and accessories incorporated therein or affixed thereto 

5

 

including, without limitation, any software that is a component or integral part of, or is included or used in connection with, any Item of Equipment, but with respect to such software, only to the
extent of Borrower's interest therein, if any. 

"Equipment Location" shall mean the location of the Equipment, as set forth on Schedule 1, or such other location (approved in writing by KEF) as
Borrower shall from time to time specify in writing. 

"Event of Default" shall have the meaning specified in Section 16 hereof. 

"GAAP" shall have the meaning specified in Section 22(g) hereof. 

"Governmental Action" shall mean all authorizations, consents, approvals, waivers, filings and declarations of any Governmental Authority, including,
without limitation, those environmental and operating permits required for the ownership, lease, use and operation of the Equipment. 

"Governmental Authority" shall mean any foreign, federal, provincial, local, municipal or other governmental authority, agency, board or court. 

"Guarantor" shall mean any guarantor of the Secured Obligations. 

"Installment" shall mean the periodic payments due to repay the Note, and, where the context hereof requires, all such additional amounts as may from
time to time be payable under any provision of the Loan Documents. 

"Item of Equipment" shall mean each item of the Equipment. 

"Liability" shall have the meaning set forth in Section 18 hereof. 

"Loan Documents" shall mean, collectively, this Agreement, the Note, and all other documents prepared by KEF and now or hereafter executed in connection
therewith. 

"Lien" shall mean all mortgages, pledges, hypothecs, security interests, liens, encumbrances, claims or other charges of any kind whatsoever, except the
security interest of KEF created by this Agreement. 

"Loss or Damage" shall mean any loss, theft, destruction, disappearance or any condemnation, expropriation or requisition of or damage to any Item of
Equipment. 

"Note" shall mean that certain Promissory Note in the original principal amount of $1,092,757.84 executed in connection herewith, together with any
extensions, modifications, renewals, refinancings or other restructurings thereof 

"Secured Obligations" means (a) all of the obligations of Borrower under the Loan Documents and (b) all of the following obligations of
Borrower, whether direct or indirect, absolute or contingent, matured or unmatured, originally contracted with KEF or another party, and now or hereafter owing to or acquired in any manner partially
or totally by KEF or in which KEF may have acquired a participation, contracted by Borrower alone or jointly or severally: (1) any and all indebtedness, obligations, liabilities, contracts,
indentures, agreements, warranties, covenants, guaranties, representations, provisions, terms, and conditions of whatever kind, now existing or hereafter arising, and however evidenced, that are now
or hereafter owed, incurred or executed by Borrower to, in favor of, or with KEF (including, without limitation, those as are set forth or contained in, referred to, evidenced by, or executed with
reference to any letter of credit agreements, advance agreements, indemnity agreements, guaranties, lines of credit, mortgage deeds, security agreements, assignments, pledge agreements, hypothecation
agreements, instruments, and acceptance financing agreements), and including any partial or total extension, restatement, renewal, amendment, and substitution thereof or therefore; (2) any and
all claims of whatever kind of KEF against Borrower, now existing or hereafter arising, including, without limitation, any arising out of or in any way connected with warranties made by Borrower to
KEF in connection with any instrument purchased by KEF; and (3) any and all of KEF' s fees, costs and expenses related to the foregoing. 

6

 

"Supplier" shall mean the manufacturer or the vendor of the Equipment, as set forth on each Collateral Schedule. 

"Term" shall mean the term of the Note. 

"Upgrade" shall have the meaning specified in Section 8 hereof 

3. Delivery and Acceptance. Concurrently with execution of the Collateral Schedule hereunder, Borrower shall execute and deliver to KEF a Certificate of
Acceptance for the Equipment described on such Collateral Schedule. KEF SHALL HAVE NO OBLIGATION TO ADVANCE ANY FUNDS TO BORROWER UNLESS AND UNTIL KEF SHALL HAVE RECEIVED A CERTIFICATE OF ACCEPTANCE
RELATING TO THE EQUIPMENT EXECUTED BY BORROWER. Such Certificate of Acceptance shall constitute Borrower's acknowledgment that such Equipment (a) was
received by Borrower, (b) is satisfactory to Borrower in all respects, (c) is suitable for Borrower's purposes, (d) is in good order, repair and condition, (e) has been
installed and operates properly, and (f) is subject to all of the terms and conditions of the Loan Documents. Borrower's execution and delivery of a Certificate of Acceptance shall be
conclusive evidence as between KEF and Borrower that the Items of Equipment described therein are in all of the foregoing respects satisfactory to Borrower, and Borrower shall not assert any claim of
any nature whatsoever against KEF based on any of the foregoing matters; provided, however, that nothing contained herein shall in any way bar, reduce
or defeat any claim that Borrower may have against the Supplier or any other person (other than KEF). 

4. Payments. Borrower shall pay the Note on the terms set forth therein. All Installments shall be payable when due whether or not Borrower has received
any additional notice that such Installments are due. All Installments shall be paid to KEF at 66 South Pearl Street, Albany, New York 12207, or as otherwise directed by KEF in writing. 

