Document/Exhibit Description Pages Size
1: 10-K Lexicon Genetics Incorporated - December 31, 2005 59 358K
2: EX-10.1 Restated Employment Agreement - Arthur T. Sands, 24 90K
M.D., Ph.D
3: EX-10.11 Summary of Non-Employee Director Compensation 1 7K
4: EX-10.12 Summary of 2006 Named Executive Officer Cash 2± 8K
Compensation
5: EX-10.14 2000 Non-Employee Directors' Stock Option Plan 8 41K
6: EX-10.17 Form of Stock Option Agreement With Directors 4 21K
7: EX-10.22 Second Amended Collaboration & License Agreement 125 410K
8: EX-23.1 Consent of Independent Registered Public 1 8K
Accounting Firm
9: EX-31.1 Certification of CEO Pursuant to Section 302 2± 11K
10: EX-31.2 Certification of CFO Pursuant to Section 302 2± 11K
11: EX-32.1 Certification of CEO & CFO Pursuant to Section 906 1 8K
EX-10.22 — Second Amended Collaboration & License Agreement
Exhibit Table of Contents
EXHIBIT 10.22
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
SECOND AMENDED AND RESTATED COLLABORATION AND LICENSE
AGREEMENT
This Second Amended and Restated Collaboration and License Agreement (the
"Agreement") is executed as of the 30th day of November, 2005 (the "Second
Restatement Date") and made effective as of the 17th day of December, 2002 (the
"Effective Date") between Genentech, Inc., a Delaware corporation having its
principal place of business at 1 DNA Way, South San Francisco, California 94080
("Genentech"), and Lexicon Genetics Incorporated, a Delaware corporation having
its principal place of business at 8800 Technology Forest Place, The Woodlands,
TX 77381-1160 ("Lexicon"). Throughout this Agreement, Genentech and Lexicon are
sometimes referred to individually as a "Party" and collectively as "Parties."
This Agreement amends and restates that certain Amended and Restated
Collaboration and License Agreement between Genentech and Lexicon dated November
19, 2003 (the "First Restated Agreement"), which such First Restated Agreement
amended and restated that certain Collaboration and License Agreement between
Genentech and Lexicon dated December 17, 2002 (the "Original Agreement").
RECITALS
WHEREAS, Genentech is in the business of using human genetic information to
discover, develop, manufacture and market pharmaceutical products;
WHEREAS, Lexicon possesses certain knowledge and experience in the design,
generation, and phenotypic analysis of Knock-Out Mice and ES Cell Lines;
WHEREAS, Lexicon further possesses technology for and expertise in the
identification and validation of gene and protein targets for use in the
discovery of pharmaceutical products, as well as in the research and development
of such products;
WHEREAS, Genentech desires, on the terms and conditions contained herein,
for Lexicon to generate Knock-Out Mice and ES Cell Lines for Genentech based on
human gene sequences provided by Genentech and then to analyze such Knock-Out
Mice and ES Cell Lines, and Lexicon desires, on the terms and conditions, and
for the consideration, contained herein, to undertake such activities; and
WHEREAS, Genentech and Lexicon, on the terms and conditions herein, desire
to collaborate with respect to the identification and validation of gene and
protein targets based on the human gene sequences provided by Genentech and the
research and discovery of pharmaceutical products based upon such gene and
protein targets.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained in this Agreement, the Parties agree as follows:
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ARTICLE 1: DEFINITIONS
Terms defined in this Article 1: and parenthetically elsewhere, including
in the introductory paragraph and recitals, will have the same meaning
throughout this Agreement, unless otherwise specified. Defined terms are
capitalized and may be used in the singular or plural.
1.1 "Actual Knowledge" of a Party means knowledge or awareness of a fact by
any board member or officer of such Party or of an Affiliate of such Party, or
any employee or agent of such Party that a board member or officer would
reasonably consult with regard to a particular fact, in each case after making
reasonable inquiries and investigations.
1.2 "Advanced Phenotypic Analysis" means any one or more of the Advanced
Phenotypic Panels or Supplementary Advanced Phenotypic Panels that (i) Lexicon
will use Commercially Reasonable Efforts to perform, under Section 3.6, on the
Knock-Out Mice of each Project so selected by the Steering Committee, or (ii)
Lexicon has otherwise performed with respect to a Project Gene prior to the
Second Restatement Date the data for which will be delivered to Genentech under
Section 3.7(a)(i).
1.3 "Advanced Phenotypic Panel(s)" means the tests, observations, and
analyses listed on Exhibit D. For the purposes of Sections 3.7(c) and 11.2, an
Advanced Phenotypic Panel shall be deemed to be "complete" upon (i) [**] and
(ii) [**].
1.4 "Affiliate" of a Party means any person or corporation, joint venture,
or other business entity which directly (or indirectly through one or more
intermediaries) controls, is controlled by, or is under common control with such
Party, as the case may be. For purposes of this definition only, the terms
"controls," "controlled," and "control" mean the direct or indirect ability or
power to direct or cause the direction of the management and policies of an
entity or otherwise direct the affairs of such entity, whether through ownership
of equity, voting securities, or beneficial interest, by contract, or otherwise.
Notwithstanding the foregoing, F. Hoffmann-La Roche Ltd and its affiliates shall
not be considered Affiliates of Genentech for purposes of this Agreement.
1.5 "Applicable Laws" means all applicable statutes, ordinances,
regulations, rules, or orders of any kind whatsoever of any government authority
or court of competent jurisdiction.
1.6 "BLA" means a complete application for a "biologics license" under
section 351 of the Public Health Service Act and containing the content, and in
the format, required by 21 C.F.R. Part 601, or a corresponding application with
a regulatory agency in a country other than the United States, together with all
additions, deletions, and supplements thereto.
1.7 "Calendar Quarter" means a period of three (3) consecutive calendar
months ending on each of March 31, June 30, September 30, or December 31.
1.8 "Calendar Year" means the respective period of a year commencing on
January 1 and ending on December 31.
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1.9 "Change in Control" of Lexicon means that during the Term of this
Agreement (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
Lexicon shall have occurred to a Competitor; and/or (ii) the stockholders of
Lexicon shall have approved of a plan or proposal for the liquidation or
dissolution of the company; and/or (iii) any Competitor (whether individually or
as part of a group) shall have become the owner, directly or indirectly,
beneficially or of record, of shares representing more than fifty percent (50%)
of the aggregate ordinary voting power represented by the issued and outstanding
voting stock of Lexicon.
1.10 "Clinical Development" means the program of work to develop and
evaluate the safety and efficacy of a Genentech IND-Opted Product or Genentech
Phase II Opted Product, such work to be conducted in accordance with the scope,
objectives and responsibilities set forth in a Clinical Development Plan.
1.11 "Clinical Development Plan" means the written plan, prepared by
Genentech, and approved by the Steering Committee, in accordance with Section
4.7(b) setting forth in reasonable detail the various Clinical Development
activities to by undertaken by the Parties. The Clinical Development Plan may be
amended or modified from time to time in accordance with Section 4.7(b).
1.12 "Collaboration Product" means a Genentech Licensed Product and/or
Lexicon Licensed Product, as applicable.
1.13 "Collaborator" means (i) a principal investigator, employed at a
university or other not-for-profit academic research institution, who is
performing collaborative research with Genentech involving use of a Knock-Out
Mouse or Progeny, or (ii) a Third Person or Affiliate with whom Genentech has a
bona fide research or development collaboration with regard to a Project Gene,
Protein Candidate, Genentech Advanced Research Protein Candidate or Genentech
Licensed Product.
1.14 "Commercially Reasonable Efforts" or "commercially reasonable efforts"
means those diligent efforts consistent with the exercise of prudent scientific
and business judgment, as applied to its own high priority research projects or
pharmaceutical products, at a similar stage of development and of similar
potential and market size, by the Party in question. With regard to the creation
and generation of Knock-Out Mice for a Project, such efforts shall be deemed to
have been exhausted if Lexicon has [**]. For clarity, and without prejudice to
the generality of the foregoing, a Party shall not be deemed to have failed to
exercise Commercially Reasonable Efforts with respect to the development or
commercialization of a Collaboration Product (to the extent an obligation to
exercise Commercially Reasonable Efforts is applicable in accordance with a
provision of this Agreement) in the event, and to the extent, that [**].
Activities by Genentech Licensees and Affiliates, with respect to Genentech, and
by Lexicon Product Licensees and Affiliates, with respect to Lexicon, will be
respectively considered as Genentech's or Lexicon's activities under this
Agreement for purposes of determining whether Genentech or Lexicon has complied
with an obligation to exercise Commercially Reasonable Efforts in accordance
with a provision of this Agreement.
1.15 "Commercialization Plan" has the meaning set forth in Section 5.2.
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1.16 "Competitor" means [**].
1.17 "Confidential Information" means Lexicon Confidential Information,
Project Confidential Information and/or Genentech Confidential Information, as
applicable.
1.18 "Contract Service Provider" means any Third Person that enters into an
agreement with Genentech providing for the performance of services for
Genentech, on a fee for service basis, relating to [**].
1.19 "Co-Promotion" and "Co-Promote" means performing sales calls by
Lexicon sales representatives to [**]. Co-Promotion shall not be included within
the term "marketing" as such term is used within the Agreement.
1.20 "Co-Promote Territory" has the meaning set forth in Section 5.1.
1.21 "Derivative Protein" means (i) [**] or (ii) [**].
1.22 "Development Costs" has the meaning set forth in the Financial
Appendix.
1.23 "Dollars" means United States dollars.
1.24 "Draft Candidate" has the meaning set forth in Section 3.7(b)(iii).
1.25 "Effective Date" has the meaning set forth in the introductory
paragraph of the Agreement.
1.26 "ES Cell Line" means the embryonic stem cell line used to produce a
line of Knock-Out Mice containing within their genome the corresponding mutated
gene. With regard to ES Cell Lines to be delivered to Genentech pursuant to this
Agreement, the term ES Cell Line, with respect to each Project Gene, shall refer
to [**].
1.27 "Excluded Gene(s)" means those Project Genes set forth on Exhibit E.
1.28 "FDA" means the U.S. Food and Drug Administration or corresponding
governmental authority in another country.
1.29 "Field" means any human or animal healthcare applications including,
without limitation, the diagnosis, prevention and treatment of diseases or
conditions.
1.30 "Financial Appendix" means Exhibit F to this Agreement, which sets
forth certain financial terms and conditions.
1.31 "First Pass Phenotypic Analysis" means the tests, observations, and
analyses listed on Exhibit A that Lexicon will use Commercially Reasonable
Efforts to perform, under Section 3.3, on the Knock-Out Mice of each Project.
1.32 "Force Majeure" means acts of God, strikes, civil disturbances,
earthquakes, fires, floods, explosions, riots, war, rebellion, sabotage, acts or
failure to act of governmental authority, or any other cause beyond the
reasonable control and without negligence of the defaulting Party,
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provided that the Party claiming force majeure has exerted all reasonable
efforts to promptly remedy such force majeure.
1.33 "GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
1.34 "Genentech Advanced Research Product" means a pharmaceutical
preparation, other than a Small Molecule Drug, that is ready for administration
to the ultimate consumer and that: (i) [**] or (ii) [**].
1.35 "Genentech Advanced Research Protein Candidate" means a Protein
designated or selected as such pursuant to Section 3.7, and shall include
Derivative Proteins thereof.
1.36 "Genentech Confidential Information" means all discoveries, trade
secrets, inventions (whether or not patentable), data, materials and information
disclosed or provided by, or on behalf of, Genentech to Lexicon or its designees
in connection with this Agreement (including, but not limited to, Genentech Gene
Patents and Know-How and Project Patents and Know-How) other than Project
Confidential Information, whether provided prior to, or after, the Effective
Date and whether provided orally, electronically, visually, or in writing,
except such discoveries, trade secrets, inventions, data, materials or
information that Lexicon can demonstrate, through its contemporaneous written
records:
(i) was known to Lexicon or to the public prior to Genentech's
disclosure hereunder;
(ii) became known to the public, after Genentech's disclosure
hereunder, other than through an unauthorized act of Lexicon or
of any person to whom Lexicon disclosed such information;
(iii) was subsequently disclosed to Lexicon by a person having lawful
possession of, and a legal right to disclose without any
restrictions, such information; or
(iv) was developed by Lexicon without use, and independent, of
Genentech Confidential Information.
1.37 "Genentech [**] Fields" means the diagnosis, prevention and treatment,
in humans or animals, of: (i) [**]; (ii) any disease or condition by means of
[**]; and (iii) [**].
1.38 "Genentech Excluded IP" means all rights in and to any of the
following, each of which is defined on Exhibit G: (i) [**]; (ii) [**]; (iii)
[**]; (iv) [**]; (v) [**]; and (vi) [**].
1.39 "Genentech Gene Patents and Know How" means (i) all Patents which (A)
are owned, controlled or licensed by Genentech as of the Effective Date and (B)
claim a Project Gene, polypeptides encoded by a Project Gene and/or antibodies
directed toward such polypeptides and/or methods of treatment employing such
Project Genes, polypeptides and/or antibodies (also referred to herein as a
"Genentech Gene Patent") and (ii) all Know-How which is owned, controlled or
licensed by Genentech as of the Effective Date which relates to any of
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the foregoing (also referred to herein as "Genentech Gene Know-How"); provided
that Genentech Gene Patents and Know-How shall not include (x) Genentech
Excluded IP or (y) general Patents that cover inventions that could be used for
products other than a Collaboration Product, including, without limitation,
Patents covering manufacturing or process (including purification process)
inventions. Without limiting the generality of the foregoing, Genentech Gene
Know How includes any Genentech Confidential Information regarding Project Genes
and [**]. Except as expressly set forth herein, Genentech shall have no
obligation to transfer Genentech Gene Know-How to Lexicon.
1.40 "Genentech IND Opted Product(s)" means those Lexicon Advanced Research
Products for which Genentech has exercised its IND Opt-In.
1.41 "Genentech Licensed Product(s)" means (i) Protein Candidate
Product(s), (ii) Genentech Advanced Research Product(s), (iii) [**] Product(s)
for use in the Genentech Retained Fields, (iv) [**] Product(s) for use in the
Genentech Retained Fields, (v) Genentech IND Opted Product(s), and (vi)
Genentech Phase II Opted Product(s) for which a Genentech Opt-Out has not become
effective.
1.42 "Genentech Opt-Out" has the meaning set forth in Section 4.10.
1.43 "Genentech Opt-Out Product(s)" means those Genentech Phase II Opted
Products for which a Genentech Opt-Out has become effective.
1.44 "Genentech Phase II Opted Product(s)" means those Lexicon Advanced
Research Products for which Genentech has exercised its Phase II Opt-In.
1.45 "Genentech Product Licensee" means any Third Person which enters into
an agreement with Genentech or its Affiliates involving the grant to such Third
Person of a license to sell a Genentech Licensed Product.
1.46 "Genentech Retained Field" means the diagnosis, prevention and
treatment, in humans or animals, of any disease or condition in the Genentech
[**] Fields, other than [**].
1.47 "Genentech Trademarks" has the meaning set forth in Section 5.6.
1.48 "Good Laboratory Practices" or "GLP" means the practices and
procedures set forth in Title 21, United States Code of Federal Regulations,
Part 58, and any other regulations, guidelines or guidance documents relating to
good laboratory practices.
1.49 "Gross Sales" means the gross amount invoiced by a Party and/or its
respective Genentech Product Licensees and Lexicon Product Licensees for sales
of a Collaboration Product to any Third Person in arms-length transactions.
Consideration for sales of Collaboration Products for other than cash shall be
valued at fair market value at the time of final sale. Notwithstanding anything
to the contrary herein, sale(s) of Collaboration Products by and between a Party
and its Genentech Product Licensee or Lexicon Product Licensees, as applicable,
shall be excluded from Gross Sales and Net Sales, provided that the final sales
of Collaboration Products by such Genentech Product Licensee or Lexicon Product
Licensees, as applicable, to third parties are included in Gross Sales and Net
Sales.
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In the event a Collaboration Product is sold in combination with one or
more other active compounds or ingredients (as used in this definition of Gross
Sales, a "Combination Product"), then Gross Sales for that Collaboration Product
shall be calculated by multiplying the Gross Sales of such Combination Product
by the fraction A/B, where "A" is the gross selling price of the Collaboration
Product sold separately and "B" is the gross selling price of the Combination
Product. The gross selling price for Collaboration Product and Combination
Product for such purposes will be calculated using data arising from the
Calendar Quarter in which such Gross Sales are recorded.
In the event that no such separate sales are made and the average amount
invoiced for the other active compounds or ingredients can be determined, but
the average amount invoiced for the Collaboration Product cannot be determined,
Gross Sales shall be calculated by multiplying the Gross Sales of the
Combination Product by the following: 1-(C/C+D), where "C" is the average amount
invoiced for the other active compounds or ingredients and "D" is the difference
between the average amount invoiced for the Combination Product and the average
amount invoiced for the other active compounds or ingredients. When determining
the average amount invoiced for a Combination Product using the 1-(C/C+D)
formula, the average amount invoiced will be calculated using data arising from
the most recent Calendar Quarter in which all of the elements of the formula are
known to Genentech.
In the event that the average amount invoiced for both the Collaboration
Product and the other active compounds or ingredients in the Combination Product
cannot be determined, the Gross Sales of the Collaboration Product shall be
negotiated in good faith by the Parties.
1.50 "IND" means a complete "Investigational New Drug Application" as
defined in 21 C.F.R. 312.3 and containing the content, and in the format,
required by 21 C.F.R. 312.23, or a corresponding application with a regulatory
agency in a country other than the United States, together with all additions,
deletions, and supplements thereto.
1.51 "IND Opt-In" has the meaning set forth in Section 4.6(a).
1.52 "IND Opt-In Period" means the period of time commencing on the Second
Restatement Date and [**].
1.53 "IND Package" means [**].
1.54 "Interest Rate" means the annual rate equal to the prime rate of
interest quoted in the Federal Reserve Bulletin H15, or successor source
thereto, on the last business day of the applicable Calendar Quarter prior to
the date on which such payment is due, plus [**].
1.55 "Joint Project Team" means the committee established and described in
Section 2.2.
1.56 "Knock-Out Mouse" means a mouse made by Lexicon pursuant to this
Agreement in which Lexicon has interrupted, disrupted, or deleted a specific
gene or portion thereof, homologous to a Project Gene, to inactivate the
function of such gene in such mouse.
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1.57 "Know-How" means all proprietary information, trade secrets,
techniques and data (including Confidential Information) of a Party that are
owned, controlled or licensed by such a Party as of the Effective Date or
thereafter during the term of this Agreement, including but not limited to,
discoveries, formulae, materials, practices, methods, knowledge, processes,
experience, test data (including pharmacological, toxicological and clinical
information and test data), analytical and quality control data, marketing,
pricing, distribution, cost and sales data or descriptions. Know-How may be made
prior to the Effective Date or after the Effective Date whether or not during
the course of, in furtherance of, and as a direct result of the activities of
one or more Parties hereunder. Know-How may be made by employees of Lexicon,
solely or jointly with a Third Person, by employees of Genentech, solely or
jointly with a Third Person, or jointly by employees of Lexicon and Genentech,
alone or together with a Third Person. Know-How does not include Patents.
1.58 "Lexicon Advanced Research Product" means a pharmaceutical
preparation, other than a Small Molecule Drug, that is ready for administration
to the ultimate consumer and that: (i) [**] or (ii) [**]. Following Section
3.7(b)(i), [**] Products and [**] Products, in each case, for use in the Lexicon
Field shall be considered Lexicon Advanced Research Products.
1.59 "Lexicon Advanced Research Protein Candidate" means a Protein
designated or selected as such pursuant to Section 3.7, and shall include
Derivative Proteins thereof.
1.60 "Lexicon Confidential Information" means all proprietary discoveries,
trade secrets, inventions (whether or not patentable), data, materials, and
information disclosed or provided by, or on behalf of, Lexicon to Genentech or
its designees in connection with this Agreement (including, but not limited to,
Lexicon Knock-Out Technology, Lexicon Product Patents and Know-How and Project
Patents and Know-How), other than Project Confidential Information, whether
provided prior to, or after, the Effective Date and whether provided orally,
electronically, visually, or in writing, except such discoveries, trade secrets,
inventions, materials, data, or information that Genentech can demonstrate,
through its contemporaneous written records:
(i) was known to Genentech or to the public prior to Lexicon's
disclosure hereunder;
(ii) became known to the public, after Lexicon's disclosure hereunder,
other than through an unauthorized act of Genentech or of any
person to whom Genentech disclosed such information;
(iii) was subsequently disclosed to Genentech by a person having
lawful possession of, and a legal right to disclose without any
restrictions, such information; or
(iv) was developed by Genentech without use, and independent, of
Lexicon Confidential Information.
1.61 "Lexicon Field" means all human or animal healthcare applications
including, without limitation, the diagnosis, prevention and treatment of
diseases or conditions, other than applications in the Genentech Retained Field.
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1.62 "Lexicon Knock-Out Technology" means all Patents and Know How which
are (i) owned, controlled or licensed by Lexicon as of the Effective Date or
created or acquired by Lexicon during the course of this Agreement and (ii)
related to a process or method used in the creation or generation of Knock-Out
or transgenic mice, including the process for creating Knock-Out Mice and
Overexpression Mice. "Lexicon Knock-out Technology" shall also include (A) the
Know-How consisting of the Knock-Out Mice and the Overexpression Mice, the
Know-How consisting of ES Cell Lines, and the Know-How consisting of biological
materials (such as nucleic acid sequences, RNA, DNA, organisms, proteins,
polypeptides, plasmids and vectors) used for the creation of such Knock-Out Mice
and Overexpression Mice, but not the Know-How related to the biological
materials and/or sequence information provided by Genentech to Lexicon or known
to Genentech (as evidenced by written records) prior to the Effective Date; and
(B) Patents claiming such Know How. "Lexicon Knock-Out Technology" shall not
include Patents claiming Know-How to the extent that such Patents claim methods
of making or methods of use of Proteins or nucleic acids encoding such Proteins.
1.63 "Lexicon Licensed Product(s)" means (i) Lexicon Advanced Research
Product(s), excluding Genentech IND Opted Product(s) and Genentech Phase II
Opted Product(s), (ii) [**] Product(s) for use in the Lexicon Field, (iii) [**]
Product(s) for use in the Lexicon Field, and (iv) Genentech Opt-Out Products; in
each case provided that such Lexicon Advanced Research Product, [**] Product or
[**] Product has not been converted to a Genentech Advanced Research Product in
accordance with Section 4.5, 11.2(b)(iv) or 11.2(a)(iv).
1.64 "Lexicon Pre-Existing Patents and Know-How" means all Patents
("Lexicon Pre-Existing Patents") and Know-How ("Lexicon Pre-Existing Know-How")
which (i) relate to a Project Gene designated as a Pre-Existing Project, (ii)
are (A) owned, controlled or licensed by Lexicon as of the Effective Date or (B)
created or acquired by Lexicon prior to expiration of this Agreement, and (iii)
which either (A) are conceived or created during the conduct of, or in
connection with, First Pass Phenotypic Analysis or Advanced Phenotypic Analysis
of a Project Gene, Pre-Clinical Development, Clinical Development, any
activities conducted under a Commercialization Plan, or [**], or (B) relate to a
product that [**]; provided in each case that Lexicon Pre-Existing Patents and
Know-How shall not include (a) Lexicon Knock-Out Technology, (b) Lexicon Product
Patents and Know-How, (c) Genentech Gene Patents and Know How, (d) Restricted
Rights Project Patents and Know-How, or (e) general Patents that cover
inventions that could be used for products other than a Collaboration Product,
including, without limitation, Patents covering manufacturing or process
(including purification process) inventions. Notwithstanding the foregoing,
Lexicon Pre-Existing Patents and Know-How shall exclude Patents and Know-How
specific to (i) [**], (ii) [**], and (iii) [**].
1.65 "Lexicon Product Licensee" means any Third Person which enters into an
agreement with Lexicon or its Affiliates involving the grant to such Third
Person of a license to sell a Lexicon Advanced Research Product.
1.66 "Lexicon Product Patents and Know-How" means all (i) Patents owned or
controlled by Lexicon that claim (A) a Lexicon Advanced Research Protein
Candidate corresponding to a Lexicon Licensed Product or a method of making or
using such Lexicon Advanced Research Protein Candidate or (B) a Lexicon Licensed
Product or a method of making or using a Lexicon Licensed Product, [**] (also
referred to herein as "Lexicon Product Patents")
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and (ii) Know How owned or controlled by Lexicon which relates to any of the
above (also referred to herein as "Lexicon Product Know How"); provided in each
case that Lexicon Product Patents and Know How shall not include (A) Lexicon
Knock-Out Technology, (B) Genentech Gene Patents and Know-How, (C) Genentech
Excluded IP, or (D) general Patents that cover inventions that could be used for
products other than a Collaboration Product, including, without limitation,
Patents covering manufacturing or process inventions.
1.67 "NDA" means a complete "application" or "New Drug Application" as
defined in 21 C.F.R. 314.3 and containing the content, and in the format,
required by 21 C.F.R. Part 314, Subpart B, or a corresponding application with a
regulatory agency in a country other than the United States, together with all
additions, deletions, and supplements thereto.
1.68 "Net Sales" means, with respect to a Collaboration Product, Gross
Sales of such Collaboration Product less Sales Returns and Allowances for such
Collaboration Product.
1.69 "Note Agreement" has the meaning set forth in Section 8.25.
1.70 "Operating Profits (Losses)" has the meaning set forth in the
Financial Appendix.
1.71 "Overexpression Analysis" has the meaning set forth in Section 3.8.
1.72 "Overexpression Mouse" means a mouse made by Lexicon under this
Agreement in which Lexicon has overexpressed a specific gene or portion thereof,
homologous to a Project Gene, [**], to exaggerate the function of such gene in
such mouse.
1.73 "Patent" means:
(i) a U.S. and corresponding foreign patent application (including
provisional application, division, re-filing, continuation,
continuation-in-part, reissue and re-examination thereof); and
(ii) any patent (including without limitation, any substitution,
extension, reissue, renewal, re-examination, patent of addition,
supplementary protection certificate and inventors' certificate)
that has issued or may issue in the future from any patent
application described in subsection (i) above.
1.74 "Phase I Clinical Trial" means, as to a specific Collaboration
Product, a well-controlled and lawful study in humans designed with the
principal purpose of preliminarily determining the safety of a pharmaceutical
product in healthy individuals or patients, and for which there are no primary
endpoints related to efficacy, as further defined in 21 C.F.R. Section
312.21(a); or similar clinical study in a country other than the United States.
1.75 "Phase II Clinical Trial" means, as to a specific Collaboration
Product, a well-controlled and lawful study in humans designed with the
principal purpose of determining initial efficacy and dosing of such
Collaboration Product in patients for the indication(s) being studied, as
further defined in 21 C.F.R. Section 312.21(b), or similar clinical study in a
country other than the United States.
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1.76 "Phase II Data Package" means the collection of data from a Phase II
Clinical Trial, and related materials, [**].
1.77 "Phase II Opt-In" has the meaning set forth in Section 4.6(b).
1.78 "Phase III Clinical Trial" means, as to a specific Collaboration
Product, a well-controlled and lawful study in humans of the efficacy and safety
of such Collaboration Product, which is prospectively designed to demonstrate
statistically whether such Collaboration Product is effective and safe for use
in a particular indication in a manner sufficient to file a BLA or NDA to obtain
Regulatory Approval to market and sell that Collaboration Product in the United
States or another country for the indication being investigated by the study, as
further defined in 21 C.F.R. Section 312.21.
1.79 "Pipeline Project" means a Project involving a Project Gene for which
Lexicon had already created or begun to create (i.e., to the stage of targeting
vector generation or beyond), prior to the proposal of such Project Gene by
Genentech, a Knock-Out Mouse involving a mouse or human gene sequence, as the
case may be, with [**] to the full length sequence of any Proposed Gene, as
determined at the protein level [**].
1.80 "Pre-Clinical Development" means the program of work to identify,
screen, select, develop and/or evaluate the safety and efficacy of a Genentech
Advanced Research Product sufficient to enable human clinical development under
an approved IND, such work to be conducted in accordance with the scope,
objectives and responsibilities set forth in a Pre-Clinical Development Plan.
1.81 "Pre-Clinical Development Budget" means a budget covering the
activities under the Pre-Clinical Development Plan, prepared and agreed to by
the Joint Project Team, and unanimously approved by the Steering Committee,
which budget shall set forth in reasonable detail the various Pre-Clinical
Development activities for which Pre-Clinical Development Costs will be
incurred. The Pre-Clinical Development Budget may be amended or modified from
time to time by the Joint Project Team, subject to [**].
1.82 "Pre-Clinical Development Costs" means the costs and expenses directly
related to Pre-Clinical Development incurred by Lexicon in accordance with the
approved Pre-Clinical Development Plan and the approved Pre-Clinical Development
Budget.
1.83 "Pre-Clinical Development Option" has the meaning set forth in Section
4.4(a).
1.84 "Pre-Clinical Development Plan" means the written plan, prepared by
the Joint Project Team, and [**], in accordance with Section 4.4(b), setting
forth in reasonable detail the various Pre-Clinical Development activities to be
undertaken by the Parties. The Pre-Clinical Development may be amended or
modified from time to time by the Joint Project Team, subject to [**].
1.85 "Pre-Existing Project" means a Pipeline Project involving a Project
Gene for which Lexicon had already [**] prior to the proposal of such Project
Gene by Genentech.
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1.86 "Progeny" means mice, including successive generations thereof, that
are produced or developed by Genentech, its Affiliates or Academic Collaborators
by breeding a Knock-Out Mouse with any other mouse (including, without
limitation, any other Knock-Out Mouse).
1.87 "Project" has the meaning set forth in Section 3.1(e).
1.88 "Project Confidential Information" means all discoveries, trade
secrets, inventions (whether or not patentable), data, materials, and
information created by either Party, or created jointly by both Parties, in
connection with this Agreement (including, but not limited to, Project Patents
and Project Know How), and whether provided orally, electronically, visually or
in writing, except such discoveries, trade secrets, inventions, materials, data,
or information that a Party can demonstrate, through its contemporaneous written
records:
(i) was known to such Party or to the public prior to its creation
hereunder;
(ii) became known to the public, after its creation hereunder, other
than through an unauthorized act of such Party or of any person
to whom such Party disclosed such information;
(iii) was subsequently disclosed to such Party by a person having
lawful possession of, and a legal right to disclose without any
restrictions, such information; or
(iv) was developed by such Party without use, and independent, of the
Project Confidential Information.
