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Sample Business ContractsHome: Sample Business Contracts:
COLLABORATION AND LICENSE AGREEMENT
By and Among
PHARMACOPEIA, INC.
and
SCHERING-PLOUGH LTD.
<PAGE>
Table of Contents
ARTICLE I - DEFINITIONS 1
1.1 ACCEPTANCE 1
1.2 ACTIVE COMPOUND 1
1.3 AFFILIATE 1
1.4 AGREEMENT COMPOUND 2
1.5 AGREEMENT PRODUCT 2
1.6 COLLABORATION 2
1.7 COLLABORATION COMMITTEE 2
1.8 COLLABORATION RESEARCH PLAN 2
1.9 COLLABORATION PLATFORM TECHNOLOGY 2
1.10 COLLABORATION TARGET-SPECIFIC TECHNOLOGY 2
1.11 COLLABORATION TECHNOLOGY 2
1.11.1 Collaboration Patent Rights 2
1.11.2 Collaboration Know-How 3
1.12 COLUMBIA LICENSE 3
1.13 COMBINATION PRODUCT 3
1.14 DERIVATIVE COMPOUND 3
1.15 DEVELOPMENT CANDIDATE 3
1.16 DISCOVERY LIBRARY 3
1.16.1 Collaboration Discovery Library 3
1.16.2 SP Discovery Library 3
1.17 EXCLUSIVITY PERIOD 3
1.18 FDA 4
1.19 FIRST COMMERCIAL SALE 4
1.20 FTE 4
1.21 HRD 4
1.22 IND 4
1.23 LEAD COMPOUND 4
1.24 LIBRARY 4
1.25 LIBRARY COMPOUND 4
1.26 MAJOR MARKET 4
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1.27 NDA 4
1.28 NET SALES 4
1.29 OPTIMIZATION LIBRARY 5
1.30 PHARMACOPEIA CHANGE IN CONTROL 5
1.31 PHARMACOPEIA ENABLING TECHNOLOGY 5
1.32 PHARMACOPEIA TECHNOLOGY 5
1.32.1 Existing Pharmacopeia Patent Rights 5
1.32.2 Existing Pharmacopeia Know-How 6
1.32.3 Pharmacopeia Improvements 6
1.33 PHASE III 6
1.34 PRODUCT 6
1.35 REGULATORY APPROVAL 6
1.36 SCHERING COMPOUND 6
1.37 SCHERING TECHNOLOGY 6
1.37.1 Schering Patent Rights 6
1.37.2 Schering Know-How 7
1.37.3 Schering Improvements 7
1.38 SP PRODUCT 7
1.39 SUBLICENSEE 7
1.40 TARGET 7
1.41 TERRITORY 7
1.42 THIRD PARTY 7
1.43 US AGREEMENT 7
ARTICLE II - COLLABORATION 8
2.0 COLLABORATION EFFECTIVE DATE 8
2.1 COLLABORATION RESEARCH PLAN 8
2.2 COLLABORATION TERM 8
2.2.1 Extension of Collaboration Term 8
2.2.2 Termination of Collaboration Upon Pharmacopeia
Change in Control 8
2.3 PHARMACOPEIA RESPONSIBILITIES 8
2.4 SPL RESPONSIBILITIES 9
2.5 COLLABORATION STAFFING 9
2.5.1 PHARMACOPEIA FTE COMMITMENTS 9
2.5.2 SPL FTE COMMITMENTS 10
2.6 ADDITIONAL COLLABORATION EXPENSES 10
2.6.1 Capital Expenditures 10
2.6.2 Third Party Licenses re Pharmacopeia Enabling Technology 11
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2.6.3 Other Third Party Licenses 11
2.7 RESERVED TARGETS 11
2.8 RECORD KEEPING AND INSPECTION OF RECORDS 12
2.9 LIBRARIES 12
2.9.0 Discovery Libraries 12
2.9.1 Classification; Limit on SP Discovery Libraries 12
2.9.2 Identification of Targets 13
2.9.3 Coded Targets 13
2.9.4 Targets for Optimization Libraries 13
2.10 COMPOUND IDENTIFICATION 13
2.11 COPIES OF LIBRARIES 13
2.12 ACTIVE COMPOUNDS 14
2.13 RETAINED RIGHTS 14
2.14 PHARMACOPEIA INDEPENDENT RESEARCH ACTIVITIES 14
2.14.1 Activities Outside the Collaboration 14
2.14.2 Restrictions on Use of Collaboration Technology 14
ARTICLE III - COLLABORATION MANAGEMENT 14
3.1 COLLABORATION COMMITTEE 14
3.2 DESIGN OF LIBRARIES; FRESH LIBRARIES 15
3.3 COLLABORATION COMMITTEE MEETINGS 15
3.4 COLLABORATION COMMITTEE DECISIONS 15
3.5 DEVELOPMENT STATUS; NOTICE OF SALE OF PRODUCTS 16
3.6 DILIGENCE 16
ARTICLE IV - LICENSES AND EXCLUSIVITY 16
4.1 LICENSE TO SPL 16
4.1.1 Compounds and Products 16
4.1.2 Collaboration Target-Specific Technology 17
4.2 SUBLICENSES 17
4.3 DIRECT AFFILIATE LICENSES 17
4.4 COLLABORATION PLATFORM TECHNOLOGY 17
4.5 THIRD PARTY RIGHTS 17
4.5.1 Pharmacopeia Third Party Activities 17
4.5.2 No Liability 18
4.5.3 Pharmacopeia Reports to SPL On Third Party Rights 18
4.6 COLUMBIA SUBLICENSE 18
4.7 COLLABORATION RESEARCH ACTIVITIES 18
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4.8 PHARMACOPEIA'S USE OF LIBRARY COMPOUNDS FOR QUALITY CONTROL 19
4.9 LIBRARY EXCLUSIVITY 19
4.9.1 Optimization Libraries 19
4.9.2 SP Discovery Libraries 19
4.9.3 Collaboration Discovery Libraries 19
4.9.4 Extension of Exclusivity for Collaboration
Discovery Libraries 20
4.9.5 Co-Exclusive Collaboration Discovery Libraries 20
4.10 NO OTHER PRODUCTS 21
4.11 LICENSE GRANT BACK FOR ABANDONED AGREEMENT COMPOUNDS 21
ARTICLE V - PAYMENTS 21
5.1 PAYMENTS BY SPL 21
5.2 COLLABORATION FUNDING 21
5.2.1 Funding During Year One 21
5.2.2 Funding During Subsequent Years 21
5.2.3 Increased FTE Requirements 21
5.2.4 Wind-Down in Final Year 21
5.2.5 Annual FTE Rate Adjustments 22
5.2.6 Quarterly Adjustment 22
5.2.7 Manner of Payment 22
5.3 MILESTONE PAYMENTS 23
5.3.1 Events and Amounts 23
(a) Discovery Library Milestones 23
(b) Optimization Library Milestones 23
5.3.2 Lead Compound 23
5.3.3 Development Candidate 24
5.3.4 Manner of Payment 24
5.3.5 Announcement of Milestones 24
5.4 ROYALTIES 24
5.4.1 Base Royalty 24
5.4.2 Royalty Term for Agreement Products 25
5.4.3 Royalty Terms for SP Products 25
5.4.4 Single Royalty; Non-Royalty Sales 25
5.4.5 Third Party Royalties 26
(a) SPL Responsibilities 26
(b) * 26
5.4.6 Compulsory Royalty Reductions 26
5.4.7 Royalty Overpayment 26
5.5 REPORTS; PAYMENT OF ROYALTY; PAYMENT EXCHANGE RATE
AND CURRENCY CONVERSIONS 26
5.5.1 Royalty Reports and Payments 26
5.5.2 Payment Method 27
5.5.3 Place of Royalty Payment and Currency Conversions 27
5.6 MAINTENANCE OF RECORDS; AUDITS 27
5.6.1 Records; Inspection 27
_________________
* CONFIDENTIAL TREATMENT REQUESTED
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5.7 COORDINATION WITH PAYMENTS UNDER US AGREEMENT 28
5.8 TAX MATTERS 28
5.8.1 Withholding Taxes 28
5.8.2 Sales Taxes 28
5.9 PRODUCT DEVELOPMENT COSTS 28
ARTICLE VI - PATENTS AND INVENTIONS 28
6.1 OWNERSHIP OF SCHERING TECHNOLOGY AND PHARMACOPEIA TECHNOLOGY 28
6.2 OWNERSHIP OF COLLABORATION TECHNOLOGY 29
6.3 FILING, PROSECUTION AND MAINTENANCE OF PATENTS 29
6.3.1 Collaboration Technology 29
6.3.2 Collaboration Platform Technology 29
6.3.3 Schering Technology 29
6.3.4 Pharmacopeia Technology 30
6.3.5 Pharmacopeia's Rights Regarding Patents Relating
to Agreement Compounds 30
6.4 COOPERATION 30
6.4.1 Cooperation 30
6.5 ENFORCEMENT 31
6.5.1 Notice 31
6.5.2 Collaboration Technology 31
6.5.3 Collaboration Platform Technology 31
6.5.4 Schering Technology and Pharmacopeia Technology 31
6.5.5 Cooperation; Costs and Recoveries 31
6.6 INFRINGEMENT CLAIMS 32
6.7 CERTIFICATION UNDER DRUG PRICE COMPETITION AND
PATENT RESTORATION ACT 32
6.8 PATENT TERM RESTORATION 32
ARTICLE VII - CONFIDENTIALITY 32
7.1 CONFIDENTIAL INFORMATION 32
7.2 PERMITTED USE AND DISCLOSURES 33
7.3 RETURN OF CONFIDENTIAL INFORMATION 33
7.4 NONDISCLOSURE OF TERMS 33
7.5 PUBLICATION 33
7.6 PHARMACOPEIA EMPLOYEES 34
ARTICLE VIII - REPRESENTATION, WARRANTIES AND COVENANTS 34
8.1 SPL 34
8.2 PHARMACOPEIA 34
8.3 COMPLIANCE WITH AGREEMENT AND LAWS 35
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8.4 DISCLAIMER 35
ARTICLE IX - INDEMNIFICATION 35
9.1 INDEMNIFICATION BY SPL 35
9.2 INDEMNIFICATION BY PHARMACOPEIA 36
9.3 NO CONSEQUENTIAL DAMAGES 36
9.4 PROCEDURE 36
9.5 INSURANCE 36
ARTICLE X - TERM AND TERMINATION 36
10.1 TERM AND EXPIRATION 36
10.2 TERMINATION FOR CAUSE 37
10.3 TERMINATION UPON BANKRUPTCY OR INSOLVENCY 37
10.4 TERMINATION FOR PHARMACOPEIA CHANGE IN CONTROL 38
10.5 CONCURRENT TERMINATION WITH THE US AGREEMENT 38
10.6 EFFECT OF TERMINATION 38
10.6.1 Accrued Obligations 38
10.6.2 Return of Materials 38
10.6.3 Effect on Agreement Products 39
10.6.4 Licenses 39
(a) Termination by Pharmacopeia Pursuant to Section 10.2 39
(b) Termination by SPL Pursuant to Sections 10.2 or 10.3 39
(c) Termination by Pharmacopeia Pursuant to Section 10.3 39
(D) TERMINATION BY SCHERING PURSUANT TO SECTION 10.4 39
10.6.5 Surviving Provisions 39
ARTICLE XI - MISCELLANEOUS 40
11.1 ASSIGNMENT 40
11.2 GOVERNING LAW 40
11.3 DISPUTE RESOLUTION 40
11.4 NO IMPLIED LICENSES 40
11.5 REPRESENTATION BY LEGAL COUNSEL 40
11.6 WAIVER 40
11.7 INDEPENDENT CONTRACTORS 40
11.8 SOLICITATION OF EMPLOYEES 41
11.9 COMPLIANCE WITH LAWS 41
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11.10 EXPORT CONTROL 41
11.11 PATENT MARKING 41
11.12 NOTICES 41
11.13 FORCE MAJEURE 42
11.14 SEVERABILITY 42
11.15 COUNTERPARTS 42
11.16 CAPTIONS 42
11.17 COMPLETE AGREEMENT 42
11.17.1 Final Agreement and Amendments 43
11.17.2 Relationship to US Agreement; Controlling Provisions 43
11.18 RECORDING 43
11.19 FURTHER ACTIONS 43
EXHIBIT A - CURRENCY CONVERSION
SCHEDULE 1.28 - Elements Of Fully Absorbed Manufacturing Costs
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<PAGE>
COLLABORATION AND LICENSE AGREEMENT
This COLLABORATION AND LICENSE AGREEMENT (the "Agreement"), effective as of
October 29, 1998 (the "Effective Date"), is made by and among: Pharmacopeia,
Inc., a Delaware corporation having its principal place of business at 3000 East
Park Boulevard, Cranbury, New Jersey 08512, (hereinafter referred to as
"Pharmacopeia"); and Schering-Plough Ltd., a Swiss corporation having its