5. Location; Inspection. The Equipment shall be delivered to the Equipment Location and shall not be removed there from without KEF's prior written
consent. Borrower shall maintain possession and control of the Equipment at all times. KEF shall have the right to enter upon the Equipment Location and inspect the Equipment at any reasonable time.
Borrower will promptly give written notice to KEF of any change in the identity or location of any Item of Equipment, which might require new filings or other action to assure continued perfection of
the security interest or hypothec of KEF granted hereby. The Borrower owns, and will continue to own, all Equipment Locations except as otherwise indicated on Schedule 1. 

6. Use; Alterations. Borrower shall use the Equipment only in the course of its business for commercial purposes (and shall not permanently discontinue
use of the Equipment), and in compliance with Applicable Law and the requirements of any applicable insurance policies, and only in the manner for which it was designed and intended and so as to
subject it only to ordinary wear and tear. Borrower shall comply with all Applicable Law with respect to the Equipment. Borrower shall immediately notify KEF in writing of any existing or threatened
investigation, claim or action by any Governmental Authority in connection with any Applicable Law or Governmental Action, which could adversely affect the value of the Equipment or the perfection or
priority of the security interest or hypothec of KEF in the Collateral. Borrower shall not make any material alterations, additions, modifications or improvements (each, an "Alteration") to the
Equipment without KEF's prior written consent; provided that Borrower, at its own expense, shall make Alterations as may be required from time to time
to meet the requirements of Applicable Law or Governmental Action. All such Alterations immediately, and without further act, shall be deemed to constitute Items of Equipment and fully be subject to
the security interest or hypothec granted to KEF hereunder. 

7. Repairs and Maintenance. Borrower, at Borrower's own cost and expense, shall (a) keep the Equipment in good repair, operating condition and
working order and in compliance with the manufacturer's specifications and Borrower's standard practices (but with respect to the latter, in no 

7

 

event less than industry practices) and (b) enter into and keep in full force and effect during the Term hereof a maintenance agreement with the manufacturer of the Equipment as applicable, or
a
manufacturer-approved maintenance organization, to maintain, service and repair the Equipment as otherwise required herein. Upon KEF's request, Borrower shall furnish KEF with an executed copy of any
such maintenance agreement. An alternate source of maintenance may be used by Borrower with KEF's prior written consent. Borrower, at its own cost and expense and within a reasonable period of time,
shall replace any part of any Item of Equipment that is unfit or unavailable for use from any cause (whether or not such replacement is covered by the aforesaid maintenance agreement) with a
replacement part of the same manufacture, value, remaining useful life and utility as the replaced part immediately preceding the replacement (assuming that such replaced part was in the condition
required by this Agreement). Such replacement part shall be free and clear of all Liens and upon installation, attachment or incorporation in, on or into such Item of Equipment, such replacement part
immediately, and without further act, shall be deemed to constitute an Item of Equipment and fully be subject to the security interest or hypothec granted to KEF hereunder. If KEF repossesses the
Equipment pursuant to its rights under this Agreement and at that time, in the opinion of KEF, any Item of Equipment fails to meet the standards set forth above, Borrower agrees to pay on demand all
costs and expenses incurred in connection with repairing or restoring such Item of Equipment so as to meet such standards and/or assembling and delivering such Item of Equipment. 

8. Equipment Upgrades/Attachments. In addition to the requirements of Section 6 hereof, Borrower,
at its own expense, may from time to time add or install upgrades or attachments (each, an "Upgrade") to the Equipment; provided, that such Upgrades are
readily removable without causing material damage to the Equipment, and do not materially adversely affect the fair market value of the Equipment. Any such Upgrades shall be owned by Borrower, shall
become subject to the security interest or hypothec created by this Agreement and shall be kept free and clear of all Liens so long as attached to the Equipment. 

9. Lease and Assignment. (a) WITHOUT KEFS PRIOR WRITTEN CONSENT, BORROWER SHALL NOT (i) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF, THE
EQUIPMENT OR ANY INTEREST THEREIN, OR ASSIGN OR DELEGATE ITS RIGHTS OR OBLIGATIONS UNDER THE LOAN DOCUMENTS, OR (ii) LEASE OR LEND THE EQUIPMENT TO, OR PERMIT THE EQUIPMENT TO BE USED BY,
ANYONE OTHER THAN BORROWER.

        (b)  KEF,
at any time with or without notice to Borrower, may sell, transfer, grant participations in, assign and/or grant a security interest in or hypothecation of any or
all of KEF's right, title and interest in and to the Loan Documents, or in KEF's security interest in or hypothecation of any Item of Equipment. In any such event, any such purchaser, transferee,
assignee or secured party shall have and may exercise all of KEF's rights hereunder or thereunder, and BORROWER SHALL NOT ASSERT AGAINST ANY SUCH PURCHASER, TRANSFEREE,
ASSIGNEE OR SECURED PARTY ANY DEFENSE, COUNTERCLAIM OR OFFSET.Borrower agrees that upon written notice to Borrower of any such sale, transfer, assignment, hypothec and/or
security interest, Borrower shall acknowledge receipt thereof in writing and shall comply with the reasonable directions and demands of such purchaser, transferee, assignee or secured party. 

        (c)  Subject
to the foregoing, all covenants and agreements contained herein shall be binding upon, and inure to the benefit of, KEF and its successors and permitted assigns
and Borrower and its successors and permitted assigns. 