1.89 "Project Gene" has the meaning set forth in Section 3.1(e); provided
that a Rejected Proposed Gene shall not be a Project Gene.
1.90 "Project Materials" means, with respect to a Project, (i) the
Knock-Out Mice made in the course of such Project, [**], and, if applicable,
[**], (ii) the data from the First Pass Phenotypic Analysis of such Knock-Out
Mice, (iii) the data from any Advanced Phenotypic Analysis of such Knock-Out
Mice, (iv) the Overexpression Mice, if any, made in the course of such Project
and (v) the data, if any, from the Overexpression Analysis of such
Overexpression Mice.
1.91 "Project Patents and Know-How" means all Patents (also referred to
herein as "Project Patents") and Know-How (also referred to herein as "Project
Know-How") (i) created or acquired [**], (ii) which relate to a Project Gene,
Rejected Project Gene, Protein Candidate, Genentech Advanced Research Protein
Candidate, Lexicon Advanced Research Protein Candidate, Genentech Licensed
Product or a Collaboration Product, and (iii) which either (A) are conceived or
created during the conduct of, or in connection with, First Pass Phenotypic
Analysis or Advanced Phenotypic Analysis of a Project Gene, Pre-Clinical
Development, Clinical Development, any activities conducted under a
Commercialization Plan, or [**], or (B) relate to [**]; provided that Project
Patents and Know-How shall not include (A) Lexicon Knock-Out Technology, (B)
Genentech Gene Patents and Know-How, (C) Lexicon Pre-Existing Patents and
Know-How, (D) Restricted Rights Project Patents and Know-How, (E) Lexicon
Product Patents
Page 12
and Know-How, (F) Genentech Excluded IP, or (G) general Patents that cover
inventions that could be used for products other than a Collaboration Product,
including, without limitation, Patents covering manufacturing or process
(including purification process) inventions. Notwithstanding the foregoing, any
Know-How created or acquired by Genentech after a Project Gene has been
designated as a Rejected Project Gene (or Patents claiming any such Know-How)
shall not be included in the definition of Project Patents and Know-How and
shall not be subject to this Agreement. Notwithstanding the foregoing, Project
Patents and Know-How shall exclude Patents and Know-How specific to (i) [**],
(ii) [**], and (iii) [**].
1.92 "Proposed Gene" means a human gene sequence proposed by Genentech
under Section 3.1(a), (i) that Genentech believes is the full-length gene
sequence for a Protein and (ii) for which a patent application owned or
controlled by Genentech has been filed claiming such full-length human gene
sequence and the Protein believed to be produced by such gene.
1.93 "Protein" means a high molecular weight [**], polymer compound
composed of a variety of amino acids joined by peptide linkages, including
allelic variants thereof and post-translationally modified variants thereof
(e.g., glycosylated proteins) that is produced by a Proposed Gene or a Project
Gene.
1.94 "Protein Candidate" has the meaning set forth in Section 3.5, and
shall include Derivative Proteins thereof.
1.95 "Protein Candidate Product" means a pharmaceutical preparation, other
than a Small Molecule Drug, that is ready for administration to the ultimate
consumer and that: (i) [**] or (ii) [**].
1.96 "Regulatory Approval" means any and all approvals (including pricing
and reimbursement approvals), licenses, registrations or authorizations of any
kind of the FDA (or foreign equivalent) necessary for the marketing and sale of
a Collaboration Product in any country or other regulatory jurisdiction.
"Regulatory Approval" shall include, without limitation, approval granted with
respect to any BLA, NDA or foreign equivalent.
1.97 "Rejected Project Gene" means a Project Gene whose Protein is not
designated as (i) a Protein Candidate under Section 3.5(b), (ii) a Genentech
Advanced Research Protein Candidate under Section 3.7, or (iii) a Lexicon
Advanced Research Protein Candidate under Section 3.7; or is designated a
"Rejected Project Gene" pursuant to Section 3.5(c).
1.98 "Rejected Proposed Gene" means a Proposed Gene (i) that is rejected
under Section 3.1(b), 3.1(c) or 3.1(d), (ii) that is removed from the
collaboration under Section 3.1(f), (iii) that is deemed a Rejected Gene
pursuant to Section 3.2(a), (iv) for which the Steering Committee does not vote,
under Section 3.2(b), to proceed or (v) that is designated a Rejected Proposed
Gene under Section 3.3.
1.99 "Research Costs" has the meaning set forth in the Financial Appendix.
1.100 "Restricted Rights Project" means a Project involving a Project Gene
which is subject to [**] prior to the initial proposal of such Project Gene by
Genentech.
Page 13
1.101 "Restricted Rights Project Patents and Know-How" means all Patents
(also referred to herein as "Restricted Rights Project Patents") and Know-How
(also referred to herein as "Restricted Rights Project Know-How") which (i)
relate to a Project Gene designated as a Restricted Rights Project, (ii) are (A)
owned, controlled or licensed by Lexicon as of the Effective Date or (B) created
or acquired by Lexicon prior to expiration of this Agreement, and (iii) which
either (A) are conceived or created during the conduct of, or in connection
with, First Pass Phenotypic Analysis or Advanced Phenotypic Analysis of a
Project Gene, Pre-Clinical Development, Clinical Development, any activities
conducted under a Commercialization Plan, or [**], or (B) [**] or (y) [**];
provided in each case that Restricted Rights Project Patents and Know-How shall
not include (A) Lexicon Knock-Out Technology, (B) Lexicon Product Patents and
Know-How, (C) Genentech Gene Patents and Know-How, (D) general Patents that
cover inventions that could be used for products other than a Collaboration
Product, including, without limitation, Patents covering manufacturing or
process (including purification process) inventions, or (E) any Patent claims or
Know-How arising from work performed not in relation to this Agreement.
Notwithstanding the foregoing, Restricted Rights Project Patents and Know-How
shall exclude Patents and Know-How specific to (i) [**], (ii) [**], and (iii)
[**].
1.102 "Sales Returns and Allowances" means, with respect to a Collaboration
Product, the sum of (a) and (b), where: (a) is a provision, [**] for sales of
such Collaboration Product under GAAP as provided hereinabove for (i) cash and
quantity discounts or rebates on such Collaboration Product (other than price
discounts granted at the time of invoicing and which are included in the
determination of Gross Sales), (ii) credits or allowances given or made for
rejection or return of previously sold Collaboration Product or for retroactive
price reductions (including Medicare and similar types of rebates and
chargebacks), (iii) sales taxes, duties or other governmental charges levied on
or measured by the billing amount for such Collaboration Product, as adjusted
for rebates and refunds, (iv) charges for freight and insurance directly related
to the distribution of such Collaboration Product, to the extent included in the
invoice to the customer, and (v) credits for allowances given or made for
wastage replacement, indigent patient and any other sales programs agreed to by
the Parties for such Collaboration Product; and (b) is a periodic adjustment of
the provision determined in (a) to reflect amounts actually incurred by
Genentech or Lexicon, as the case may be, and their respective Affiliates and
Genentech Product Licensees and Lexicon Product Licensees, as applicable, for
items (i), (ii), (iii), (iv) and (v) in clause (a).
1.103 "Small Molecule Drug" means any pharmaceutical compound for the
treatment of any human or animal disease or condition, the active ingredient of
which is a synthetically prepared, or a naturally derived chemical compound
[**]; provided, however, that "Small Molecule Drug" specifically excludes any
compound which consists of or incorporates as an active ingredient a Protein, a
Derivative Protein, a nucleic acid oligomer, or an antibody or any fragment
thereof.
1.104 "Steering Committee" means the committee established and described in
Section 2.1.
1.105 "Supplementary Advanced Phenotypic Panel" has the meaning set forth
in Section 3.6(b).
Page 14
1.106 "Third Person" means any person or entity other than Lexicon,
Genentech or any Affiliate of Lexicon or Genentech.
1.107 "[**]" means the nucleotide sequence set forth in Exhibit H.
1.108 "[**] Product" means a pharmaceutical preparation, other than a Small
Molecule Drug, that is ready for administration to the ultimate consumer and
that: (i) contains as the active pharmaceutical ingredient a Protein produced by
[**] or (ii) directly modulates either a Protein produced by [**] or a nucleic
acid that encodes a Protein encoded by [**]; in each case excluding endogenous,
naturally-occurring ligands of such Protein produced by [**].
1.109 "[**]" means the nucleotide sequence set forth in Exhibit I.
1.110 "[**] Product" means a pharmaceutical preparation, other than a Small
Molecule Drug, that is ready for administration to the ultimate consumer and
that: (i) [**] or (ii) [**].
1.111 "Valid Co-Funded Patent Claim" means a Valid Claim of [**].
1.112 "Valid Advanced Research Patent Claim" means a Valid Claim of: (i)
[**]; (ii) [**]; or (iii) [**]. [**].
1.113 "Valid Claim" means a claim of an issued and unexpired Patent, which
has not been revoked, held unenforceable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal, and which has not been admitted to be
invalid or unenforceable through reissue or disclaimer or otherwise.
ARTICLE 2: GOVERNANCE OF COLLABORATION
2.1 Steering Committee.
(a) Creation of a Steering Committee. Within [**] days of the
Effective Date, the Parties shall establish a Steering Committee to oversee and,
as set forth herein, approve the Parties' activities under this Agreement. The
Steering Committee shall be comprised of [**], but each Party may change its
Steering Committee members at any time by giving prior written notice to the
other Party.
(b) Steering Committee Responsibilities. The Steering Committee shall
have the following responsibilities, as well as any additional responsibilities
expressly set forth in this Agreement:
(i) receiving and reviewing reports and data received from a Party
from time to time as set forth herein, including without
limitation the submission of Proposed Genes, data related to the
murine homology of Proposed Genes, results of the First Pass
Phenotypic Analysis, data and results related to any Advanced
Phenotypic analysis (including any Advanced Phenotypic Panels)
and Overexpression Analysis;
Page 15
(ii) receiving notices from the Parties as set forth herein, including
without limitation notices of delays or stalled research pursuant
to Section 3.3;
(iii) the designation of Project Genes and Protein Candidates under
Sections 3.1 and 3.5, respectively;
(iv) the selection of Project Genes for Advanced Phenotypic Analysis
and the Advanced Phenotypic Panels to be conducted on such
Project Genes under Section 3.6,
(v) the designation or selection, as applicable, of Genentech
Advanced Research Protein Candidates and Lexicon Advanced
Research Protein Candidates under Section 3.7;
(vi) overseeing and, as required, approving the actions of the Joint
Project Team with respect to Pre-Clinical Development, Clinical
Development and Co-Promotion;
(vii) coordinating the activities of the Parties hereunder;
(viii) developing and implementing a publicity strategy and policy for
the review and approval of press releases and publications in
accordance with Section 9.4;
(ix) settling disputes or disagreements that arise between the Parties
hereunder and as set forth in Article 14: ; and
(x) performing such other functions as appropriate to further the
purposes of this Agreement, as determined by the Parties.
(c) Steering Committee Decisions. All Steering Committee decisions
will be made by [**] of all the Steering Committee's members, except as
expressly stated otherwise in this Agreement. Each Steering Committee member
will have one vote, and a Steering Committee member need not be present in order
to vote; the Steering Committee member(s) of a Party that are present for, or
participating in, a decision shall have the authority to vote on behalf of the
Steering Committee member(s) of such Party who are not present for, or
participating in, such decision.
(d) Steering Committee Meetings. Within [**] days after the Effective
Date, the Steering Committee will hold an in-person organizational meeting to
establish the Committee's operating procedures. After such initial meeting, the
Steering Committee will meet at such other times as are unanimously agreed to by
the Steering Committee members, but no less than once each Calendar Quarter.
Such meetings may be in-person, via videoconference, or via teleconference,
provided that at least one meeting per Calendar Year shall be held in person.
The location of in-person Steering Committee meetings will alternate between
South San Francisco, California and The Woodlands, Texas. Each Party will bear
the expense of its respective Committee members' participation in Steering
Committee meetings. Minutes will be kept of all Steering Committee meetings.
Responsibility for keeping minutes will alternate
Page 16
between the Parties, beginning with Genentech. Meeting minutes will be sent to
each member of the Steering Committee for review as soon as practicable after a
meeting.
(e) Dissolution of the Steering Committee. The Steering Committee will
have no further responsibilities or authority under this Agreement, and will be
considered dissolved by the Parties, on the later of (i) [**], or (ii) [**].
2.2 Joint Project Teams.
(a) Creation of Joint Project Teams. The Parties shall, as required
under this Agreement, establish one or more "Joint Project Teams" to oversee
certain specified activities of the Parties, and have those responsibilities, as
set forth in this Agreement (including as set forth in Sections 4.4(b), 4.7 and
Article 5: ). In addition, the Parties may upon mutual agreement, or the
Steering Committee may by [**] vote, from time-to-time establish one or more
additional Joint Project Teams to oversee specific aspects of the Parties'
activities under this Agreement as appropriate to implement the objectives of
this Agreement. Any Joint Project Team shall consist of such number of
representatives of each Party as are reasonably necessary to undertake and
fulfill the responsibilities of the Joint Project Team as set forth in this
Agreement; provided that each Party shall have the right to appoint at least
[**] representatives to each Joint Project Team. The Joint Project Team is
intended to be an operational committee and each Party's representatives shall
include individuals with expertise and responsibilities in the areas of
preclinical development, clinical development, process sciences, manufacturing,
regulatory affairs, market research, product development, marketing, and/or
sales, as applicable to the stage of development or commercialization of a
Collaboration Product. One such representative from each Party shall be
designated as that Party's "Project Team Leader." Such Project Team Leaders will
act as the primary Joint Project Team contact for that Party. Either Party may
replace any or all of its representatives at any time upon written notice to the
other Party. Any member of the Joint Project Team may designate a substitute to
attend and perform the functions of that member at any meeting of the Joint
Project Team.
(b) Joint Project Team Decisions. With respect to decisions reserved
for the Joint Project Team, the Joint Project Team will operate by [**]. In the
event that the Joint Project Team members do not [**] with respect to a matter
that is within the purview of the Joint Project Team herein, such matter shall
be referred to the Steering Committee for resolution.
(c) Joint Project Team Meetings. With respect to each activity under
this Agreement for which the Joint Project Team is tasked with oversight, the
Joint Project Team shall hold an initial meeting as set forth herein. Such
initial meeting shall be in-person and shall include the establishment of the
Joint Project Team's operating procedures with respect to such activities. After
the initial meeting, a Joint Project Team will meet at such times as are agreed
to by the Joint Project Team members, but no less than once each Calendar
Quarter. Such meetings may be in-person, via videoconference, or via
teleconference, provided that at least one meeting per Calendar Year shall be
held in person. The location of in-person Joint Project Team meetings will
alternate between South San Francisco, California and The Woodlands, Texas, or
may take place at another agreed upon location. Each Party will bear the expense
of its respective Joint Project Team members' participation in Joint Project
Team meetings. Minutes will be kept of all Joint Project Team meetings.
Responsibility for keeping minutes will alternate
Page 17
between the Parties, beginning with Genentech. Meeting minutes will be sent to
each member of the Joint Project Team for review as soon as practicable after a
meeting.
(d) Disputes. Any dispute arising in the Joint Project Team that are
unable to be resolved within [**] after the matter is first referred to the
Joint Project Team shall be referred to the Steering Committee for resolution.
In such event, the decision of the Steering Committee shall be deemed the
decision of the Joint Project Team
(e) Dissolution of the Joint Project Team. Upon the expiration of [**]
after all of the activities for which a Joint Project Team was established have
been completed, the Joint Project Team will have no further responsibilities or
authority under this Agreement and will be considered dissolved by the Parties.
2.3 Accounting and Financial Reporting. Each Party will appoint [**] with
expertise in the areas of accounting, cost allocation, budgeting and financial
reporting. Such representatives shall work under the direction of the Steering
Committee, or as necessary the Joint Project Team, to provide services to and
consult with the Steering Committee or Joint Project Team in order to address
the financial, budgetary and accounting issues which arise in connection with
the Pre-Clinical Development Budget, Clinical Development, Co-Promotion and the
Financial Appendix. [**] may designate a substitute to perform such functions,
or may be replaced at any time by the represented Party by providing notice
thereof to the other Party.
ARTICLE 3: KNOCK-OUT MICE PROJECTS
3.1 Genentech Submission of Proposed Genes.
(a) Initial Submission of Proposed Genes. Genentech, within [**] days
after the Effective Date, will provide the Steering Committee with a written
list of up to five hundred (500) Proposed Genes, together with the date of
Genentech's initial Patent filing with regard to each such Proposed Gene.
(b) Delivery of Notice by Lexicon. Within [**] of the delivery by
Genentech of the list of Proposed Genes (or, with respect to replacement
Proposed Genes proposed by Genentech under Section 3.1(b), 3.1(c) or 3.1(f) or
Section 3.2(a), within [**] of the delivery by Genentech of notice to the
Steering Committee of such replacement), Lexicon will notify the Steering
Committee in writing as to whether or not: (i) to Lexicon's Actual Knowledge,
Lexicon's conducting the activities contemplated by this Agreement with regard
to such Proposed Gene would infringe patents or other intellectual property
rights under which Lexicon is not licensed through this Agreement or otherwise;
or (ii) Lexicon is working (or under contractual obligation to begin work) for,
or on behalf of, any other person or entity or for itself involving a mouse or
human gene sequence, as the case may be, with [**] to any Proposed Gene, as
determined at the protein level using [**]. If so, Lexicon shall additionally
notify Genentech which Proposed Gene(s) are the subject of such patents or
intellectual property rights or such work, as the case may be, and whether such
work is under an exclusive or non-exclusive license or arrangement for any
Proposed Gene. Any Proposed Gene for which Lexicon is working for a Third Person
under an exclusive license or arrangement shall automatically be deemed a
Rejected Proposed Gene; provided, however, that Genentech may propose [**], in
which case
Page 18
Lexicon will [**] and, if the Steering Committee elects to [**], the Parties
will [**]. In the event Genentech does not [**], Genentech shall have the sole
right, but not the obligation, to propose another Proposed Gene in the place of
such Rejected Proposed Gene for the Steering Committee's review and approval, by
notice to the Steering Committee within [**] of Lexicon's notice.
(c) Rejection of Proposed Genes by Lexicon; Proposal of Replacement
Proposed Genes by Genentech. Lexicon shall not be obligated to develop, produce
or deliver a Knock-Out Mouse related to a Proposed Gene where Lexicon reasonably
believes, with the advice of its counsel and the Steering Committee, that such
action would infringe the intellectual property rights of a Third Person. Such
Proposed Gene shall become a Rejected Proposed Gene and the Steering Committee
shall adopt an acceptable solution including, but not limited to, the
identification by Genentech of an alternative Proposed Gene. Lexicon shall
further have the sole right, but not the obligation, to reject any Proposed Gene
for which Lexicon reasonably believes, with the advice of its counsel and the
Steering Committee, that Genentech was not the first to file a patent
application, but only in cases where the Steering Committee reasonably believes
[**], by notice to the Steering Committee within the period specified in Section
3.1(b), in which case Lexicon shall have the right to designate such Proposed
Gene as a Rejected Proposed Gene. In such event, Genentech shall have the sole
right, but not the obligation, to propose another Proposed Gene in the place of
such Rejected Proposed Gene for the Steering Committee's review and approval, by
notice to the Steering Committee within [**] of Lexicon's notice.
(d) Removal of Proposed Genes by Genentech. Within [**] of Genentech's
receipt of Lexicon's notice under Section 3.1(b), Genentech shall inform Lexicon
which, if any, of the Proposed Genes referenced in Lexicon's notice (and not
automatically deemed a Rejected Proposed Gene under Section 3.1(b)) Genentech
elects to remove from the collaboration and, thereafter, all such removed
Proposed Genes shall constitute Rejected Proposed Genes. Genentech shall have no
right to propose a replacement Proposed Gene for any Proposed Gene that it
elects to remove from the collaboration under this Section 3.1(d).
(e) Designation of Project Genes. Following Genentech's notice
pursuant to Section 3.1(d), the remaining Proposed Genes shall constitute
"Project Genes" (and the work performed pursuant to this Article 3: with regard
to such Project Gene shall be deemed a corresponding "Project"), and be deemed
to be submitted to the collaboration for Lexicon to begin determining, as fully
described in Section 3.2(a), the murine gene that is homologous to each such
Project Gene. Except as set forth in this Section 3.1, Lexicon, acting through
the Steering Committee or otherwise, shall not have the ability to prevent the
submission of a Project Gene to the collaboration for Lexicon to conduct its
activities under Section 3.2(a) regarding such Project Gene. To the extent that
the total number of Project Genes is less than (i) 500 minus (ii) the number of
Proposed Genes removed by Genentech under Section 3.1(d), Genentech shall have
the right, during the period ending [**], to propose up to [**] additional
Proposed Genes, until the aggregate number of Project Genes is (x) 500 minus (y)
the number of Proposed Genes removed by Genentech under Section 3.1(d). Within
[**] following each designation of Proposed Genes as Project Genes hereunder,
Lexicon shall provide Genentech with a list of the Projects, if any, that are
Pipeline Projects and/or Pre-Existing Projects, and the stage of each such
Pipeline Project or Pre-Existing Project, as the case may be.
Page 19
(f) Removal and Replacement of Project Genes by Genentech. At any time
prior to [**], Genentech shall have the sole right, but not the obligation, to
remove such Project Gene and/or propose another Proposed Gene for the Steering
Committee's review and approval, by delivering notice thereof to the Steering
Committee; provided, however, that Genentech shall not be permitted to remove
more than [**] Project Genes pursuant to this Section 3.1(f); and provided,
further, that Genentech shall reimburse Lexicon for all reasonable costs and
expenses, including Allocable Overhead, incurred by Lexicon under this Agreement
prior to the date of Genentech's notice under this Section 3.1(f) in respect of
the Project Gene being removed. Any such removed Project Gene shall be
considered a Rejected Proposed Gene for purposes of this Agreement.
(g) Status as of Second Restatement Date. As of the Second Restatement
Date, the Parties have designated all Project Genes, and neither Party may
reject, remove or replace any such Project Gene under this Section 3.1.
3.2 Lexicon Identification of Homologous Murine Gene; Steering Committee
Review and Approval of Projects.
(a) Lexicon Efforts to Determine Homologous Murine Gene. For each
Project Gene submitted to the collaboration under Section 3.1(e), Lexicon will
use Commercially Reasonable Efforts to identify the homologous murine gene as
soon as practicable, and in any event within [**], after such Project Gene was
submitted to it, and will provide Genentech with [**]. To identify the
homologous murine gene, Lexicon will use its standard resources and, if
applicable, [**]. Upon identifying what it believes to be the homologous murine
gene(s) for a Project Gene, Lexicon will provide the Steering Committee with
written evidence of such gene's (or, if applicable, genes') homology. If Lexicon
is unable to identify a homologous murine gene for a Project Gene, Lexicon will
report all of the results related to such Project Gene obtained during the
course of its search to the Steering Committee as well, and such Project Gene
shall thereafter be deemed a Rejected Proposed Gene under this Agreement.
Genentech shall have the sole right, but not the obligation, to propose another
Proposed Gene in the place of such Rejected Proposed Gene for the Steering
Committee's review and approval, by notice to the Steering Committee within [**]
of Lexicon's report of its failure to identify a homologous murine gene.
(b) Steering Committee Review and Approval of Projects. The Steering
Committee will review the information provided by Lexicon under Section 3.2(a)
with respect to a Project Gene and will confirm that Lexicon has identified the
homologous murine gene, and therefore to proceed with such Project Gene under
Section 3.3 hereof. If the Steering Committee determines that Lexicon has not
identified a homologous murine gene for a Project Gene, such Project Gene shall
thereafter be deemed a Rejected Proposed Gene under this Agreement.
(c) Project Development Plan. Concurrently with its delivery of the
information contemplated by Section 3.2(a), Lexicon will provide the Steering
Committee (i) for Pipeline Projects, information (as set forth in Exhibit A)
regarding [**], and (ii) for Projects other than Pipeline Projects, [**]. With
regard to Pipeline Projects involving the use of an ES Cell Line generated
through Lexicon's gene trapping technology in the creation of a Knock-Out Mouse,
[**], Lexicon will [**]; provided that, [**]. For all Projects that are not
Pipeline Projects, Lexicon will [**].
Page 20
(d) Status as of Second Restatement Date. As of the Second Restatement
Date, the Steering Committee has reviewed and approved all Projects pursuant to
this Section 3.2.
3.3 Lexicon's Creation and Testing of Knock-Out Mice and ES Cell Lines.
Once the Steering Committee approves proceeding with a Project Gene under
Section 3.2(b), Lexicon, in accordance with the recommendation from Genentech as
to desired priority, will, at Lexicon's sole expense, use Commercially
Reasonable Efforts to perform the following activities on such Project: (i)
create and generate, [**], Knock-Out Mice using the Project Gene's homologous
murine gene; (ii) conduct a First Pass Phenotypic Analysis of such Knock-Out
Mice; and (iii) if requested by the Steering Committee pursuant to Section 3.8,
create Overexpression Mice for some or all Project Genes corresponding to
Protein Candidates. Lexicon agrees to use Commercially Reasonable Efforts to
perform and complete such activities on a Project [**] after the approval of a
Project Gene by the Steering Committee under Section 3.2(b). If a Project is
delayed or stalled due to technological or scientific difficulties, Lexicon will
so notify Genentech and the Steering Committee. The Parties will consult with
each other to determine whether such difficulties can be resolved or remedied.
The Steering Committee shall decide, based on input from Lexicon, whether such
Project's problems can be remedied within the scope of Commercially Reasonable
Efforts for such Project or whether to terminate such Project and designate such
Project Gene a Rejected Proposed Gene.
3.4 Review of First Pass Phenotypic Analysis. [**] Lexicon completes the
First Pass Phenotypic Analysis on each of the Project Genes, it will submit to
Genentech, through the Steering Committee, the data from such Projects.
3.5 Designation of Protein Candidates.
(a) Initial Designation of Protein Candidates. [**] shall have the
right to designate the Proteins produced by up to an aggregate of [**] as
"Protein Candidates;" provided that [**] shall make such designations no later
than [**]. [**] shall have the rights and obligations set forth in Article 4:
and Article 7: and otherwise in this Agreement with regard to such Protein
Candidates.
(b) Rejected Project Genes. Any Project Gene the Protein product of
which has not been designated as a Protein Candidate pursuant to this Section
3.5, shall be deemed a Rejected Project Gene for purposes of this Agreement,
unless and until such Rejected Project Gene has been designated a Genentech
Advanced Research Protein Candidate or a Lexicon Advanced Research Protein
Candidate pursuant to Section 3.7. Genentech shall have the rights and
obligations set forth in Article 6: and Article 7: with regard to such Rejected
Project Genes.
(c) [**]. From time to time following the designation of Protein
Candidates pursuant to Section 3.5(a), but no later than [**] following the
earlier of (i) [**] or (ii) [**], Lexicon shall be permitted to [**], [**].
3.6 Selection of Project Genes for Advanced Phenotypic Analysis.
(a) Submission for Advanced Phenotypic Analysis. In addition to the
completion of any Advanced Phenotypic Panels initiated on a Project Genes prior
to the Second
Page 21
Restatement Date in accordance with Section 3.6(c), the Steering Committee may
elect to submit for Advanced Phenotypic Analysis any Project Gene other than an
Excluded Gene. The timing pursuant to which the Steering Committee shall select
the Advanced Phenotypic Panels to be conducted with respect to each Project
Gene, other than an Excluded Gene, selected for Advanced Phenotypic Analysis
shall be as follows: (i) no later than [**] following the Second Restatement
Date, the Steering Committee may select up to [**] Advanced Phenotypic Panels to
be conducted by Lexicon on such Project Genes; (ii) no later than [**] following
receipt by Genentech of [**], provided that [**], the Steering Committee may
select up to [**] Advanced Phenotypic Panels to be conducted by Lexicon on such
Project Genes; and (iii) no later than [**] following receipt by Genentech of
[**], the Steering Committee may select up to [**] Advanced Phenotypic Panels to
be conducted by Lexicon on such Project Genes, or if the conditions set forth in
(ii) above are not met [**] Advanced Phenotypic Panels. In conjunction with the
Steering Committee's selection of Advanced Phenotypic Panels in accordance with
above, the Steering Committee shall designate the priority in which such
Advanced Phenotypic Analysis and Advanced Phenotypic Panels will be conducted.
For the avoidance of doubt, [**].
(b) Additional Advanced Phenotypic Analysis. At any time prior to [**]
following the Second Restatement Date, Genentech may, through the Steering
Committee, select supplementary Advanced Phenotypic Panels, in addition to those
selected under Section 3.6(a), to be conducted by Lexicon on a Project Gene
(each a "Supplementary Advanced Phenotypic Panel"). Genentech shall fund each
Supplementary Advanced Phenotypic Panel it selects in accordance with this
Section 3.6(b) as set forth in Section 8.4.
(c) Additional Assays within Certain Advanced Phenotypic Panels. With
respect to [**] Advanced Phenotypic Panels conducted prior to the Second
Restatement Date for which Lexicon delivered data (pursuant to Section
3.7(a)(i)), the Steering Committee may elect, at any time prior to [**]
following the Second Restatement Date, to proceed with additional assays within
up to [**] of such Advanced Phenotypic Panels. Such additional assays, if any,
will be [**].
(d) Activities Performed by Lexicon. Once the Steering Committee
elects to proceed with Advanced Phenotypic Analysis on a Project Gene under
Section 3.6(a) or 3.6(c), or Genentech selects a Supplementary Advanced
Phenotypic Panel pursuant to Section 3.6(b), Lexicon will, [**], use
Commercially Reasonable Efforts to complete such Advanced Phenotypic Analysis
within [**] of the Steering Committee's election or, as applicable, Genentech
selection. If any Advanced Phenotypic Analysis is delayed or stalled due to
technological or scientific difficulties, Lexicon will so notify Genentech and
the Steering Committee. The Parties will consult with each other to determine
whether such difficulties can be resolved or remedied. [**].