principal place of business at Toepferstrasse 5, CH 6004, Lucerne, Switzerland,
(hereinafter referred to as "SPL"). Pharmacopeia and SPL are sometimes referred
to herein individually as a Party and collectively as the Parties. References
to "SPL" and "Pharmacopeia" shall include their respective Affiliates (as
hereinafter defined).
WHEREAS, Pharmacopeia has developed proprietary technologies relating to
the design and preparation of encoded compound libraries based upon
combinatorial chemistry; and
WHEREAS, SPL and Pharmacopeia desire to collaborate to design, prepare and
screen compound libraries against SPL's biological targets; and
WHEREAS, Pharmacopeia and SPL's Affiliate Schering Corporation have entered
into a collaboration and license agreement relating to the United States, its
territories, possessions and commonwealths, of even date herewith;
NOW, THEREFORE, in consideration of the covenants, conditions, and
undertakings herein contained, SPL and Pharmacopeia hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following capitalized terms, whether used in
the singular or plural, shall have the respective meanings set forth below:
1.1 "Acceptance" shall mean, with respect to an IND, NDA or HRD submitted
----------
by or on behalf of SPL or its Affiliate or Sublicensee, notice by the FDA (or an
analogous regulatory authority in another country) that the IND, NDA or HRD has
been accepted for review by the FDA (or analogous regulatory authority). In the
event that the FDA (or analogous regulatory authority) is not required to
provide such a notice of acceptance of an IND, NDA or HRD, then "Acceptance"
shall be deemed to occur: (i) in the case of an IND, thirty (30) days following
the date of submission, or if previously rejected any resubmission, of such IND;
or (ii) in the case of an NDA or HRD, sixty (60) days following the date of
submission, or if previously rejected any resubmission, of such NDA or HRD,
unless in each case SPL or its Affiliates or Sublicensee receives notice from
the FDA (or analogous regulatory authority), during the applicable thirty (30)
or sixty (60) day period, that the NDA or HRD is not acceptable for review.
1.2 "Active Compound" shall mean, except as otherwise provided in
---------------
Section 2.12, a Library Compound that demonstrates activity against a specific
Target, which Library Compound (i) was found to have such activity at a
concentration set forth in the applicable Collaboration Research Plan during
screening of one or more Libraries by Pharmacopeia in the conduct of the
Collaboration or (ii) was found to have such activity during screening by or on
behalf of SPL.
1.3 "Affiliate" shall mean any individual or entity directly or indirectly
---------
controlling, controlled by or under common control with, a Party to this
Agreement. For purposes of this Agreement, the direct or indirect ownership of
fifty percent (50%) or more of the outstanding voting
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<PAGE>
securities of an entity, or the right to receive fifty percent (50%) or more of
the profits or earnings of an entity shall be deemed to constitute control, or
if not meeting the preceding requirements, any company owned or controlled by or
owning or controlling Pharmacopeia or SPL at the maximum control or ownership
right permitted in a country where such company exists. Such other relationship
as in fact results in actual control over the management, business and affairs
of an entity shall also be deemed to constitute control.
1.4 "Agreement Compound" shall mean any Active Compound or Derivative
------------------
Compound as well as any compositions-of-matter claimed in patent applications
filed or patents issued under Article VI which claim an Active Compound or
Derivative Compound.
1.5 "Agreement Product" shall mean any product containing an Agreement
-----------------
Compound, including, without limitation, products for the therapeutic or
prophylactic treatment or prevention of diseases and conditions in human beings
or animals.
1.6 "Collaboration" shall mean the research and drug discovery programs
-------------
to be performed at Pharmacopeia's facilities by SPL or Pharmacopeia under this
Agreement to discover Agreement Compounds for further development by SPL.
1.7 "Collaboration Committee" shall have the meaning set forth in
-----------------------
Section 3.1.
1.8 "Collaboration Research Plan" shall have the meaning set forth in
---------------------------
Section 2.1.
1.9 "Collaboration Platform Technology" shall mean Collaboration
---------------------------------
Technology relating to assays, compound screening methods and biological
research tools, in each case which are demonstrated to be broadly applicable
(i.e., can be readily applied and used in research directed to a variety of
pharmacologically distinct Targets); provided, however, that Collaboration
-------- -------
Platform Technology shall not include any rights in or to (1) any of SPL's
Targets, (2) any Library Compounds, or (3) any Agreement Compounds.
1.10 "Collaboration Target-Specific Technology" shall mean
----------------------------------------
Collaboration Technology relating to assays, compound screening methods and
biological research tools, in each case which are discovered and developed
through Collaboration research directed to a specific Target, or a small number
of closely related Targets (e.g. a family of biological receptor subtypes), and
are not readily applicable to other types of Targets; provided, however, that
-------- -------
Collaboration Target-Specific Technology shall not include any rights in or to
(1) any of SPL's Targets, (2) any Library Compounds, or (3) any Agreement
Compounds.
1.11 "Collaboration Technology" shall mean Collaboration Patent Rights and
------------------------
Collaboration Know-How.
1.11.1 "Collaboration Patent Rights" shall mean: (i) all patents and
---------------------------
patent applications claiming any invention or discovery made by or on behalf of
Pharmacopeia in performance of the Collaboration (including, without limitation,
the synthesis and composition of matter of any Agreement Compound, or method of
use thereof); and (ii) any divisions, continuations, continuations-in-part,
reissues, reexaminations, extensions or other governmental actions which extend
any of the subject matter of the patent applications or patents in (i) above,
and any substitutions, confirmations, registrations, revalidations, or additions
of any of the foregoing, in each case, which is owned or controlled, in whole or
part, by license, assignment or otherwise by Pharmacopeia during the term of
this Agreement; provided, however, that Collaboration Patent Rights shall not
-------- -------
include any patents or patent applications which are Schering Technology,
Pharmacopeia Technology or Pharmacopeia Enabling Technology.
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1.11.2 "Collaboration Know-How" shall mean all proprietary ideas,
----------------------
inventions, data, know-how, instructions, processes, formulas, materials,
expert opinion and information (including, without limitation, (i) biological,
chemical, physical and analytical data and information relating to Agreement
Compounds, and (ii) any structure-function data obtained from Library Compounds)
discovered and/or developed in performance of the Collaboration by or on behalf
of Pharmacopeia, in each case, to the extent Pharmacopeia has the right to
license or sublicense the same, and subject to any limitations and prohibitions
of such license or sublicense; provided, however, that Collaboration Know-How
-------- -------
shall not include Collaboration Patent Rights, Schering Technology, Pharmacopeia
Technology or Pharmacopeia Enabling Technology.
1.12 "Columbia License" shall mean that certain License Agreement
----------------
effective as of July 16, 1993, as amended and restated as of October 6, 1995,
entered by and between Pharmacopeia, Inc., the Trustees of Columbia University
in the City of New York and the Cold Spring Harbor Laboratory.
1.13 "Combination Product" shall mean a Product which comprises two
-------------------
(2) or more active therapeutic ingredients at least one (1) of which is an
Agreement Compound or a Schering Compound.
1.14 "Derivative Compound" shall mean any compound, other than a Library
-------------------
Compound, derived (a) by or on behalf of SPL, or (b) in the performance of the
Collaboration by Pharmacopeia, in each case from an Active Compound, and having
activity against the same Target as such Active Compound. As used herein, a
compound shall be deemed to have been "derived from" an Active Compound if it *.