10. Loss of or Damage to Equipment. In the event of Loss or Damage to any Item of Equipment, Borrower shall immediately notify KEF of same and, at the
option of KEF, as specified in a notice from KEF to Borrower, Borrower shall within thirty (3o) days following such Loss or Damage: (1) place such Item of Equipment in good condition and
repair, in accordance with the terms hereof; (2) replace such Item of Equipment with replacement equipment (acceptable to KEF) in as good 

8

 

condition and repair, and with the same or greater fair market value as such replaced Item of Equipment immediately preceding the Loss or Damage (assuming that such replaced Item of Equipment was in
the condition required by this Agreement), which replacement equipment shall immediately, and without further act, be deemed to constitute Items of Equipment and be fully subject to this Agreement as
if originally pledged as Collateral hereunder and shall be free and clear of all Liens; or (3) pay to KEF any unpaid Installments and other charges due prior to the payment date specified in
such notice plus an amount, with respect to an Item of Equipment, equal to the pro rata portion of the Installments attributable to such Item of Equipment under the Loan Documents after discounting
such Installments to present worth as of the payment date specified in such notice on the basis of a per annum rate of discount equal to three percent (3%) from the respective dates upon which such
Installments would have been paid but for the operation of this clause, together with interest on such amount at the Default Rate from the payment date specified in such notice to the date of actual
payment. 

        Upon
KEF's receipt of the payment required under clause (3) above, KEF shall release its security interest in or hypothec on such Item of Equipment. If Borrower replaces
the Item of Equipment pursuant to clause (2) above, such replacement shall be deemed to constitute an Item of Equipment and be fully subject to this Agreement and the security interest
or hypothecation granted to KEF hereunder, as if originally pledged hereunder. If Borrower fails to either restore or replace the Item of Equipment pursuant to clauses (1) or (2) above,
respectively, Borrower shall make the payment under clause (3) above. 

11. Insurance. (a) Borrower, at Borrower's own cost and expense, shall maintain (1) insurance against all risks of Loss or Damage to the
Equipment (which shall include theft and collision for Equipment consisting of motor vehicles, and shall not exclude loss resulting from flood or earthquake) in an amount not less than the full
replacement value thereof and (2) comprehensive public liability insurance including blanket contractual liability for personal and bodily injury and property damage in an amount satisfactory
to KEF. 

        (b)  All
insurance policies required hereunder shall (1) require 3o days' prior written notice to KEF of cancellation or material change in coverage (any such
cancellation or change, as applicable, not being effective until the thirtieth (3oth) day after the giving of such notice); (2) name "Key Equipment Finance Canada Limited and its subsidiaries
and affiliated companies including KeyCorp, their successors and assigns" as sole loss payee under the property insurance policies; (3) not require contributions from other policies held by
KEF; (4) waive any right of subrogation against KEF; (5) in respect of any liability of KEF, except for the insurers' salvage rights in the event of a Loss or Damage, waive the right of
such insurers to set-off, to counterclaim or to any other deduction, whether by attachment or otherwise, to the extent of any monies due to KEF under such policies; (6) not require
that KEF pay or be liable for any premiums with respect to such insurance covered thereby; (7) be in full force and effect throughout any geographical areas at any time traversed by any Item of
Equipment; and (8) contain breach of warranty provisions providing that, in respect of the interests of KEF in such policies, the insurance shall not be invalidated by any action or inaction of
Borrower or any other person (other than KEF) and shall insure KEF regardless of any breach or violation of any warranty, declaration or condition contained in such policies by Borrower or by any
other person (other than KEF Prior to funding the Note, and thereafter not less than 15 days prior to the expiration dates of the expiring policies theretofore delivered pursuant to this
Section, insurers thereunder) for the insurance maintained pursuant to this Section. 

        (c)  Proceeds
of insurance with respect to physical loss or damage to the Equipment shall be applied, at the option of KEF, to repair or replace the Equipment or to reduce or
satisfy (as applicable) the Secured Obligations. 

9

 

12. Taxes. Borrower shall pay when due any and all taxes, fees, levies, imposts, duties, assessments and public and private charges levied or assessed
on or with respect to the Equipment, on the use thereof, or on this Agreement or any of the other Loan Documents. 

13. KEF's Right to Perform for Borrower. If Borrower fails to perform any of its obligations contained in the Loan Documents, KEF may (but shall not be
obligated to) itself perform such obligations, and the amount of the reasonable costs and expenses of KEF incurred in connection with such performance, together with interest on such amount from the
date paid by KEF until the date repaid by Borrower to KEF, at the Default Rate, shall be payable by Borrower to KEF upon demand. No such performance by KEF shall be deemed a waiver of any rights or
remedies of KEF, or be deemed to cure the default of Borrower hereunder. All such sums and amounts so expended by KEF shall be repayable by the Borrower immediately without notice or demand, shall
constitute additional Secured Obligations and shall bear interest from the date said amounts are expended at the Default Rate. 

14. Delinquent Payments; Interest. If Borrower fails to pay any of the Installments on the date when the same becomes due, Borrower shall pay to KEF a
late charge equal to five percent (5%) per annum of such delinquent amount as a genuine pre-estimate of damages of KEF and not as a penalty. Such late charge shall be payable by Borrower
upon demand by KEF and shall be deemed part of the Secured Obligations. In no event shall such late charge exceed the maximum amounts permitted under Applicable Law. 