3.7 Selection of Genentech Advanced Research Protein Candidates and Lexicon
Advanced Research Protein Candidates.
(a) Delivery and Review of Advanced Phenotypic Analysis.
(i) Data Collected Prior to the Second Restatement Date. With respect
to [**].
Page 22
(ii) Data Collected Following the Second Restatement Date. Other than
as set forth in Section 3.7(a)(i) above, Lexicon will submit to
Genentech, through the Steering Committee, the data from all
Advanced Phenotypic Analysis as Lexicon completes the Advanced
Phenotypic Analysis on each such Project Gene. The Steering
Committee will meet to review such data and designate and select
"Genentech Advanced Research Protein Candidates" and "Lexicon
Advanced Research Protein Candidates" in accordance with Sections
3.7(b) and 3.7(c).
(b) Initial Selection of Advanced Protein Candidates. The
Steering Committee shall designate the Proteins produced by the Project Genes
upon which Advanced Phenotypic Analysis requested pursuant to Section 3.6(a) was
completed or for which Lexicon delivered data to Genentech pursuant to Section
3.7(a)(i) as either Genentech Advanced Research Protein Candidates, Lexicon
Advanced Research Protein Candidates or Draft Candidates in accordance with the
following rules and procedures:
(i) As of the Second Restatement Date, the Parties and Steering
Committee acknowledge that, as of the Second Restatement Date,
Lexicon has the right to develop and commercialize [**] Products
and [**] Products, each in the Lexicon Field subject to the
limitations set forth in Sections 4.2(b) and 4.5(a) and other
relevant provisions, and that within such Lexicon Field the
Proteins produced by [**] and [**] shall, as of the Second
Restatement Date, each be designated a Lexicon Advanced Research
Protein Candidate;
(ii) At each meeting, with respect to each Project Gene (other than
[**] and [**]) for which [**] reasonably determines that the data
from any First Pass Phenotypic Analysis, Advanced Phenotypic
Analysis or any other scientifically relevant data or information
regarding such Project Gene indicates a [**], the Protein
produced by such Project Gene shall be designated a Genentech
Advanced Research Protein Candidate; and
(iii) All other Project Genes upon which Advanced Phenotypic Analysis
was completed shall be designated "Draft Candidates" and be
subject to the selection process set forth in Section 3.7(c).
(c) Draft Selection. The Proteins produced by each Draft Candidate
shall be designated either a Genentech Advanced Research Protein Candidate or a
Lexicon Advanced Research Protein Candidate in accordance with the following: At
a meeting of the Steering Committee, such meeting to be held [**] following the
completion of [**], the Proteins produced by the remaining Draft Candidates not
previously selected shall be designated as Genentech Advanced Research Protein
Candidates or Lexicon Advanced Research Protein Candidates as follows and in the
following order: (A) Genentech shall select the Proteins encoded by [**] of the
Draft Candidates to be designated as Genentech Advanced Research Protein
Candidates; (B) Lexicon shall select the Proteins encoded by [**] of the
remaining Draft Candidates to be designated as Lexicon Advanced Research Protein
Candidates; (C) Genentech shall select the Proteins encoded by [**] of the
remaining Draft Candidates to be designated as Genentech
Page 23
Advanced Research Protein Candidates; (D) Lexicon shall select the Proteins
encoded by [**] of the remaining Draft Candidates to be designated as Lexicon
Advanced Research Protein Candidates; and (E) the Proteins encoded by all
remaining Draft Candidates shall be designated as Genentech Advanced Research
Protein Candidates.
3.8 Creation of Overexpression Mice; Overexpression Analysis. With respect
to any Project Gene, the Steering Committee may elect to have Lexicon produce an
Overexpression Mouse which overexpresses the Project Gene for further testing,
by voting to make such election no later than [**] following the Second
Restatement Date. Lexicon agrees, [**], to promptly use Commercially Reasonable
Efforts to create such Overexpression Mouse, and to promptly perform phenotypic
tests, observations, or analyses selected from the assays set forth on Exhibit K
("Overexpression Analysis") for up to [**]. Alternately, Genentech may elect to
perform Overexpression Analysis on any Overexpression Mouse itself. Once Lexicon
or Genentech, as the case may be, has completed such Overexpression Analysis on
a Project, it will submit to the Steering Committee for the Steering Committee's
review of the Project the data from such Overexpression Analysis. The Party
performing such Overexpression Analysis shall use Commercially Reasonable
Efforts to complete such Overexpression Analysis no later than [**] after the
creation of such Overexpression Mouse, subject to unanimous decision by the
Steering Committee for any subsequent extension of time, but in any event will
submit to the Steering Committee all available data related to such
Overexpression Analysis, whether complete or not, within such time period.
3.9 Reports; Consultation and Site Visits. Within [**] after the end of
each Calendar Quarter, Lexicon will provide each Steering Committee member with
a written report describing the status of its work on each Project, and, on a
monthly basis, Lexicon will provide a Genentech Steering Committee member with
the same monthly report generated for Lexicon's internal purposes. Upon
reasonable advance written notice from the Steering Committee or Genentech,
Lexicon will make persons working on its behalf on a Project available during
normal business hours for a reasonable number of consultations with the Steering
Committee or Genentech regarding such Project. Such consultations will either be
in-person at such person's place of employment or via videoconference or
teleconference. Upon reasonable notice, Genentech representatives may visit
during normal business hours the facilities where Lexicon is performing services
on Projects. All Genentech representatives will be advised of, and be bound by,
Genentech's confidentiality obligations in Article 10: and will follow such
security and facility access procedures as are reasonably designated by Lexicon.
Lexicon may require that at all times the Genentech representatives be
accompanied by a Lexicon representative.
3.10 Safeguards to Protect Confidentiality of Projects.
(a) Lexicon hereby agrees that each person working on a Project on its
behalf (whether as an employee, subcontractor, or otherwise) has or will, prior
to commencing work on a Project, have executed an instrument:
(i) assigning to Lexicon all of his, her, or its rights, title, and
interest in inventions or intellectual property arising during
the course, and as a result, of his, her, or its association with
Lexicon; and
Page 24
(ii) agreeing to abide by confidentiality and non-use restrictions
regarding Confidential Information and the existence and terms of
this Agreement no less stringent than Lexicon's confidentiality
and non-use obligations under Article 10:.
Lexicon also agrees to maintain appropriate security measures no less
stringent than measures that are customary in the industry.
(b) Genentech hereby agrees that each person working on a Project on
its behalf (whether as an employee, subcontractor, or otherwise) has or will,
prior to commencing work on a Project, have executed an instrument:
(i) assigning to Genentech all of his, her, or its rights, title, and
interest in inventions or intellectual property arising during
the course, and as a result, of his, her, or its association with
Genentech; and
(ii) agreeing to abide by confidentiality and non-use restrictions
regarding Confidential Information and the existence and terms of
this Agreement no less stringent than Genentech's confidentiality
and non-use obligations under Article 10:.
Genentech also agrees to maintain appropriate security measures no less
stringent than measures that are customary in the industry.
ARTICLE 4: DEVELOPMENT OF COLLABORATION PRODUCTS
4.1 Development of Protein Candidate Products and Genentech Advanced
Research Products.
(a) Exclusive Right to Develop and Commercialize. Genentech shall have
the sole right and responsibility for, and control over, developing and
commercializing Protein Candidate Products and Genentech Advanced Research
Products; provided, however, that with regard to Restricted Rights Projects,
nothing in this Section 4.1(a) will be deemed to grant Genentech rights beyond
the scope of the licenses granted to Genentech (or limit the rights of Lexicon,
its collaborators or licensees) with regard to such Restricted Rights Project.
(b) Transfer to Genentech of Lexicon Pre-Existing Know-How, Restricted
Rights Project Know-How and Project Know-How. Within [**] days after designation
of a Protein Candidate pursuant to Section 3.5 or a Genentech Advanced Research
Protein Candidate pursuant to Section 3.7, Lexicon will provide Genentech, to
the extent not previously provided, with a copy of all Lexicon Pre-Existing
Know-How, Project Know-How and Restricted Rights Project Know-How in Lexicon's
possession or control related to such Protein Candidate or Genentech Advanced
Research Protein Candidate.
(c) Development Costs. Genentech shall bear all costs and expenses
associated with, and shall have sole control over, developing and
commercializing Protein Candidate Products and Genentech Advanced Research
Products.
Page 25
4.2 Development and Commercialization of [**] Products and [**] Products.
(a) Genentech [**] Products and [**] Products. Genentech shall have
the sole right and responsibility for, and control over, and shall bear all
costs and expenses associated with, developing and commercializing [**] Products
and [**] Products in the Genentech Retained Fields. Within [**] after the Second
Restatement Date, Lexicon will provide Genentech, to the extent not previously
provided, with a copy of all Lexicon Pre-Existing Know-How, and if applicable
Project Know-How and Restricted Rights Know-How, in Lexicon's possession or
control related to Proteins produced by [**] and [**] and [**] Products and [**]
Products.
(b) Lexicon [**] Products and [**] Products. Subject to Sections
4.5(a) and 4.5(b), Lexicon shall have the sole right and responsibility for, and
control over, and shall bear all costs and expenses associated with, developing
and commercializing [**] Products and [**] Products in the Lexicon Fields;
provided, however, that nothing in this Section 4.2(b) will be deemed to grant
Lexicon rights beyond the scope of the licenses granted to Lexicon (or limit the
rights of Genentech, its collaborators or licensees) in Section 6.3. Within [**]
after the Second Restatement Date, Genentech will, subject to any Third Person
obligations of Genentech, provide Lexicon, to the extent not previously
provided, with a copy of all Project Know-How in Genentech's possession and
control related to Proteins produced by [**] and [**] and [**] Products and [**]
Products.
4.3 Development and Commercialization of Lexicon Advanced Research
Products. Subject to Sections 4.5, 4.6, 4.7, 4.8 and 4.15, and with respect to
[**] Products and [**] Products subject to the additional limitations set forth
in Sections 4.2(b), Lexicon shall have sole right and responsibility for, and
control over, and shall bear all costs and expenses associated with, developing
and commercializing Lexicon Advanced Research Products. Within [**] following
selection by Lexicon of a Lexicon Advanced Research Protein Candidate pursuant
to Section 3.7, Genentech will, subject to any Third Person obligations of
Genentech, provide Lexicon, to the extent not previously provided, with a copy
of all Project Know-How in Genentech's possession and control related to such
Lexicon Advanced Research Protein Candidate and relevant to Lexicon's further
development of Lexicon Advanced Research Products corresponding to such Lexicon
Advanced Research Protein Candidates.
4.4 Option for Pre-Clinical Development by Lexicon of a Genentech Advanced
Research Product.
(a) Pre-Clinical Development Option. Genentech shall have the option
("Pre-Clinical Development Option") to select up to [**] Genentech Advanced
Research Protein Candidates for which Pre-Clinical Development of a Genentech
Advanced Research Product will be conducted by Lexicon. In order to exercise the
Pre-Clinical Development Option, Genentech must provide Lexicon with written
notice thereof, which such notice shall identify the Genentech Advanced Research
Protein Candidate selected for Pre-Clinical Development by Lexicon.
(b) Responsibilities of the Joint Project Team. Within [**] following
receipt by Lexicon of Genentech's written notice under Section 4.4(a), the Joint
Project Team, established in accordance with Section 2.2, shall meet to initiate
its oversight of Pre-Clinical
Page 26
Development and Lexicon's implementation thereof. As part of its
responsibilities for oversight of any Pre-Clinical Development, the Joint
Project Team shall prepare and agree to a Pre-Clinical Development Plan and
Pre-Clinical Development Budget governing any Pre-Clinical Development to be
undertaken. The Joint Project Team shall present the Pre-Clinical Development
Plan and Pre-Clinical Development Budget to the Steering Committee for review
and approval. The Pre-Clinical Development Plan and Pre-Clinical Development
Budget shall require [**] approval of the Steering Committee.
(c) Conduct of Pre-Clinical Development.
(i) Performance of Pre-clinical Development Activities. Pre-Clinical
Development shall be conducted by Lexicon, subject to oversight
by the Joint Project Team, in accordance with the Pre-Clinical
Development Plan and the terms and conditions of this Agreement.
Lexicon shall use Commercially Reasonable Efforts to complete all
activities under the Pre-Clinical Development Plan within the
timeframes established therein. All activities under the
Pre-Clinical Development Plan shall be conducted at facilities
provided or procured by Lexicon that are in compliance with Good
Laboratory Practices and shall use such personnel, methods and
resources as shall be approved by the Joint Project Team, and all
in accordance with the Pre-Clinical Development Plan and the
terms and conditions of this Agreement. All Pre-Clinical
Development activities conducted by Lexicon shall be conducted in
a professional and competent manner, in compliance with GLP, all
Applicable Laws and in accordance with the terms and conditions
of this Agreement.
(ii) Records. Lexicon shall maintain complete and accurate records, in
good scientific manner and in appropriate detail for [**], and
the Pre-Clinical Development Plan. Genentech shall have the
right, during normal business hours and upon reasonable notice,
to [**]. Lexicon shall maintain such records and the information
contained therein in confidence in accordance with Article 10: .
All such records shall be owned by and be the property of
Genentech. In addition, Lexicon shall maintain complete and
accurate records of all costs associated with any Pre-Clinical
Development activities.
(iii) Reports. [**], and as otherwise specified in the Pre-Clinical
Development Plan, Lexicon shall prepare and provide to the Joint
Project Team a written summary describing, in reasonable detail,
the status of Pre-Clinical Development, including all Know-How
conceived or reduced to practice in the course of any
Pre-Clinical Development activities.
(iv) Hazards. Lexicon [**] shall report to Genentech, and no later
than [**] following Lexicon's own notification or receipt of
knowledge thereof, of any findings associated with the use of any
Genentech Advanced Research Protein Candidate or associated
Genentech Advanced Research Product that may suggest significant
hazards, significant contraindications,
Page 27
significant side effects or significant precautions pertinent to
the safety of such Genentech Advanced Research Protein Candidate
or Genentech Advanced Research Product.
(v) Access. Representatives of Genentech, including Joint Project
Team members, may, upon reasonable notice during normal business
hours, (a) visit any facilities where Pre-Clinical Development
activities are being conducted, and (b) consult informally,
during such visits and by telephone, concerning Pre-Clinical
Development.
(d) Pre-Clinical Development Costs. Genentech shall be responsible for
[**] approved by the Steering Committee and set forth in the approved
Pre-Clinical Development Budget.
(i) Invoicing. Within [**], Lexicon shall submit to Genentech a
written invoice detailing the Pre-Clinical Development Costs [**]
for the performance of Pre-Clinical Development as detailed in
the Pre-Clinical Development Plan and the approved Pre-Clinical
Development Budget. In the event that [**].
(ii) Payment. Within [**] of receipt of an invoice issued pursuant to
Section 4.4(d)(i) [**], Genentech shall pay to Lexicon the
invoiced amount. Notwithstanding the foregoing, Genentech shall
not be obligated to assume any financial obligations that are not
expressly set forth and duly authorized by the Steering Committee
in the approved Pre-Clinical Development Budget, unless Lexicon
has obtained prior written authorization from Genentech for such
costs.
4.5 Diligent Development of Lexicon Advanced Research Protein Candidates.
(a) Development Progress of [**] and [**]. In addition to the
obligations set forth in Section 4.5(b), in the respective event that Lexicon
has [**] with a [**] Product and/or [**] [**], then, as applicable [**].
(b) Development Progress of Lexicon Advanced Research Products.
Lexicon shall use Commercially Reasonable Efforts to develop and commercialize
at least one Lexicon Advanced Research Product for each Lexicon Advanced
Research Protein Candidate. In the event that, with respect to a particular
Lexicon Advanced Research Protein Candidate, Lexicon has [**].
(c) Diligent Development of Lexicon Licensed Products. In addition to
Sections 4.5(a) and 4.5(b), prior to the expiration of the period in which
Genentech may exercise an IND Opt-In or Phase II Opt-In, Lexicon shall use
Commercially Reasonable Efforts to develop at least one Lexicon Licensed Product
for each Lexicon Advanced Research Protein Candidate corresponding thereto. In
the event that Lexicon fails to exercise Commercially Reasonable Efforts with
respect to the development of a particular Lexicon Licensed Product in
accordance with this Section 4.5(c), [**].
Page 28
4.6 Genentech Opt-In Rights.
(a) Pre-IND Opt-In.
(i) Pre-Clinical Information and IND Package. Lexicon shall, through
the Steering Committee, [**]. In addition, prior to submission to
the FDA of an IND with respect to the first Lexicon Advanced
Research Product corresponding to a particular Lexicon Advanced
Research Protein Candidate, Lexicon shall provide to Genentech a
complete copy of the IND Package for such Lexicon Advanced
Research Product, along with [**].
(ii) IND Opt-In Period. At any time prior to the expiration of the IND
Opt-In Period, Genentech shall have the option ("IND Opt-In") to
assume the sole right and responsibility for, and control over,
developing and commercializing such Lexicon Advanced Research
Product [**], subject to the financial obligations set forth in
Article 8: . In order to exercise the IND Opt-In, Genentech must
provide Lexicon with written notice thereof prior to the
expiration of the IND Opt-In Period.
(b) Phase II Opt-In. Within [**] following the later of: (i)
completion of the first Phase II Clinical Trial with respect to the first
Lexicon Advanced Research Product corresponding to a particular Lexicon Advanced
Research Protein Candidate [**], and (ii) completion of [**]; Lexicon shall
provide a complete copy of the corresponding Phase II Data Package to Genentech,
along with [**]. Within [**] following Genentech's receipt of the Phase II Data
Package and any other information required above, Genentech shall have the
option ("Phase II Opt-In") to assume the sole right and responsibility for, and
control over developing and commercializing such Lexicon Advanced Research
Product [**], subject to Lexicon's right to Co-Promote such Lexicon Advanced
Research Product as set forth in Article 5: and the financial terms set forth in
Article 8: . In order to exercise the Phase II Opt-In, Genentech must provide
Lexicon with written notice thereof within [**] following Genentech's receipt of
the Phase II Data Package.
(c) Reimbursement of Incurred Research Costs and Development Costs.
Genentech shall reimburse Lexicon for incurred Research Costs and Development
Costs as set forth in Section 8.9.
4.7 Development of Genentech IND Opted Products and Genentech Phase II
Opted Products.
(a) Oversight by Joint Project Team.
(i) Initial Meeting. Within [**] of Genentech's exercise of an IND
Opt-In or Phase II Opt-In, the Joint Project Team shall meet to
discuss the further development of the Genentech IND Opted
Product or Genentech Phase II Opted Product for which Genentech
has exercised its opt-in, the transition of control over such
development to Genentech, and Lexicon's role in such development.
Page 29
(ii) Purpose and Responsibilities. The purpose of the Joint Project
Team is to facilitate the exchange of information and the
coordination between the Parties relating to the development of
the Genentech IND Opted Product or Genentech Phase II Opted
Product for which Genentech has exercised its opt-in, and to
serve as a forum for each Party to keep the other Party updated
with regard to such development, including with respect to (i)
the commencement and progress of clinical trials, the results of
any clinical trials, and the strategy for obtaining Regulatory
Approval, and (ii) a comparison of the development efforts to
date as measured against the Clinical Development Plan.
(b) Clinical Development Plan.
(i) Initial Clinical Development Plan; Modifications. Within [**] of
the Joint Project Team's initial meeting pursuant to Section
4.7(a)(i), Genentech will create an initial Clinical Development
Plan which will address the further development of the Genentech
IND Opted Product or Genentech Phase II Opted Product subsequent
to Genentech's exercise of its IND Opt-In or Phase II Opt-In.
Genentech will update the Clinical Development Plan as needed to
address any changes in the plans for development and Regulatory
Approval.
(ii) Lexicon Review and Comment. Although Genentech shall be
responsible for the creation of the Clinical Development Plan,
Genentech, through the Joint Project Team, shall provide Lexicon
[**]. Genentech shall promptly inform Lexicon between meetings of
the Joint Project Team of significant changes to the Clinical
Development Plan and material events adverse to the development
of a Genentech IND Opted Product or Genentech Phase II Opted
Product.
(c) Development Responsibilities.
(i) Generally. The Parties intend and agree that the development,
filing for any Regulatory Approval, and commercialization
(subject to Lexicon's right to Co-Promote as set forth in Article
5:) of Genentech IND Opted Products and Genentech Phase II Opted
Products shall be controlled by Genentech. Without limiting the
generality of the foregoing, Genentech shall be responsible for
making and have authority to make all decisions, and undertake
any actions necessary as a result of such decisions, regarding
development (including additional preclinical and clinical
development and testing), selecting drug candidates and preparing
and filing NDAs, BLAs and any other applications for Regulatory
Approval. Notwithstanding the foregoing, Genentech shall provide
Lexicon [**].
(ii) Lexicon Development Activities. Without limiting the generality
of Section 4.7(c)(i), the Parties, through the Joint Project
Team, may agree that certain activities related to the
development and seeking of Regulatory
Page 30
Approval of Genentech IND Opted Products and Genentech Phase II
Opted Products be performed by Lexicon, provided, however, that
no such activities shall be allocated to Lexicon without the
prior consent of Lexicon. Lexicon shall perform all activities
allocated to Lexicon hereunder with commercially reasonable
efforts and in compliance with all Applicable Laws.
(iii) Cooperation. Each Party shall cooperate with and provide
reasonable support to the other Party in its conduct of any
activities in the development and seeking of Regulatory Approval
of Genentech IND Opted Products and Genentech Phase II Opted
Products, including any activities set forth in the Clinical
Development Plan. To the extent that both Lexicon and Genentech
are participating in the development of a Genentech IND Opted
Product or Genentech Phase II Opted Product, the parties shall
enter into an agreement governing the Parties' compliance with
Applicable Laws, including any requirements for the reporting of
adverse events (as provided in Title 21 of the Code of Federal
Regulations).
(iv) Transfer of Information and Regulatory Filings. Lexicon agrees to
transfer to Genentech all Lexicon Pre-Existing Know-How, Project
Know-How, Restricted Rights Know-How and Lexicon Product
Know-How, including any preclinical data, clinical data, assays
and associated materials, protocols, procedures and any other
information in Lexicon's possession or control, necessary or
useful to continue or initiate pre-clinical or clinical
development, or in seeking Regulatory Approval, of Genentech IND
Opted Products and Genentech Phase II Opted Products. Without
limiting the generality of the foregoing, upon Genentech's
request Lexicon shall assign to Genentech (i) all applications
and filings made with the FDA with respect to a Genentech IND
Opted Product or Genentech Phase II Opted Product, including any
IND and orphan drug designations, (ii) all agreements related to
the conduct of any clinical trial with respect to a Genentech IND
Opted Product or Genentech Phase II Opted Product, and (iii) all
agreements related to the manufacture, supply or distribution of
clinical supplies of a Genentech IND Opted Product or Genentech
Phase II Opted Product.
4.8 Diligent Development of Genentech IND Opted Products and Phase II Opted
Products. Following exercise of an IND Opt-In or Phase II Opt-In, as applicable,
and provided that Lexicon has not exercised a Lexicon Opt-Out with respect
thereto, Genentech shall use Commercially Reasonable Efforts to further develop
and commercialize at least one Genentech IND Opted Product or Genentech Phase II
Opted Product, as applicable, for each Lexicon Advanced Research Protein
Candidate corresponding thereto.
Page 31
4.9 Lexicon Opt-Out Rights.
(a) Lexicon Opt-Out. In the event that Genentech exercised either its
IND Opt-In or Phase II Opt-In with respect to those Lexicon Advanced Research
Products corresponding to a particular Lexicon Advanced Research Protein
Candidate and a Genentech Opt-Out has not been exercised with respect thereto,
Lexicon shall have the option ("Lexicon Opt-Out") to decline to participate in
the future development and commercialization and the sharing of costs and
profits relating to all such Lexicon Advanced Research Products in accordance
with either of the following:
(i) At any time, by providing Genentech with at [**] prior written
notice thereof. A Lexicon Opt-Out exercised in accordance with
this Section 4.9(a)(i) shall become effective [**] following
Genentech's receipt of Lexicon's written notice, or at
Genentech's option an earlier date selected by Genentech.
(ii) Upon [**], Lexicon shall have the option to exercise a Lexicon
Opt-Out by notifying Genentech in writing before [**]. A Lexicon
Opt-Out exercised in accordance with this Section 4.9(a)(ii)
shall become effective [**] of the Calendar Year following the
Calendar Year of exercise of the Lexicon Opt-Out, or at
Genentech's option an earlier date selected by Genentech.
(iii) [**], Lexicon shall have the option to exercise a Lexicon
Opt-Out by notifying Genentech in writing within [**] of the
delivery of [**]. If Lexicon does not elect to exercise such
option within such [**] period, it will forego its right to such
Lexicon Opt-Out for the remainder of that Calendar Year. A
Lexicon Opt-Out exercised in accordance with this Section
4.9(a)(iii) shall become effective [**] following Genentech's
receipt of Lexicon's written notice hereunder, or at Genentech's
option an earlier date selected by Genentech.
(b) Effect of Lexicon Opt-Out. Prior to the effective date of a
Lexicon Opt-Out, Lexicon shall remain responsible for, and if applicable
entitled to, its share of Research Costs, Development Costs and Operating
Profits (Losses) as set forth in Section 8.14. Following the effective date of
the Lexicon Opt-Out with respect to the applicable Genentech IND Opted Products
or Genentech Phase II Opted Products, Lexicon shall be entitled to receive [**].
(c) Transition. If Lexicon exercises a Lexicon Opt-Out and is
responsible for conducting activities under an applicable Development Plan, the
Parties will agree to a transition plan to transition such activities to
Genentech. Lexicon shall exercise Commercially Reasonable Efforts in undertaking
any activities under a transition plan and shall be obligated to undertake such
activities for no less than [**] after the applicable Lexicon Opt-Out is
effective, unless [**]. The transition plan shall include a plan for the
reimbursement of the direct costs of Lexicon's activities under a Development
Plan and in accordance with a transition plan and actually incurred by Lexicon
following the effective date of an applicable Lexicon Opt-Out.
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4.10 Genentech Opt-Out.
(a) Genentech Phase II Opted Product.
(i) In the event [**], Genentech shall be considered to have
opted-out with respect to the further development and
commercialization of that particular Genentech Phase II Opted
Product and the sharing of costs and profits relating to such
Genentech Phase II Opted Product ("Genentech Opt-Out"). A
Genentech Opt-Out shall become effective [**] following [**].
Prior to the effective date of the Genentech Opt-Out, Genentech
shall remain responsible for, and if applicable entitled to, its
share of Operating Profits (Losses) as set forth in Section 8.14.
Following the effective date of the Genentech Opt-Out with
respect to the applicable Genentech Phase II Opted Product,
Genentech shall be entitled to receive [**].
(ii) [**], Genentech agrees to transfer to Lexicon all Lexicon
Pre-Existing Know-How, Project Know-How, and Restricted Rights
Know-How, including any preclinical data, clinical data, assays
and associated materials, protocols, procedures and any other
information in Genentech's possession or control, necessary or
useful to continue or initiate pre-clinical or clinical
development, or in seeking Regulatory Approval, of such Genentech
Phase II Opted Product. Without limiting the generality of the
foregoing, upon Lexicon's request Genentech shall assign to
Lexicon (i) all applications and filings made with the FDA with
respect to such Genentech Phase II Opted Product, including any
IND and orphan drug designations, (ii) all agreements related to
the conduct of any clinical trial with respect to such Genentech
Phase II Opted Product, and (iii) all agreements related to the
manufacture, supply or distribution of clinical supplies of such
Genentech Phase II Opted Product.
(b) Genentech IND Opted Product.
(i) [**].
(ii) [**].
(iii) [**].
4.11 Regulatory Filings. Genentech shall own all regulatory submissions,
including all applications for Regulatory Approval, for Genentech Licensed
Products. Subject to Lexicon's obligation to assign to Genentech pursuant to
Section 4.7(c)(iv), Lexicon shall own all regulatory submissions, including all
applications for Regulatory Approval, for Lexicon Licensed Products. Lexicon
shall assist Genentech and any Genentech Licensee in the preparation and filing
for any Regulatory Approval with respect to Genentech Licensed Products,
including by delivering all information in Lexicon's possession (in a complete
and accurate form) necessary or useful to complete and file any Regulatory
Approval for a Genentech Licensed Product. If Lexicon is responsible for
preparation of a portion of and filings for Regulatory Approval, or participates
Page 33
substantively in its preparation, then Lexicon shall have the right, at its
expense, to have observer status with regard to the parts of meetings and
primary communications with the FDA in which such portions are discussed.
4.12 Regulatory Meetings and Materials.
(a) Genentech Observation Right. Genentech shall have the right to
have one or more of its representatives observe Lexicon's substantive
discussions and meetings with FDA and other government and regulatory
authorities with respect to a Lexicon Licensed Product during the period
commencing upon the Effective Date and ending upon the expiration of the period
in which Genentech may exercise its IND Opt-In or Phase II Opt-In. Lexicon shall
have the right to initiate meetings with Regulatory Authorities independently of
Genentech during such period, provided that Genentech shall have the right to
observe in such discussions and meetings as set forth above.
(b) Lexicon Observation Right. Lexicon shall have the right to have
one or more of its representatives observe Genentech's substantive discussions
and meetings with FDA and other government and regulatory authorities with
respect to a Genentech IND Opted Product or Genentech Phase II Opted Product
during the period commencing upon Genentech's exercise of its IND Opt-In or
Phase II Opt-In, as applicable, and ending upon the date on which Lexicon
exercises its Lexicon Opt-Out with respect to such Genentech IND Opted Product
or Genentech Phase II Opted Product, if applicable. Genentech shall have the
right to initiate meetings with Regulatory Authorities independently of Lexicon
during such period, provided that Lexicon shall have the right to observe in
such discussions and meetings as set forth above.
4.13 Regulatory Documents.
(a) Copies to Genentech. During the period commencing upon the
Effective Date and ending upon the expiration of the period in which Genentech
may exercise its IND Opt-In or Phase II Opt-In, Lexicon shall provide Genentech
with a copy of any material documents or reports to be filed with the FDA or any
other government or regulatory authority in connection with development work
related to a Lexicon Licensed Product, and shall consider in good faith
Genentech's comments. To the extent Lexicon receives any material written or
oral communication from the FDA or any other government or regulatory authority
relating to a Lexicon Licensed Product during the period commencing upon the
Effective Date and ending upon the expiration of the period in which Genentech
may exercise its IND Opt-In or Phase II Opt-In, Lexicon shall, as soon as
reasonably practicable, notify Genentech and provide Genentech with a copy of
any written communication received by Lexicon or, if applicable, complete and
accurate minutes of such oral communication. All such documents, reports and
communications with respect to Lexicon Licensed Products provided pursuant to
this Section 4.13(a) shall be considered Lexicon Confidential Information.