1.15 "Development Candidate" shall mean a Lead Compound or derivative
---------------------
thereof which possesses the desirable properties of a therapeutic agent for the
prevention or treatment of a clinical condition, in the absence of required
safety trials necessary to begin human testing.
1.16 "Discovery Library" shall mean a Library transferred to SPL pursuant
-----------------
to this Agreement for screening against one or more Targets and which is not an
Optimization Library.
1.16.1 "Collaboration Discovery Library" shall mean a Discovery
-------------------------------
Library that is not an SP Discovery Library.
1.16.2 "SP Discovery Library" shall mean a Discovery Library based
--------------------
on one or more specific SPL proprietary core structures which core structures
are (i) discovered, designed or developed by or on behalf of SPL without
assistance or information from Pharmacopeia or any Pharmacopeia employee, or
(ii) designed or developed by Pharmacopeia based on proprietary SPL structures
or structure-function data.
1.17 "Exclusivity Period" shall mean, with respect to any Collaboration
------------------
Discovery Library and for all Library Compounds contained in such Library, that
period commencing on the date Pharmacopeia first provides SPL notice that such
Collaboration Discovery Library is available to be shipped to SPL or Schering
Corporation. (the "Notice Date"), and continuing until *,
or such later date as may be established under Section 4.9.4 below. In the
event that SPL is unable to accept delivery of any Collaboration Discovery
Library at the time of the applicable Notice Date, SPL may, upon written notice
to Pharmacopeia, delay delivery of such Collaboration Discovery Library, in
which case the Notice Date with respect to such Collaboration Discovery Library
shall be deemed to be the earlier of (i) the date that SPL notifies Pharmacopeia
that
__________________
* CONFIDENTIAL TREATMENT REQUESTED
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SPL is ready to accept delivery of the first plates from such Collaboration
Discovery Library or (ii) the date three (3) months after the original Notice
Date.
1.18 "FDA" shall mean the United States Food and Drug Administration
---
or any corresponding foreign registration or regulatory authority.
1.19 "First Commercial Sale" shall mean, with respect to any Product,
---------------------
the first sale for end use of such Product in the Territory after receipt of the
requisite Regulatory Approval.
1.20 "FTE" shall mean a full-time employee dedicated to the conduct
---
of the Collaboration or, in the case of less than full-time dedication, a full-
time equivalent person-year, based on a total of forty-six and one-fourth
(46.25) weeks or one thousand eight hundred fifty (1,850) hours per year, of
work on or directly related to the Collaboration.
1.21 "HRD" shall mean a health registration dossier or its equivalent
---
covering an Agreement Product filed in any country outside the United States and
which is analogous to an NDA and including, where applicable, applications for
pricing, pricing reimbursement approval, labeling and Regulatory Approval.
1.22 "IND" shall mean an Investigational New Drug application, as defined
---
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.
1.23 "Lead Compound" shall mean any Active Compound or Derivative
-------------
Compound with respect to which SPL or its Affiliates initiates a program of
medicinal chemistry to identify a Development Candidate based upon the structure
of such Active Compound or Derivative Compound.
1.24 "Library" shall mean any chemical compound library prepared by
-------
Pharmacopeia employees working on the Collaboration, and/or SPL employees
working at Pharmacopeia's facilities on the Collaboration, under the terms of
this Agreement using (i) combinatorial chemistry techniques or (ii) such other
techniques as may, from time to time, be agreed by the Parties.
1.25 "Library Compound" shall mean any compound which is contained in
----------------
a Discovery Library or Optimization Library hereunder.
1.26 "Major Market" shall mean Japan or any three (3) of the following
------------
countries; France, Germany, Italy, Spain or the United Kingdom.
1.27 "NDA" shall mean a New Drug Application, Product License
---
Application, or Biologic License Application, as defined in the U.S. Food Drug
and Cosmetics Act and regulations promulgated hereunder, or the equivalent filed
with the FDA seeking approval to market and sell a Product in the United States.
1.28 "Net Sales" shall mean, with respect to each country in the
---------
Territory, the invoice price billed by SPL or its Affiliates, or their
respective Sublicensees, to Third Parties (whether an end-user, a distributor or
otherwise) for the sale of Products, and exclusive of intercompany transfers or
sales among SPL, its Affiliates and/or Sublicensees in the Territory, less the
reasonable and customary deductions from such gross amounts including: (i)
normal and customary trade, cash and quantity discounts, allowances and credits;
(ii) credits or allowances actually granted for damaged goods, returns or
rejections of Product and retroactive price reductions; (iii) sales or similar
taxes (including duties or other governmental charges levied on, absorbed or
otherwise imposed on the sale of Product including, without limitation, value
added taxes or other governmental charges otherwise measured by the billing
amount, when included in billing); (iv) freight, postage, shipping, customs
duties and
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insurance charges, when included in billing; (v) charge back payments and
rebates granted to managed health care organizations or their agencies, and
purchasers and reimbursers or to trade customers, including but not limited to,
wholesalers and chain and pharmacy buying groups; (vi) commissions paid to
Third Parties other than sales personnel and sale representatives or sales
agents; and (vii) rebates (or equivalents thereof) granted to or charged by
national, state or local governmental authorities in a country in the Territory.
In determining Net Sales of a Product any of the above discounts shall be
accounted for and apportioned based on the list price of each such Product.
In the event that a Product is sold in the form of a Combination Product,
Net Sales for such Combination Product will be calculated by multiplying actual
Net Sales of such Combination Product by the fraction A/(A+B) where: A is the
invoice price of the Agreement Product and/or Schering Compound contained in the
Combination Product if sold separately by SPL, an Affiliate or Sublicensee; and
B is the invoice price of any other active therapeutic ingredients in the
Combination Product if sold separately by SPL, an Affiliate or Sublicensee. In
the event that the Product is sold in the form of a Combination Product
containing one or more active therapeutic ingredients other than an Agreement
Product and/or Schering Compound and one or more such active therapeutic
ingredients of the Combination Product are not sold separately, then the above
formula shall be modified such that A shall be the fully allocated manufacturing
cost to SPL, its Affiliates or Sublicensee of the Agreement Product and/or
Schering Compound and B shall be the fully allocated manufacturing cost to SPL,
its Affiliate or Sublicensee of any other active therapeutic ingredients in the
combination, in each case, determined in accordance with the schedule of fully
allocated manufacturing costs set forth in Schedule 1.28.
1.29 "Optimization Library" shall mean a Library based upon one or more
--------------------
Active Compound or Schering Compound structures, and which is designed to
optimize such structures with respect to activity against one or more specific
Targets.
1.30 "Pharmacopeia Change in Control" shall mean any of the following:
------------------------------
(i) a reorganization, merger or consolidation of Pharmacopeia with a Major
Pharmaceutical Company if the shareholders of Pharmacopeia (determined
immediately prior to the reorganization, merger or consolidation taking effect)
hold, directly or indirectly, less than fifty percent (50%) of the surviving
corporation (determined immediately after such reorganization, merger or
consolidation takes effect); (ii) an acquisition by a Major Pharmaceutical
Company of direct or indirect beneficial ownership of voting stock of
Pharmacopeia representing more than fifty percent (50%) of the total current
voting power of Pharmacopeia then issued and outstanding; (iii) a sale of all or
substantially all the assets of Pharmacopeia to a Major Pharmaceutical Company;
or (iv) a liquidation or dissolution of Pharmacopeia. As used in this Section
1.30, the term "Major Pharmaceutical Company" shall mean any entity (including
any corporation, joint venture, partnership or unincorporated entity) having
annual sales of pharmaceutical products of at least five hundred million dollars
($500,000,000), as well as any Affiliates or division(s) of such entity, that is
engaged in the research, development, manufacturing, registration and/or
marketing of drug products that are approved under NDAs, HRDs, ANDAs or
Biologics License Applications.
1.31 "Pharmacopeia Enabling Technology" shall mean the Columbia License
--------------------------------
and any other proprietary technology owned or controlled by Pharmacopeia with
the right to grant sublicenses which is necessary or useful for the design,
preparation and use of Libraries.
1.32 "Pharmacopeia Technology" shall mean Existing Pharmacopeia Patent
-----------------------
Rights, Existing Pharmacopeia Know-How, and Pharmacopeia Improvements (except
for Pharmacopeia Improvements which are Pharmacopeia Enabling Technology).
1.32.1 "Existing Pharmacopeia Patent Rights" shall mean (i) all
-----------------------------------
patents and patent applications existing as of the Effective Date that claim the
synthesis or composition of matter of an
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Active Compound, or the method of use thereof, and (ii) any divisions,
continuations, continuations-in-part, reissues, reexaminations, extensions or
other governmental actions which extend any of the subject matter of the patent
applications or patents in (i) above, and any substitutions, confirmations,
registrations, revalidations, or additions of any of the foregoing, in each
case, which is owned or controlled, in whole or part, by license, assignment or
otherwise by Pharmacopeia during the term of this Agreement, and subject to any
limitations and prohibitions of such license or sublicense; provided, however,
-------- -------
it is understood that Existing Pharmacopeia Technology shall not include any
Pharmacopeia Enabling Technology.
1.32.2 "Existing Pharmacopeia Know-How" shall mean all ideas,
------------------------------
inventions, data, know-how, instructions, processes, formulas, expert opinion
and information, including, without limitation, biological, chemical, physical
and analytical data and information, existing as of the Effective Date, owned or
controlled in whole or part by Pharmacopeia by license, assignment or otherwise,
which is necessary for the discovery, development, manufacture or use of
Agreement Compounds and/or the discovery, development, manufacture, use, sale or
commercialization of Agreement Products, in each case, to the extent
Pharmacopeia has the right to license or sublicense the same, and subject to any
limitations and prohibitions of such license or sublicense; provided, however,
-------- -------
that Existing Pharmacopeia Know-How shall not include Existing Pharmacopeia
Patent Rights or Pharmacopeia Enabling Technology.