15. Personal Property; Liens; Warranty of Title. The Borrower is, and will continue to be, the sole owner of the Equipment, free from any Lien. KEF and
Borrower hereby agree that the Equipment is, and shall at all times remain, personal or moveable property notwithstanding the fact that any Item of Equipment may now be, or hereafter become, in any
manner affixed or attached to real or immoveable property or any improvements thereon. Borrower shall at all times keep the Equipment free and clear
from all Liens, and the Borrower shall obtain and deliver to KEF (to be recorded at the Borrower's expense) from each person having a Lien on any Equipment Location waivers of any Lien which such
person might have or hereafter obtain or claim with respect to the Equipment. Borrower shall (i) give KEF immediate written notice of any Lien on the Collateral, (ii) promptly, at
Borrower's sole cost and expense, take such action as may be necessary to discharge any such Lien, and (iii) indemnify and hold KEF, on an after-tax basis, harmless from and against
any loss or damage caused by any such Lien. Borrower warrants that it has good, valid and marketable title to the Equipment, and that (i) the security interest or hypothec in the Collateral
granted to KEF hereunder, when properly perfected by filing or registration, shall constitute a valid and perfected first priority security interest or hypothec in the Collateral and, (ii) the
Collateral is not subject to, and Borrower will not grant or permit to exist, any Liens or claims on or against the Collateral, whether senior, superior, junior, subordinate or equal to the security
interest or hypothec granted to KEF hereby, or otherwise. 

16. Events of Default; Remedies. (a) As used herein, the term "Event of Default" shall mean any of the following events: (1) Borrower
fails to pay any Installment within ten (1o) days after the same becomes due and payable; (2) Borrower breaches any of its other obligations under any of the Loan Documents and fails to
cure the same within thirty (3o) days after written notice thereof; (3) any winding-up, dissolution, termination of existence, merger, consolidation, change in controlling
ownership of Borrower or Guarantor, or if Borrower or Guarantor is a natural person, the death or incompetence of Borrower or Guarantor; (4) Borrower or any Guarantor fails to pay its debts
generally as they become due or becomes insolvent or makes an assignment for the benefit of its creditors; (5) a receiver, receiver and manager, trustee, conservator or liquidator of Borrower
or any Guarantor or of all or a substantial part of Borrower's or such Guarantor's assets is appointed with or without the application or consent of Borrower or such Guarantor, respectively;
(6) a petition is filed by or against Borrower or any Guarantor under any bankruptcy, insolvency or similar legislation; (7) Borrower or any Guarantor violates or fails to perform any
provision of either the Loan Documents or any other loan, lease or credit agreement or any acquisition or purchase agreement with KEF or any other party; 

10

 

(8) Borrower violates or fails to perform any covenant or representation made by Borrower in the Loan Documents; (9) any representation or warranty made herein or in any of the Loan
Documents, certificates, financial statements or other statements furnished to KEF (or KEF's parent, subsidiaries or affiliates) shall prove to be false or misleading in any material respect as of the
date on which the same was made; (i) there is a material adverse change in Borrower's or any Guarantor's financial condition; (ii) Borrower shall fail to satisfy any final judgment
rendered against the Borrower by any court of competent jurisdiction where the judgment is material in amount as to the Borrower or materially impairs the financial "" or business condition of the
Borrower; (12) any of the liens created or granted hereby, or intended to be granted or created hereby, to KEF shall fail to be valid, first priority perfected liens subject to no prior or
equal lien; or (13) the receipt by KEF of a notice to creditors with regard to a bulk transfer by the Borrower pursuant to Applicable Law; or (14) an additional Lien attaches to the
Equipment or the Equipment becomes subject to risk of seizure or forfeiture. 

        (b)  (i) Upon
the occurrence of an Event of Default, KEF, at its option and as permitted by Applicable Law, may declare any or all of the Secured Obligations,
including, without limitation, the Note, to be immediately due and payable, without demand or notice to Borrower or any Guarantor. The obligations and liabilities accelerated thereby shall bear
interest (both before and after any judgment) until paid in full at the Default Rate. Should there occur a Default and if a voluntary or involuntary petition under Applicable Law is filed by or
against Borrower while such Default remains uncured, the Secured Obligations automatically shall be accelerated and due and payable and interest thereon at the
Default Rate automatically shall apply as of the date of the first occurrence of the Default, without any notice, demand or action of any type on the part of KEF (including any action evidencing the
acceleration or imposition of the Default Rate). The fact that KEF has, prior to the filing of the voluntary or involuntary petition under Applicable Law, acted in a manner which is inconsistent with
the acceleration and imposition of the Default Rate shall not constitute a waiver of this provision or estop KEF from asserting or enforcing KEF's rights hereunder. 