(b) Copies to Lexicon. During the period commencing upon Genentech's
exercise of its IND Opt-In or Phase II Opt-In, as applicable, and ending upon
the date on which Lexicon exercises its Lexicon Opt-Out with respect to a
Genentech IND Opted Product or Genentech Phase II Opted Product, if applicable,
Genentech shall provide Lexicon with a copy of any material documents or reports
to be filed with the FDA or any other government or
Page 34
regulatory authority in connection with development work related to such
Genentech IND Opted Product or Genentech Phase II Opted Product, and shall
consider in good faith Lexicon's comments. To the extent Genentech receives any
material written or oral communication from the FDA or any other government or
regulatory authority relating to a Genentech IND Opted Product or Genentech
Phase II Opted Product during the period commencing upon Genentech's exercise of
its IND Opt-In or Phase II Opt-In, as applicable, and ending upon the date on
which Lexicon exercises its Lexicon Opt-Out with respect to a Genentech IND
Opted Product or Genentech Phase II Opted Product, if applicable, Genentech
shall, as soon as reasonably practicable, notify Lexicon and provide Lexicon
with a copy of any written communication received by Genentech or, if
applicable, complete and accurate minutes of such oral communication. All such
documents, reports and communications with respect to Genentech IND Opted
Products or Genentech Phase II Opted Products provided pursuant to this Section
4.13(b) shall be considered Genentech Confidential Information
4.14 Genentech Product Licensees. Genentech agrees to notify Lexicon [**]
of any (sub)license that it enters into with a Genentech Product Licensee, and
Genentech further covenants that any such (sub)license shall contain terms and
conditions consistent with Genentech's obligations and Lexicon's rights under
this Agreement.
4.15 Lexicon Product Licensees.
(a) Lexicon Product Licensees. Subject to the limitations set forth in
this Section 4.15, Lexicon agrees to notify Genentech [**] of any (sub)license
that it enters into with a Lexicon Product Licensee, and Lexicon further
covenants that any such (sub)license shall contain terms and conditions
consistent with Lexicon's obligations and Genentech's rights under this
Agreement.
(b) Prior to Opt-In Expiration. Prior to expiration of the period of
time in which Genentech has the right to exercise its IND Opt-In or Phase II
Opt-In under Section 4.6, Lexicon shall not enter into any agreement with a
Third Person relating to any Lexicon Advanced Research Protein Candidate or any
Lexicon Advanced Research Product without the prior written consent of Genentech
(such consent not to be unreasonably withheld).
(c) [**].
(i) [**].
(ii) [**].
ARTICLE 5: CO-PROMOTION OF GENENTECH PHASE II OPTED PRODUCTS
5.1 Lexicon Co-Promote Election. Lexicon shall have the right to elect to
Co-Promote in the Co-Promote Territory (as defined below) all Genentech Phase II
Opted Products corresponding to a particular Protein, except those Genentech
Phase II Opted Products that are [**] Products or [**] Products, for which
Lexicon has not exercised its Lexicon Opt-Out under Section 4.8, which right
shall be exercisable no later than [**] following the filing with the FDA of the
first application for Regulatory Approval with respect to the first such
Genentech Phase II Opted Product. In order to exercise such right to Co-Promote,
Lexicon must provide Genentech
Page 35
with written notice thereof no later than [**] following the filing with the FDA
of the first application for Regulatory Approval with respect to the first such
Genentech Phase II Opted Product. Such written notice shall include [**]; which
election shall become the "Co-Promote Territory." For those Genentech Phase II
Opted Products which Lexicon elects to Co-Promote in accordance with the
foregoing, the provisions of this Article 5: shall govern such Co-Promotion.
5.2 Commercialization Plan. Within [**] after submission of an application
for Regulatory Approval for a Genentech Phase II Opted Product (except those
Genentech Phase II Opted Products that are [**] Products or [**] Products),
Genentech shall submit to the Joint Project Team a detailed annual plan and
budget (the "Commercialization Plan") for the commercialization of such
Genentech Phase II Opted Product in the Co-Promote Territory. [**]. Following
review and comment of the initial Commercialization Plan by the Joint Project
Team, the Commercialization Plan shall be presented to the Steering Committee
for review and approval. Thereafter, [**] shall update the Commercialization
Plan on a yearly basis on or before the anniversary date of the applicable
Regulatory Approval and present the budget for such updated Commercialization
Plan to the Steering Committee for review and approval. [**].
5.3 Co-Promotion Responsibilities. [**]. Subject to the term and conditions
of this Article 5: and [**], Lexicon shall have the right to deploy, in the
Co-Promote Territory, a Co-Promotion sales force comprising a reasonable number
of sales representatives consistent with the percentage with which Operating
Profits (or Losses) are shared between Lexicon and Genentech, or as otherwise
[**] determined by the Steering Committee. [**] shall allocate markets and
accounts within the Co-Promote Territory to Lexicon's Co-Promotion sales force
in a reasonable manner in view of (i) the objective of maximizing Operating
Profits (Losses) and efficiency, and (ii) how Co-Promotion efforts by Lexicon
will benefit the collaboration by resulting in incremental profits.
5.4 Commercialization Efforts. Each Party, to the extent that such Party is
participating in the Co-Promotion of Genentech Phase II Opted Products, shall
use Commercially Reasonable Efforts in marketing Genentech Phase II Opted
Products in accordance with the Commercialization Plan developed by Genentech.
(a) Sales and Distribution. Unless otherwise agreed in writing,
Genentech shall have the sole responsibility for the following with respect to
Genentech Phase II Opted Products:
(i) Booking sales for and distributing Genentech Phase II Opted
Products. If Lexicon receives any orders for Genentech Phase II
Opted Products, it shall refer such orders to Genentech.
(ii) Handling all returns of Genentech Phase II Opted Products. If any
Genentech Phase II Opted Product is returned to Lexicon, it shall
promptly be shipped to the facility responsible for shipment of
such Genentech Phase II Opted Product in the country in question
to the attention of the "returned goods department" or another
location as may be designated by Genentech.
Page 36
(iii) Handling all recalls of Genentech Phase II Opted Products.
Lexicon will make available to Genentech, upon request, all of
its pertinent records which Genentech may reasonably request to
assist Genentech in effecting any recall.
(iv) Handling all aspects of order processing, invoicing and
collection, distribution, warehousing, inventory and receivables,
and collection of data of sales to hospitals and other end users
(e.g., DDD data).
(v) Handling all other customer service related functions, including
providing customer medical information.
(b) Marketing and Promotional Materials. All marketing and promotional
materials related to Genentech Licensed Products shall be prepared by Genentech.
Genentech shall be entitled to select any Third Persons involved in the
preparation of such materials.
(c) Training Program. Genentech shall develop training programs
relating to Genentech Phase II Opted Products for the sales forces of each
respective Party and for any Third Persons engaged in selling or promotion, and
shall reasonably assign responsibility to itself, Lexicon or a Third Person for
the preparation of materials and conduct of training. The Parties agree to
utilize such training programs on an ongoing basis to assure a consistent,
focused promotional strategy. The initial training shall be carried out at a
time which is mutually acceptable to the Parties, and which is prior to but
reasonably near the date on which the first Regulatory Approval is expected. As
additional members are added to the Parties' respective sales forces, training
will be given to groups of the newly selected members.
(d) Co-Promotion Compliance Responsibilities. Each Party Co-Promoting
a Genentech Phase II Opted Product in the Co-Promote Territory shall in all
material respects conform its practices and procedures relating to such
Co-Promotion to the Federal Food Drug and Cosmetic Act ("FFD&C Act"), the Public
Health Service ("PHS Act"), the Pharmaceutical Research and Manufacturers of
America ("PhRMA") Code of Pharmaceutical Marketing Practices (the "PhRMA Code")
and the American Medical Association ("AMA") Guidelines on Gifts to Physicians
from Industry (the "AMA Guidelines"), as the same may be amended from time to
time, and the rules and regulations promulgated under any of the foregoing, and
promptly notify the other Parties of and provide the other Parties with a copy
of any material correspondence or other reports with respect to the Co-Promotion
of a Licensed Product submitted to or received from the FDA, PhRMA or the AMA
relating to the FFD&C Act, the PHS Act, the PhRMA Code, or the AMA Guidelines.
5.5 Commercialization Costs. Except as otherwise provided herein, all costs
related to the commercialization of a Genentech Phase II Opted Product for which
Lexicon has not exercised its Lexicon Opt-Out under Section 4.8 shall be shared
by the Parties as set forth in Section 8.14.
5.6 Trademarks.
(a) Selection, Prosecution and Maintenance. All Genentech Phase II
Opted Products shall be sold under trademarks and trade dress selected and owned
by Genentech
Page 37
worldwide (collectively, "Genentech Trademarks"). Genentech shall control the
preparation, prosecution and maintenance of applications related to any and all
Genentech Trademarks.
(b) Enforcement and Defense. Each Party shall notify the other Party
promptly upon learning of any actual, alleged or threatened infringement of a
Genentech Trademark in the Co-Promote Territory, or of any unfair trade
practices, trade dress imitation, passing off of counterfeit goods, or like
offenses. Upon learning of such offenses, the Parties shall confer regarding the
defense of the Genentech Trademark. [**].
(c) Costs. All of the costs, expenses and legal fees associated with
preparing filing, prosecuting, registering and maintaining a Genentech
Trademark, as well as any action to maintain, protect or defend a Genentech
Trademark, and any recovery, shall be shared by the Parties as set forth in
Section 8.14 and the Financial Appendix.
5.7 Party Name on Licensed Packaging and Labeling. With respect to each
Genentech Phase II Opted Product marketed in the Co-Promote Territory and then
currently Co-Promoted by Lexicon, to the extent such Genentech Phase II Opted
Product's packaging or labeling identifies or otherwise references any of the
Parties, both Genentech and Lexicon shall be presented and described with equal
prominence and emphasis as having joined and participated in the development and
Co-Promotion thereof, as permitted by the Applicable Laws.
5.8 Termination of Co-Promotion.
(a) Breach of Agreement. [**].
(b) Lexicon Opt-Out. Lexicon's rights to Co-Promote a Genentech Phase
II Opted Product shall terminate upon Lexicon's exercise of its Lexicon Opt-Out
with respect to such Genentech Phase II Opted Product, and such termination
shall become effective as set forth in Section 4.8. Upon termination of
Lexicon's right to Co-Promote a Genentech Phase II Opted Product pursuant to
this Section 5.7(b), the licenses granted in Section 6.4 shall immediately
terminate.
(c) [**]. [**].
(d) Transitional Assistance. Upon any termination of Lexicon's
Co-Promotion rights in accordance with this Section 5.8, Lexicon covenants and
agrees to cooperate, and cause its employees and agents to cooperate, with
Genentech to enable Genentech to transition any Co-Promotion activities
performed by Lexicon to Genentech in a timely and orderly manner.
ARTICLE 6: GRANT OF LICENSE RIGHTS
6.1 Exclusive License under Lexicon Pre-Existing Patents and Know-How and
Restricted Rights Project Patents and Know-How for the Research, Development and
Commercialization of Genentech Licensed Products. Subject to the terms of this
Agreement, Lexicon hereby grants to Genentech (i) an exclusive (even as to
Lexicon), world-wide right and license under the Lexicon Pre-Existing Patents
and Know-How and (ii), to the extent specified in the Parties' designation(s) of
Restricted Rights Project(s), an exclusive (even as to Lexicon) or
Page 38
non-exclusive, world-wide right and license under the Restricted Rights Project
Patents and Know-How, in each case to research, develop, make (or have made),
use, sell, offer for sale, and import Genentech Licensed Products in the Field.
Such license includes the right to grant sublicenses of all or part of such
rights without Lexicon's consent; provided that the grant of any such sublicense
shall be consistent with the terms and conditions of this Agreement and that no
such sublicense to a Genentech Product Licensee shall relieve Genentech of
primary responsibility for all payments and royalties due to Lexicon under
Article 8: with respect to Genentech Licensed Product(s) licensed to such
Genentech Product Licensee.
6.2 License under Lexicon Pre-Existing Patents and Know-How and Restricted
Rights Project Patents and Know-How for the Research, Development and
Commercialization of Products Other than Genentech Licensed Products in the
Field. Subject to the terms of this Agreement, Lexicon hereby grants to
Genentech a royalty-free, worldwide right and license under the Lexicon
Pre-Existing Patents and Know-How and, to the extent specified in the Parties'
designation(s) of Restricted Rights Project(s), the Restricted Rights Project
Patents and Know-How to research, develop, make (or have made), use, offer for
sale, sell, and import products (including, but not limited to Small Molecule
Drugs) other than Genentech Licensed Products and Lexicon Licensed Products for
use in the Field. Such right and license (i) shall be exclusive (even as to
Lexicon) under the Lexicon Pre-Existing Patents and Know-How with respect to
products in the Field other than Small Molecule Drugs, (ii) shall be exclusive
(even as to Lexicon) or non-exclusive under the Restricted Rights Project
Patents and Know-How, to the extent specified in the Parties' designation(s) of
Restricted Rights Project(s), with respect to products in the Field other than
Small Molecule Drugs and (iii) shall be non-exclusive with regard to Small
Molecule Drugs. Lexicon hereby grants Genentech the right to grant sublicenses
under the right and license granted by Lexicon pursuant to this Section 6.2, on
a Project Gene-by-Project Gene basis; provided, however, that with respect to a
Small Molecule Drug related to a Project Gene, without the prior written consent
of Lexicon, no such sublicense under the Lexicon Pre-Existing Patents or
Know-How or Restricted Rights Project Patents or Know-How may be granted to any
Third Person in the absence of (x) a corresponding license or sublicense of
right to a given Small Molecule Drug that directly modulates the Protein
produced by such Project Gene or Derivative Protein thereof and discovered,
researched and under bona fide commercial development (at least through the
stage of the demonstration of preclinical efficacy in animal studies) by
Genentech and (y) the license or sublicense of Patent rights pertaining thereto
owned by, licensed to or controlled by Genentech.
6.3 License to Lexicon for the Research, Development and Commercialization
of Lexicon Licensed Products. Subject to the terms of this Agreement, Genentech
hereby grants to Lexicon an exclusive (even as to Genentech), world-wide right
and license under the (i) Genentech Gene Patents and Know-How and (ii) Project
Patents and Know-How, in each case to research, develop, make (or have made),
use, sell, offer for sale, and import Lexicon Licensed Products in the Field,
except that such license shall be limited to the Lexicon Field with respect to
Lexicon Licensed Products which are [**] Products or [**] Products. Subject to
Section 4.15 such license includes the right to grant sublicenses of all or part
of such rights without Genentech's consent; provided that the grant of any such
sublicense shall be consistent with the terms and conditions of this Agreement
and that no such sublicense to a Lexicon Product Licensee shall relieve Lexicon
of primary responsibility for all payments and royalties due to
Page 39
Genentech under Article 8: with respect to Lexicon Licensed Product(s) licensed
to such Lexicon Product Licensee.
6.4 License to Genentech Under the Lexicon Product Patents and Know-How for
the Research, Development and Commercialization of Genentech Licensed Products.
Subject to the terms of this Agreement, Lexicon hereby grants to Genentech an
exclusive (even as to Lexicon, but subject to any sub-license granted to Lexicon
under Sections 6.5 and 6.6), world-wide right and license under the Lexicon
Product Patents and Know-How to research, develop, make (or have made), use,
sell, offer for sale, and import Genentech Licensed Products in the Field. Such
license includes the right to grant sublicenses of all or part of such rights
without Lexicon's consent; provided that the grant of any such sublicense shall
be consistent with the terms and conditions of this Agreement and that no such
sublicense to a Genentech Product Licensee shall relieve Genentech of primary
responsibility for all payments and royalties due to Lexicon under Article 8:
with respect to Genentech Licensed Product(s) licensed to such Genentech Product
Licensee.
6.5 Licenses for the Co-Promotion of Genentech Phase II Opted Products.
(a) Gene Patents and Know-How and Project Patents and Know-How.
Subject to the terms of this Agreement, Genentech hereby grants to Lexicon a
non-exclusive, non-transferable, non-sublicenseable, right and license under the
(i) Genentech Gene Patents and Know-How, (ii) Lexicon Pre-Existing Patents,
(iii) Restricted Rights Project Patents, (iv) Project Patents and Know-How and
(v) Lexicon Product Patents and Know-How (to the extent licensed to Genentech
pursuant to Section 6.4), in each case solely to the extent necessary to offer
for sale in the Co-Promote Territory Genentech Phase II Opted Products in the
Field in accordance with the Commercialization Plan and Article 5: , and in
accordance with the requirements of all applicable Regulatory Approvals.
(b) Genentech Trademarks. Subject to the terms of this Agreement,
Genentech hereby grants to Lexicon a non-exclusive, non-transferable,
non-sublicenseable, right and license to use the Genentech Trademarks solely in
connection with Lexicon's offering for sale in the Co-Promote Territory
Genentech Phase II Opted Products in the Field in accordance with the
requirements of the applicable Regulatory Approval, and to such limited extent
as set forth in the Commercialization Plan and Article 5: . All Genentech
Trademarks are and shall remain the sole and exclusive property of Genentech and
all use thereof and goodwill associated therewith shall inure to the benefit of
Genentech.
(i) Maintenance and Quality Control. Lexicon shall not prepare,
disseminate or otherwise make available any printed materials or
any other sales, marketing or promotional materials containing or
referencing any Genentech Trademark or Genentech Phase II Opted
Product without the prior written approval of Genentech. In the
event that Genentech reasonably determines that Lexicon is not
complying with the terms and conditions of this Agreement with
respect to the usage of Genentech Trademarks, or is otherwise
improperly using a Genentech Trademark, Genentech shall notify
Lexicon in writing, and Lexicon shall promptly correct such
improper usage.
Page 40
(ii) Termination of License. Genentech may terminate the license
granted in Section 6.4(b) immediately upon the written notice by
Genentech to Lexicon if Genentech, in its reasonable business
judgment, determines that there is any conflict with a Third
Person, or liability, that has arisen or could arise, from
Lexicon's use of a Genentech Trademark. The license granted in
Section 6.4(b) shall automatically and immediately terminate if
(i) Lexicon is prohibited by law or regulation from using a
Genentech Trademark, (ii) Lexicon fails to correct its use of a
Genentech Trademark in accordance with Section 6.4(b)(i), or
(iii) Lexicon's right to Co-Promote Genentech Phase II Opted
Products is terminated in accordance with Section 5.7. Upon the
occurrence of any of the foregoing events, Lexicon shall
immediately cease all use of the Genentech Trademarks.
6.6 Licenses for Lexicon Development of Genentech Licensed Products.
(a) Pre-Clinical Development. Subject to the terms of this Agreement,
Genentech hereby grants to Lexicon a non-exclusive, non-transferable,
non-sublicenseable, right and license under the (i) Genentech Gene Patents and
Know-How, (ii) Project Patents and Know-How, (iii) Lexicon Pre-Existing Patents
and Know-How and (iv) Restricted Rights Project Patents and Know-How, in each
case, as applicable, to research, develop and use Genentech Advanced Research
Products in the Field solely to the extent necessary for Lexicon to conduct
those activities specified in an approved Pre-Clinical Development Plan.
(b) Clinical Development. Subject to the terms of this Agreement,
Genentech hereby grants to Lexicon a non-exclusive, non-transferable,
non-sublicenseable, right and license under the (i) Genentech Gene Patents and
Know-How, (ii) Project Patents and Know-How, (iii) Lexicon Pre-Existing Patents
and Know-How, (iv) Restricted Rights Project Patents and Know-How and (v)
Lexicon Product Patents and Know-How (to the extent licensed to Genentech
pursuant to Section 6.4), in each case, as applicable, to research, develop and
use Genentech IND Opted Products and Genentech Phase II Opted Products in the
Field solely to the extent necessary to conduct those activities that Lexicon is
authorized to conduct under an approved Clinical Development Plan.
6.7 License under Project Patents and Know-How for the Research,
Development and Commercialization of Small Molecule Drugs in the Field. Subject
to the terms of this Agreement, Genentech hereby grants to Lexicon a
royalty-free, non-exclusive, worldwide right and license under those Project
Patents and Know-How created or acquired solely by Lexicon or jointly by Lexicon
and Genentech to research, develop, make (or have made), use, offer for sale,
sell, and import Small Molecule Drugs for use in the Field. Such right and
license shall be exclusive; provided that Genentech retains rights under the
Genentech Project Patents and Know How (i) to research, develop, make (or have
made), use, offer for sale, sell, and import Small Molecule Drugs for use in the
Field and (ii) to grant licenses to Third Persons under the Project Patents and
Know How to research, develop, make (or have made), use, offer for sale, sell,
and import Small Molecule Drugs for use in the Field in connection with (A) a
corresponding license or sublicense of right to a given Small Molecule Drug that
directly modulates the Protein produced by a Project Gene or Derivative Protein
thereof and discovered, researched and under bona fide commercial development
(at least through the stage of the demonstration of preclinical
Page 41
efficacy in animal studies) by Genentech and (B) the license or sublicense of
Patent rights pertaining thereto owned by, licensed to or controlled by
Genentech. Genentech hereby grants Lexicon the right to grant sublicenses under
the right and license granted by Genentech pursuant to this Section 6.7, subject
to the restrictions, if any, on Project Materials set forth in Section 6.9.
6.8 Non-Exclusive Research License Grant under Lexicon Knock-Out Technology
to Knock-Out Mice and Progeny. Subject to the terms of this Agreement and the
restrictions, if any, on Project Materials set forth in Section 6.9, Lexicon
hereby grants to Genentech a worldwide, non-exclusive right and license under
the Lexicon Knock-Out Technology to use, breed, cross-breed and have bred and
cross-bred Knock-Out Mice and Progeny, at the internal research facilities of
Genentech and its Collaborators or Contract Service Providers, for research
directed toward the discovery, identification, selection, characterization,
development or commercialization of products for use in the Field. Except as
provided in Section 6.14, Genentech agrees to use Knock-Out Mice and Progeny
solely for its own internal research purposes in accordance with the terms and
conditions of this Agreement, and not to use any Knock-Out Mice or Progeny for
any purposes for any Third Person, or to transfer, license the use of or make
available to any Third Person any Knock-Out Mice or Progeny.
6.9 Exclusivity Period for Project Materials. Notwithstanding the
provisions of Sections 6.2, 6.3 and 6.8:
(a) Lexicon shall not [**] unless [**] (and then only to the extent
permitted under Section 6.9(b) below); and
(b) Lexicon shall not provide Project Materials from a Project to any
Third Person before the expiration of (i) [**] following the submission to the
Steering Committee of the data from the First Pass Phenotypic Analysis for such
Project Gene in accordance with Section 3.4, for Project Genes that become
Rejected Project Genes, and (ii) [**] following the submission to the Steering
Committee of the data from the First Pass Phenotypic Analysis for such Project
Gene in accordance with Section 3.4, for Project Genes that become Protein
Candidates; provided that no such restriction shall apply to Project Materials
generated in the course of Projects that qualify as Pre-Existing Projects unless
Genentech shall have exercised the option specified below; provided, further,
that the restriction set forth in clause (ii) shall nevertheless apply to a
Pre-Existing Project in the event that, at the time such Project Gene becomes a
Protein Candidate, Lexicon has no obligation to a Third Person with respect to
such Pre-Existing Project or the Project Materials generated in the course
thereof. In addition to the foregoing, for Pre-Existing Projects with respect to
which Lexicon has no obligation to a Third Person, at any time prior to
designation of such Pre-Existing Project as a Protein Candidate, Genentech shall
have the option to obtain the foregoing exclusivity period by delivering notice
of such exercise to Lexicon, together with payment of the option fee specified
in Section 8.4; provided that such option is exercised at a time when Lexicon
has no obligation to a Third Person with respect to such Pre-Existing Project.
Such option fee shall be credited against next performance or milestone payment
payable by Genentech in the event the Project Gene to which such Pre-Existing
Project relates shall be designated as a Protein Candidate. Nothing herein shall
be deemed to restrict, at any time (except as provided in Section 6.10 below),
Lexicon's right to develop for a Third Person a transgenic or Knock-Out mouse
with a mutation in a Project
Page 42
Gene independently requested by such Third Person or provide such Third Person
with phenotypic data derived therefrom; provided that, [**].
6.10 Exclusivity Period for Specified Projects. At any time after the
initial designation of Project Genes under Section 3.1(e), Genentech may
designate as [**], by delivering written notice of such designations to Lexicon.
Except as may be independently requested under agreements with Lexicon in effect
on [**], Lexicon shall not [**] prior to the submission to the Steering
Committee of the data from the First Pass Phenotypic Analysis for such Project
Gene in accordance with Section 3.4.
6.11 Reservation of Rights. Notwithstanding the non-exclusive rights and
licenses granted to Genentech under Sections 6.2 and 6.8, but subject to the
exclusive rights and licenses granted to Genentech under Sections 6.1 and 6.2
and the restrictions, if any, on Project Materials set forth in Section 6.9 and
[**] set forth in Section 6.10:
(a) Lexicon reserves the right under the Lexicon Knock-Out Technology
to make and use, and to permit others to use, (i) Project Materials and (ii)
other transgenic and Knock-Out Mice (including, without limitation, transgenic
and Knock-Out Mice with a mutation in the same gene as a Knock-Out Mouse or
Overexpression Mouse) and phenotypic data with respect thereto, including the
right to grant licenses with respect to any applicable intellectual property
rights for such purpose.
(b) Lexicon reserves the right under the Lexicon Pre-Existing Patents
and Know-How and Restricted Rights Project Patents and Know-How (i) to discover,
research, develop, make, have made, import, use, have used, offer for sale, sell
and have sold Small Molecule Drugs and (ii) to grant licenses to Third Persons
to discover, research, develop, make, have made, import, use, have used, offer
for sale, sell and have sold Small Molecule Drugs.
6.12 Limited License to Genentech Gene Patents and Know-How. For each
Project Gene, Genentech hereby grants Lexicon a non-exclusive, royalty-free
license under the Genentech Gene Patents and Know-How related to such Project
Gene solely for Lexicon to perform the following activities under this
Agreement:
(i) identify, under Section 3.2(a), the homologous murine gene;
(ii) create, under Section 3.3, Knock-Out Mice with such homologous
murine gene;
(iii) test, under Section 3.3 and, if applicable, Section 3.8, such
Knock-Out Mice;
(iv) conduct a First Pass Phenotypic Analysis on such Project Gene
under Section 3.3;
(v) conduct a Advanced Phenotypic Analysis on such Project Gene under
Section 3.6; and
(vi) create Overexpression Mice and do additional testing under
Section 3.6.
Page 43
Except as may be otherwise explicitly set forth in this Agreement, Lexicon
has no right to sublicense under this license grant, which shall be considered
personal to Lexicon. Such license will terminate with regard to a Project Gene
upon the earliest to occur of such Project Gene becoming a Rejected Proposed
Gene, a Rejected Project Gene, a Protein Candidate, Genentech Advanced Research
Protein Candidate, Genentech Licensed Product, or the completion of Lexicon's
activities under this Section 6.12.
6.13 No Grant of Other Technology or Patent Rights. Except as otherwise
expressly provided in this Agreement, under no circumstances shall a Party
hereto, as a result of this Agreement, obtain any ownership interest in or other
right to any technology, know-how, patents, patent applications, gene or genomic
sequence data or information, products, or biological materials of the other
Party, including items owned, controlled or developed by, or licensed to, the
other Party, or transferred by the other Party to said Party, at any time
pursuant to this Agreement.
6.14 Transfers to Collaborators or Contract Service Providers. Genentech
shall have the right to transfer a Knock-Out Mouse or Progeny made pursuant to
this Agreement to Collaborators or Contract Service Providers, provided that
such Collaborators or Contract Service Providers shall have entered into an
agreement with Genentech containing terms that expressly (i) prohibit the use of
such Knock-Out Mice or Progeny thereof for any purpose other than such
Collaborator's collaborative research or development with, or Contract Service
Provider's service for, Genentech in the Field and (ii) prohibit the transfer of
such Knock-Out Mice thereof by such Collaborator or Contract Service Provider to
any other Third Person. Within [**] of transferring a Knock-Out Mouse or Progeny
pursuant to this Section 6.14, , Genentech shall provide Lexicon with notice
thereof (which such notice and the information contained therein shall be deemed
Genentech Confidential Information).
6.15 License to Lexicon Isogenic Technology. On the Effective Date, Lexicon
and Genentech shall enter into the Sublicense Agreement attached hereto as
Exhibit B.
6.16 License to Genentech Excluded IP. At any time following [**] Lexicon
Licensed Product, Lexicon may, by giving written notice to Genentech, request a
license under the Genentech Excluded IP to make, use, sell, offer for sale and
import such Lexicon Licensed Product. Following receipt of such written notice,
Genentech and Lexicon shall [**] definitive license agreement in accordance with
the foregoing, and such agreement shall include provisions for (i) the grant by
Genentech to Lexicon of a non-exclusive license under the Genentech Excluded IP;
(ii) the payment by Lexicon to Genentech under such agreement, which payments
shall [**], of (A) [**], (B) [**], (C) [**], (D) [**], and (E) [**]; and (iii)
additional provisions to be negotiated in good faith by the Parties, provided
that the [**] for a license under [**] set forth in this Section 6.16.
ARTICLE 7: REQUEST FOR AND DELIVERY OF KNOCK-OUT MICE
7.1 Requests for Project Materials by Genentech.
(a) Knock-Out Mice. During the period of [**] following the selection
or designation of [**], Genentech shall have the option, subject to the terms
and conditions of this
Page 44
Agreement, to have Lexicon deliver to Genentech [**] of the Knock-Out Mice for a
Project Gene, by delivering written notice of such request to Lexicon.
(b) Genentech Project Materials and Project Know-How. During the
period beginning on [**] and ending on the later of (i) [**], (ii)[**], (iii)
[**], and (iv) [**], Genentech shall have the option, subject to the terms and
conditions of this Agreement, to have Lexicon deliver to Genentech Project
Materials and Project Know-How (to the extent not already provided), including
without limitation [**] for such Project Gene.