1.32.3 "Pharmacopeia Improvements" shall mean all patentable
-------------------------
inventions conceived and reduced to practice, solely or jointly, by Pharmacopeia
or SPL in the conduct of the Collaboration that are within the scope of a claim
of an issued patent within the Existing Pharmacopeia Patent Rights or
Pharmacopeia Enabling Technology (i) which patent issued prior to the Effective
Date or (ii) which claim has an effective filing date prior to the Effective
Date; provided, however, that Pharmacopeia Improvements shall not include
-------- -------
Pharmacopeia Independent Technology (as defined in Section 2.14).
1.33 "Phase III" shall mean Phase III clinical trials as prescribed
---------
by applicable FDA regulations, regardless of whether such trials are conducted
in the United States or elsewhere
1.34 "Product" means any Agreement Product or SP Product.
-------
1.35 "Regulatory Approval" shall mean any applications or approvals,
-------------------
including any INDs, NDAs, supplements, amendments, pre- and post-approvals,
marketing authorizations based upon such approvals (including any prerequisite
manufacturing approvals or authorizations related thereto) and labeling
approval(s), technical, medical and scientific licenses, registrations or
authorizations of any national, supra-national (e.g. the European Commission,
the Council of the European Union, or the European Agency for the Evaluation of
Medicinal Products), regional, state or local regulatory agency, department,
bureau, commission, council or other governmental entity, necessary for the
manufacture, distribution, use, import, export or sale of Product(s) in the
Territory.
1.36 "Schering Compound" shall mean a compound which is independently
-----------------
discovered by or on behalf of SPL, without the use of Collaboration Technology
or Pharmacopeia Technology as demonstrated by documented evidence created at the
time of such discovery, and which is active against a specific Target.
1.37 "Schering Technology" shall mean Schering Patent Rights, Schering
-------------------
Know-How and Schering Improvements.
1.37.1 "Schering Patent Rights" shall mean (i) all existing patents
----------------------
and patent applications owned or controlled in whole or in part by SPL or its
Affiliates as of the Effective Date (including, without limitation, those which
claim the synthesis or composition of matter of an Active Compound, or the
method of use thereof, or which relate to any Target or any assay provided by
SPL
-6-
<PAGE>
for use in the Collaboration or the corresponding Targets for such assays), (ii)
all patents and patent applications claiming any invention or discovery made by
or behalf of SPL or its Affiliates, other than in performance of the
Collaboration, in connection with the discovery and/or development of any
Agreement Compounds and/or Schering Compounds, and/or the development and
commercialization of any Product, and (iii) any divisions, continuations,
continuations-in-part, reissues, reexaminations, extensions or other
governmental actions which extend any of the subject matter of the patent
applications or patents in (i) or (ii) above, and any substitutions,
confirmations, registrations, revalidations, or additions of any of the
foregoing.
1.37.2 "Schering Know-How" shall mean all ideas, inventions, data,
-----------------
know-how, instructions, processes, formulas, materials, expert opinion and
information, including, without limitation, biological, chemical,
pharmacological, toxicological, pharmaceutical, physical and analytical,
clinical, safety, manufacturing and quality control data and information (except
for any of the above arising in performance of the Collaboration) owned or
controlled in whole or part by SPL by license, assignment or otherwise, which is
necessary for the discovery, development, manufacture, use, sale or
commercialization of Products, in each case, to the extent SPL has the right to
license or sublicense the same, and subject to any limitations and prohibitions
of such license or sublicense; provided, however, that Schering Know-How does
-------- -------
not include Schering Patent Rights.
1.37.3 "Schering Improvements" shall mean all patentable inventions
---------------------
conceived and reduced to practice solely or jointly by SPL or Pharmacopeia in
the conduct of the Collaboration that are within the scope of the claims of any
issued patent within the Schering Patent Rights (i) which patent issued prior to
the Effective Date or (ii) which claim has an effective filing date prior to the
Effective Date.
1.38 "SP Product" shall mean any product for the therapeutic or
----------
prophylactic treatment or prevention of diseases and conditions in human beings
containing a Schering Compound, provided such SP Product is not a Combination
Product containing both a Schering Compound and an Agreement Compound.
1.39 "Sublicensee" shall mean with respect to a particular Product, a
-----------
Third Party to whom SPL has granted a sublicense under the applicable
Pharmacopeia Technology, Schering Technology or Collaboration Technology to
make, use and/or sell such Product. As used in this Agreement, it is understood
that "Sublicensee" shall also include a Third Party or Third Parties to whom SPL
has granted the right to distribute such Product, provided that such Third Party
or parties has (have) the primary responsibility for marketing and promotion at
its (their) expense of such Product within the field or territory for which such
distribution rights are granted, which marketing and promotional activities are
not subsidized directly or indirectly by SPL.
1.40 "Target" shall mean a biomolecular entity (including, without
------
limitation, receptors, enzymes, nucleic acids and proteins, and/or fragments
thereof) that a small molecule is screened against in order to determine whether
the small molecule demonstrates a specific biochemical or pharmaceutical effect.
1.41 "Territory" shall mean the shall mean all the countries and
---------
territories in the world except for the United States and its territories,
possessions and commonwealths.
1.42 "Third Party" shall mean any Party other than Pharmacopeia and its
-----------
Affiliates, Schering-Plough Ltd. and its Affiliates, Schering Corporation and
its Affiliates, and their permitted assigns.
11.43 "US Agreement" shall mean that certain Collaboration and License
------------
Agreement entered into by and between Pharmacopeia and Schering Corporation of
even date herewith.
-7-
<PAGE>
ARTICLE II
COLLABORATION
2.0 Collaboration Effective Date. The Parties wish Pharmacopeia to begin
---------------------------------
performance of the Collaboration effective as of October 1, 1998 (the
"Collaboration Effective Date") and agree that upon execution of this Agreement
on the Effective Date the Parties' respective obligations relating to
performance of the Collaboration hereunder shall be deemed to be effective as of
the Collaboration Effective Date. Notwithstanding the foregoing, the
effectiveness of this Agreement is expressly conditioned upon the Board of
Directors of Schering-Plough Corporation approving this Agreement and the
execution of this Agreement by the Parties on the Effective Date.
2.1 Collaboration Research Plan. Within thirty (30) days of the Effective
--------------------------------
Date, the Collaboration Committee shall agree upon a written overall plan for
the research and drug discovery activities to be conducted by the Parties (the
"Collaboration Research Plan"). The Collaboration Research Plan shall be
periodically revised and updated (at least annually) by the Collaboration
Committee during the term of the Collaboration. The Collaboration Research Plan
shall set forth the responsibilities of each of the Parties with respect to
performance of the Collaboration. The Collaboration Committee shall have
responsibility for monitoring the performance of Collaboration research
programs. Notwithstanding the foregoing, the Parties acknowledge and agree
that, subject to Section 2.7 below, SPL, in its sole discretion, shall have
primary responsibility and decision making authority with respect to the
selection of the Targets and specific research programs to be conducted during
the Collaboration.
2.2 Collaboration Term. The term of the Collaboration shall be for a
-----------------------
period of five (5) years unless extended pursuant to Section 2.2.1, or earlier
terminated pursuant to Section 2.2.2 or Article X.
2.2.1 Extension of Collaboration Term. SPL shall have the right, in
--------------------------------------
its sole discretion, to extend the Collaboration for an additional * period by
providing written notice to Pharmacopeia on or before the * of the Collaboration
Effective Date. If SPL does not provide such notice, the Collaboration shall
expire on the fifth anniversary of the Collaboration Effective Date.
2.2.2 Termination of Collaboration Upon Pharmacopeia Change in
---------------------------------------------------------------
Control. In the event of a Pharmacopeia Change in Control during the term of
-------
the Collaboration, SPL shall have the right, in its discretion, (i) to terminate
the Agreement pursuant to Section 10.4, below, or (ii) to terminate the
Collaboration and not the Agreement upon ninety (90) days written notice to
Pharmacopeia after such Change in Control expressly stating its intention to
terminate the Collaboration. In the event that SPL elects to terminate the
Collaboration and not the Agreement, then (a) SPL will not be obligated to make
the payments set forth in Section 5.2 for the period after the effective date of
such termination, (b) subject to Sections 2.10 and 2.11, Pharmacopeia shall not
be obligated to conduct any Collaboration research activities after the
effective date of such termination, and (c) the remaining terms and conditions
of this Agreement, including without limitation the licenses and royalty
obligations set forth herein, shall remain in full force and effect until the
Agreement expires or is terminated as set forth in Article X, below.
2.3 Pharmacopeia Responsibilities. Pharmacopeia shall use commercially
----------------------------------
reasonable efforts to provide:
(i) the number of scientist FTEs agreed to by the Parties, as set
forth in Section 2.5, and such additional scientists as may be mutually agreed
to in writing by the Parties and paid for by
__________________
* CONFIDENTIAL TREATMENT REQUESTED
-8-
<PAGE>
SPL, for performance of the Collaboration during each year of the Collaboration
(it being understood and agreed that FTEs provided by Pharmacopeia for the
Collaboration under the US Agreement shall also be deemed to be provided to this
Collaboration for purposes of determining the number of FTEs provided by
Pharmacopeia hereunder);
(ii) research facilities, laboratories and equipment sufficient to
enable the Collaboration scientists (including Pharmacopeia employees and one
(1) SPL employee to be provided pursuant to Section 2.4(i)) to perform the
Collaboration in a fashion similar to the operation of Pharmacopeia's own
operations, and which shall be located in dedicated laboratories at
Pharmacopeia's research facilities in Monmouth Junction, New Jersey;
(iii) access to Pharmacopeia Enabling Technology by the Pharmacopeia
scientists working on the Collaboration and by SPL scientists, if any, working
on the Collaboration at Pharmacopeia's facilities as set forth in Section 2.4,
as Pharmacopeia, in its discretion, deems is reasonably necessary and useful for
the optimal performance of the Collaboration;
(iv) administrative services necessary to conduct the business of
the Collaboration in a manner comparable to that of Pharmacopeia's own business
activities; and
(v) during the term of the Collaboration, on an as needed basis, up
to an additional * miscellaneous FTEs, at Pharmacopeia's expense, to assist with
SPL's requests for Library plate production and/or Library Compound decodes
pursuant to Sections 2.10 and 2.11, which additional FTEs shall not be dedicated
FTEs assigned to the Collaboration and shall not be included in the FTE
allocations set forth in Section 2.5.