        (ii)  Furthermore,
upon the occurrence of an Event of Default, KEF shall have, in addition to the rights and remedies provided herein, in the other Loan Documents or by law,
the rights and remedies of a secured party under Applicable Law and further KEF may do any one or more of the following as KEF in its sole discretion may elect: (i) enter and remain on any
premises on which any of the Equipment may be located and, without resistance or interference by the Borrower, without liability to KEF by reason of such entry or taking possession, take possession of
the Equipment, (ii) prepare for sale and sell or otherwise dispose of any Equipment on any such premises, (iii) require the Borrower to assemble and make available to KEF at Borrower's
expense any Equipment at any place and time designated by KEF, (iv) remove any Equipment from any such premises for the purpose of effecting sale or other disposition thereof,
(v) without demand and without advertisement, notice, hearing or process of law, all of which the Borrower hereby waives, at any place and time or times, sell and deliver any or all Equipment
held by or for it at public or private sale, by one or more contracts, in one or more parcels, for cash, upon credit or otherwise, at such prices and upon such terms as KEF deems advisable, in its
sole discretion, or (vi) lease all or any portion of the Equipment on such terms and conditions as KEF in its sole discretion may determine. In addition to all other sums due KEF hereunder, the
Borrower shall pay KEF all reasonable costs and expenses incurred by KEF, including reasonable legal fees and court costs, in obtaining or liquidating the Collateral, in enforcing payment of Secured
Obligations, or in the prosecution or defense of any action or proceeding by or against KEF or the Borrower concerning any matter arising out of or connected with the Loan Documents, the Collateral or
the Secured Obligations, including without limitation any of the foregoing. 

        (iii) Borrower's waivers regarding disposition of the equipment. IF AN EVENT OF DEFAULT OCCURS, BORROWER HEREBY WAIVES ANY
DEFENSES, RIGHTS, OFFSETS OR CLAIMS AGAINST KEF ARISING OUT OF THE REPOSSESSION, RETENTION, SALE, MANNER OR METHOD OF SALE OR DISPOSITION OF ANY ITEMS OF EQUIPMENT. THE BORROWER  

11

 

 AGREES THAT ANY REQUIREMENT OF REASONABLE NOTICE SHALL BE MET IF SUCH NOTICE IS PERSONALLY SERVED ON OR MAILED, POSTAGE PREPAID, TO THE BORROWER IN ACCORDANCE WITH THE NOTICE PROVISIONS HEREOF AT
LEAST 10 DAYS BEFORE THE TIME OF SALE OR OTHER EVENT GIVING RISE TO THE REQUIREMENT OF SUCH NOTICE. KEF SHALL NOT BE OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION OF THE EQUIPMENT REGARDLESS OF
NOTICE HAVING BEEN GIVEN. KEF MAY BE THE PURCHASER AT ANY SUCH SALE. THE BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF REDEMPTION FROM ANY SUCH SALE. KEF MAY POSTPONE OR CAUSE THE
POSTPONEMENT OF THE SALE OF ALL OR ANY PORTION OF THE EQUIPMENT BY ANNOUNCEMENT AT THE TIME AND PLACE OF SUCH SALE, AND SUCH SALE MAY, WITHOUT FURTHER NOTICE, BE MADE AT THE TIME AND PLACE TO WHICH
THE SALE WAS SCHEDULED. NONE OF KEFIS RIGHTS OR REMEDIES HEREUNDER ARE INTENDED TO BE EXCLUSIVE OF, BUT EACH SHALL BE CUMULATIVE AND IN ADDITION TO, ANY OTHER RIGHT OR REMEDY REFERRED TO HEREUNDER OR
OTHERWISE AVAILABLE TO KEF OR ITS ASSIGNS AT LAW OR IN EQUITY, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR
CONCURRENTLY AT THE SOLE DISCRETION OF LENDER AND MAY BE EXERCISED AS OFTEN AS OCCASION THEREFORE SHALL OCCUR. THE FAILURE TO EXERCISE, OR ANY DELAY IN THE EXERCISE OF, ANY RIGHT OR REMEDY
SHALL IN NO EVENT BE CONSTRUED AS A WAIVER, RELEASE OR EXHAUSTION OF ANYSUCH REMEDIES. NO EXPRESS OR IMPLIED WAIVER BY KEF OF ANY EVENT OF DEFAULT SHALL CONSTITUTE A WAIVER OF ANY OTHER EVENT OF
DEFAULT OR A WAIVER OF ANY OF KEFS RIGHTS UPON THE REOCCURRENCE OF ANY SUCH EVENT OF DEFAULT.

        (c)  The
Borrower hereby authorizes KEF, upon the occurrence and during the continuation of any Event of Default hereunder, at KEF's option to adjust, compromise and settle
any losses under any insurance afforded, and the Borrower does hereby irrevocably constitute KEF and each of its designees, as its
attorneys-in-fact, with full power and authority, and coupled with an interest upon the occurrence and during the continuation of any Event of Default hereunder, to effect such
adjustment, compromise and/or settlement and to endorse any drafts drawn by an insurer of the Equipment or any part thereof and to do every-thing necessary to carry out such purposes and to receive
and receipt for any unearned premiums due under policies of such insurance; but unless or until KEF elects to adjust, compromise or settle losses as aforesaid, such insurance proceeds shall be subject
to the lien and security interest of KEF hereunder. (d) Upon the occurrence, and during the continuance, of an Event of Default hereunder, any payments in respect of the Secured Obligations and
any proceeds of the Collateral, when received by KEF in cash or its equivalent, will be applied first to costs of collection and, thereafter, in reduction of the Secured Obligations in such order and
manner as KEF may direct in its sole discretion, and the Borrower irrevocably waives the right to direct the application of such payments and proceeds and acknowledges and agrees that KEF shall have
the continuing and exclusive right to apply any and all such payments and proceeds in KEF's sole discretion, notwithstanding any entry to the contrary upon any of its books and records. The Borrower
shall remain liable to KEF for any deficiency. Any surplus remaining after the full payment and satisfaction of the Secured Obligations shall be returned to the Borrower or to whomsoever a court of
competent jurisdiction shall determine to be entitled thereto. 