(c) [**] Knock-Out Mice. Genentech may also have, during such period,
Lexicon [**] and deliver to Genentech [**] of the Knock-Out Mice for such
Project Gene, subject to the payment of the fee specified in Section 8.7.
Lexicon shall have no further obligation to deliver Project Materials to
Genentech following such period; provided that, following such period, Genentech
may have Lexicon deliver to Genentech [**] to the Knock-Out Mice for such
Project Gene, to the extent any such materials remain available, subject to the
payment of the fee specified in Section 8.8.
7.2 Maintenance of Back-Up Colonies. For a period of at least [**] after
the delivery of a particular Knock-Out Mouse requested by Genentech under
Section 7.1, Lexicon shall retain a back-up colony of such Knock-Out Mice
sufficient to replace any mice shipped to Genentech under this Article 7: (i.e.,
at least [**]) which die or are otherwise unable to breed during or within [**]
after shipment to Genentech hereunder. Thereafter, until the expiration of [**]
following the submission to the Steering Committee of the data from the last
Advanced Phenotypic Analysis to be submitted to the Steering Committee in
accordance with Section 3.7, Lexicon shall retain [**], if requested by
Genentech. In the event Genentech requests that Lexicon maintain any such colony
for a period of more than [**] after the delivery of a particular Knock-Out
Mouse requested by Genentech under Section 7.1, Genentech shall pay Lexicon a
storage and maintenance charge of [**] for such requested line of Knock-Out Mice
for each [**] that Lexicon maintains such colony at Genentech's request.
7.3 Delivery Terms and Conditions. Lexicon shall be responsible for making
shipping arrangements for all Knock-Out Mice to be shipped to Genentech from
Lexicon; provided that Genentech shall be responsible for (i) paying all
shipment and delivery charges in connection therewith and (ii) obtaining, if
desired, and paying for any insurance for Knock-Out Mice shipped to Genentech
from Lexicon. Genentech shall also be responsible for complying with all
customs, regulations, veterinary handling procedures and protocols, and
obtaining any and all permits, forms or permissions that may be required for
Genentech to accept shipment of Knock-Out Mice from Lexicon. Lexicon shall ship
to Genentech at least [**], promptly following its receipt of written notice
that Genentech is prepared to accept shipment. [**]. If Genentech fails to
complete the necessary arrangements to accept shipment and provide such notice
within [**] after delivery of its request for such Knock-Out Mice pursuant to
Section 7.1, Genentech shall pay Lexicon a storage and maintenance charge of
[**] for such requested line of Knock-Out Mice [**] thereafter until Lexicon
receives such notice.
Page 45
ARTICLE 8: PAYMENTS
8.1 Up-Front Fees. As partial consideration for the work to be performed by
Lexicon under this Agreement, Genentech shall pay Lexicon the following fees:
(i) Nine Million Dollars (U.S.$9,000,000), which fee shall be payable
within ten (10) days of the Effective Date; and
(ii) [**], which fee shall be payable within ten (10) days of the
Second Restatement Date.
Lexicon acknowledges that, as of the Second Restatement Date, the fee set
forth in Section 8.1(i) has been timely paid by Genentech.
8.2 Performance Payments. Within [**] of achieving each of the research
milestones listed below, Genentech shall pay to Lexicon the following amounts:
[**]
Lexicon acknowledges that, as of the Second Restatement Date, the fees set
forth in Sections 8.2[**] have been timely paid by Genentech.
8.3 Advanced Research Funding. As partial consideration for the Advanced
Phenotypic Analysis performed by Lexicon under this Agreement, Genentech shall
pay Lexicon [**], payable in three (3) installments as follows: (i) [**] due
within thirty (30) days following the Second Restatement Date, (ii) [**] due
within thirty (30) days following the first anniversary of the Second
Restatement Date, and (iii) [**] due within thirty (30) days following the
second anniversary of the Second Restatement Date.
8.4 Supplementary Advanced Phenotypic Panel Funding. To the extent
Genentech selects any Supplementary Advanced Phenotypic Panels, Genentech shall
pay Lexicon funding of [**] for each Supplementary Advanced Phenotypic Panel so
selected, which funding shall be payable [**].
8.5 Option Fee. In the event Genentech exercises its option under Section
6.10 with respect to a Pre-Existing Project, Genentech shall pay Lexicon an
option fee of [**] concurrently with its delivery of its notice exercising such
option.
8.6 Overexpression Funding. To the extent the Steering Committee elects to
have Lexicon produce an Overexpression Mouse for more than [**] Project Genes,
Genentech shall pay Lexicon funding of [**] for each additional Project Gene for
which the Steering Committee elects to have Lexicon produce an Overexpression
Mouse, which funding shall be payable within [**] of such election.
8.7 Fee for [**] Knock-Out Mice. In the event Genentech requests, more than
[**] following the submission to the Steering Committee of the data from the
First Pass Phenotypic Analysis for a Project Gene in accordance with Section
3.4, or with respect to a Project Gene selected for Advanced Phenotypic Analysis
in accordance with Section 3.6 more than [**]
Page 46
following the submission to the Steering Committee of the data from the Advanced
Phenotypic Analysis in accordance with Section 3.7, that Lexicon [**], Genentech
shall pay Lexicon a fee of [**] concurrently with its delivery of such request.
8.8 Fee for Delivery of [**]. In the event Genentech requests, after the
later of (i) the date of submission to the Steering Committee of the data from
the last First Pass Phenotypic Analysis to be submitted under this Agreement,
(ii) [**] following the date of submission to the Steering Committee of the data
from the First Pass Phenotypic Analysis for a Project Gene, (iii) with respect
to a Project Gene selected for Advanced Phenotypic Analysis in accordance with
Section 3.6 submission to the Steering Committee of the data from the last
Advanced Phenotypic Analysis to be submitted under this Agreement, and (iv) with
respect to a Project Gene selected for Advanced Phenotypic Analysis in
accordance with Section 3.6 [**] following the submission to the Steering
Committee of the data from the Advanced Phenotypic Analysis for such Project
Gene, that [**], Genentech shall pay Lexicon a fee of [**] within [**] of
Lexicon's notice that [**].
8.9 Reimbursement of Incurred Research Costs and Development Costs Upon
Opt-In.
(a) IND Opt-In. Within [**] of Genentech's exercise of its IND Opt-In
with respect to a particular Lexicon Advanced Research Product, Lexicon may
provide Genentech with a written request for reimbursement of [**] of the
Research Costs and Development Costs incurred by Lexicon from the date on which
the Lexicon Advanced Research Protein Candidate corresponding to such Lexicon
Advanced Research Product was so designated pursuant to Section 3.7 through the
date upon which Genentech exercised its IND Opt-In for such Lexicon Advanced
Research Product.
(b) Phase II Opt-In for [**] Products and [**] Products. Within [**]
of Genentech's exercise of its Phase II Opt-In with respect to a particular
Lexicon Advanced Research Product which is either a [**] Product or a [**]
Product, Lexicon may provide Genentech with a written request for reimbursement
of [**] of the Research Costs and Development Costs incurred by Lexicon from the
date on which the Lexicon Advanced Research Protein Candidate corresponding to
such Lexicon Advanced Research Product was so designated pursuant to Section 3.7
through the date upon which Genentech exercised its Phase II Opt-In for such
Lexicon Advanced Research Product.
(c) Phase II Opt-In. Within [**] of Genentech's exercise of its Phase
II Opt-In with respect to a particular Lexicon Advanced Research Product which
is not a [**] Product or a [**] Product, Lexicon may provide Genentech with a
written request for reimbursement of [**] of the Research Costs and Development
Costs incurred by Lexicon from the date on which the Lexicon Advanced Research
Protein Candidate corresponding to such Lexicon Advanced Research Product was so
designated pursuant to Section 3.7 through the date upon which Genentech
exercised its Phase II Opt-In for such Lexicon Advanced Research Product.
(d) Supporting Documentation and Payment. Any request by Lexicon under
Section 8.9(a), 8.9(b), or 8.9(c) shall be accompanied by documentation
supporting any incurred Research Costs and Development Costs. Within [**]
following Genentech's receipt of such request and accompanying documentation,
Genentech shall pay Lexicon any amounts owed.
Page 47
8.10 Genentech Payments on Protein Candidate Products.
(a) Milestones. With respect to the first Protein Candidate Product
relating to a specified Protein Candidate to achieve the following development
milestones listed below, within [**] of achieving each such development
milestones, Genentech shall pay Lexicon the following amounts:
(i) [**] upon filing of the first IND for such Protein Candidate
Product;
(ii) [**] upon commencement (i.e., first patient enrolled) of the
first Phase III Clinical Trial for such Protein Candidate
Product; and
(iii) [**] upon receipt of the first Regulatory Approval of such
Protein Candidate Product.
TOTAL: $17,000,000
Genentech shall give Lexicon written notice of the achievement of any
milestone event no later than [**] after such achievement.
(b) Royalties. As consideration for its exclusive rights with respect
to Protein Candidate Products and the other rights provided and activities
performed by Lexicon hereunder, Genentech agrees to pay Lexicon a royalty of
[**] of Net Sales of each Protein Candidate Product by Genentech, its Affiliates
and Product Licensees, on a country-by-country basis, during the period
commencing with the first sale for use or consumption by the general public of a
Product in a country after Regulatory Approval in such country and ending on the
date that is [**] from the date of such first commercial sale of such Protein
Candidate Product in such country; provided that, in the event the worldwide Net
Sales of such Protein Candidate Product for which a royalty is payable to
Lexicon hereunder exceeds [**] in any Calendar Year, Genentech shall pay Lexicon
a royalty of [**] on that portion of such Net Sales of such Protein Candidate
Product that exceeds [**] in such Calendar Year.
8.11 Genentech Payments on [**] Products and [**] Products in the Genentech
Retained Fields.
(a) Milestones. With respect to the first [**] Product and the first
[**] Product to achieve the following development milestones listed below,
within [**] days of achieving each such development milestones, Genentech shall
pay Lexicon the following amounts:
(i) [**] upon filing of the first IND by Genentech for such [**]
Product and [**] Product for an indication in the Genentech
Retained Field;
(ii) [**] upon commencement (i.e., first patient enrolled) of the
first Phase III Clinical Trial by Genentech for an indication in
the Genentech Retained Field; and
Page 48
(iii) [**] upon receipt of the first Regulatory Approval of such [**]
Product and [**] Product by Genentech for an indication in the
Genentech Retained Field.
Genentech shall give Lexicon written notice of the achievement of any
milestone event no later than [**] after such achievement.
(b) Royalties. As consideration for its exclusive rights with respect
to [**] Products and [**] Products in the Genentech Retained Fields and the
other rights provided and activities performed by Lexicon hereunder, Genentech
agrees to pay Lexicon a royalty of [**] of Net Sales by Genentech, its
Affiliates and Genentech Product Licensees of each [**] Product and [**] Product
the making, using, selling, offering for sale, or import of which, in each case
for use in the Genentech Retained Field, would (but for ownership of, or a
license under, the relevant Patent) infringe a Valid Advanced Research Patent
Claim, on a country-by-country basis, commencing with the first sale for use or
consumption by the general public of such [**] Product or, as applicable, [**]
Product in the Genentech Retained Field in a country after Regulatory Approval
in such country.
8.12 Genentech Payments on Advanced Research Products.
(a) Milestones. With respect to the first Genentech Advanced Research
Product relating to a specified Genentech Advanced Research Protein Candidate to
achieve the following development milestones listed below, within [**] of
achieving each such development milestones, Genentech shall pay Lexicon the
following amounts:
(i) [**] upon filing of the first IND for such Genentech Advanced
Research Product;
(ii) [**] upon commencement (i.e., first patient enrolled) of the
first Phase III Clinical Trial for such Genentech Advanced
Research Product; and
(iii) [**] upon receipt of the first Regulatory Approval of such
Genentech Advanced Research Product.
Genentech shall give Lexicon written notice of the achievement of any
milestone event no later than [**] days after such achievement.
(b) Royalties. As consideration for its exclusive rights with respect
to Genentech Advanced Research Products and the other rights provided and
activities performed by Lexicon hereunder, Genentech agrees to pay Lexicon a
royalty of [**] of Net Sales by Genentech, its Affiliates and Genentech Product
Licensees of each Genentech Advanced Research Product, except those Genentech
Advanced Research Products for which Lexicon has satisfactorily completed
Pre-Clinical Development, the making, using, selling, offering for sale, or
import of which, in each case for use in the Field, would (but for ownership of,
or a license under, the relevant Patent) infringe a Valid Advanced Research
Patent Claim, on a country-by-country basis, commencing with the first sale for
use or consumption by the general public of a Genentech Advanced Research
Product in a country after Regulatory Approval in such country.
Page 49
(c) Royalties for Lexicon Completed Pre-Clinical Development. As
consideration for its exclusive rights with respect to Genentech Advanced
Research Products and the other rights provided and activities performed by
Lexicon hereunder, Genentech agrees to pay Lexicon a royalty of [**] of Net
Sales by Genentech, its Affiliates and Genentech Product Licensees of each
Genentech Advanced Research Product for which Lexicon has satisfactorily
completed Pre-Clinical Development the making, using, selling, offering for
sale, or import of which, in each case for use in the Field, would (but for
ownership of, or a license under, the relevant Patent) infringe a Valid Advanced
Research Patent Claim, on a country-by-country basis, commencing with the first
sale for use or consumption by the general public of a Genentech Advanced
Research Product in a country after Regulatory Approval in such country.
8.13 Genentech Milestone Payments for Genentech IND Opted Products and
Genentech Phase II Opted Products.
(a) IND Opt-In. With respect to the first Genentech IND Opted Product
relating to a specified Lexicon Advanced Research Protein Candidate for which
Lexicon has not exercised its Lexicon Opt-Out under Section 4.7 to achieve the
following development milestones listed below, within [**] of achieving each
such development milestones, Genentech shall pay Lexicon the following amounts:
(i) [**] upon filing of the first IND for such Genentech IND Opted
Product;
(ii) [**] upon commencement (i.e., first patient enrolled) of the
first Phase III Clinical Trial for such Genentech IND Opted
Product; and
(iii) [**] upon receipt of the first Regulatory Approval of such
Genentech IND Opted Product.
Genentech shall give Lexicon written notice of the achievement of any
milestone event no later than [**] after such achievement.
(b) Phase II Opt-In. With respect to the first Genentech Phase II
Opted Product relating to a specified Lexicon Advanced Research Protein
Candidate for which Lexicon has not exercised its Lexicon Opt-Out under Section
4.7, and for which a Genentech Opt-Out has not been exercised in accordance with
Section 4.10, to achieve the following development milestones listed below,
within [**] of achieving each such development milestones, Genentech shall pay
Lexicon the following amounts:
(i) [**] upon commencement (i.e., first patient enrolled) of the
first Phase III Clinical Trial for such Genentech Phase II Opted
Product; and
(ii) [**] upon receipt of the first Regulatory Approval of such
Genentech Phase II Opted Product.
Genentech shall give Lexicon written notice of the achievement of any
milestone event no later than [**] after such achievement.
Page 50
(c) Lexicon Opt-Out. With respect to the first Genentech IND Opted
Product or Genentech Phase II Opted Product relating to a specified Lexicon
Advanced Research Protein Candidate for which Lexicon has exercised its Lexicon
Opt-Out under Section 4.7, and for which a Genentech Opt-Out has not been
exercised in accordance with Section 4.10, to achieve the following development
milestones listed below, within [**] of achieving each such development
milestones, Genentech shall pay Lexicon the following amount:
(i) If a Genentech IND Opted Product, [**] upon receipt of the first
Regulatory Approval of such Genentech IND Opted Product; or
(ii) If a Genentech Phase II Opted Product, [**] upon receipt of the
first Regulatory Approval of such Genentech Phase II Opted
Product.
Genentech shall give Lexicon written notice of the achievement of any
milestone event no later than [**] after such achievement.
8.14 Share of Operating Profits (Losses) for Genentech IND Opted Products
and Genentech Phase II Opted Products.
(a) Generally. For all Genentech IND Opted Products and Genentech
Phase II Opted Products for which Lexicon has not exercised its Lexicon Opt-Out
under Section 4.7, and for which a Genentech Opt-Out has not been exercised in
accordance with Section 4.10, in lieu of royalty payments, Genentech and Lexicon
will share Operating Profits (Losses) as follows and as further detailed in the
Financial Appendix.
(i) IND Opted Products. For Genentech IND Opted Products, Genentech
will be allocated [**], and Lexicon will be allocated [**], of
the Operating Profits (Losses) for each Genentech IND Opted
Product.
(ii) Phase II Opted Products Other Than [**] and [**] Products . For
Genentech Phase II Opted Products other than [**] Products and
[**] Products, Genentech will be allocated [**], and Lexicon will
be allocated [**], of the Operating Profits (Losses) for each
Genentech Phase II Opted Product.
(iii) [**] and [**] Phase II Opted Products. For Genentech Phase II
Opted Products that are [**] Products or [**] Products, Genentech
will be allocated [**], and Lexicon will be allocated [**], of
the Operating Profits (Losses) for each Genentech Phase II Opted
Product.
(b) Financial Appendix. Terms describing calculations and reporting of
Operating Profits (Losses) are set forth in the Financial Appendix. The
Financial Appendix is applicable to revenues and expenses by a Party in the
United States. For revenues and expenses by a Genentech Product Licensee, the
definitions may need to be modified to comply with changes to GAAP or to comply
with ex-U.S. financial accounting standards. Any such modification, however,
will be consistent with the ratios set forth in Section 8.14(a) and with the
material concepts in the Financial Appendix.
Page 51
8.15 Genentech Royalties on Genentech Licensed Products on which Lexicon
Opts-Out. As consideration for its rights with respect to Genentech Licensed
Products for which Lexicon has exercised its Lexicon Opt-Out pursuant to Section
4.7, and for which a Genentech Opt-Out has not been exercised in accordance with
Section 4.10, and the other rights provided and activities performed by Lexicon
hereunder, Genentech agrees to pay Lexicon one of the following:
(i) if Lexicon exercised its Lexicon Opt-Out prior to enrollment of
the first patient in a Phase II Clinical Trial for such Genentech
Licensed Product, a royalty of [**] of Net Sales by Genentech,
its Affiliates and Genentech Product Licensees of each such
Genentech Licensed Product the making, using, selling, offering
for sale, or import of which, in each case for use in the Field,
would (but for ownership of, or a license under, the relevant
Patent) infringe a Valid Advanced Research Patent Claim or Valid
Co-Funded Patent Claim, on a country-by-country basis, commencing
with the first sale for use or consumption by the general public
of such Genentech Licensed Product in a country after Regulatory
Approval in such country.
(ii) if Lexicon exercised its Lexicon Opt-Out after enrollment of the
first patient in a Phase II Clinical Trial and before Regulatory
Approval of such Genentech Licensed Product, a royalty of [**] of
Net Sales by Genentech, its Affiliates and Genentech Product
Licensees of each such Genentech Licensed Product the making,
using, selling, offering for sale, or import of which, in each
case for use in the Field, would (but for ownership of, or a
license under, the relevant Patent) infringe a Valid Advanced
Research Patent Claim or Valid Co-Funded Patent Claim, on a
country-by-country basis, commencing with the first sale for use
or consumption by the general public of such Genentech Licensed
Product in a country after Regulatory Approval in such country.
(iii) if Lexicon exercised its Lexicon Opt-Out after Regulatory
Approval of such Genentech Licensed Product, a royalty of [**] of
Net Sales by Genentech, its Affiliates and Genentech Product
Licensees of each such Genentech Licensed Product the making,
using, selling, offering for sale, or import of which, in each
case for use in the Field, would (but for ownership of, or a
license under, the relevant Patent) infringe a Valid Advanced
Research Patent Claim or Valid Co-Funded Patent Claim, on a
country-by-country basis, commencing with the first sale for use
or consumption by the general public of such Genentech Licensed
Product in a country after Regulatory Approval in such country.
8.16 Lexicon Payments on Lexicon Licensed Products Other Than Genentech
Opt-Out Products.
(a) Milestones. With respect to the first Lexicon Licensed Product
relating to a specified Lexicon Advanced Research Protein Candidate, other than
those Lexicon Licensed
Page 52
Products that are Genentech Opt-Out Products, to achieve the following
development milestones listed below, within [**] of achieving each such
development milestones, Lexicon shall pay Genentech the following amounts:
(i) [**] upon receipt of the first Regulatory Approval of such
Lexicon Advanced Research Product; and
(ii) [**] upon the first anniversary of the first Regulatory Approval
of such Lexicon Advanced Research Product;
Lexicon shall give Genentech written notice of the achievement of any
milestone event no later than [**] after such achievement.
(b) Royalties. As consideration for its rights with respect to Lexicon
Licensed Products and the other rights provided hereunder, Lexicon agrees to pay
Genentech a royalty of [**] of Net Sales by Lexicon, its Affiliates and Lexicon
Product Licensees of each Lexicon Licensed Product, other than those Lexicon
Licensed Products that are Genentech Opt-Out Products, the making, using,
selling, offering for sale, or import of which, in each case for use in the
Field, would (but for ownership of, or a license under, the relevant Patent)
infringe a Valid Claim of a Project Patent, Genentech Gene Patent, Lexicon
Pre-Existing Patent or Restricted Rights Project Patent, on a country-by-country
basis, commencing with the first sale for use or consumption by the general
public of a Lexicon Licensed Product in a country after Regulatory Approval in
such country.
8.17 Lexicon Payments on Genentech Opt-Out Products.
(a) Milestones. With respect to the first Genentech Phase II Opted
Product relating to a specified Lexicon Advanced Research Protein Candidate for
which a Genentech Opt-Out has been exercised in accordance with Section 4.10 to
achieve the following milestones listed below, within [**] of achieving each
such milestones, Lexicon shall pay Genentech the following amounts:
(i) if the Genentech Opt-Out was exercised prior to filing with the
FDA of an application for Regulatory Approval of such Genentech
Phase II Opted Product, [**] upon receipt of the first Regulatory
Approval of such Genentech Phase II Opted Product; and
(ii) if the Genentech Opt-Out was exercised after the to filing with
the FDA of an application for Regulatory Approval of such
Genentech Phase II Opted Product, [**] upon receipt of the first
Regulatory Approval of such Genentech Phase II Opted Product;
Lexicon shall give Genentech written notice of the achievement of any
milestone event no later than [**] after such achievement.
(b) Royalties. As consideration for its rights with respect to
Genentech Phase II Opted Products for which a Genentech Opt-Out has been
exercised in accordance with Section
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4.10, and the other rights provided and activities performed by Genentech
hereunder, Lexicon agrees to pay Genentech one of the following:
(i) if the Genentech Opt-Out was exercised prior to filing with the
FDA of an application for Regulatory Approval of such Genentech
Phase II Opted Product, a royalty of [**] of Net Sales by
Lexicon, its Affiliates and Lexicon Product Licensees of each
such Genentech Phase II Opted Product, the making, using,
selling, offering for sale, or import of which, in each case for
use in the Field, would (but for ownership of, or a license
under, the relevant Patent) infringe a Valid Claim of a Genentech
Gene Patent, Lexicon Pre-Existing Patent, Lexicon Product Patent,
Project Patent, or Restricted Rights Project Patent, except for a
Valid Claim of any of the foregoing which claims an invention
that was conceived by or on behalf of Lexicon following the
effective date of the Genentech Opt-Out with respect to such
Genentech Phase II Opted Product, on a country-by-country basis,
commencing with the first sale for use or consumption by the
general public of such Genentech Phase II Opted Product in a
country after Regulatory Approval in such country.
(ii) if the Genentech Opt-Out was exercised after the to filing with
the FDA of an application for Regulatory Approval of such
Genentech Phase II Opted Product, a royalty of [**] of Net Sales
by Lexicon, its Affiliates and Lexicon Product Licensees of each
such Genentech Phase II Opted Product, the making, using,
selling, offering for sale, or import of which, in each case for
use in the Field, would (but for ownership of, or a license
under, the relevant Patent) infringe a Valid Claim of a Genentech
Gene Patent, Lexicon Pre-Existing Patent, Lexicon Product Patent,
Project Patent, or Restricted Rights Project Patent, except for a
Valid Claim of any of the foregoing which claims an invention
that was conceived by or on behalf of Lexicon following the
effective date of the Genentech Opt-Out with respect to such
Genentech Phase II Opted Product, on a country-by-country basis,
commencing with the first sale for use or consumption by the
general public of such Genentech Phase II Opted Product in a
country after Regulatory Approval in such country.
8.18 Single Milestone and Royalty Payment.
(a) Milestones. With respect to each set of milestone payments to be
made hereunder, only one set shall ever be due and payable per a particular
Protein or Project Gene, regardless of the number of Genentech Licensed Products
or Lexicon Licensed Products developed with respect to its such Protein or
Project Gene, or the number of indications pursued or approved or whether a
Genentech Licensed Product or Lexicon Licensed Product is discontinued after a
milestone payment has been made. All milestone payments payable hereunder are
non-refundable and non-creditable against any other payments hereunder.
(b) Royalties. Any royalty payable hereunder shall be payable only
once with respect to the same unit of Genentech Licensed Product or Lexicon
Licensed Product. In the
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event that more than one category of royalty payment applies to a single
Genentech Licensed Product or Lexicon Licensed Product, the highest applicable
royalty rate shall apply.
8.19 Payment of Royalties; Royalty Reporting. Within [**] after the end of
each [**], Genentech and/or Lexicon, as applicable, will pay (and/or cause its
Affiliates and/or Genentech Product Licensees or Lexicon Product Licensees to
pay) the royalty owed under this Agreement, if any, on applicable Net Sales
invoiced during such just-ended [**]. Such payment will be accompanied by the
report showing: (i) the Gross Sales and Net Sales of Collaboration Products sold
during the reporting period and the calculation of Net Sales from such Gross
Sales; (ii) the royalties payable in Dollars which shall have accrued hereunder
in respect of such Net Sales; (iii) withholding taxes, if any, required by law
to be deducted in respect of such royalties; (iv) the dates of the first
commercial sales of Collaboration Products in any country during the reporting
period, if applicable; and (v) the exchange rates used in determining the amount
of Dollars payable hereunder. If no royalty or payment is due for any royalty
period hereunder, the Party shall so report. Each Party shall keep, and shall
require its Affiliates and Genentech Product Licensees or Lexicon Product
Licensees, as applicable, to keep (all in accordance with GAAP), complete and
accurate records in sufficient detail to properly reflect all Gross Sales and
Net Sales and to enable the royalties payable hereunder to be determined.
8.20 U.S. Currency; Wire Transfers. All payments, including any interest
pursuant to Section 8.23, payable by a Party, its Affiliates and Product
Licensees to the other Party under this Agreement will be paid in Dollars and
will be made by wire transfer, in immediately available funds, to an account
designated by the receiving Party in writing.
8.21 Exchange Rates. For the purpose of computing Net Sales, Operating
Profits (Losses), Research Costs and Development Costs in a currency other than
Dollars, such currency shall be converted into Dollars in accordance with the
standard exchange rate conversion practices used by Genentech or Lexicon, their
respective Affiliates, Genentech Product Licensee or Lexicon Product Licensees,
as applicable, for financial accounting purposes using the conversion rate for
the relevant period as reported by Reuters Ltd on the last business day of the
relevant period.
8.22 Taxes. Any and all taxes levied on any payments from one Party to the
other Party under this Agreement will be the liability of, and paid by, the
Party making such payment. However, if Applicable Laws require the withholding
of such taxes, the Party will deduct such taxes from its payment to the other
Party and remit such withheld amount to the proper tax authority. The Party
remitting any such withheld amounts will provide proof of payment to the other
Party within [**] of such payment. This Agreement shall not be considered a
partnership for tax reporting purposes.
8.23 Interest on Overdue Payments. In the event a royalty or other payment
under this Agreement is not made within [**] of when due, such outstanding
payment will accrue interest (from the date such payment is due through and
including the date upon which full payment is made) at the Interest Rate.
Payment of accrued interest will accompany payment of the outstanding payment.
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8.24 Records; Audit Rights. Each Party will keep, and maintain for a period
of [**] following the end of a Calendar Year, accurate records in sufficient
detail to enable royalties, Operating Profits (Losses), Research Costs, and
Development Costs under this Agreement for such Calendar Year to be determined.
In addition, Lexicon shall retain such records for such longer period of time as
necessary to support an audit by Genentech of Research Costs and Development
Costs reimbursable by Genentech upon exercise of an IND Opt-In or Phase II
Opt-In pursuant to Section 4.6. A Party shall have the right, upon at least [**]
prior written notice to the other Party, not more than once in any Calendar
Year, through an independent certified public accountant acceptable to the other
Party (which acceptance shall not be unreasonably refused) to have access during
normal business hours to those records of the other Party as may be reasonably
necessary to verify the accuracy of the royalty reports furnished by such other
Party under this Agreement for the previous Calendar Years subject to audit
hereunder, or for the verification of royalties, Operating Profits (Losses),
Research Costs and Development Costs. Prior to implementing an audit, the
auditing Party agrees to submit an audit plan, including audit scope, to the
other Party for approval (which shall not be unreasonably withheld). The
independent certified public accountant will be instructed to provide an audit
report containing its conclusions regarding the audit, and specifying whether
the amounts paid were correct, and, if incorrect, the amount of any underpayment
or overpayment. The independent certified public accountant further will be
instructed to provide that audit report first to the Party being audited, and
will be further instructed to redact any of that Party's proprietary information
that is not relevant to the calculation of royalties, Operating Profits
(Losses), Research Costs and/or Development Costs prior to providing that audit
report to the other Party. That audit report shall be deemed to be Confidential
Information of the Party subject to the audit, and used only for purposes
germane to this Section. The Party being audited shall have the right, at its
own expense, to have its own independent certified public accountant review and
confirm the results of any audit performed by the auditing Party's accountants.
In the event that the Parties' accountants do not agree as to the results of the
audit, the Parties agree that such accountants shall attempt in good faith to
resolve any discrepancies between their results according to GAAP and the terms
of this Agreement. In the event that the Parties' accountants cannot resolve any
discrepancies within a reasonable amount of time, such dispute shall be resolved
by the Parties pursuant to Article 14:.