It is understood and agreed that, except as may be mutually agreed by the
Parties, Pharmacopeia shall not be obligated hereunder to conduct research or
development activities in the Collaboration which are outside the scope of the
Collaboration Research Plan.
2.4 SPL Responsibilities. SPL shall provide research funding for the
-------------------------
Collaboration as set forth in Section 5.1 and shall use commercially reasonable
efforts to provide:
(i) one scientific director provided by Schering Corporation, in
combination with Schering-Plough, Ltd., to work full-time at Pharmacopeia during
the term of the Collaboration managing the day-to-day operations of the
Collaboration (the "Collaboration Director"); and
(ii) additional support for Collaboration research projects,
including, without limitation, scientists, facilities and materials to perform
biological research to identify Targets, assay development, Library screening,
medicinal chemical research and analytical support services.
2.5 Collaboration Staffing.
---------------------------
2.5.1 Pharmacopeia FTE Commitments. Pharmacopeia will provide *
-----------------------------------
FTEs at the start of the first year of the Collaboration consisting of
* chemists and * biologists (each of which shall be a *
and * miscellaneous FTEs to handle Library production, engineering,
decoding, quality control, etc. for the Collaboration (which
miscellaneous FTEs *.
During the first quarter of the 1999 calendar year, Pharmacopeia will
add an additional * FTEs to the Collaboration from personnel currently assigned
to work on research projects under the December 22, 1994 Collaboration Agreement
between Pharmacopeia, Schering Corporation and Schering-Plough Ltd. The total
number of Collaboration FTEs shall be increased to *, consisting of * chemists,
* biologists and *
miscellaneous FTEs, by the start of the second year of the Collaboration.
Subject to the wind-down
__________________
* CONFIDENTIAL TREATMENT REQUESTED
-9-
<PAGE>
provisions set forth in Section 5.2.4, Pharmacopeia shall continue to provide *
FTEs to the Collaboration during each subsequent year of the Collaboration, or
such other number as the Parties shall agree upon in writing. With the
exception of the * FTEs responsible for support activities for the Collaboration
(such as Library production, engineering, decoding, quality control, etc.), all
of the Pharmacopeia FTEs assigned to work on the Collaboration *
In the event that SPL determines that it will be
unable to screen the number of Discovery Libraries anticipated to be delivered
in year *
of the Collaboration *,
SPL may, upon written notice to Pharmacopeia at least six (6) months prior to
the beginning of such year, reduce the number of chemistry FTEs to be provided
to the Collaboration by Pharmacopeia in such year; provided, however, that such
-------- -------
reduction shall be in whole FTE increments, and SPL shall not so reduce the
number of chemistry FTEs to be provided by Pharmacopeia to less than eighty
percent (80%) of the number of Pharmacopeia chemistry FTEs assigned to the
Collaboration at the time of such notice. On or before the Effective Date
Pharmacopeia will provide to SPL a list individually identifying those
Pharmacopeia FTEs assigned to the Collaboration, which list shall be updated
from time to time during the term of the Collaboration as FTEs assigned to work
exclusively for the Collaboration are added, removed and/or replaced. It is
understood that, in the aggregate, the education, training and experience levels
of Pharmacopeia FTEs assigned to the Collaboration will be reasonably
representative of Pharmacopeia employees working on Pharmacopeia's internal
research programs. Within fifteen (15) business days after the Effective Date,
Pharmacopeia will provide SPL with: (i) a copy of the * Collaboration; and (ii)
Pharmacopeia's written representation and warranty that *.
2.5.2 SPL FTE Commitments. During the term of the Collaboration SPL
--------------------------
shall, in combination with Schering Corporation under the US Agreement, provide
a single scientific director as set forth in Section 2.4(i). Such director
shall be subject to Pharmacopeia's confidentiality restrictions such as limited
access to laboratories and access only to data that specifically relate to the
Collaboration. It is understood that the scientific director shall remain an
employee of Schering Corporation, and that SPL shall remain responsible for, and
indemnify Pharmacopeia for any claims arising from or relating to, the conduct,
activities, salary and benefits of such director, except to the extent caused by
the gross negligence or willful misconduct of Pharmacopeia. In addition, SPL
shall provide such additional FTEs located at SPL's research facilities as SPL
determines, in its sole discretion, are reasonably necessary to support the
ongoing research programs of the Collaboration, including, without limitation,
assay development, screening, medicinal chemistry, analytical services and
animal testing services.
2.6 Additional Collaboration Expenses.
--------------------------------------
2.6.1 Capital Expenditures. In the event that the Parties determine
---------------------------
that one or more Collaboration research projects to be performed at
Pharmacopeia, as identified in the Collaboration Research Plan, will require
Pharmacopeia to incur unanticipated reasonable out-of-pocket expenses in
connection with such research project(s) for capital expenditures on specialized
equipment, the Parties shall agree on the additional monies to be paid by SPL to
Pharmacopeia therefor. It is understood and agreed that Pharmacopeia shall not
be obligated hereunder to pay any such unanticipated capital expenditures
without its express consent, and that the failure of Pharmacopeia to conduct
research activities that cannot be performed without such expenditures shall not
constitute a breach of this Agreement. It is further understood and agreed that
SPL may, by providing written notice, prohibit Pharmacopeia from using
specialized equipment acquired pursuant to this Section 2.6.1, and for which SPL
has paid and/or reimbursed Pharmacopeia for all of the acquisition costs and
major operating costs, for activities outside of the Collaboration. The Parties
acknowledge and agree that, at SPL's
__________________
* CONFIDENTIAL TREATMENT REQUESTED
-10-
<PAGE>
option, SPL may elect to provide on loan to Pharmacopeia any such specialized
equipment required for performance of the Collaboration, which equipment shall
be returned to SPL upon termination of the Collaboration.
2.6.2 Third Party Licenses re Pharmacopeia Enabling Technology. In
--------------------------------------------------------------
the event that the Parties agree that it is necessary for Pharmacopeia to obtain
any license from a Third Party to Pharmacopeia Enabling Technology (existing as
of the Effective Date) for the performance of Library encoding and/or decoding
in connection with one or more Collaboration research projects, SPL shall pay to
Pharmacopeia SPL's equitable share of any amounts paid by Pharmacopeia pursuant
to such license. Pharmacopeia shall provide SPL notice of such payment
obligations and invoice SPL for such costs and SPL shall pay the invoice within
* days. SPL's share, which may be subject to adjustment periodically, shall be
determined by ascertaining the independent value the licensed technology has to
Pharmacopeia and Third Parties collaborating with Pharmacopeia, as reasonably
determined by Pharmacopeia, and apportioning the license costs between
Pharmacopeia, SPL and such Third Parties in an equitable manner; provided,
--------
however, that SPL may reduce any royalty otherwise due Pharmacopeia hereunder to
-------
reimburse it for any royalties actually paid to Pharmacopeia pursuant to this
Section 2.6.2, as set forth below. The amount of the reduction shall be equal to
* of the royalty paid to Pharmacopeia pursuant to this Section 2.6.2, but in
no event shall the royalty due Pharmacopeia for any calendar quarter, with
respect to any Product, be thereby reduced to less than * of the royalty due
Pharmacopeia under Section 5.4.1 with respect to Net Sales of such Product. In
the event that Pharmacopeia enters into a royalty-bearing license or agreement
during the term of this Agreement with respect to Pharmacopeia Enabling
Technology, and SPL does not approve and agree to pay for its equitable share of
such license or agreement within * days after a request by Pharmacopeia, the
subject matter covered by such license or agreement shall not be within this
Agreement for any purpose
2.6.3 Other Third Party Licenses. In the event that the Parties
---------------------------------
agree that it is necessary for Pharmacopeia to obtain a license (except for any
licenses relating to Pharmacopeia Enabling Technology obtained pursuant to
Section 2.6.2) from a Third Party in order to perform one or more Collaboration
research projects selected by SPL, the Parties shall agree on the respective
amounts to be paid by SPL and Pharmacopeia to obtain any such license. Each
Party's share of such license costs shall be determined by ascertaining the
independent value the licensed technology has to SPL (as reasonably determined
by SPL), and to Pharmacopeia and any Third Parties collaborating with
Pharmacopeia (as reasonably determined by Pharmacopeia) and apportioning the
license costs between Pharmacopeia, SPL and such Third Parties in an equitable
manner. It is understood and agreed that Pharmacopeia shall not be obligated
hereunder to pay for any such license without its express consent, and that the
failure of Pharmacopeia to conduct research activities that cannot be performed
without such license shall not constitute a breach of this Agreement. It is
further understood and agreed that, in the event that no Third Parties have
shared in the costs and SPL has paid and/or reimbursed Pharmacopeia for all of
the costs of such licenses, SPL shall have the right, by providing written
notice, to prohibit Pharmacopeia from using licensed technology, or other
license rights, acquired pursuant to this Section 2.6.3 for activities outside
of the Collaboration.
2.7 Reserved Targets. The Parties acknowledge that , as of the Effective
---------------------
Date, there are certain Targets with respect to which Pharmacopeia may have
obligations under its existing agreements with Third Parties, and that
Pharmacopeia will not conduct certain research activities with respect to such
Targets in connection with the Collaboration (each such Target a "Reserved
Target"). SPL shall not knowingly request Pharmacopeia to develop assays with
respect to, or screen any Libraries against, such Reserved Targets. *
In the event that during the term of the Collaboration Pharmacopeia's
Third Party obligations with respect to a given Reserved Target expire, or such
Reserved Target otherwise becomes available for unrestricted use in the
Collaboration, Pharmacopeia shall promptly notify SPL and such Target shall
thereafter cease to be a Reserved Target. It is further
__________________
* CONFIDENTIAL TREATMENT REQUESTED
-11-
<PAGE>
understood and agreed that, notwithstanding any other provision of this
Agreement, Pharmacopeia shall not be obligated to conduct any activities in
performance of the Collaboration that would constitute a breach of any of its
obligations to any Third Party.