        (e)  To
the extent that any of the Secured Obligations are now or hereafter secured by property other than the Collateral, or by a guarantee, endorsement or property of any
other person, then KEF also shall have the right to proceed against such other property, guarantee or endorsement upon the occurrence of a default hereunder, and KEF shall have the right, in its sole
discretion, to determine which rights, liens, security interests or remedies KEF shall at any time pursue, relinquish, subordinate or modify, without in any way affecting the Secured Obligations or
any of KEF's rights under this Agreement. 

12

 

17. Notices. All notices and other communications hereunder shall be in writing and shall be transmitted by hand, overnight courier or certified mail
(return receipt requested), postage prepaid. Such notices and other communications shall be addressed to Borrower at the address as follows: 100 Garfield Street, Denver, CO 80206, with a copy to Key
Equipment Finance, 66 South Pearl Street, 8th Floor, Albany, New York 12207, Attention: Canada Team or at such other address as any party may from time to time designate by notice duly given in
accordance with this Section. Such notices and
other communications shall be effective upon the earlier of receipt or three (3) days after mailing if mailed in accordance with the terms of this Section. 

18. General Indemnification. Borrower shall pay, and shall indemnify and hold KEF and its directors, officers, employees, counsel, agents and advisors
harmless on an after-tax basis from and against, any and all liabilities, causes of action, claims, suits, penalties, damages, losses, costs or expenses (including legal fees),
obligations, liabilities, demands and judgments, and Liens, of any nature whatsoever (collectively, a "Liability") arising out of or in any way related to: (a) the Loan Documents (b) a
failure to comply fully with Applicable Law and (c) Borrower's failure to perform any covenant, or breach of any representation or warranty under the Loan Documents; provided, that the
foregoing indemnity shall not extend to the Liabilities to the extent resulting solely from the gross negligence or willful misconduct of KEF. Borrower shall promptly deliver to KEF (i) copies
of any documents received from any federal, provincial, or municipal environmental or health agency concerning the Equipment or its operation and (ii) copies of any documents submitted by
Borrower or any of its subsidiaries to any federal, provincial or municipal environmental or health agency concerning the Equipment or its operation. Borrower further agrees to indemnify KEF against
and hold it harmless from all present and future stamp, transfer, documentary and other such taxes, levies, fees, assessments or other charges made by any jurisdiction by reason of the execution,
delivery, performance and enforcement of the Loan Documents. 

19. Severability; Captions. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Law. If, however, any provision of this Agreement or any of the Loan Documents shall be prohibited or unenforceable in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law, or if for any reason it is not deemed so modified, it shall be ineffective only to the extent of such prohibition or unenforceability
without affecting the remaining provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. Captions are
intended for convenience or reference only, and shall not be construed to define, limit or describe the scope or intent of any provisions hereof. 

20. Financial and Other Data. During the Term hereof, Borrower shall furnish KEF, as soon as available and in any event within 120 days after the
last day of each fiscal year, financial statements of Borrower and each Guarantor, in each case compiled, reviewed or audited by an independent auditor if required by KEF. Borrower shall also furnish
such other financial reports, information or data (including federal and provincial income tax returns and quarterly or interim financial statements compiled, reviewed or audited by an independent
auditor if required by KEF) as KEF may reasonably request from time to time. 

21. Representations and Warranties of Borrower. Borrower represents and warrants that: (a) Borrower is a corporation, and is duly organized and
validly existing in good standing under the laws of the jurisdiction of its incorporation; (b) the execution, delivery and performance of this Agreement and all related instruments and
documents: (i) have been duly authorized by all necessary corporate action on the part of Borrower, (2) do not require the approval of any shareholder, partner, trustee, or holder of any
obligations of Borrower except such as have been duly obtained, and (3) do not and will not contravene any law, governmental rule, regulation or order now binding on Borrower, or the articles
of
incorporation or by-laws of Borrower, or contravene the provisions of, or constitute a default under, or result in the creation of any Lien or encumbrance upon the property of Borrower
under, any indenture, 