The Party requesting an audit is solely responsible for all the expenses of
an audit, unless the independent certified public accountant's report correctly
shows any underpayment exceeding [**] of amounts due hereunder. If the
independent certified public accountant's report correctly shows an underpayment
of more than [**], the Party being audited shall be responsible for the
reasonable expenses incurred by the auditing Party for the independent certified
public accountant's services.
If the independent certified public accountant's report correctly shows any
underpayment, the Party being audited shall remit to the other Party within [**]
after receipt of such report:
(i) the amount of such underpayment;
(ii) interest on the amount being paid in (i), which interest shall be
calculated pursuant to Section 8.23; and
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(iii) if such underpayment exceeds [**], the reasonable expenses
incurred by the auditing Party for the independent certified
public accountant's services.
If the independent certified public accountant's report correctly shows any
overpayment, such overpayment shall be fully creditable against future payments
due hereunder, or if no additional payments are due hereunder shall be
reimbursed to the overpaying Party within [**] of that Party's receipt of the
independent certified public accountant's report.
The calculation of royalties payable, Operating Profits (Losses), Research
Costs and Development Costs with respect to a Calendar Year will be binding and
conclusive on the Parties upon the expiration of [**] following the end of such
Calendar Year, unless (i) an audit of such Calendar Year, initiated before the
expiration of such [**] period, is on-going or (ii) a Party has, in good faith
and through written notice to the other Party, disputed such calculation before
the expiration of such [**] period or, if applicable, within [**] after receipt
of the audit report.
8.25 Convertible Note. Simultaneously with the execution and delivery of
the Original Agreement, the parties hereto entered into a Note Agreement (the
"Note Agreement"), dated as of the December 17, 2002, substantially in the form
attached as Exhibit C hereto. Under the Note Agreement, Genentech loaned Lexicon
Four Million Dollars (U.S.$4,000,000), on or before December 31, 2002, pursuant
to the terms and conditions set forth in such Note Agreement. Effective as of
the Second Restatement Date, the Parties have amended the Note Agreement, which
Amendment is attached hereto as Exhibit L.
ARTICLE 9: INTELLECTUAL PROPERTY RESPONSIBILITIES
9.1 Ownership.
(a) Lexicon shall own all Lexicon Knock-Out Technology, Lexicon
Pre-Existing Patents and Know-How, Restricted Rights Project Patents and
Know-How, and Lexicon Product Patents and Know-How. Genentech shall own all
Genentech Gene Patents and Know-How, Project Patents and Know-How, and Genentech
Excluded IP.
(b) Lexicon shall assign all right, title and interest in inventions
and Know-How encompassed within Project Patents and Know-How to Genentech by
taking, and causing its employees and agents to take, all necessary actions and
executing, and causing its employees and agents to execute, all necessary
documents to assign such rights, title and interest to Genentech within a
reasonable time after receiving notice from Genentech, but in no event later
than [**] after the filing of a patent application claiming an invention or
Know-How encompassed within Project Patents and Know-How. Moreover, Lexicon
covenants and agrees to cooperate, and cause its employees and agents to
cooperate, with Genentech to enable Genentech to enjoy to the fullest extent the
right, title and interest herein conveyed in the United States and foreign
countries. Such cooperation shall include prompt production of pertinent facts
and documents, giving of testimony, execution of petitions, oaths,
specifications, declarations or other papers, and other assistance all to the
extent deemed necessary or desirable by Genentech (i) for perfecting the right,
title and interest herein conveyed; (ii) for prosecuting any of said
applications; (iii) for filing and prosecuting applications for reissuance of
any of said patents;
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(iv) for interference or other priority proceedings involving said invention;
and (v) for legal proceedings involving said invention and any applications
therefore and any patents granted thereon, including without limitation
opposition proceedings, cancellation proceedings, priority contests, public use
proceedings, infringement actions and court actions; provided, however, that the
expense incurred by Lexicon, its employees and agents in providing such
cooperation shall be paid for by Genentech.
(c) Lexicon shall, from time to time, but no less than once per
Calendar Quarter, provide Genentech, to the extent not previously provided, with
a copy of all Lexicon Pre-Existing Know-How, Project Know-How and Restricted
Rights Project Know-How (with respect to Restricted Rights Project Know-How, to
the extent licensed to Genentech) in Lexicon's possession or control related a
Project Gene, Protein Candidate, Genentech Advanced Research Protein Candidate,
or Genentech Licensed Product, in each case which is not a Lexicon Advanced
Research Protein Candidate or Lexicon Licensed Product.
9.2 Patent Prosecution of Lexicon Owned Patents.
(a) Patentable Inventions. Lexicon shall be responsible, at its sole
discretion and expense, for filing, prosecuting, and maintaining Patents
claiming Lexicon Knock-Out Technology, Lexicon Pre-Existing Patents, Restricted
Rights Project Patents and Lexicon Product Patents; provided that Genentech
shall be responsible, at its sole discretion, for filing, prosecuting, and
maintaining Lexicon Pre-Existing Patents, Restricted Rights Project Patents and
Lexicon Product Patents to the extent such Patents are exclusively licensed to
Genentech.
(b) Review and Comment. Lexicon shall provide Genentech with a copy of
any patent application (including any provisional applications) within the
Lexicon Knock-Out Technology or Lexicon Product Patents specifically related to
a Genentech Licensed Product or a Lexicon Licensed Product prior to filing in
any jurisdiction, for review and comment by Genentech. Genentech shall provide
Lexicon with a copy of any patent application (including any provisional
applications) within the Lexicon Pre-Existing Patents, Restricted Rights Project
Patents and Lexicon Product Patents for which Genentech has responsibility under
Section 9.2(a) specifically related to a Lexicon Licensed Product or a Genentech
Licensed Product prior to filing in any jurisdiction, for review and comment by
Lexicon. Each Party with responsibility for filing, prosecuting, and maintaining
such Patents shall reasonably consider comments and suggestions provided in a
timely manner by the other Party. The other Party shall maintain any such
applications in confidence.
(c) Notice of Decision. If Lexicon decides not to file a patent
application claiming Lexicon Knock-Out Technology or Lexicon Product Know-How
specifically related to a Genentech Licensed Product or a Lexicon Licensed
Product in any country, it shall give Genentech prompt notice to this effect. If
Genentech decides not to file a patent application within the Lexicon
Pre-Existing Patents, Restricted Rights Project Patents and Lexicon Product
Patents for which Genentech has responsibility under Section 9.2(a) specifically
related to a Lexicon Licensed Product or a Genentech Licensed Product in any
country, it shall give Lexicon prompt notice to this effect.
Page 58
(d) Prosecution and Maintenance. Lexicon agrees to use reasonable
diligence to prosecute and maintain Patents claiming the Lexicon Knock-Out
Technology and Lexicon Product Patents specifically related to a Genentech
Licensed Product or a Lexicon Licensed Product it filed and to prosecute any
interference proceedings with respect thereto, unless it provides Genentech
notice under Section 9.2(c) or 9.2(e). Genentech agrees to use reasonable
diligence to prosecute and maintain Patents within the Lexicon Pre-Existing
Patents, Restricted Rights Project Patents and Lexicon Product Patents for which
Genentech has responsibility under Section 9.2(a) specifically related to a
Lexicon Licensed Product or a Genentech Licensed Product it filed and to
prosecute any interference proceedings with respect thereto, unless it provides
Lexicon notice under Section 9.2(c) or 9.2(e). Upon the other Party's request,
the Party responsible for prosecuting and maintaining any such Patent shall
provide the other Party with (i) a copy of communications with any patent office
with respect to such Patent and (ii) the opportunity to review and comment on
any or all such communications. The other Party shall provide its comments on
any such communication within [**] after receipt of such communication, and
should no comments be received by the Party responsible for prosecuting and
maintaining any such Patent on or before the thirty-first day, then it shall be
deemed that such other Party has no comment to make on such communication. The
Party responsible for prosecuting and maintaining any such Patent shall
reasonably consider comments and suggestions provided in a timely manner by the
other Party. Such other Party shall maintain any such communications in
confidence. All such communications provided to such other Party pursuant to
this Section 9.2 shall be sent to a person to be designated by such other Party
by written notice to the Party responsible for prosecuting and maintaining any
such Patent.
(e) Cessation of Prosecution or Maintenance. Lexicon shall give prior
written notice to Genentech of any decision by Lexicon to cease the prosecution
(including any interference) and maintenance of Patents claiming the Lexicon
Knock-Out Technology or Lexicon Product Patents specifically related to a
Genentech Licensed Product or a Lexicon Licensed Product and, in such case,
Genentech shall have the right at its sole discretion and expense to continue
such prosecution (including any interference) or maintenance. If Genentech
continues such prosecution or maintenance, Lexicon shall execute such documents
and perform such acts as may be reasonably necessary for Genentech to continue
such prosecution or maintenance. Genentech shall give prior written notice to
Lexicon of any decision by Genentech to cease the prosecution (including any
interference) and maintenance of Patents within the Lexicon Pre-Existing
Patents, Restricted Rights Project Patents and Lexicon Product Patents for which
Genentech has responsibility under Section 9.2(a) specifically related to a
Lexicon Licensed Product and, in such case, Lexicon shall have the right at its
sole discretion and expense to continue such prosecution (including any
interference) or maintenance. If Lexicon continues such prosecution or
maintenance, Genentech shall execute such documents and perform such acts as may
be reasonably necessary for Lexicon to continue such prosecution or maintenance.
9.3 Patent Prosecution of Genentech Owned Patents.
(a) Patentable Inventions. Genentech shall be responsible, at its sole
discretion and expense, for filing, prosecuting, and maintaining Genentech Gene
Patents, Project Patents and Genentech Excluded IP; provided that Lexicon shall
be responsible, at its sole
Page 59
discretion, for filing, prosecuting, and maintaining Project Patents to the
extent such Patents are exclusively licensed to Lexicon.
(b) Review and Comment. Genentech shall provide Lexicon with a copy of
any patent application (including any provisional applications) within the
Project Patents specifically related to a Lexicon Licensed Product or a
Genentech Licensed Product or Genentech Gene Patents specifically related to a
Lexicon Licensed Product prior to filing in any jurisdiction, for review and
comment by Lexicon. Lexicon shall provide Genentech with a copy of any patent
application (including any provisional applications) within the Project Patents
for which Lexicon has responsibility under Section 9.3(a) prior to filing in any
jurisdiction, for review and comment by Genentech. Each Party with
responsibility for filing, prosecuting, and maintaining such Patents shall
reasonably consider comments and suggestions provided in a timely manner by the
other Party. The other Party shall maintain any such applications in confidence.
(c) Notice of Decision. If Genentech decides not to file a patent
application within the Project Patents specifically related to a Lexicon
Licensed Product or a Genentech Licensed Product or Genentech Gene Patents
specifically related to a Lexicon Licensed Product in any country, it shall give
Lexicon prompt notice to this effect. If Lexicon decides not to file a patent
application within the Project Patents for which Lexicon has responsibility
under Section 9.3(a) in any country, it shall give Genentech prompt notice to
this effect.
(d) Prosecution and Maintenance. Genentech agrees to use reasonable
diligence to prosecute and maintain Project Patents specifically related to a
Lexicon Licensed Product or a Genentech Licensed Product and Genentech Gene
Patents specifically related to a Lexicon Licensed Product it filed and to
prosecute any interference proceedings with respect thereto, unless it provides
Lexicon notice under Section 9.3(c) or 9.3(e). Lexicon agrees to use reasonable
diligence to prosecute and maintain Patents within the Project Patents for which
Lexicon has responsibility under Section 9.3(a) it filed and to prosecute any
interference proceedings with respect thereto, unless it provides Genentech
notice under Section 9.3(c) or 9.3(e). Upon the other Party's request, the Party
responsible for prosecuting and maintaining any such Patent shall provide the
other Party with (i) a copy of communications with any patent office with
respect to such Patent and (ii) the opportunity to review and comment on any or
all such communications. The other Party shall provide its comments on any such
communication within [**] after receipt of such communication, and should no
comments be received by the Party responsible for prosecuting and maintaining
any such Patent on or before the thirty-first day, then it shall be deemed that
such other Party has no comment to make on such communication. The Party
responsible for prosecuting and maintaining any such Patent shall reasonably
consider comments and suggestions provided in a timely manner by the other
Party. Such other Party shall maintain any such communications in confidence.
All such communications provided to such other Party pursuant to this Section
9.3 shall be sent to a person to be designated by such other Party by written
notice to the Party responsible for prosecuting and maintaining any such Patent.
(e) Cessation of Prosecution or Maintenance. Genentech shall give
prior written notice to Lexicon of any decision by Genentech to cease the
prosecution (including any interference) and maintenance of (i) Project Patents
or Genentech Gene Patents specifically
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related to a Lexicon Licensed Product or (ii) Project Patents containing any
Valid Co-Funded Patent Claims or Valid Advanced Research Patent Claims (or, in
the case of applications filed by Genentech, from which a Valid Co-Funded Patent
Claims or Valid Advanced Research Patent Claim may issue), and, in such case,
Lexicon shall have the right at its sole discretion and expense to continue such
prosecution (including any interference) or maintenance. If Lexicon continues
such prosecution or maintenance, Genentech shall execute such documents and
perform such acts as may be reasonably necessary for Lexicon to continue such
prosecution or maintenance. Lexicon shall give prior written notice to Genentech
of any decision by Lexicon to cease the prosecution (including any interference)
and maintenance of Patents within the Project Patents for which Lexicon has
responsibility under Section 9.3(a) and, in such case, Genentech shall have the
right at its sole discretion and expense to continue such prosecution (including
any interference) or maintenance. If Genentech continues such prosecution or
maintenance, Lexicon shall execute such documents and perform such acts as may
be reasonably necessary for Genentech to continue such prosecution or
maintenance.
9.4 Infringement and Misappropriation.
(a) Notice. Each Party shall promptly notify the other Party in
writing of any alleged infringement or misappropriation, of which it becomes
aware, by any person of any intellectual property licensed or sublicensed to a
Party under this Agreement.
(b) Infringement of Lexicon-Controlled Patent Claims. Lexicon shall
have the sole right, but not the obligation, to take appropriate steps to remove
the infringement or alleged infringement of (i) Lexicon Knock-Out Technology and
(ii), except to the extent such Patents (A) have been exclusively licensed to
Genentech or (B) claim Lexicon Licensed Products or uses thereof, Lexicon
Pre-Existing Patents, Restricted Rights Project Patents, and Lexicon Product
Patents, including, without limitation, by initiation, prosecution and control,
at its own expense, of any suit, proceeding or other legal action by counsel of
its own choice. Any damages or other monetary awards recovered by Lexicon shall
be owned by Lexicon.
Notwithstanding the above, if the infringement or alleged infringement of a
Patent claiming Lexicon Knock-Out Technology specifically relates to a Genentech
Licensed Product, Lexicon shall have the first right, but not the obligation, to
take appropriate steps to remove the infringement or alleged infringement,
including, without limitation, by initiation, prosecution and control, at its
own expense, of any suit, proceeding or other legal action by counsel of its own
choice, provided that Lexicon keeps Genentech reasonably informed of the
progress of such suit, proceeding or legal action and provides Genentech with
copies of any substantive documents related to such suit, proceeding or legal
action and reasonable notice thereof. Lexicon shall notify Genentech of its
decision to exercise its right to enforce Lexicon Knock-Out Technology
specifically related to a Genentech Licensed Product not later than [**]
following its discovery or notice of alleged infringement of Lexicon Knock-Out
Technology specifically related to such Genentech Licensed Product. Genentech
shall have the right, at its own expense, to be represented in any such action
by counsel of its own choice. If Lexicon decides not to institute an
infringement suit, proceeding or other legal action that Genentech feels is
reasonably required to protect such Lexicon Knock-Out Technology specifically
related to a Genentech Licensed Product, Genentech shall have the right, at its
sole discretion, to institute such suit, proceeding or other legal action and
Lexicon shall have the right to be represented in such suit, proceeding or
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legal action, at its own expense, by counsel of its own choice. For this
purpose, the Party not bringing the suit shall execute such legal papers
necessary for such suit as may be reasonably requested by the Party bringing
suit.
If Lexicon brings an action under this Section 9.4(b), any damages or other
monetary awards recovered by Lexicon shall be applied proportionately first to
defray the unreimbursed costs and expenses (including actual and reasonable
attorneys' fees) incurred by the Parties in the action. If any balance remains,
such balance shall be the property of Lexicon. If Lexicon fails to bring an
action under this Section 9.4(b) with respect to a Patent claiming Lexicon
Knock-Out Technology specifically related to a Genentech Licensed Product, but
Genentech brings an action, any damages or other monetary awards recovered by
Genentech shall be applied first to defray the costs and expenses (including
actual and reasonable attorneys' fees) incurred in the action by the Parties.
The balance that remains shall be the property of Genentech.
(c) Infringement of Genentech-Controlled Patent Claims Not Related to
Lexicon Licensed Products. Genentech shall have the sole right, but not the
obligation, to take appropriate steps to remove the infringement or alleged
infringement of (i), to the extent such Patents have been exclusively licensed
to Genentech and claim Genentech Licensed Products or uses thereof, Lexicon
Pre-Existing Patents, Restricted Rights Project Patents, and Lexicon Product
Patents and (ii), except to the extent such Patents have been exclusively
licensed to Lexicon, Project Patents, including, without limitation, by
initiation, prosecution and control, at its own expense, of any suit, proceeding
or other legal action by counsel of its own choice. Any damages or other
monetary awards recovered by Genentech shall be owned by Genentech.
Notwithstanding the above, if Genentech brings action under this Section
9.4(c) with respect to any Valid Advanced Research Patent Claim specifically
related to a Genentech Licensed Product, any damages or other monetary awards
recovered by Genentech shall be applied proportionately first to defray the
unreimbursed costs and expenses (including actual and reasonable attorneys'
fees) incurred by the Parties in the action. If any balance remains, Lexicon
shall retain as its own property an amount of compensatory damages equal to the
royalty that Lexicon would otherwise be entitled to under this Agreement if such
remaining balance was treated as Net Sales, or equal to Lexicon's share of
Operating Profits (Losses). If any balance remains after Lexicon's retained
amount, such balance shall be the property of Genentech.
(d) Infringement of Genentech-Controlled Patent Claims Related to a
Lexicon Licensed Product. Lexicon shall have the first right, but not the
obligation, to take appropriate steps to remove the infringement or alleged
infringement of (i), to the extent such Patents have been exclusively licensed
to Lexicon and claim Lexicon Licensed Products or uses thereof, Project Patents,
and (ii), to the extent such Patents claim Lexicon Licensed Products or uses
thereof, Lexicon Pre-Existing Patents, Restricted Rights Project Patents, and
Lexicon Product Patents, including, without limitation, by initiation,
prosecution and control, at its own expense, of any suit, proceeding or other
legal action by counsel of its own choice.
If Lexicon brings action under this Section 9.4(d) with respect to any
claim to a Lexicon Licensed Product within a Project Patent, Lexicon
Pre-Existing Patent, Restricted Rights Project Patent, or Lexicon Product
Patent, any damages or other monetary awards recovered by Lexicon shall be
applied proportionately first to defray the unreimbursed costs and expenses
(including
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actual and reasonable attorneys' fees) incurred by the Parties in the action. If
any balance remains, Genentech shall retain as its own property an amount of
compensatory damages equal to the royalty that Genentech would otherwise be
entitled to under this Agreement if such remaining balance was treated as Net
Sales. If any balance remains after Genentech's retained amount, such balance
shall be the property of Lexicon.
Lexicon shall keep Genentech reasonably informed of the progress of such
suit, proceeding or legal action and provide Genentech with copies of any
substantive documents related to such suit, proceeding or legal action and
reasonable notice thereof. Lexicon shall notify Genentech of its decision to
exercise its right to enforce Project Patents and Know-How or Lexicon
Pre-Existing Patents and Know-How related to Lexicon Licensed Products under
this Section 9.4(d), not later than [**] following its discovery or notice of
alleged infringement thereof. Genentech shall have the right, at its own
expense, to be represented in any such action by counsel of its own choice. If
Lexicon decides not to institute an infringement suit, proceeding or other legal
action under this Section 9.4(d), Genentech shall have the right, at its sole
discretion, to institute such suit, proceeding or other legal action and Lexicon
shall have the right to be represented in such suit, proceeding or legal action,
at its own expense, by counsel of its own choice. For this purpose, the Party
not bringing the suit shall execute such legal papers necessary for such suit as
may be reasonably requested by the Party bringing suit.
If the infringement or alleged infringement of a Patent claiming Genentech
Gene Patents specifically relates to a Lexicon Licensed Product, Genentech shall
have the first right, but not the obligation, to take appropriate steps to
remove the infringement or alleged infringement, including, without limitation,
by initiation, prosecution and control, at its own expense, of any suit,
proceeding or other legal action by counsel of its own choice, provided that
Genentech keeps Lexicon reasonably informed of the progress of such suit,
proceeding or legal action and provides Lexicon with copies of any substantive
documents related to such suit, proceeding or legal action and reasonable notice
thereof. Genentech shall notify Lexicon of its decision to exercise its right to
enforce Genentech Gene Patents specifically related to a Lexicon Licensed
Product not later than [**] following its discovery or notice of alleged
infringement of Genentech Gene Patents specifically related to such Lexicon
Licensed Product. Lexicon shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice. If Genentech
decides not to institute an infringement suit, proceeding or other legal action
that Lexicon feels is reasonably required to protect such Genentech Gene Patents
specifically related to a Lexicon Licensed Product, Lexicon shall have the
right, at its sole discretion, to institute such suit, proceeding or other legal
action and Genentech shall have the right to be represented in such suit,
proceeding or legal action, at its own expense, by counsel of its own choice.
For this purpose, the Party not bringing the suit shall execute such legal
papers necessary for such suit as may be reasonably requested by the Party
bringing suit.
If Genentech brings an action further to an infringement or alleged
infringement of a Patent claiming Genentech Gene Patents specifically related to
a Lexicon Licensed Product, any damages or other monetary awards recovered by
Genentech shall be applied proportionately first to defray the unreimbursed
costs and expenses (including actual and reasonable attorneys' fees) incurred by
the Parties in the action. If any balance remains, such balance shall be the
property of Genentech. If Genentech fails to bring such action with respect to a
Patent claiming Genentech Gene Patents specifically related to a Lexicon
Licensed Product, but Lexicon brings
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an action, any damages or other monetary awards recovered by Lexicon shall be
applied first to defray the costs and expenses (including actual and reasonable
attorneys' fees) incurred in the action by the Parties. The balance that remains
shall be the property of Lexicon.
In the case of infringement or alleged infringement of a Project Patent,
Genentech in its sole discretion, may elect to assign such a Project Patent to
Lexicon so that Lexicon may maintain such suit, proceeding or legal action in
its own name. In such event, the licenses to Genentech under such a Project
Patent shall remain unaffected.
9.5 Notice of Infringement by a Party. If the making, using, importing,
offer for sale, or selling a Collaboration Product results in a claim against a
Party of patent infringement by any Third Person, the Party first having notice
of that claim shall promptly notify the other Party in writing. The notice shall
set forth the facts of the claim in reasonable detail.
If any notice of infringement is received by, or a suit is initiated
against, either Party with respect to any Collaboration Product, the Parties
shall consult in good faith regarding the best response.
Notwithstanding the foregoing, if the claim involves an allegation of a
violation of the trade secret rights of a Third Person, the Party accused of
such violation shall have the obligation to defend against such claim and shall
indemnify the other Party against all costs associated with such claim.
9.6 Litigation Expenses. Each Party shall assume and pay all of its own
out-of-pocket expenses incurred in connection with all litigation described in
this Article 9:, including without limitation, the fees and expenses of that
Party's counsel.
9.7 Settlement Approval. No settlement, consent judgment or other voluntary
final disposition of a suit being prosecuted by a Party under this Article 9:
may be entered into without the consent of the other Party if such settlement,
consent judgment or other voluntary final disposition would alter, derogate, or
diminish such other Party's rights under the Agreement, which consent will not
be unreasonably withheld or delayed.
9.8 Patent Term Extensions. When appropriate, the Parties shall cooperate
with each other in gaining patent term extension. All filings for such extension
shall be made by the Party that is the owner of the patent
9.9 Audit Rights Regarding Invoices. In the event there is a good faith
dispute over an amount owed by a Party under this Article 9:, the disputed
payment may be delayed, and such payment will not be considered delinquent
pending a resolution of the Parties' dispute. Section 8.24 (i.e., "Records;
Audit Rights") is applicable with regard to all invoices submitted by a Party to
the other Party under this Article 9:.
9.10 Third Person Licenses for Genentech IND Opted Products and Genentech
Phase II Opted Products. If in either Party's reasonable judgment it is
desirable or useful to seek a license or immunity from suit from any Third
Person in order to research, develop, make, have made, use, sell, offer to sell,
or import a Genentech IND Opted Product or Genentech Phase II Opted Product (for
which Lexicon has not exercised its Opt-Out), such Party shall bring such
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matter to the other Party's attention. If in either Party's reasonable judgment,
such matter is material to the research, development, making, having made,
using, selling, offering to sell, or importing a Genentech IND Opted Product or
Genentech Phase II Opted Product, such matter shall be referred to the Steering
Committee. The Steering Committee shall discuss reasonable courses of action
with respect thereto, giving due consideration to the advisability of seeking an
opinion of counsel, the use of alternative technologies and the efforts required
to design around any Patents at issue. Neither Party shall, without the approval
of the Steering Committee, obtain any license or immunity from suit from a Third
Person relating to the research, development, making, having made, using,
selling, offering to sell, or importing a Genentech IND Opted Product or
Genentech Phase II Opted Product, if such license or immunity from suit would
place any material financial obligation on the other Party, either individually
or through the sharing of Operating Profits (Losses), or otherwise affect a
Party's ability to engage in such activities. As decided by the Steering
Committee, a Party shall use commercially reasonable efforts to minimize the
amount of any of payments or royalties to a Third Person relating to the
manufacture, use or sale of a Genentech IND Opted Product or Genentech Phase II
Opted Product.
ARTICLE 10: CONFIDENTIALITY
10.1 Obligations. Except upon obtaining the other Party's prior written
consent to the contrary, each Party agrees that it will, for a period of [**]
after the expiration or early termination of the entire Agreement:
(i) maintain in confidence, and not disclose to any person (except as
provided in Section 10.2), the other Party's Confidential
Information or any Project Confidential Information; and
(ii) not use such Confidential Information for any purpose except as
contemplated in this Agreement.
10.2 Authorized Disclosures of Confidential Information.
(a) Permitted Persons. Each Party may disclose Confidential
Information of the other Party or Project Confidential Information, without such
other Party's prior written consent, to its and its Affiliates' (or the other
Party's and its Affiliates') directors, employees, agents, consultants,
permitted (sub)licensees, suppliers, and other Third Persons who:
(i) need to know such Confidential Information to assist the Party in
fulfilling its obligations or exploiting its rights hereunder (or
to determine their interest in providing such assistance); and
(ii) are bound by written confidentiality and non-use obligations no
less stringent than those contained herein.
(b) Legally Required or Necessary. Each Party may also disclose the
Confidential Information of the other Party or Project Confidential Information,
without such other Party's prior written consent, to any person or to a
government or regulatory authority to the extent that such disclosure is:
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(i) required by Applicable Law;
(ii) required pursuant to the disclosure requirements of the
Securities and Exchange Commission ("SEC") or the national
securities exchange or other stock market on which such Party's
securities are traded ("Exchange"); or
(iii) otherwise necessary for filing a patent application,
prosecuting, maintaining, or enforcing a patent, obtaining or
maintaining authorizations to conduct pre-clinical or clinical
studies regarding a product, or obtaining or maintaining a
registration regarding a product (provided such Party is entitled
at the time to engage in such activities under this Agreement).
Prior to disclosing the other Party's Confidential Information or Project
Confidential Information under this Section 10.2(b), the disclosing Party, to
the extent practicable, will give the other Party a copy of the Confidential
Information to be disclosed and provide such Party a reasonable opportunity to
comment on the necessity and the text of the proposed disclosure. The disclosing
Party agrees to consider such comments in good faith and to reasonably avail
itself of available means under the applicable law to minimize the disclosure of
such Confidential Information.
In the event that one Party reasonably concludes that a given disclosure is
required by law and the other Party disagrees with the substance or extent of
the disclosure, then the Party seeking such disclosure shall either (i) limit
said disclosure to address the concerns of the other Party, or (ii) provide a
written opinion from counsel stating that such disclosure is indeed required by
law. With respect to complying with the disclosure requirements of the SEC, in
connection with any required SEC filing of this Agreement, the filing Party
shall seek confidential treatment of portions of this Agreement from the SEC and
the other Party shall have the right to review and comment on such an
application for confidential treatment prior to its being filed with the SEC.
The non-filing Party shall provide its comments, if any, on such application as
soon as practicable and in no event later than [**] after such application is
provided to the non-filing Party.
(c) Court Orders. Each Party may also disclose the Confidential
Information of the other Party or Project Confidential Information, without such
other Party's prior written consent, pursuant to an order of a regulatory
authority or court of competent jurisdiction, provided that it promptly notifies
the other Party of the required disclosure in order to provide such Party an
opportunity to take legal action to prevent or limit such disclosure and, if
asked, reasonably assists the other Party in pursuing such action.
(d) Legal Actions. Each Party may also disclose the Confidential
Information of the other Party or Project Confidential Information, without such
other Party's prior written consent, as is necessary to pursue or defend against
a legal or regulatory action related to this Agreement.
10.3 Disclosure of the Terms of the Agreement. Each Party agrees that it
will maintain in confidence, and not to disclose, the terms of this Agreement
without the prior written consent
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of the other Party, except as authorized under Sections 10.2(a), 10.2(b),
10.2(c), or 10.2(d). In addition, if a Party receives a request from an
authorized representative of a U.S. or foreign tax authority for a copy of the
Agreement, that Party may provide a copy of the Agreement to such tax authority
representative without advance notice to or the consent or cooperation of the
other Party, but the disclosing Party must notify the other Party of the
disclosure as soon as practical.