2.8 Record Keeping and Inspection of Records. Each of SPL and
---------------------------------------------
Pharmacopeia, and their respective Affiliates, shall maintain records of its
Collaboration activities (or cause such records to be maintained) in sufficient
detail and in good scientific manner appropriate for patent and regulatory
purposes as will properly reflect all work performed and the results achieved in
performance of the Collaboration. SPL shall also maintain analogous records of
its development activities with respect to Agreement Compounds and Agreement
Products. Such records may include books, records, reports, research notes,
charts, graphs, comments, computations, analyses, recordings, photographs,
computer programs and documentation thereof, computer information storage media,
samples of materials and other graphic or written data generated in connection
with the Collaboration, including any data required to be maintained pursuant to
all requirements of applicable laws, rules and regulations, or as directed by
the Collaboration Committee. Pharmacopeia's records shall also document by name
which individuals assigned to the Collaboration pursuant to Section 2.5.1 are
working on each specific Collaboration research project (identifying the
Target(s) involved, to the extent known by Pharmacopeia at the time of the
research). During the Collaboration and for * years thereafter, each of SPL
and Pharmacopeia shall have the right, upon at least five (5) business days'
prior notice, to inspect all such records of the other Party (or legible copies
thereof) during normal business hours. Each Party's rights under this Section
2.8 shall be limited to one (1) inspection in any calendar year. In each case,
the Party conducting the inspection shall maintain such records and the
information disclosed therein in confidence in accordance with Section 7.1, and
shall use such information solely for purposes of this Agreement. Upon request
and tender of payment for the actual cost in providing copies, Pharmacopeia
and/or SPL, as appropriate, shall provide to the requesting Party copies of such
records
2.9 Libraries.
--------------
2.9.0 Discovery Libraries. A Discovery Library is generally a large
--------------------------
collection of compound (typically containing anywhere from 10,000 to 100,000
compounds, but more typically around 30,000 to 50,000 compounds) prepared by
combinatorial chemistry techniques based on one or more core structures such
that the compounds in the library represent a number of structurally diverse
classes of compounds useful for screening against a variety of Targets. The
selection of core structures and the design of Discovery Libraries based thereon
are generally handled such that the compounds contained in the Discovery Library
are novel compounds (i.e, are not generally known and have not been included in
compound libraries previously prepared by Pharmacopeia). The Parties
acknowledge and agree (i) that the Discovery Library descriptions set forth in
this Section 2.9.0 represent general guidelines for the size and composition of
Discovery Libraries, (ii) that SPL and Pharmacopeia will generally be
cooperating in the design of Discovery Libraries, and that Discovery Libraries
prepared for the Collaboration may therefore vary from the general guidelines
set forth herein, and (iii) that nothing in the Section 2.9.0 shall be construed
as a commitment or representation by Pharmacopeia that any given Discovery
Library prepared for the Collaboration will conform to such guidelines.
2.9.1 Classification; Limit on SP Discovery Libraries. At the time
------------------------------------------------------
SPL and Pharmacopeia agree that Pharmacopeia will prepare and provide to SPL any
given Library, SPL and Pharmacopeia shall agree upon the appropriate
classification of such Library as a Collaboration Discovery Library, SP
Discovery Library, or Optimization Library. It is understood and agreed that
the number of SP Discovery Libraries provided to SPL in a given year during the
term of the Collaboration * in
such year without the prior written consent of Pharmacopeia. It is further
understood and agreed that if the *
__________________
* CONFIDENTIAL TREATMENT REQUESTED
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<PAGE>
*, for all purposes of this Agreement, unless otherwise agreed in writing by the
Parties. In determining the number of SP Discovery Libraries and total number
of all Discovery Libraries for purposes of this Section, *.
2.9.2 Identification of Targets. At the time that SPL notifies
--------------------------------
Pharmacopeia of an Active Compound from any Library pursuant to Section 2.12,
SPL shall also notify Pharmacopeia of the applicable Target(s) (in coded form
only) and the general therapeutic area relevant to such Target.
2.9.3 Coded Targets. To the extent that SPL identifies Targets to
--------------------
Pharmacopeia in coded form pursuant to Section 2.9.2, SPL shall use a unique
code for each Target, and shall not use more than one code to identify the same
Target unless SPL tells Pharmacopeia that more than one code identifies the same
Target and specifies the applicable codes. SPL shall have no obligation to
disclose to Pharmacopeia the identity of any Targets on a non-coded basis prior
to the publication of a patent application disclosing both (i) the structure of
an Active Compound having activity against the Target and (ii) the identity of
the Target. If, at any time, SPL has identified a Target to Pharmacopeia on a
non-coded basis, SPL shall identify the codes, if any, that SPL had used to
identify such Target, and shall thereafter only identify such Target on a non-
coded basis.
2.9.4 Targets for Optimization Libraries. At the time that SPL and
-----------------------------------------
Pharmacopeia initiate the design and preparation of an Optimization Library, SPL
shall identify the Target (in coded form only) and the relevant general
therapeutic area for which the Optimization Library is being prepared.
2.10 Compound Identification. Following SPL's screening of the Discovery
-----------------------------
Libraries and/or Optimization Libraries, at SPL's request, during the term of
this Agreement (for so long as Pharmacopeia's business operations include
preparing and providing libraries and related services), Pharmacopeia shall
decode and identify to SPL any Library Compound in such Libraries that
demonstrates activity in SPL's screening assays; provided, however, Pharmacopeia
-------- -------
shall have no obligation (i) to decode more Library Compounds than can
reasonably be accomplished by * Pharmacopeia FTEs, in conjunction with their
other assigned tasks in the Collaboration. *
If SPL requests the decoding of additional Library Compounds during the
Collaboration, or requests any decoding after the end of the Collaboration, then
Pharmacopeia shall decode such compounds and invoice SPL for the actual direct
labor and material costs associated with, and other allocated costs directly
required for, such decoding, and SPL shall pay such invoice within *days of
receipt.
2.11 Copies of Libraries. Until the exhaustion of all copies of a
-------------------------
particular Library, SPL may provide Pharmacopeia notice that SPL wishes to
obtain sets of plates from such Library containing sufficient quantities of
compounds to perform an agreed number of assays, and Pharmacopeia will deliver
such plates to SPL as soon as practicable; provided, however, that during the
-------- -------
term of the Collaboration, Pharmacopeia shall have no obligation to prepare more
such Library plates than can reasonably be accomplished by * Pharmacopeia FTEs,
in conjunction with their other assigned tasks in the Collaboration. * If SPL
requests the preparation of additional Library plates during the Collaboration,
or requests any preparation of such Library plates after the end of the
Collaboration, then Pharmacopeia shall prepare such plates and invoice SPL for
the actual direct labor and material costs associated with, and other allocated
costs directly required for, such preparation, and SPL shall pay such invoice
within * days of receipt. Following the exhaustion of all copies of a
__________________
* CONFIDENTIAL TREATMENT REQUESTED
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<PAGE>
Library, SPL may request a further set of plates for any such Library, and the
Parties shall negotiate in good faith the terms on which such plates may be
provided.
2.12 Active Compounds. Any Library Compound identified as meeting the
----------------------
definition of an Active Compound through (i) screening of one or more Libraries
by Pharmacopeia and/or SPL in the conduct of the Collaboration, or (ii)
screening of one or more Libraries by SPL after the term of the Collaboration,
shall be an Active Compound. It is understood that no grant of any licenses by
Pharmacopeia to SPL, its Affiliates or Sublicensees under Section 4.1 with
respect to any Library Compound shall become effective unless and until
Pharmacopeia has received notice that such Library Compound is an Active
Compound. Pharmacopeia shall be deemed to have received such notice effective
upon receipt of a request by SPL to decode a Library Compound. In the event
that SPL or its Affiliates or Sublicensees identifies, without decoding by
Pharmacopeia pursuant to Section 2.10, a particular Library Compound with
activity against a Target, SPL shall give Pharmacopeia notice identifying such
Library Compound as an Active Compound, which notice shall be effective upon
receipt by Pharmacopeia. Notwithstanding the foregoing, any Active Compound
that is subject to a license by Pharmacopeia to a Third Party (as set forth in
Section 4.5 or 4.9.5) granted prior to the time the Library Compound is decoded
as set forth in Section 2.10 above or, with respect to a Library Compound which
is not decoded, the time that Pharmacopeia receives actual notice from SPL as
set forth in this Section 2.12, shall not be deemed to be licensed to SPL under
Section 4.1.
2.13 Retained Rights. Subject to the rights and licenses granted to SPL
---------------------
hereunder, and the limitations expressly set forth in Section 4.6, Pharmacopeia
shall retain ownership of the tangible property embodied in the encoded
Discovery Libraries and Optimization Libraries.
2.14 Pharmacopeia Independent Research Activities.
--------------------------------------------------
2.14.1 Activities Outside the Collaboration. The Parties
--------------------------------------------
acknowledge that during and after the term of the Collaboration Pharmacopeia may
(either alone or in collaboration with one or more Third Parties) perform
independent research and development activities with respect to Targets,
including, without limitation, to identify, develop and commercialize products,
which activities are not within the scope of this Agreement ("Pharmacopeia
Independent Technology"). The Parties further acknowledge that Pharmacopeia
Independent Technology may include technology independently acquired, discovered
or developed by Pharmacopeia (as demonstrated by documented evidence created at
the time of such acquisition, discovery or development) and which coincidentally
is substantially the same as technology within the scope of Collaboration
Technology and/or Schering Technology. SPL shall have no rights or licenses
whatsoever to any Pharmacopeia Independent Technology.
2.14.2 Restrictions on Use of Collaboration Technology. To the
-------------------------------------------------------
extent that Pharmacopeia is entitled to use Collaboration Technology under this
Agreement for purposes outside the Collaboration, Pharmacopeia will not
knowingly use such Collaboration Technology to jeopardize the commercial value
of Agreement Products.
ARTICLE III
COLLABORATION MANAGEMENT
3.1 Collaboration Committee. The Parties shall establish a Collaboration
-----------------------------
Committee to oversee, review and coordinate the conduct of the Collaboration.
The Collaboration Committee shall be comprised of two (2) representatives from
each of SPL and Pharmacopeia, or such other equal number of representatives as
the Parties may agree, each Party's members selected by that Party. Each of
Pharmacopeia and SPL may replace its Collaboration Committee representatives at
any time upon written notice to the other Party. The Collaboration Committee
shall be chaired by the Collaboration Director appointed by SPL, unless
otherwise agreed by the Parties. From time to time the
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Collaboration Committee may establish various subcommittees, constituted as
agreed by the Collaboration Committee, to oversee particular projects or
activities within the Collaboration.