13

 

mortgage, contract or other agreement to which Borrower is a party or by which it or its property is bound; (c) the Loan Documents, when entered into, will constitute legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with the terms thereof; (d) there are no pending actions or proceedings to which Borrower is a party, and there are no other
pending or threatened actions or proceedings of which Borrower has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would adversely
affect the financial condition of Borrower, or the ability of Borrower to perform its obligations under the Loan Documents; (e) Borrower is not in default under any obligation for the payment
of borrowed money, for the deferred purchase price of property or for the payment of any installments under any lease agreement which, either individually or in the aggregate, would have the same such
effect; (f) under the laws of the province(s) in which the Equipment is to be located, the Equipment consists solely of personal property and not fixtures; (g) the financial statements
of Borrower (copies of which have been furnished to KEF) have been prepared in accordance with Canadian and/or U.S. generally accepted accounting principles consistently applied ("GAAP"), and fairly
present Borrower's financial condition and the results of its operations as of the date of and for the period covered by such statements, and since the date of such statements there has been no
material adverse change in such conditions or operations; (h) the address stated above is the chief place of business and chief executive office, or in the case of individuals, the primary
residence, of Borrower; (i) Borrower does not conduct business under a trade, assumed or fictitious name, except as set forth in Schedule 1; (j) this Agreement creates a valid
first priority security interest in or hypothec of the Collateral securing payment and performance of the Secured Obligations and all filings and other action necessary to perfect such security
interest have been taken or shall be promptly taken; (k) Borrower has filed or has caused to have been filed all federal, provincial and foreign tax returns which, to the knowledge of Borrower,
are required to be filed, and has paid or caused to have been paid all taxes as shown on such returns or on any assessment or reassessment received by it, to the extent that such taxes have become
due, unless and to the extent only that such taxes, assessments, reassessments and governmental charges are currently contested in good faith and by appropriate proceedings by Borrower and adequate
reserves therefore have been established as required under GAAP and, to the extent Borrower believes it advisable to do so, Borrower has set up reserves which are believed by Borrower to be adequate
for the payment of additional taxes for years which have not been audited by the respective tax authorities; (1) except as previously disclosed in writing to KEF, neither Borrower nor
any of its officers or directors (if a corporation) or, partners (if a partnership) or members or managers (if a limited liability corporation) has, directly or indirectly, any financial interest in
the Supplier; and (m) Borrower is not in violation of any Applicable Law, the violation of which would have a material adverse effect on the conduct of its business, and Borrower has obtained
any and all licenses, permits, franchises or other governmental authorizations necessary for the ownership of its properties and the conduct of its business. 

22. Further Covenants of Borrower. The Borrower further covenants and agrees that it will not change its legal name, be a party to a merger,
consolidation or other change in structure or use a trade name in its business without reasonable prior written notice to KEF; and shall execute and deliver to KEF (to be filed at Borrower's expense)
all financing change statements or equivalent filings as may be required by KEF in connection with such event. 

23. Miscellaneous. Time is of the essence with respect to this Agreement. ANY FAILURE OF KEF TO REQUIRE STRICT PERFORMANCE BY
BORROWER OR ANY WAIVER BY KEF OF ANY
PROVISION HEREIN S NOT BE CONSTRUED AS A CONSENT OR WAIVER OF. ANY PROVISION OF THIS AGREEMENT. None of the Loan Documents may be amended except by a writing signed by KEF and
Borrower. This Agreement will be binding upon KEF only if executed by a duly authorized officer or representative of KEF at KEF's principal place of business as set forth above. This Agreement and all
other Loan Documents shall be executed on Borrower's behalf by Authorized Signers of Borrower. The Borrower hereby waives presentment, notice of dishonor and protest of all 

14

 

instruments included in or evidencing any Secured Obligations, and all other notices and demands whatsoever (except as expressly provided herein). THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE PROVINCE OF ONTARIO, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAWS PROVISION OR RULE THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE
THEREIN.

24. More than One Borrower. If more than one person or entity executes this Agreement, each of the other Loan Documents, and all addenda or other
documents executed in connection herewith or therewith, as "Borrower," the obligations of "Borrower" contained herein and therein shall be deemed joint and several and all references to "Borrower"
shall apply both individually and jointly. 

25. Entire Agreement. This Agreement, together with the other Loan Documents, collectively constitute the entire understanding or agreement between KEF
and Borrower with respect to the financing of the Equipment, and there is no understanding or agreement, oral or written, which is not set forth herein or therein. This Agreement shall not be modified
except by the written agreement of KEF and Borrower. 

26. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 

27. Power of Attorney; Personal Property Security Filings. BORROWER SHALL EXECUTE AND DELIVER TO KEF CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT, AND AT ANY TIME FROM
TIME TO TIME THEREAFTER, ALL FINANCING STATEMENTS, FINANCING STATEMENTS, CHATTEL MORTGAGES, ASSIGNMENTS, AND ALL OTHER INSTRUMENTS, IN FORM SATISFACTORY TO KEF, AND TAKE ALL OTHER ACTION AS KEF
MAY REASONABLY REQUIRED, TO PERFECT AND CONTINUE PERFECTED, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE OF KEF'S SECURITY IN THE COLLATERAL. BORROWER HEREBY APPOINTS KEF, OR ITS ASSIGNEE, AND
ANY OF KEF'S OR ASSIGNEE'S OFFICERS OR EMPLOYEES AS ITS TRUE AND LAWFUL ATTORNEY IN FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF BORROWER ALL FINANCING STATEMENTS
WHICH IN KEFS SOLE DISCRETION ARE NECESSARY OR PROPER TO SECURE KEF'S INTEREST IN THE EQUIPMENT IN ALL APPLICABLE JURISDICTIONS.
Borrower hereby ratifies, to the extent permitted by law, all that KEF shall lawfully and in good faith do or cause to be done by reason of and in compliance with this paragraph. 