10.4 Publicity about the Agreement.
(a) Press Releases and Public Statements. If a Party desires to issue
a press release or other public statement or announcement concerning this
Agreement, the subject matter hereof, or the research, development or commercial
results of the products hereunder, it must first obtain the other Party's
written approval of the proposed release or announcement. All press releases and
other publicity will conform to the publicity strategy and policy developed by
the Steering Committee in accordance with Section 2.1(b)(viii). Without limiting
the generality of the foregoing, each Party agrees that the other Party will
have no less than [**] to review and provide comment regarding any such proposed
press release or publicity, unless a shorter review time is agreed to by both
Parties. Notwithstanding the foregoing, the Parties agree to the release of the
press release attached hereto as Exhibit J upon full execution of this
Agreement.
(b) Use of Trademarks and Logos. Neither Party may use any trademarks,
logos, or symbols associated with the other Party without the prior written
permission of such other Party.
(c) Specific Exclusions. Notwithstanding Sections 10.4(a) and 10.4(b),
Genentech shall not be prohibited from making a statement regarding the
development or commercialization of Genentech Licensed Product or Small Molecule
Drug, and Lexicon shall not be prohibited from making a statement regarding the
development or commercialization of a Lexicon Licensed Product or a Small
Molecule Drug; provided that neither Party shall disclose any material term of
condition or this Agreement, including any and all financial terms, except as
expressly permitted under this Agreement.
10.5 Publications. Genentech and Lexicon (as applicable, the "Publishing
Party") may each publish or present data and/or results generated by or on
behalf of such Publishing Party utilizing Knock-Out Mice or Progeny, subject to
the prior review of the proposed disclosure by the other Party (the "Reviewing
Party") solely to determine (i) whether the proposed disclosure contains
Confidential Information of the Reviewing Party or Project Confidential
Information or (ii) whether information contained in the proposed disclosure
should be the subject of a patent application to be filed by Lexicon or
Genentech prior to such disclosure. The Publishing Party shall provide the
Reviewing Party with the opportunity to review any proposed abstract, manuscript
or presentation which discloses the results of research conducted utilizing the
Knock-Out Mice or Progeny by delivering a copy thereof to the Reviewing Party no
less than [**] before its intended submission for publication or presentation.
The Reviewing Party shall have [**] from its receipt of any such abstract,
manuscript or presentation in which to notify the Publishing Party in writing of
any specific objections to the disclosure, based on either the need to seek
patent protection or concern regarding the specific disclosure of the
Confidential Information of the Reviewing Party or Project Confidential
Information. In the event the Reviewing Party objects to the disclosure, the
Publishing Party agrees not to submit the
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publication or abstract or make the presentation containing the objected-to
information until the Reviewing Party is given a reasonable additional period of
time (not to exceed an additional [**]) to seek patent protection for any
material in the disclosure which the Reviewing Party believes is patentable
(subject, in all events, to Article 9: ) or, in the case of Confidential
Information of the Reviewing Party, to allow the Publishing Party to delete any
Confidential Information of Reviewing Party from the proposed disclosure. Each
Party agrees to delete from the proposed disclosure any Confidential Information
of the Reviewing Party upon request. Notwithstanding the foregoing, publication
of Patent applications shall not be subject to this Section 10.5.
ARTICLE 11: TERM AND TERMINATION OF AGREEMENT
11.1 Term. This Agreement commences on the Effective Date and will remain
in full force and effect, unless earlier terminated as provided in this Article
11:, until the later of: (i) [**] after the last Project Gene becomes a
Rejected Project hereunder; (ii) the date on which all obligations under this
Agreement between the Parties with respect to the payment of milestones or
royalties, or the sharing of Operating Profits (Losses), with respect to
Collaboration products have passed or expired; or (iii) the date on which the
Parties are no longer developing or commercializing any Collaboration Products.
11.2 Genentech's Unilateral Right to Terminate.
(a) In the event that Lexicon has not completed, by December 1, 2008,
Advanced Phenotypic Analysis on at least seventy-five percent (75%) of the
Project Genes submitted for Advanced Phenotypic Analysis by the Steering
Committee pursuant to Section 3.6, except for those assays within a particular
Advanced Phenotypic Panel which were selected by the Steering Committee for
performance on a date following selection of the Advanced Phenotypic Panel
generally and which are not completed prior to December 1, 2008 for (A) a good
scientific reason existing at the time of selection of such assay and (B)
despite Lexicon's exercise of Commercially Reasonable Efforts thereon, then
Genentech shall have the right to terminate this Agreement, and:
(i) Lexicon will provide Genentech, to the extent not previously
provided, with a copy of all Project Patents and Know-How,
Lexicon Pre-Existing Patents and Know-How, and Lexicon Product
Patents and Know-How, and deliver Project Materials (to the
extent not previously provided) related to such Projects;
(ii) all licenses granted by Genentech to Lexicon shall terminate;
(iii) all rights and licenses granted by Lexicon to Genentech shall
continue;
(iv) any Lexicon Advanced Research Protein Candidates, and all
corresponding Lexicon Advanced Research Products, shall become
Genentech Advanced Research Protein Candidates and Genentech
Advanced Research Products, respectively; and
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(v) Genentech shall have no further payment obligations to Lexicon
under this Agreement with respect to milestone payments,
royalties or otherwise (notwithstanding the continuation of
Genentech's rights and licenses hereunder), except for those set
forth in Section 8.10.
(b) In the event that Lexicon has completed, by December 1, 2008,
Advanced Phenotypic Analysis on at least seventy-five percent (75%) of the
Project Genes submitted for Advanced Phenotypic Analysis by the Steering
Committee pursuant to Section 3.6 but has not completed at least ninety-five
percent (95%) of such Advanced Phenotypic Analysis, except for those assays
within a particular Advanced Phenotypic Panel which were selected by the
Steering Committee for performance on a date following selection of the Advanced
Phenotypic Panel generally and which are not completed prior to December 1, 2008
for (A) a good scientific reason existing at the time of selection of such assay
and (B) despite Lexicon's exercise of Commercially Reasonable Efforts thereon,
then Genentech shall have the right to terminate this Agreement, and:
(i) Lexicon will provide Genentech, to the extent not previously
provided, with a copy of all Project Patents and Know-How,
Lexicon Pre-Existing Patents and Know-How, and Lexicon Products
Patents and Know-How, and deliver Project Materials (to the
extent not previously provided) related to such Projects;
(ii) all licenses granted by Genentech to Lexicon shall terminate;
(iii) all rights and licenses granted by Lexicon to Genentech shall
continue;
(iv) any Lexicon Advanced Research Protein Candidates, and all
corresponding Lexicon Advanced Research Products, shall become
Genentech Advanced Research Protein Candidates and Genentech
Advanced Research Products, respectively; and
(v) Genentech shall have no further payment obligations to Lexicon
under this Agreement with respect to milestone payments,
royalties or otherwise (notwithstanding the continuation of
Genentech's rights and licenses hereunder), except for (A) those
set forth in Section 8.10 and (B) those set forth in Section 8.12
with respect to only those Genentech Advanced Research Products
for which Lexicon has completed Advanced Phenotypic Analysis on
the corresponding Project Gene.
11.3 Termination for Insolvency or Bankruptcy. Either Party may, by written
notice, terminate this Agreement with immediate effect if the other Party:
(i) makes a general assignment for the benefit of creditors;
(ii) files an insolvency petition in bankruptcy;
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(iii) petitions for or acquiesces in the appointment of any receiver,
trustee or similar officer to liquidate or conserve its business
or any substantial part of its assets;
(iv) commences under the laws of any jurisdiction any proceeding
involving its insolvency, bankruptcy, reorganization, adjustment
of debt, dissolution, liquidation or any other similar proceeding
for the release of financially distressed debtors; or
(v) becomes a party to any proceeding or action of the type described
above in (iii) or (iv), and such proceeding or action remains
undismissed or unstayed for a period of more than sixty (60)
days.
All rights and licenses granted under or pursuant to this Agreement by each
Party as a licensor or sublicensor are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of Title XI, U.S. Code (the "Bankruptcy Code"),
licenses (or, if applicable, sublicenses) of rights to "intellectual property"
as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that
each licensee (or, if applicable, sublicensee) of such rights under this
Agreement shall retain and may fully exercise all rights and elections it would
have in the case of a licensor (or sublicensor) bankruptcy under the Bankruptcy
Code. Each Party agrees during the term of this Agreement to create or maintain
current copies, or if not amenable to copying, detailed descriptions or other
appropriate embodiments, of all such intellectual property licensed or
sublicensed to the other Party.
11.4 Surviving Obligations. The rights and obligations of the Parties under
Article 1: (Definitions), Article 10: (Confidentiality), Article 12:
(Disclaimers, Representations and Warranties), Article 13: (Indemnification),
and Article 15: (General Provisions) survive the termination or expiration of
this Agreement. Also, termination or expiration of the Agreement shall not
affect the rights and obligations of the Parties that by their nature survive,
including, but not limited to, those in Article 9: (Intellectual Property
Responsibilities) and, to the extent applicable, the effects of termination
contained in Sections 11.2 through 11.4. The provisions of Section 8.10 and
Sections 8.17 through 8.24 shall survive termination of this Agreement under
Section 11.2(a). The provisions of Sections 8.10 and 8.12 and Sections 8.17
through 8.24 shall survive termination of this Agreement under Section 11.2(b).
Finally, except as specifically provided to the contrary in this Agreement,
termination or expiration of the Agreement shall be without prejudice to any
rights that shall have accrued to the benefit of either Party prior to such
termination or expiration and shall not relieve the Parties of any obligations
accrued hereunder prior to such termination or expiration. This Section 11.4
survives the termination or expiration of this Agreement for any reason.
ARTICLE 12: DISCLAIMERS, REPRESENTATIONS, AND WARRANTIES
12.1 Corporate Existence and Authority. Each Party represents and warrants
to the other Party that:
(i) it is a corporation or entity duly organized and validly existing
under the law of the state or country of its incorporation; and
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(ii) it has the full authority to enter into and perform all of the
duties and obligations contemplated under this Agreement.
12.2 Authorized Execution; Binding Obligation. Each Party represents and
warrants to the other Party that its execution, delivery, and performance of
this Agreement have been duly authorized and approved by all necessary corporate
action and that this Agreement is binding, upon and enforceable against it in
accordance with the Agreement's terms (subject to bankruptcy and similar laws
affecting the rights of creditors generally).
12.3 No Conflicts. Each Party represents and warrants that its execution,
delivery, and performance of this Agreement:
(i) does not, except as otherwise described in this Agreement,
require the approval or consent of any Third Person, which has
not already been obtained;
(ii) does not, to the best of its knowledge, contravene any Applicable
Law; and
(iii) does not contravene the provisions of, nor constitutes a default
under, its Certificate of Incorporation or bylaws or any
indenture, mortgage, contract or other agreement or instrument to
which it is a signatory.
12.4 No Debarment. Each Party represents and warrants to the other that it
is not debarred under the Generic Drug Enforcement Act of 1992 (the "Act") and
is in compliance with the provisions of such Act. Each Party also covenants
that, while this Agreement is in effect, it will comply with such Act, will not
become debarred under the Act, and will not use in connection with this
Agreement the services of any person debarred under such Act. Finally, upon
request by the other Party, a Party will certify its compliance with the Act and
this Section 12.4 in writing to such other Party. If, at any time, a Party
breaches a covenant under this Section 12.4, the breaching Party shall
immediately notify the other Party of such fact.
12.5 Representations and Warranties Regarding Licenses. With regard to each
license granted under this Agreement, the Party granting such license (the
"Granting Party") will be deemed to represent and warrant to the other Party, at
the time any such license is granted, that, to the Granting Party's Actual
Knowledge:
(a) the Granting Party's grant of such license does not require the
approval or consent of any person or entity, which has not already been
obtained;
(b) the Granting Party's grant of such license does not contravene any
Applicable Law;
(c) the Granting Party's grant of such license does not contravene the
provisions of, nor constitutes a default under, the Granting Party's Certificate
of Incorporation or bylaws or any indenture, mortgage, contract or other
agreement or instrument to which the Granting Party is a signatory;
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(d) the Granting Party has the ability and right to grant the other
Party such license;
(e) except as previously identified in a written notice, the Granting
Party has not received, nor been made aware of, any communications alleging that
its practice of the licensed intellectual property rights has infringed or
misappropriated (or that it, or the other Party, will infringe or misappropriate
in carrying out such license) the intellectual property rights of any person or
entity;
(f) except as previously identified in a written notice, there have
been no claims made against the Granting Party asserting the invalidity, abuse,
misuse, or unenforceability of the licensed intellectual property rights; and
(g) there are no outstanding encumbrances on, licenses under, or
covenants-not-to-sue with respect to the licensed intellectual property rights,
which, in the case of licenses or covenants not-to-sue, would conflict with the
rights granted herein.
12.6 Genentech Representation Regarding Excluded IP. [**].
12.7 DISCLAIMER OF IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE, AND EACH
PARTY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES
INCLUDING WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.
12.8 LIMITATION OF LIABILITY. NEITHER PARTY WILL BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES INCLUDING, BUT
NOT LIMITED TO, LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS
AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. HOWEVER,
NOTHING IN THIS SECTION 12.8 IS INTENDED TO LIMIT OR RESTRICT THE
INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY.
ARTICLE 13: INDEMNIFICATION
13.1 Indemnification Obligations.
(a) Genentech's Obligation. Genentech will defend, indemnify, and hold
harmless Lexicon, its Affiliates and their respective directors, officers,
shareholders, employees, and agents ("Lexicon Indemnitees"), from and against
any and all liabilities, damages, losses, penalties, fines, costs, interest, and
expenses, including, without limitation, reasonable attorneys' fees ("Damages"),
arising from or occurring as a result of a Third Person's claim, action, suit,
judgment, or settlement against a Lexicon Indemnitee that is due to or based
upon:
(i) any breach of a representation, warranty, covenant, obligation,
or agreement of Genentech under this Agreement;
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(ii) any grossly negligent or more culpable act of Genentech or a
Genentech Affiliate or sublicensee, or their respective
directors, officers, shareholders, employees, and agents related
to this Agreement; or
(iii) the development, manufacture, marketing, sale or other
disposition, offer to sell, use, importation, or exportation of a
Genentech Licensed Product or other product in the Field by
Genentech or Genentech's Affiliates, sublicensees,
subcontractors, or customers, or the customers of Genentech's
Affiliates and sublicensees (any of clauses of (i) through (iii),
a "Lexicon Third Person Claim").
However, Genentech shall not indemnify or hold harmless Lexicon Indemnitees
from Damages from a Lexicon Third Person Claim to the extent that such Damages
are finally determined to have resulted from the acts or omissions of a Lexicon
Indemnitee or Third Person. Genentech's obligations under this Section 13.1(a)
shall survive the expiration or termination of this Agreement for any reason.
(b) Lexicon's Obligation. Lexicon will defend, indemnify, and hold
harmless Genentech, its Affiliates and their respective directors, officers,
shareholders, employees and agents ("Genentech Indemnitees"), from and against
any and all Damages arising from or occurring as a result of a Third Person's
claim, action, suit, judgment, or settlement against a Genentech Indemnitee that
is due to or based upon:
(i) any breach of a representation, warranty, covenant, obligation,
or agreement of Lexicon under this Agreement;
(ii) any grossly negligent or more culpable act of Lexicon or a
Lexicon Affiliate or sublicensee, or their respective directors,
officers, shareholders, employees, and agents related to this
Agreement; or
(iii) the development, manufacture, marketing, sale or other
disposition, offer to sell, use, importation, or exportation of a
Small Molecule Drug, Lexicon Licensed Product, Genentech Phase II
Opted Product for which Lexicon has not exercised its Opt-Out
under Section 4.8, or other product in the Field by Lexicon,
Lexicon's Affiliates, Lexicon Product Licensees, subcontractors,
or customers, or the customers of Lexicon's Affiliates and
Lexicon Product Licensees (any of clauses (i) through (iii), a
"Genentech Third Person Claim").
However, Lexicon shall not indemnify or hold harmless Genentech Indemnitees
from Damages from a Genentech Third Person Claim to the extent that such Damages
are finally determined to have resulted from the acts or omissions of a
Genentech Indemnitee or Third Person. Lexicon's obligations under this Section
13.1(b) shall survive expiration or termination of this Agreement for any
reason.
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13.2 Indemnification Procedures.
(a) Notice. Promptly after a Genentech Indemnitee or a Lexicon
Indemnitee (each, an "Indemnitee") receives notice of a pending or threatened
Lexicon Third Person Claim or Genentech Third Person Claim, as the case may be
(an "Action"), such Indemnitee shall give written notice of the Action to the
Party to whom the Indemnitee is entitled to look for indemnification pursuant to
this Article 13: (the "Indemnifying Party"). However, an Indemnitee's delay in
providing or failure to provide such notice shall not relieve the Indemnifying
Party of its indemnification obligations, except to the extent it can
demonstrate prejudice due to the delay or lack of notice.
(b) Defense. Upon receipt of notice under Section 13.2(a) from the
Indemnitee, the Indemnifying Party will have the duty to either to compromise or
defend, at its own expense and by counsel (reasonably satisfactory to
Indemnitee), such Action. The Indemnifying Party will promptly (and in any event
not more than [**] after receipt of the Indemnitee's original notice) notify the
Indemnitee in writing of its intention to either compromise or defend such
Action. Once the Indemnifying Party notifies the Indemnitee of its election to
assume the defense of an Action, the Indemnifying Party is not liable to the
Indemnitee for the fees of other counsel or any other expenses subsequently
incurred by the Indemnitee in connection with such defense, other than the
Indemnitee's reasonable costs of investigation and cooperation. However, the
Indemnitee shall have the right to employ separate counsel and to participate in
the defense of an Action (and the Indemnifying Party shall bear the reasonable
fees, costs, and expenses of such counsel) if:
(i) the use of the counsel chosen by the Indemnifying Party would
present such counsel with a conflict of interest;
(ii) the actual or potential defendants in, or targets of, such Action
include both the Indemnifying Party and the Indemnitee, and the
Indemnitee reasonably concludes that there may be legal defenses
available to it that are different from or additional to those
available to the Indemnifying Party (in which case the
Indemnifying Party shall not have the right to assume the defense
of such Action on the Indemnitee's behalf);
(iii) the Indemnifying Party does not employ counsel satisfactory to
the Indemnitee to represent the Indemnitee within a reasonable
time after the Indemnitee's notice of such Action;
(iv) the Indemnifying Party denies or fails to timely admit its
obligation to defend and indemnify the Action; or
(v) in the reasonable opinion of counsel to the Indemnitee, the claim
could result in the Indemnitee becoming subject to injunctive
relief or relief other than the payment of Damages that could
have a materially adverse effect on the ongoing business of the
Indemnitee.
(c) Cooperation. The Indemnitee shall cooperate fully with the
Indemnifying Party and its legal representatives in the investigation and
defense of an Action. The
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Indemnifying Party will keep the Indemnitee informed on a reasonable and timely
basis as to the status of such Action (to the extent the Indemnitee is not
participating jointly in the defense of such Action) and conduct the defense of
such Action in a prudent manner.
(d) Settlement. If an Indemnifying Party assumes the defense of an
Action, no compromise or settlement of such Action may be effected by the
Indemnifying Party without the Indemnitee's written consent (which consent shall
not be unreasonably withheld or delayed), unless (i) there is no finding or
admission of any violation of law or any violation of the rights of any person
and no effect on any other claims that may be made against the Indemnitee, (ii)
the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party, and (iii) the Indemnitee's rights under this Agreement are
not adversely affected. In any event, the Indemnitee shall have no right to
settle any such Action without the prior written consent of the Indemnifying
Party, unless (i) there is no finding or admission of any violation of law or
any violation of the rights of any person and no effect on any other claims that
may be made against the Indemnifying Party, (ii) the sole relief provided is
monetary damages that are paid in full by the Indemnitee, and (iii) the
Indemnifying Party's rights under this Agreement are not adversely affected; any
settlement under this Section 13.2(d) without the prior written consent of the
Indemnifying Party shall relieve the Indemnifying Party of its obligations under
this Article 13: .
13.3 Insurance.
(a) During the term of this Agreement, each Party shall maintain an
ongoing basis, Commercial General Liability ("CGL") insurance, including
contractual liability and completed operations insurance, in the minimum amount
of [**] per occurrence and [**] annual aggregate combined single limit for
bodily injury and property damage liability; provided that Lexicon may satisfy
such requirement by maintaining a combination of CGL insurance and umbrella
insurance in such combined per occurrence and aggregate amounts. Within [**] of
the Effective Date, the Parties shall provide one another with their respective
certificates of such insurance. The aggregate deductible under CGL shall be
reasonably satisfactory to the other Party. The insurance policy shall be an
occurrence or claims-made form, but if only on a claims made form, the insurance
coverage shall be maintained for at least [**] following completion of the work
performed under this Agreement.
(b) Commencing not later than [**] prior to the first use in humans of
the first potential Genentech Licensed Product and thereafter for the period of
time required below, Genentech shall obtain and maintain on an ongoing basis
products Liability insurance (including contractual liability and advertising
and copyright liability), with a reputable carrier, in the amount of at least
[**] per occurrence and annual aggregate combined single limit for bodily injury
and property damage liability. No later than [**] prior to the first use in
humans of the first potential Genentech Licensed Product with respect to the
product liability insurance coverage, Genentech shall provide to Lexicon a
certificate evidencing all such coverage required hereunder. Thereafter
Genentech shall maintain such products liability insurance coverage without
interruption during the term of this Agreement and for a period of at least [**]
after the expiration or termination of the term, except as provided under the
next paragraph below.
(c) Commencing not later than [**] prior to the first use in humans of
the first potential Lexicon Licensed Product, or Genentech Phase I Opted Product
or Genentech Phase II
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Opted Product for which Lexicon has not exercised its Lexicon Opt-Out, and
thereafter for the period of time required below, Lexicon shall obtain and
maintain on an ongoing basis products liability insurance (including contractual
liability and advertising and copyright liability), with a reputable carrier, in
the amount of at least [**] per occurrence and annual aggregate combined single
limit for bodily injury and property damage liability. No later than [**] prior
to the first use in humans of the first potential Lexicon Licensed Product with
respect to the product liability insurance coverage, Lexicon shall provide to
Genentech a certificate evidencing all such coverage required hereunder.
Thereafter Lexicon shall maintain such products liability insurance coverage
without interruption during the term of this Agreement and for a period of at
least [**] after the expiration or termination of the term, except as provided
under the next paragraph below.
(d) In addition, the Parties agree with respect to (a), (b) and (c)
above that:
(i) The Parties shall use Commercially Reasonable Efforts to name
each other as an additional insured under their respective CGL
and products liability insurance;
(ii) Each of the above insurance policies shall be primary insurance
as respects each Party's participation under this Agreement; and
(iii) Each of the above insurance coverage shall be maintained with an
insurance company or companies having an A.M. Best rating of "A"
or better.
ARTICLE 14: DISPUTE RESOLUTION
14.1 Internal Resolution. The Parties shall attempt to settle any dispute,
controversy or claim arising out of or relating to the validity, enforceability
or performance of this Agreement, including disputes relating to alleged breach
or termination of this Agreement but excluding any determination as to the
validity of the Parties' patents (hereinafter, the "Dispute"), in accordance
with the provisions of this Section 14.1. The Parties have entered into the
Agreement in good faith and in the belief that it is mutually advantageous to
them. It is with that same spirit of cooperation that they pledge to attempt to
resolve any Dispute amicably. Accordingly, the Parties agree that if any Dispute
should arise, it shall be referred to a member of senior management from each of
the Parties and from any sublicensee (if any).
14.2 Arbitration. Should the senior management be unable to resolve the
dispute, any controversy, dispute or claim which may arise out of or in
connection with this Agreement, or the breach, termination or validity thereof,
shall be settled by final and binding arbitration pursuant to the Arbitration
Rules of the American Arbitration Association as hereinafter provided:
(a) The arbitration tribunal shall consist of three (3) arbitrators.
Each Party shall nominate in the request for arbitration and the answer thereto
one (1) arbitrator and the two (2) arbitrators so named will then jointly
appoint the third arbitrator as chairman of the arbitration tribunal. If one
Party fails to nominate its arbitrator or, if the parties' arbitrators
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cannot agree on the person to be named as chairman within [**], the President of
the American Arbitration Association shall make the necessary appointments for
arbitrator or chairman.
(b) The place of arbitration shall be in a neutral location (i.e., not
California or Texas) to be decided by the Party not initiating such arbitration,
and the arbitration proceedings shall be held in English. The procedural law of
the State of Delaware shall apply where the said Arbitration Rules are silent.
(c) The decision of the arbitration tribunal must be in writing and
must specify the basis on which the decision was made, and the award of the
arbitration tribunal shall be final and judgment upon such an award may be
entered in any competent court or application may be made to any competent court
for juridical acceptance of such an award and order of enforcement.
ARTICLE 15: ASSIGNMENT
15.1 Assignment Generally.
(a) Neither Party may assign this Agreement (nor any part thereof)
without the prior written consent of the other Party. Notwithstanding the
foregoing but subject to Sections 5.8(c) and 15.2, if either Party is a party to
a merger or acquisition and it will not be the surviving entity of such
transaction, such Party may assign, without the other Party's prior written
consent (but with [**] prior written notice to the other Party) all of its
rights and obligations hereunder to the surviving or new entity resulting from
such merger or acquisition so long as the surviving or new entity expressly
agrees in writing to assume all obligations of such Party under this Agreement.
(b) Any attempted assignment of this Agreement, other than as allowed
in this Section 15.1, will be of no force or effect. Subject to the provisions
set forth in this Section 15.1, this Agreement will be binding upon and will
inure to the benefit of the successors and permitted assigns of the Parties.
15.2 Purchase of Lexicon's Share of Operating Profits (Losses) Upon
Assignment.
(a) Upon any proposed assignment of this Agreement by Lexicon
permitted by Section 15.1 or Change of Control of Lexicon, Lexicon shall deliver
written notice thereof to Genentech (the "Sale Notice") at least [**] prior to
the planned effective date of such permitted assignment. [**] (each a Sale
Price") [**] Lexicon's share of Operating Profits (Losses) with respect to each
Genentech IND Opted Product and Genentech Phase II Opted Product (each a
"Purchase Option"). A Sale Notice shall be Lexicon Confidential Information.
(b) Within [**] of Genentech's receipt of the Sale Notice [**],
Genentech shall deliver written notice to Lexicon identifying [**].
(c) On the date that is [**] after Genentech's receipt of the Sale
Notice [**], for those Genentech IND Opted Products and Genentech Phase II Opted
Products for which Genentech:
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(i) [**], then (A) Genentech shall pay the applicable Sale Price to
Lexicon and (B) any and all rights granted to Lexicon (or, if
applicable, its permitted assignee) under this Agreement with
respect to such Genentech IND Opted Products and/or Genentech
Phase II Opted Products shall immediately terminate, including
any right of further participation in Operating Profits (Losses)
as set forth in Section 8.14 or receive any other monies, whether
royalties, milestones or otherwise;
(ii) [**] then: (A) Lexicon shall pay to Genentech (x) [**] for
Genentech Phase II Opted Products which are neither [**] Products
nor [**] Products, (y) [**] for Genentech Phase II Opted Products
which are either [**] Products or [**] Products and (z) [**] for
Genentech IND Opted Products; and (B) such Genentech Phase II
Opted Product and Genentech IND Opted Products shall revert to
Lexicon Advanced Research Products and all rights held by
Genentech hereunder with respect to such Genentech Phase II Opted
Products and Genentech IND Opted Products shall terminate
(including the right to receive further payments from Lexicon
pursuant to Article 8); and
(iii) agrees to maintain the sharing of Operating Profits (Losses),
Operating Profits (Losses) shall continue to be shared as set
forth in this Agreement.
(d) [**], the selling Party under this Section 15.2 shall use
Commercially Reasonable Efforts to transfer to the purchasing Party (to the
extent applicable), any technology, materials, data and regulatory filings so as
to fully enable the purchasing Party to develop and commercialize the applicable
Collaboration Products. Without limiting the generality of the foregoing, to the
extent not already done so and applicable, the selling Party agrees to use
Commercially Reasonable Efforts to transfer to the purchasing Party all Lexicon
Pre-Existing Know-How, Project Know-How, Restricted Rights Know-How and Lexicon
Product Know-How, including any preclinical data, clinical data, assays and
associated materials, protocols, procedures and any other information in the
selling Party's possession or control, necessary or useful to continue or
initiate pre-clinical or clinical development, or in seeking Regulatory
Approval, of such Genentech IND Opted Product or Genentech Phase II Opted
Product. If applicable, upon the purchasing Party's request the selling Party
shall assign to the purchasing Party (i) all applications and filings made with
the FDA with respect to such Genentech IND Opted Product or Genentech Phase II
Opted Product, including any IND and orphan drug designations, (ii) all
agreements related to the conduct of any clinical trial with respect to such
Genentech IND Opted Product or Genentech Phase II Opted Product, and (iii) all
agreements related to the manufacture, supply or distribution of clinical
supplies of such Genentech IND Opted Product or Genentech Phase II Opted
Product. Upon exercise of the Sale Option, all Genentech Trademark(s) which are
specifically and solely related to the Genentech IND Opted Product or Genentech
Phase II Opted Product as to which the Sale Option applies, and the goodwill
associated therewith, shall be assigned to Lexicon.
(e) [**].
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15.3 Treatment of Intellectual Property Rights of Acquiring or Acquired
Party. Notwithstanding anything in this Agreement to the contrary, Patents and
Know-How (i) initially owned or controlled by a Third Person, (ii) developed
independent of this Agreement and any Confidential Information, and (iii) which
become owned or controlled by a Party as a result of such Party acquiring
ownership or control of such Patents and Know-How in connection with the
acquisition of all or substantially all of such Third Person's outstanding
voting equity or assets ("Acquired Patents and Know-How"), shall not become
subject to rights and obligations set forth in this Agreement; provided that, to
foregoing exclusion shall not apply to Acquired Patents and Know-How that
specifically relate to either a Genentech IND Opted Product or Genentech Phase
II Opted Product or that would be infringed by the making, using, selling,
offering for sale, or import of a Genentech IND Opted Product or Genentech Phase
II Opted Product.
ARTICLE 16: GENERAL PROVISIONS
16.1 Common Information Technology. In order to facilitate efficient
communication between Genentech and Lexicon regarding the Projects, the Parties
agree to establish and maintain a secure communication link between Genentech
and Lexicon and work together to identify and support hardware, software, and
services, in accordance with Genentech's platforms and technology architecture,
appropriate for the sharing of Project information. Each Party shall bear its
own costs of identifying, acquiring, operating, and maintaining such hardware,
software, and services.