3.2 Design of Libraries; Fresh Libraries. At SPL's discretion, SPL's
-----------------------------------------
representatives on the Collaboration Committee may contribute to the development
of the design of one or more Discovery Libraries or Optimization Libraries, or
contribute particular starting materials for use in synthesis of the Discovery
Libraries or Optimization Libraries. Except as set forth in Section 4.9.5, or
as the Parties may otherwise agree in writing, the Libraries made available to
SPL under this Agreement shall not have been provided to Third Parties, or
screened by Pharmacopeia for itself or for Third Parties. Notwithstanding any
other provision of this Agreement, Pharmacopeia shall not be obligated to
prepare or deliver to SPL any Library containing one or more compounds
previously delivered by Pharmacopeia to any Third Party.
3.3 Collaboration Committee Meetings. During the term of the
-------------------------------------
Collaboration, as it may be extended, the Collaboration Committee shall meet six
(6) times per year, or more often as agreed by the Parties, at such locations as
the Parties shall agree. At such meetings the Collaboration Committee will
formulate and review the Collaboration objectives with respect to each
Collaboration research project (including, without limitation, review and
approval of the design of Libraries), monitor the progress of the Collaboration
toward those objectives, and take such other actions as may be specified under
this Agreement or which the Parties deem appropriate. The Collaboration
Committee may designate a patent committee comprised of employees or
representatives of the Parties to oversee the patent prosecution and/or
enforcement activities described in Article VI, and to facilitate communication
and agreement between the Parties regarding inventorship of inventions made in
the Collaboration and the classification of such inventions (e.g., as SPL
Improvements, Pharmacopeia Improvements, Collaboration Platform Technology,
Collaboration Target-Specific Technology, etc.). Additional non-voting
representatives or consultants from either Party may from time to time be
invited by SPL or Pharmacopeia to attend and participate in Collaboration
Committee meetings (e.g., to evaluate and advise on business or scientific
issues) subject to compliance with the confidentiality provisions of Section
7.1. Each Party shall be responsible for its own expenses in connection with
the Collaboration Committee.
3.4 Collaboration Committee Decisions. Decisions of the Collaboration
--------------------------------------
Committee shall be based upon the consensus of all the members. In the event
that the Collaboration Committee cannot or does not, after good faith efforts,
reach agreement on an issue, such issue shall be referred to the respective
Presidents of SPL's Affiliate, the Schering-Plough Research Institute ("SPRI"),
and Pharmacopeia for resolution. In the event that the Presidents of SPRI and
Pharmacopeia are unable to resolve the issue within fifteen (15) business days
after submission of the issue to them, then the unresolved issue may be
submitted by either Party to binding arbitration pursuant to Section 11.3 of
this Agreement, except that the decision shall be made by one (1) arbitrator
with expertise in pharmaceutical product development, and the decision of the
arbitrator shall be rendered within six (6) months of initiation of the
arbitration. During the pendency of any such arbitration proceedings, the
Parties shall proceed with performance of the Collaboration following the course
of conduct determined by SPL; provided, however, that notwithstanding the
-------- -------
foregoing, Pharmacopeia shall not be obligated to (i) take any action that would
violate its obligations to any Third Party, (ii) spend or forego receiving any
amounts of money (except as necessary in connection with the fulfillment of
Pharmacopeia's responsibilities under Section 2.3), (iii) conduct any of the
activities referred to in Section 2.7 with respect to Reserved Targets, or (iv)
knowingly prepare or deliver to SPL any Library containing one or more compounds
previously provided to any Third Party. Notwithstanding the foregoing, SPL, in
its sole discretion, shall have complete and final control over SPL's research,
development and commercialization of Schering Compounds, Agreement Compounds
and/or Product(s) in accordance with the terms and conditions of this Agreement.
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3.5 Development Status; Notice of Sale of Products. During the term of
---------------------------------------------------
this Agreement, SPL shall provide Pharmacopeia written semi-annual reports
within thirty (30) days after the end of each six (6) month period, providing:
(i) a brief report summarizing the development status of each Lead Compound
and/or Development Candidate under development at SPL; (ii) the status of all
patent applications claiming any Library Compounds or Derivative Compounds, and
(iii) copies of all such patent applications which have published during such
six (6) month period and were not previously provided to Pharmacopeia. Such
reports shall contain information sufficient to allow Pharmacopeia to monitor
the status of SPL's efforts with respect to the accomplishment of the milestones
set forth in Section 5.3; provided, however, that nothing hereunder shall be
-------- -------
construed as requiring SPL to provide Pharmacopeia with any specific research
data or results, including, without limitation, information relating to Targets
or data obtained from screening programs being conducted at SPL. Until the
First Commercial Sale of each Agreement Product by or on behalf of SPL
hereunder, SPL shall keep Pharmacopeia reasonably informed as to the status of
the pre-clinical, clinical and commercial development of such Agreement Product
by providing Pharmacopeia with semi-annual written reports summarizing such
activities with respect to each potential Agreement Product under development
during the term of this Agreement. Within thirty (30) days of the First
Commercial Sale of any Agreement Product, or any SP Product as to which
Pharmacopeia is entitled to receive royalty payments hereunder, SPL shall give
Pharmacopeia written notice thereof, which notice shall describe the relevant
Product, identify the active ingredients in such Product, and identify the
specific Target(s) which led to the development of such Product, it being
understood that SPL shall identify such Target(s) on a non-coded basis, and
shall identify the code(s), if any, used by SPL under this Agreement to identify
such Target; provided, however, that nothing herein shall require SPL to
-------- -------
disclose to Pharmacopeia any of SPL's proprietary information which has not been
previously publicly disclosed, beyond that which is necessary to satisfy SPL's
reporting requirements under this Section 3.5.
3.6 Diligence. The Parties acknowledge and agree that all business
--------------
decisions regarding research, development and commercialization of Agreement
Products including, without limitation, decisions relating to the development
and manufacture of Agreement Compounds, or to the design, development,
manufacture, sale, price, distribution, marketing and promotion of Agreement
Products under this Agreement, and the decision whether to develop a particular
Agreement Compound, or to develop and commercialize a particular Agreement
Product, shall be within the sole discretion of SPL. SPL shall use reasonable
good faith efforts to discover and develop Agreement Compounds, and to discover,
develop and commercialize Agreement Products; provided, however, that SPL shall
-------- -------
have no quotas or other minimum diligence obligations with regard to number of
Agreement Compounds and Agreement Products to be developed and commercialized
hereunder. SPL's diligence obligations hereunder are expressly conditioned upon
the continuing absence of any adverse condition or event which warrants a delay
in commercialization of an Agreement Product including, but not limited to, an
adverse condition or event relating to the safety or efficacy of the Agreement
Product or unfavorable pricing, pricing reimbursement, labeling or lack of
Regulatory Approval, and SPL shall have no obligation to develop or market any
such Agreement Product so long as in SPL's opinion any such condition or event
exists. SPL shall use commercially reasonable efforts to overcome any
unfavorable pricing or pricing reimbursement. The Parties acknowledge and agree
that none of the diligence obligations in this Section 3.6 shall apply to any
Schering Compounds or SP Products, the discovery, development and
commercialization of which are the sole and exclusive responsibility of SPL.
ARTICLE IV
LICENSES AND EXCLUSIVITY
4.1 License to SPL.
-------------------
4.1.1 Compounds and Products. Pharmacopeia agrees to grant, and
-----------------------------
hereby grants to SPL an exclusive license under the Pharmacopeia Technology and
Pharmacopeia's interest in the
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Collaboration Technology (exclusive even as to Pharmacopeia and its Affiliates),
to make, have made, use, sell, offer to sell, import and export Agreement
Products in the Territory. It is understood that such licenses shall include
the right to conduct drug research and development, and the exclusive right to
discover, develop, make, have made and use Agreement Compounds, during the term
of this Agreement.
4.1.2 Collaboration Target-Specific Technology. Pharmacopeia agrees
-----------------------------------------------
to grant, and hereby grants, to SPL an exclusive license (exclusive even as to
Pharmacopeia and its Affiliates), under all of Pharmacopeia's interest in the
Collaboration Target-Specific Technology for any and all purposes in the
Territory, including the right to grant sublicenses.
4.2 Sublicenses. SPL shall have the right to sublicense the rights
----------------
granted in Section 4.1 above; provided, however, that SPL and its Affiliates
-------- -------
shall not provide any Discovery Library or Optimization Library to any Third
Party without the prior written consent of Pharmacopeia, except that such
consent shall not be required if the Third Party is a contractor or academic
collaborator conducting Library screening on behalf of SPL and is not granted,
and will not be granted or otherwise acquire, any rights to Agreement Compounds
or Agreement Products. Each such sublicense shall be consistent with all the
terms and conditions of this Agreement. It is further understood that SPL's
Sublicensees shall have no rights under the sublicense granted in Section 4.6
herein, but may make, have made, use, sell, offer to sell, import and export
Agreement Products. SPL shall remain responsible to Pharmacopeia for all of
each such Sublicensee's applicable financial and other obligations due under
this Agreement. Such Sublicensee shall not have the right to grant further
sublicenses, and such sublicenses may not be assigned or transferred to any
Third Party without the prior written consent of Pharmacopeia. Each sublicense
shall provide for its continuation following early termination of the license
rights of SPL hereunder and its assignment to Pharmacopeia. Promptly following
the execution of each sublicense requiring Pharmacopeia's consent hereunder, SPL
shall give Pharmacopeia written notice of the existence and identity of each
Sublicensee and identify the Agreement Product(s) sublicensed to such
Sublicensee.
4.3 Direct Affiliate Licenses. Whenever SPL shall reasonably demonstrate
------------------------------
to Pharmacopeia that, in order to facilitate direct royalty payments by an
Affiliate, it is desirable that a separate license agreement be entered into
between Pharmacopeia and such Affiliate, Pharmacopeia will grant such licenses
directly to such Affiliate by means of an agreement which shall be consistent
with all of the provisions hereof and SPL shall guarantee the Affiliate's
obligations thereunder and otherwise provide to Pharmacopeia assurances of
performance satisfactory to Pharmacopeia. SPL shall reimburse Pharmacopeia for
its reasonable attorneys' fees and costs incurred in connection with any such
separate license agreement.