28. Language. The parties hereto have expressly required that this Agreement and all other documents, agreements and notices related hereto and thereto
be drafted in the English language. Les parties aux presentes ont express6ment exige' que le pr6sent contract et tous les autres documents, conventions et avis qui y sont affirents soient redig6s en
langue anglaise. 

	Lender:	 	Borrower:
	KEY EQUIPMENT FINANCE CANADA LIMITED	 	STARTEK CANADA SERVICES, LTD.
	By:	 	/s/  GARY F. CARE      
	 	By:	 	/s/  WILLIAM MEADE      

	Name:	 	/s/  GARY F. CARE      
	 	Name:	 	/s/  WILLIAM MEADE      

	Title:	 	Vice-President, General Manager
	 	Title:	 	President/CEO

15

 
COLLATERAL SCHEDULE  

Schedule 1  

 BORROWER TRADE NAMES  

        None 

DESCRIPTION OF EQUIPMENT  

        This Equipment Schedule covers all of Borrower's right, title and interest, now owned or hereafter acquired, in and to All furniture, fixtures and equipment,
including without limitation all tables, desks, filing cabinets, lamps, credenzas, carpets and other furnishings, including without limitation all of the components of such equipment installed,
assembled or provided therewith, including without limitation all computer equipment and all components of such computer equipment, installed and assembled or provided herewith described on the
attached copies of invoices consisting of loo (originals or copies of such invoices are also on file at Lender's location), together with any and all (1) substitutions, replacements or
exchanges therefor, (2) replacement parts, additions, attachments and accessories incorporated therein or affixed thereto, or used in connection therewith, and (3) proceeds thereof (both
cash and non-cash), including insurance proceeds, (but without power of sale by Borrower), and also including, without limitation, claims of the Borrower against third parties for loss or
damage to, or destruction of, such Equipment. 

16

 
 
 

ANNEX 1
  Borrower Covenants    
  

        Borrower covenants and agrees with KEF that, while this Agreement is in effect, Borrower will: 

        Total Senior Liabilities to Adjusted Tangible Capital Ratio.    Borrower shall maintain a ratio of Total Senior Liabilities to
Adjusted Tangible Capital of not more than 3.75 to 1.oo for the period 12/31/01 to 09/30/02; 3.00 to 1.oo for the period 12/31/02 and thereafter tested at the end of each fiscal quarter. "Total Senior
Liabilities" means total liabilities less Subordinated Debt and intercompany payables due to Startek USA, Inc. "Adjusted Tangible Capital" means Tangible Capital less investments in, advances
to, promissory notes and any receivables from, any affiliate or other related entity of Borrower. Notwithstanding the foregoing, "Tangible Capital" means Tangible Net Worth plus Subordinated Debt,
plus intercompany payables due to Startek USA, Inc. "Tangible Net Worth" means Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights,
organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements) less Total Debt. "Total Debt" means Total Senior Liabilities plus Subordinated Debt.
"Subordinated Debt" means
indebtedness and liabilities of Borrower which have been subordinated by written agreement to indebtedness owed by Borrower to KEF in form and substance acceptable to KEF. 

        Operating Cash Flow to Fixed ChMe Ratio.    Borrower shall attain a ratio of Operating Cash Flow to Fixed Charges of not less
than 1.20 to too, tested at the end of each fiscal quarter. For the fiscal quarters ending 12/31/01, 3/31/02, and 6/30/02 this ratio shall be calculated on an annualized basis by dividing the actual
year to date performance by the actual number of months in the period, and multiplying the result by twelve (12). Beginning 9/30/02 this ratio shall be calculated based on the preceding
12 months results. "Operating Cash Flow" means net income after taxes and exclusive of extraordinary gains and losses, gains on sale of fixed assets, and other income; PLUS depreciation,
amortization, interest expense and lease expense; LESS dividends and distributions (dividends and distributions shall exclude intercompany items to Startek USA, Inc.). "Fixed Charges" means the
sum of interest expense, lease expense, and the preceding 12 months maturities of long-term debt and capital leases. 

17

 
Note
and Security Agreement No. 8800021387 

EXCHANGE
RATE 

	Re:	 	Note and Security Agreement No. 8800021387, dated December 6, 2001 between STARTEK CANADA SERVICES, LTD. "Borrower" and KEY EQUIPMENT FINANCE CANADA LIMITED "Lender"

It
is the understanding of Borrower and Lender that the equipment listed on the attached Note and Security Agreement has been provided by a vendor outside of Canada. 

The
Lender has used an exchange rate of 1.5813 dated December 6, 2001 from the Royal Bank. Fluctuations in this rate up until the time of payment to the vendor will be adjusted accordingly and
will be reflected in the payment on the Note and Security Agreement. 

The
Borrower will be responsible for any additional costs not included in the Note and Security Agreement such as costs associated with the importing of equipment across the Canadian/United States
border. 

Agreed
to and Accepted by: 

	Lender:
	 	Borrower:

	Key Equipment Finance Canada Limited	 	Startek Canada Services, Ltd.
	Accepted By: /	 	Accepted By: /s/ William Meade
	Title	 	Title President/CEO
	Date	 	Date 12/11/01

18

QuickLinks

Promissory Note

Security Agreement

W I T N E S S E T H

ANNEX 1 Borrower Covenants

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]