4.4 Collaboration Platform Technology. Upon conclusion of the
--------------------------------------
Collaboration Term, Pharmacopeia and SPL each agree to grant, and hereby grant,
to the other a co-exclusive license under their respective interests in the
Collaboration Platform Technology in the Territory, as follows: (i) SPL and
Pharmacopeia may each use such Collaboration Platform Technology for any and all
internal uses, including without limitation, in collaboration with Third Parties
for drug discovery, and (ii) neither Pharmacopeia nor SPL may license,
sublicense or otherwise transfer the Collaboration Platform Technology to any
Third Party.
4.5 Third Party Rights.
-----------------------
4.5.1 Pharmacopeia Third Party Activities. It is understood that
------------------------------------------
Pharmacopeia is in the business of providing combinatorial 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 SPL's rights under this Article IV. Notwithstanding the licenses
granted to SPL under Section 4.1 above, it is possible that a Third Party may
acquire rights from Pharmacopeia with
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<PAGE>
respect to one or more compounds of which Pharmacopeia is a sole or joint owner,
which compounds were made and designed independently of Pharmacopeia's
activities in the Collaboration; accordingly, Pharmacopeia's grant of rights
under Section 4.1 is limited to the extent that (i) a Third Party (either alone
or jointly with Pharmacopeia) has filed a patent application with respect to
such a compound prior to the filing by SPL (either alone or jointly with
Pharmacopeia) of a patent application with respect to such a compound, or (ii)
Pharmacopeia has previously granted a Third Party a license, an option to
acquire a license, a right of first negotiation, field exclusivity, or a non-
competition covenant with respect to such a compound, and is subject to any such
grant of rights to a Third Party.
4.5.2 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 applications and patents, including
patent applications and patents owned by such Third Parties, or owned jointly by
Pharmacopeia and such Third Parties, which could conflict with patent
applications and patents owned by SPL, or jointly owned by SPL and Pharmacopeia
hereunder. Pharmacopeia shall use reasonable efforts to avoid such conflict,
which efforts shall be comparable to those used by Pharmacopeia in performing
similar obligations under its agreements with Third Parties. It is understood
that, unless SPL is damaged as a proximate result of a material breach by
Pharmacopeia of Section 4.9, or of any of the representations and warranties in
Article VIII, then Pharmacopeia shall have no liability under this Agreement
with respect to any such conflict
4.5.3 Pharmacopeia Reports to SPL On Third Party Rights. During the
--------------------------------------------------------
period from the Effective Date until the First Commercial Sale of an Agreement
Product, within thirty (30) days of a written demand by SPL concerning a
Pharmacopeia license to a Third Party of a patent application owned or co-owned
by Pharmacopeia, Pharmacopeia shall, to the extent it may do so without
breaching any contractual or other legal obligation, provide SPL with a
statement explaining why the invention(s) claimed in the patent application or
technology licensed to such Third Party is independent of Pharmacopeia's
activities in the Collaboration. Such statement shall be supported by written
records kept in the ordinary course of business consistent with pharmaceutical
industry standards, provided that such records need not be provided to SPL at
the time of providing such statement, but may have to be provided pursuant to
Section 11.3. Such information shall be deemed Confidential Information of
Pharmacopeia pursuant to this Agreement.
4.6 Columbia Sublicense. Pharmacopeia agrees to grant, and hereby grants,
------------------------
to SPL a non-exclusive sublicense, without the right to sublicense, under the
Columbia License, to make, have made, use, offer to sell, sell, import and
export Agreement Products in the Territory, (including, without limitation, the
right to decode Library Compounds). It is understood and agreed that such
sublicenses do not include the right to create, make or have made encoded
combinatorial libraries or use methods or processes relating to the preceding,
except as expressly provided in this Agreement. It is further understood and
agreed that SPL's right to decode Library Compounds, as granted hereunder, shall
only be exercisable in the event that Pharmacopeia is unable or unwilling to
provide decoding services to SPL, in which event Pharmacopeia shall promptly
provide to SPL the technology and know-how necessary to perform such decoding.
4.7 Collaboration Research Activities. SPL agrees to grant, and hereby
--------------------------------------
grants, to Pharmacopeia a royalty-free, non-exclusive license under (i) SPL's
interest in the Collaboration Technology, and (ii) any Schering Technology which
SPL, in its sole discretion, reasonably determines is necessary or useful for
Pharmacopeia's performance of the Collaboration, in each case to use during the
term of the Collaboration and solely in performance of the Collaboration such
intellectual property of SPL (including, without limitation, research materials
and reagents, as are reasonably necessary or useful to assay compounds in
certain Optimization Libraries, to be selected by SPL, for activity against the
applicable Target). Pharmacopeia will not be required to pay any fees to use
such intellectual property, but will as a condition precedent to such use
execute any consents or
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sublicenses required by any SPL licensor. Pharmacopeia shall not be required to
execute any unreasonable consents or licenses and will not be in breach of this
Agreement for failure to do so.
4.8 Pharmacopeia's Use of Library Compounds for Quality Control.
----------------------------------------------------------------
Notwithstanding Section 4.1 above or Section 4.9 below, and subject to the other
applicable provisions of this Agreement, Pharmacopeia shall retain the right
under the Collaboration Technology to make, have made and use Library Compounds
solely for Pharmacopeia's internal quality control purposes, provided that such
rights shall not include the right to conduct any research other than quality
control research on any individual Library Compounds. Pharmacopeia agrees to
use reasonable efforts not to conduct quality control research pursuant to this
Section 4.8 which would adversely affect SPL's ability to commercialize
Agreement Products or which would jeopardize the commercial or research value of
the Collaboration Technology.
4.9 Library Exclusivity.
------------------------
4.9.1 Optimization Libraries. SPL shall have exclusivity with
-----------------------------
respect to all Optimization Libraries, as follows: Pharmacopeia shall not *
for any purpose, * for any purpose. Solely to ensure such exclusivity
Pharmacopeia agrees to *
This Section 4.9.1 shall
survive the termination or expiration of this Agreement.
4.9.2 SP Discovery Libraries. SPL shall have exclusivity with
-----------------------------
respect to all SP Discovery Libraries, as follows: Pharmacopeia shall not *
for any purpose, *
for any purpose. Solely to ensure such exclusivity, Pharmacopeia
agrees to *. This Section 4.9.2 shall survive the
termination or expiration of this Agreement.
4.9.3 Collaboration Discovery Libraries. To provide SPL a period of
----------------------------------------
exclusivity for screening of the Collaboration Discovery Libraries provided to
SPL hereunder, Pharmacopeia agrees that until the termination of the Exclusivity
Period for a Collaboration Discovery Library, including as such period may be
extended, Pharmacopeia shall not * for any purpose,
* for any purpose. The undertakings in this
Section 4.9.3 shall be in addition to and not in derogation of any
undertakings of Pharmacopeia expressly set forth in the other terms of this
Agreement with respect to Collaboration Discovery Libraries, Agreement Compounds
and Agreement Products. Solely to ensure such exclusivity, Pharmacopeia agrees
to *. Upon expiration of the applicable Exclusivity Period with respect to a
Collaboration Discovery Library, including as it may be extended pursuant to
Section 4.9.4, below, the *
__________________
* CONFIDENTIAL TREATMENT REQUESTED
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provided, however, that Pharmacopeia's rights shall be subject to SPL's rights
-------- -------
to Active Compounds and to the provisions of Section 4.9.5 below.
4.9.4 Extension of Exclusivity for Collaboration Discovery Libraries.
---------------------------------------------------------------------
SPL shall have the right, in its sole discretion, to extend the Exclusivity
Period with respect to any particular Collaboration Discovery Library for
successive * periods by notifying Pharmacopeia no later than sixty (60) days
prior to the date on which such Exclusivity Period will expire, and concurrently
paying to Pharmacopeia a maintenance fee of*
for each such Collaboration Discovery Library. In the event that SPL
has paid to Pharmacopeia milestone payments totaling * with respect to Library
Compounds contained in any given Collaboration Discovery Library and/or
Derivative Compounds derived from such Library Compounds, SPL's exclusivity with
respect to such Collaboration Discovery Library shall become perpetual and
irrevocable; provided, however, that if the Exclusivity Period for such
Collaboration Discovery Library has lapsed prior to the payment of such
milestone payments totaling *, then such exclusivity shall be subject to and
limited by (i) applicable rights, if any, granted to Third Parties during any
period of co-exclusive rights as set forth in Section 4.9.5, and (ii)
Pharmacopeia's rights regarding the Library Compounds identified before such
time in an "Outlicensing Notice" as set forth in Section 4.9.5.
4.9.5 Co-Exclusive Collaboration Discovery Libraries. Following the
-----------------------------------------------------
expiration of the Exclusivity Period (including any extensions thereof) for any
given Collaboration Discovery Library, Pharmacopeia shall have the right to *
provided, however, that Pharmacopeia shall not *
-------- -------
If after the expiration of the applicable Exclusivity Period, Pharmacopeia *
__________________
* CONFIDENTIAL TREATMENT REQUESTED
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*
4.10 No Other Products. With the exception of (i) any Schering Compounds
-----------------------
which are the same as a Library Compound and with respect to which Schering
notifies Pharmacopeia in writing prior to finalization by the Collaboration
Committee of the design the relevant Library, or (ii) as otherwise agreed or
specifically provided in the terms of this Agreement, neither SPL nor its
Affiliates or Sublicensees shall commercialize any Library Compound, Active
Compound, Derivative Compound, or other composition-of-matter claimed in patent
applications filed, or patents issued, under Article VI which claim an Active
Compound or Derivative Compound, other than as an Agreement Product in
accordance with this Agreement.
4.11 License Grant Back for Abandoned Agreement Compounds. In the event
----------------------------------------------------------
that Pharmacopeia acquires rights to patent applications and/or patents claiming
any Agreement |