16.2 Legal Compliance. Each Party will comply with all Applicable Laws in
the performance of its obligations or the exercise of its rights hereunder. In
addition, each party will do all other acts, as may be necessary or appropriate
to assist the other party under its obligations to comply with all accounting
and reporting requirements in effect at that time.
16.3 Independent Contractors. It is understood and agreed that the Parties
are independent contractors and are engaged in the operation of their own
respective businesses, and neither Party is to be considered the agent of the
other Party or to have a fiduciary responsibility to such other Party for any
purpose whatsoever. The rights and obligations of each Party under this
Agreement do not constitute the formation of a partnership for federal, state,
or any other tax purpose. Each Party shall file all income tax returns
consistent with that position. Neither Party will have any authority to enter
into any contracts or assume any obligations for the other Party nor make any
warranties or representations on behalf of that other Party.
16.4 Governing Law. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the Parties hereunder,
will be construed under and governed by the laws of the State of Delaware
exclusive of its conflicts of laws principles.
16.5 Entire Agreement. This Agreement, including all Exhibits, Schedules
and attachments hereto, constitutes the entire agreement between Lexicon and
Genentech with respect to the subject matter hereof, and all previous or other
negotiations, representations and understandings with respect to the subject
matter hereof between Lexicon and Genentech, including without limitation, the
Original Agreement and First Restated Agreement, are superceded as of the
Effective Date. This Agreement has been prepared jointly and will not be
strictly construed against either Party.
Page 79
16.6 Severability. All rights and restrictions contained herein may be
exercised and will be applicable and binding only to the extent that they do not
violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement,
not essential to the commercial purpose of this Agreement, will be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the Parties that the remaining provisions or portions thereof
shall constitute their agreement with respect to the subject matter hereof, and
all such remaining provisions, or portions thereof, will remain in full force
and effect. To the extent legally permissible, any illegal, invalid or
unenforceable provision of this Agreement will be replaced by a valid provision
which will implement the commercial purpose of the illegal, invalid, or
unenforceable provision. In the event that any provision essential to the
commercial purpose of this Agreement is held to be illegal, invalid or
unenforceable and cannot be replaced by a valid provision which will implement
the commercial purpose of this Agreement, the Parties will promptly negotiate a
suitable resolution (potentially even termination of the Agreement) in good
faith.
16.7 Force Majeure. Any delays in, or failure of, performance of any
obligations of a Party will not constitute a default hereunder or give rise to
any claim for damages, if, and to the extent, caused by Force Majeure. The Party
asserting this Section 16.7 will promptly notify the other Party of the event
constituting Force Majeure, of all relevant details of the occurrence, and an
estimate of how long such Force Majeure event shall continue. The affected Party
will also take reasonable and diligent actions to cure such cause, and the
Parties will consult with each other in order to find a fair solution and shall
use all reasonable endeavors to minimize the consequences of such Force Majeure.
16.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
16.9 Notices. All notices, statements, and reports required to be given
under this Agreement will be in writing, delivered in person, via registered or
certified mail postage prepaid, or through a professional courier service (e.g.,
FedEx or DHL), and addressed as follows:
To Lexicon: To Genentech:
Lexicon Genetics Incorporated Genentech, Inc.
8800 Technology Forest Place 1 DNA Way
Woodlands, TX 77381-1160 South San Francisco, California 94080
Fax: (281) 863-8088 Fax: (650) 467-9146
Phone: (281) 863-3000 Phone: (650) 225-1000
Attn: President, CEO Attn: Corporate Secretary
With a copies to: With a copy to:
General Counsel and Vice President, Research and
Chief Financial Officer Vice President, Business Development
Page 80
Notice will be deemed to have been given when delivered if personally
delivered on a business day, on [**] after dispatch if sent by a professional
courier, and on [**] following the date of mailing if sent by registered or
certified mail. A Party may change the address to which notices to such Party
are to be sent by giving written notice to the other Party at the address and in
the manner provided above. Any notice may be given, in addition to the manner
set forth above, by facsimile or e-mail, provided that the Party giving such
notice obtains acknowledgment by facsimile or e-mail that such notice has been
received by the Party to be notified. Notices made in this manner will be deemed
to have been given when such acknowledgment has been transmitted.
16.10 Waiver. The failure of either Party to enforce any provision of this
Agreement at any time will not be construed as a present or future waiver of
such provision or any other provision of this Agreement. The written waiver by
either Party, pursuant to this Section 16.10, of any provision or requirement
hereunder will neither be deemed nor operate as a future waiver of such or any
other provision or requirement.
16.11 Modifications. No amendment, waiver or modification of this Agreement
will be valid or binding on either Party unless made in writing and signed by
duly authorized representatives of both Parties.
16.12 Interpretation. All headings and captions used in this Agreement are
for convenience only, and are not intended to have any substantive effect. This
Agreement has been prepared jointly and no rule of strict construction shall be
applied against either Party. In this Agreement, the singular shall include the
plural and vice versa and the word "including" shall be deemed to be followed by
the phrase "without limitation." In the event of any conflict between this
Agreement and any Exhibits, Schedules or other attachments hereto,, the terms
and conditions of this Agreement shall control.
16.13 No Implied Licenses. Except as specifically provided for in this
Agreement, neither Party grants, expressed or implied, any license to the other
Party under this Agreement.
16.14 No Third Party Beneficiaries. Except as expressly provided herein,
this Agreement shall not confer any rights or remedies upon any Third Person
other than the Parties and their respective successors and permitted assigns.
16.15 R&D Tax Credits. To the extent permitted by Applicable Law, Genentech
will be entitled to any tax credits due on account of research and development
expenses it pays to Lexicon under this Agreement.
16.16 Responsible for Sublicensees. If a Party sublicenses to another
person any of the rights it received under this Agreement from the other Party,
such Party agrees to remain responsible to other Party for the performance and
compliance of such sublicensee with all obligations under this Agreement that
apply to such sublicensee.
16.17 Further Actions. Each Party agrees to execute, acknowledge, and
deliver such further instruments, and to do all other acts, as may be necessary
or appropriate to carry out the purposes and intent of this Agreement.
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* * * * *
IN WITNESS WHEREOF, each Party has executed this Agreement by its
respective, duly authorized officer as of the day and year herein written.
GENENTECH, INC. LEXICON GENETICS INCORPORATED
------------------------------------- ----------------------------------------
By: David Ebersman By: Arthur T. Sands
Title: SVP & CFO Title: President and CEO
Page 82
EXHIBIT A
Comprehensive Therapeutic Protein Discovery & Validation Program
First Pass Phenotypic Analysis of Project Genes
[**]
EXHIBIT B
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT (this "Agreement") is made and entered into this
seventeenth (17th) day of December, 2002 (the "Effective Date") by and between
LEXICON GENETICS INCORPORATED, a Delaware corporation ("Lexicon"), and
GENENTECH, INC., a Delaware corporation ("Genentech").
RECITALS:
WHEREAS, Lexicon holds a license from GenPharm International Inc.
("GenPharm") under certain Patent Rights (as defined herein) relating to the use
of "isogenic DNA constructs" in gene targeting for the generation of transgenic
and knock-out mice, and has the right to grant sublicenses under said Patent
Rights; and
WHEREAS, Genentech desires to obtain from Lexicon, and Lexicon desires to
grant to Genentech, a sublicense under the Patent Rights in the Field of Use
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following words and
phrases shall have the following meanings:
1.1 "Academic Collaborator" shall mean a principal investigator,
employed by a university or other not-for-profit academic research
institution, who is performing collaborative research with or sponsored
research for Genentech involving use of a Mutant Mouse or Progeny.
1.2 "Contract Service Provider" shall mean any Third Party that enters
into an agreement with Genentech providing for the performance of services
for Genentech, on a fee-for-service basis, relating to [**] of Mutant Mice
or Progeny.
1.3 "Field of Use" shall mean (i) the generation and development of
Mutant Mice by Genentech at its internal research facilities and (ii) the
use of Mutant Mice and Progeny, including the breeding thereof, by
Genentech and, subject to the terms and conditions of Sections 2.2 and 2.3,
by Genentech's Academic Collaborators and Contract Service Providers, at
the internal research facilities of Genentech, such Academic Collaborators
or Contract Service Providers, in each case for research purposes only,
including research directed toward the discovery, development and
commercialization of human therapeutic and diagnostic products. The Field
of Use shall specifically exclude (i) the development of a library of mouse
embryonic stem cells, (ii) the sale, lease or other transfer for
consideration of any Mutant Mouse or Progeny, (iii) the use of any Mutant
Mouse or Progeny for consideration (including, without limitation, use of
any Mutant
1
Mouse or Progeny in contract testing services) and (iv) the generation,
development, manufacture or importation of any Mutant Mouse or Progeny for
any of the foregoing. The Field of Use shall further exclude the
generation, development and use of (i) any transgenic mouse containing
unrearranged human immunoglobulin DNA or inactivated murine immunoglobulin
DNA, (ii) any mouse as a model for Alzheimer's disease based upon
(beta)-amyloid precursor protein coded for by the App gene or mutated forms
thereof, (iii) any immunomodified mouse model for the study of transplanted
human cells or (iv) any transgenic immunomodified mouse for use in studies
of human allergenicity of non-therapeutic proteins or peptides and in
research directed toward the development of non-therapeutic proteins or
peptides that demonstrate a reduction in human allergenicity (for purposes
of which, "non-therapeutic proteins or peptides" shall mean proteins or
peptides for use in cosmetic, cleaning and other non-therapeutic consumer
products).
1.4 "Mutant Mouse" shall mean any mouse cell or mouse generated or
developed by Genentech through use of any product or process covered by a
Valid Claim of the Patent Rights. As used herein, a "line of Mutant Mice"
shall mean all mouse cells and mice with a mutation in the same gene.
1.5 "Patent Rights" shall mean all of Lexicon's rights and interests
in and to [**] (i) the United States patents and patent applications listed
in Exhibit A, (ii) any patents issuing from such patent applications, (iii)
any continuations, continuations-in-part, divisionals, reissues,
reexaminations or extensions of any of the foregoing, and (iv) all foreign
counterparts of any of the foregoing.
1.6 "Progeny" shall mean any mouse cells or mice, including successive
generations thereof, that are produced or developed by Genentech, its
Academic Collaborators or Contract Service Providers by breeding a Mutant
Mouse with any other mouse (including, without limitation, any other Mutant
Mouse); provided, however, that Progeny shall not include, and the rights
and licenses granted under this Agreement shall not extend to, any mouse
cell or mouse that is produced or developed by breeding a Mutant Mouse with
any mouse, other than another Mutant Mouse, that contains a mutation in its
genome which was generated or developed, or whose progenitors include a
mouse containing such mutation which was generated or developed, through
use of any product or process covered by a Valid Claim of the Patent
Rights.
1.7 [**] shall mean any [**]; provided, however, that [**]
specifically excludes [**].
1.8 "Third Party" shall mean any person or entity other than Lexicon
and Genentech.
1.9 "Valid Claim" shall mean a claim of an issued and unexpired patent
which has not been held permanently revoked, unenforceable or invalid by a
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal.
2
2. GRANT OF SUBLICENSE AND RELEASE.
2.1 Subject to the terms and conditions of this Agreement, Lexicon
hereby grants to Genentech, during the term of this Agreement, a worldwide,
royalty-free, non-exclusive right and sublicense under the Patent Rights in
the Field of Use, to the extent not prohibited by other patents, (i) to
make (but not have made) up to a total of [**] lines of Mutant Mice per
calendar year during the term of this Agreement, and (ii) to breed and use
such Mutant Mice and Progeny. Nothing in this Agreement shall be construed
to confer upon Genentech any rights under the Patent Rights outside the
Field of Use.
2.2 Genentech shall have the right to transfer Mutant Mice and Progeny
to Academic Collaborators subject to the terms and conditions of this
Section 2.2. Any such transfer shall be made pursuant to a material
transfer agreement or other agreement containing terms relating to the
transfer of such material that expressly (i) prohibit the use of such
Mutant Mice and Progeny thereof for any purpose other than such Academic
Collaborator's collaborative research with Genentech in the Field of Use
and (ii) prohibit the transfer of such Mutant Mice or Progeny thereof by
such Academic Collaborator to any Third Party.
2.3 Genentech shall have the right to transfer Mutant Mice and Progeny
to Contract Service Providers subject to the terms and conditions of this
Section 2.3. Any such transfer shall be made pursuant to a material
transfer agreement or other agreement containing terms relating to the
transfer of such material that expressly (i) prohibits the use of such
Mutant Mice and Progeny thereof for any purpose other than such Contract
Service Provider's performance of services for Genentech, on a
fee-for-service basis, relating to [**] of Mutant Mice or Progeny, (ii)
prohibits the transfer of such Mutant Mice or Progeny thereof by such
Contract Service Provider to any Third Party, and (iii) obligates such
Contract Service Provider to return or destroy such Mutant Mice or Progeny
upon the completion of its services for Genentech.
2.4 Genentech shall not assert or enforce against Lexicon any claims
of an issued patent arising from the use by Genentech, its Academic
Collaborators or Contract Service Providers of a Mutant Mouse or Progeny,
to the extent, but only to the extent, any such assertion or enforcement
would, absent a license from Genentech, prevent Lexicon from using or
permitting others to use, [**] for research purposes directed towards the
discovery, identification, selection or characterization of [**], any
transgenic or knockout mouse or phenotypic data derived therefrom.
2.5 Nothing in this Agreement shall be construed to confer upon
Genentech any rights, by implication, estoppel or otherwise, to any patent,
technology or intellectual property of Lexicon or any other entity other
than the Patent Rights, regardless of whether such intellectual property
rights shall be dominant or subordinate to any Patent Rights.
3
2.6 Genentech shall be responsible for all development activities
related to the generation of Mutant Mice and use of the Patent Rights,
including the compliance with Third Party patent rights.
3. LICENSE FEE.
3.1 For the rights, privileges and sublicense granted hereunder,
Genentech shall pay Lexicon a license fee of [**], payable within [**] of
the Effective Date.
3.2 All payments due hereunder shall be paid in full, without
deduction of taxes or other fees that may be imposed by any government.
3.3 Any payments by Genentech to Lexicon that are not paid on or
before [**] the date such payments are due under this Agreement shall bear
interest, to the extent permitted by applicable law, at one and one half
percent (1.5%) per month, calculated on the total number of days payment is
delinquent.
3.4 Payments to be made by Genentech to Lexicon under this Agreement
shall be payable in United States dollars and shall be paid by check
delivered to Lexicon at its principal office at The Woodlands, Texas or
bank wire transfer in immediately available funds to such bank account in
the State of Texas as is designated in writing by Lexicon from time to
time.
4. REPORTS AND RECORDS. Within thirty (30) days after the end of each
calendar year, Genentech shall deliver to Lexicon a true and accurate written
report listing the number of lines of Mutant Mice made by Genentech during such
year, and certifying that Genentech has complied with its obligations under this
Agreement.
5. INFRINGEMENT OF PATENT RIGHTS. Lexicon shall have the exclusive right,
but shall not be obligated, to prosecute any infringements of the Patent Rights.
The total cost of any such infringement action commenced or defended by Lexicon
shall be borne by Lexicon, and Lexicon shall keep any recovery or damages for
past infringement derived therefrom.
6. INDEMNIFICATION AND LIMITATION OF LIABILITY.
6.1 Genentech shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold Lexicon and its directors, officers,
employees and affiliates harmless from and against all claims, proceedings,
demands, liabilities and losses of any kind whatsoever that are brought by
a Third Party, including legal expenses and reasonable attorneys' fees,
arising out of, based upon or resulting from the use of the Patent Rights
hereunder [**] or the use, testing, marketing or sale of human therapeutic
or diagnostic products by Genentech, its Academic Collaborators or Contract
Service Providers, except to the extent that such claims, proceedings,
demands, liabilities and losses result from Lexicon's gross negligence or
willful misconduct.
6.2 Indemnification Procedures.
4
(a) Notice. Promptly after a Genentech Indemnitee or a Lexicon
Indemnitee (each, an "Indemnitee") receives notice of a pending or
threatened Lexicon Third Person Claim or Genentech Third Person Claim,
as the case may be (an "Action"), such Indemnitee shall give written
notice of the Action to the Party to whom the Indemnitee is entitled
to look for indemnification pursuant to this Article 12 (the
"Indemnifying Party"). However, an Indemnitee's delay in providing or
failure to provide such notice shall not relieve the Indemnifying
Party of its indemnification obligations, except to the extent it can
demonstrate prejudice due to the delay or lack of notice.
(b) Defense. Upon receipt of notice under Subsection (a) from the
Indemnitee, the Indemnifying Party will have the duty to either to
compromise or defend, at its own expense and by counsel (reasonably
satisfactory to Indemnitee), such Action. The Indemnifying Party will
promptly (and in any event not more than twenty (20) days after
receipt of the Indemnitee's original notice) notify the Indemnitee in
writing of its intention to either compromise or defend such Action.
Once the Indemnifying Party notifies the Indemnitee of its election to
assume the defense of an Action, the Indemnifying Party is not liable
to the Indemnitee for the fees of other counsel or any other expenses
subsequently incurred by the Indemnitee in connection with such
defense, other than the Indemnitee's reasonable costs of investigation
and cooperation. However, the Indemnitee shall have the right to
employ separate counsel and to participate in the defense of an Action
(and the Indemnifying Party shall bear the reasonable fees, costs, and
expenses of such counsel) if:
(i) the use of the counsel chosen by the Indemnifying Party
would present such counsel with a conflict of interest;
(ii) the actual or potential defendants in, or targets of, such
Action include both the Indemnifying Party and the
Indemnitee, and the Indemnitee reasonably concludes that
there may be legal defenses available to it that are
different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party
shall not have the right to assume the defense of such
Action on the Indemnitee's behalf);
(iii) the Indemnifying Party does not employ counsel satisfactory
to the Indemnitee to represent the Indemnitee within a
reasonable time after the Indemnitee's notice of such
Action;
(iv) the Indemnifying Party denies or fails to timely admit its
obligation to defend and indemnify the Action; or
(v) in the reasonable opinion of counsel to the Indemnitee, the
claim could result in the Indemnitee becoming subject to
injunctive relief or relief other than the payment of
Damages that could have a materially adverse effect on the
ongoing business of the Indemnitee.
(c) Cooperation. The Indemnitee shall cooperate fully with the
Indemnifying Party and its legal representatives in the investigation
and defense of
5
an Action. The Indemnifying Party will keep the Indemnitee informed on
a reasonable and timely basis as to the status of such Action (to the
extent the Indemnitee is not participating jointly in the defense of
such Action) and conduct the defense of such Action in a prudent
manner.
(d) Settlement. If an Indemnifying Party assumes the defense of
an Action, no compromise or settlement of such Action may be effected
by the Indemnifying Party without the Indemnitee's written consent
(which consent shall not be unreasonably withheld or delayed), unless
(i) there is no finding or admission of any violation of law or any
violation of the rights of any person and no effect on any other
claims that may be made against the Indemnitee, (ii) the sole relief
provided is monetary damages that are paid in full by the Indemnifying
Party, and (iii) the Indemnitee's rights under this Agreement are not
adversely affected. In any event, the Indemnitee shall have no right
to settle any such Action without the prior written consent of the
Indemnifying Party, unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no
effect on any other claims that may be made against the Indemnifying
Party, (ii) the sole relief provided is monetary damages that are paid
in full by the Indemnitee, and (iii) the Indemnifying Party's rights
under this Agreement are not adversely affected; any settlement under
this Subsection (d) without the prior written consent of the
Indemnifying Party shall relieve the Indemnifying Party of its
obligations under this Article 12.
6.3 Lexicon warrants to Genentech that it has the lawful right to
grant the rights and licenses set forth in this Agreement. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, LEXICON AND ITS DIRECTORS,
OFFICERS, EMPLOYEES, AND AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING, AND THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN THIS
AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY
LEXICON THAT THE PRACTICE BY GENENTECH OF THE SUBLICENSE RIGHTS GRANTED
HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO
EVENT SHALL EITHER PARTY OR ITS DIRECTORS, OFFICERS, EMPLOYEES AND
AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND,
INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS,
REGARDLESS OF WHETHER THEY SHALL BE ADVISED, SHALL HAVE OTHER REASON TO
KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.
7. TERM AND TERMINATION.
7.1 This Agreement shall become effective on the Effective Date and
shall remain in effect until the expiration of the last-to-expire patent
included within the Patent Rights.
6
7.2 Upon any material breach or default of this Agreement by Genentech
(including, but not limited to, breach or default under Section 2.1 or use
of the Patent Rights outside of the Field of Use), Lexicon shall have the
right to terminate this Agreement and the rights, privileges and sublicense
granted hereunder, effective on [**] written notice, unless Genentech shall
have cured any such material breach or default prior to the expiration of
such [**] period.
7.3 If Genentech shall liquidate, dissolve, file a voluntary petition
in bankruptcy, be adjudicated a bankrupt, make a general assignment for the
benefit of creditors, admit in writing that it is insolvent or fail to
discharge within [**] an involuntary petition in bankruptcy filed against
it, this Agreement shall terminate upon written notice by Lexicon.
7.4 No termination of this Agreement shall be construed to release
either party from any obligation that matured prior to the effective date
of such termination. The provisions of Sections 2.4, 2.5, 4, 5, 6, 7.4, 9,
11, 12 and 13 shall survive any termination of this Agreement.
8. EXPORT CONTROLS. Genentech acknowledges that it is subject to United
States laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities (including the Arms Export
Control Act, as amended and the United States Department of Commerce Export
Administration Regulations). The transfer of such items may require a license
from the relevant agency of the United States Government and/or written
assurances by Genentech that Genentech shall not export data or commodities to
certain foreign countries without prior approval of such agency. Lexicon does
not represent that a license shall not be required nor that, if required, it
shall be issued.
9. CONFIDENTIALITY OF TERMS; PUBLICITY. The terms of this Agreement shall
be treated as confidential and shall not be disclosed to anyone except for the
parties' respective employees, consultants, agents and attorneys assisting in
the review and negotiation of this Agreement who have a need to know the terms
of this Agreement and have an obligation to keep such terms confidential, or
such other attorneys or agents who are performing due diligence on either party
and who are under an implied obligation of confidentiality, without the written
permission of the other party; provided that each party may disclose that
Genentech has obtained a sublicense under the Patent Rights hereunder. If either
party desires to release a public announcement relating to this Agreement, it
shall first allow the other party to approve in writing such proposed
announcement; provided that such approval shall not be unreasonably withheld or
delayed.
10. ASSIGNMENT. This Agreement may not be assigned or otherwise transferred
by either party without the written consent of the other party; provided,
however, that Lexicon may, without such consent, assign its rights and
obligations under this Agreement (i) to any affiliate or (ii) in connection with
a merger, consolidation or sale of its assets to a Third Party; provided,
however, that Lexicon's rights and obligations under this Agreement shall be
assumed by its successor in interest in any such merger, consolidation or sale
of assets transaction and shall not be transferred separate from all or
substantially all of its other
7
business assets, including those business assets that are the subject of this
Agreement. Any purported assignment in violation of the preceding sentence shall
be void. Any permitted assignee shall assume all obligations of its assignor
under this Agreement.
11. DISPUTE RESOLUTION. If any controversy or claim should arise under this
Agreement, the matter shall be referred to an individual designated by the Chief
Executive Officer (or equivalent position) of Lexicon and an individual
designated by the Chief Executive Officer (or equivalent position) of Genentech
(the "Representatives"), who will attempt in good faith to resolve such
controversy or claim promptly by negotiations. If the matter has not been
resolved within [**] of the first meeting of the Representatives of the parties
(which period may be extended by mutual agreement) concerning such matter, the
parties shall be free to pursue all available recourse both at law and in
equity.
12. PAYMENTS, NOTICES AND OTHER COMMUNICATIONS. Any payments, notice or
other communication pursuant to this Agreement shall be sufficiently made or
given on the date of mailing if sent to such party by certified first class
mail, return receipt requested, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other party:
In the case of Genentech:
Genentech, Inc.
1 DNA Way
South San Francisco, California 94080
Attention: Corporate Secretary
cc: Vice President of Research
In the case of Lexicon:
Lexicon Genetics Incorporated
8800 Technology Forest Place
The Woodlands, Texas 77381
Attention: President
cc: Vice President, Intellectual Property
13. MISCELLANEOUS.
13.1 Entire Agreement. The parties hereto acknowledge that this
Agreement sets forth the entire Agreement and understanding of the parties
hereto as to the subject matter hereof, and shall not be subject to any
change or modification except by the execution of a written instrument
signed by the parties.
13.2 Severability. The provisions of this Agreement are severable, and
in the event that any provisions of this Agreement shall be determined to
be invalid or unenforceable under any controlling body of the law, such
invalidity or unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof.
8
The parties shall thereafter in good faith amend this Agreement to provide
for an acceptable provision to replace such invalid or unenforceable
provision.
13.3 No Waiver. The failure of either party to assert a right
hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the other
party.
13.4 Governing Law. All disputes arising out of or related to this
Agreement, or the performance, enforcement, breach or termination hereof,
and any remedies relating thereto, shall be construed, governed,
interpreted and applied in accordance with the laws of the State of
Delaware, U.S.A., except that questions affecting the construction and
effect of any patent shall be determined by the law of the country in which
the patent shall have been granted.
13.5 No Trademark Rights. Except as otherwise provided herein or
agreed to in advance in writing, no right, express or implied, is granted
by this Agreement to a party to use in any manner the names "Lexicon" or
"Genentech," or any other trade name or trademark of a party or the names
of any employees thereof, for any purpose.
13.6 Captions. The captions to this Agreement are for convenience
only, and are to be of no force or effect in construing or interpreting any
of the provisions of this Agreement.
13.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9
13.8 Independent Contractors. The relationship between Lexicon and
Genentech is that of independent contractors. Lexicon and Genentech are not
joint venturers, partners, principal and agent, master and servant,
employer or employee, and have no other relationship other than independent
contracting parties. Lexicon shall have no power to bind or obligate
Genentech in any manner, other than as is expressly set forth in this
Agreement. Likewise, Genentech shall have no power to bind or obligate
Lexicon in any manner other than is expressly set forth in this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
Effective Date.
"GENENTECH"
GENENTECH, INC.
By:
------------------------------------
Arthur D. Levinson
Chief Executive Officer
"LEXICON"
LEXICON GENETICS INCORPORATED
By:
------------------------------------
Arthur T. Sands, M.D., Ph.D.
President and
Chief Executive Officer
10
APPENDIX A
PATENT RIGHTS
ISOGENIC DNA
U.S. Patent No. 5,789,215 issued August 4, 1998 entitled "Gene Targeting in
Animal Cells Using Isogenic DNA Constructs"
11
EXHIBIT C
NOTE AGREEMENT
THIS NOTE AGREEMENT is entered into as of December 17, 2002 (this "Note
Agreement"), between LEXICON GENETICS INCORPORATED, A Delaware corporation
(herein called "Borrower"), and GENENTECH, INC., a Delaware corporation (herein
called "Lender").
1. COMMITMENT. Subject to all the terms and conditions of this Note
Agreement and prior to the termination of its commitment as hereinafter
provided, Lender hereby agrees to make a loan (the "Loan"), up to an aggregate
principal amount not to exceed $4,000,000, pursuant to Article 7.14 of the
Collaboration and License Agreement dated as of the date hereof, between
Borrower and Lender (the "Collaboration Agreement"). The Loan shall become
available to Borrower on or before December 31, 2002. The Loan shall be
evidenced by a convertible promissory note, in the form of the Convertible
Promissory Note attached as Exhibit A hereto and incorporated herein by this
reference (the "Note"), which Note shall reflect the date of payment of the Loan
(the "Effective Date"). The Loan will be advanced to Borrower in immediately
available funds by wire transfer to a deposit account of Borrower in accordance
with the wire transfer instructions set forth beneath Borrower's signature to
this Agreement (as the same may be amended by written notice from Borrower to
Lender).
2. LOAN.
A. MATURITY DATE. Borrower promises to pay to Lender the entire
outstanding principal balance (and all accrued interest thereon) of the Loan on
or before the date (the "Maturity Date") that is the earlier of (i) December 31,
2005, (ii) six (6) months after the termination of the Collaboration Agreement
or (iii) the date of an Event of Default as set forth in Section 8 below.
(1) PAYMENT IN NOTE SHARES. At Borrower's option, subject to the
limitations set forth in Section 2.A.(3), on the Maturity Date, Borrower may
elect to pay the outstanding principal balance (and all accrued interest
thereon) of the Loan in (a) shares of Borrower's common stock, par value $0.001
per share (the "Common Stock"), pursuant to the Note (the "Note Shares"), (b)
immediately available funds, or (c) a combination of Note Shares and immediately
available funds.
(2) OPTIONAL PREPAYMENT. At Borrower's option, subject to the
limitations set forth in Section 2.A.(3), Borrower may at any time, upon fifteen
(15) days written notice to Lender, prepay all or any portion of the outstanding
principal balance (and all accrued interest on the principal amount so prepaid)
of the Loan in (a) Note Shares pursuant to the Note, (b) immediately available
funds, or (c) a combination of Note Shares and immediately available funds.
(3) LIMITATIONS ON PAYMENT IN NOTE SHARES.
(a) Borrower shall have no right to pay in Note Shares any
amounts in respect of principal outstanding under the Loan and accrued interest
in respect thereof to the extent that the number of such Note Shares, calculated
pursuant to Section 3 of the Note, would, when added to all other shares of
Common Stock of Borrower then owned by Lender or issuable to Lender pursuant to
the terms of any convertible securities of Borrower then owned by Lender, cause
Lender to own, in the aggregate, shares of Common Stock equal to more than 15%
of Borrower's issued and outstanding Common Stock plus the Note Shares so
contemplated to be issued, calculated at the time such payment in Note Shares is
contemplated. In such event, then Borrower shall pay in Note Shares only up to
such amount as, in Lender's good faith opinion, based on the advice of legal
counsel, would not exceed 15% of Borrower's issued and outstanding Common Stock
plus the Note Shares so issued unless Lender elects, in its sole discretion, to
receive payment of the entire amount due under the Loan in Note Shares,
notwithstanding the foregoing limitation on repayment in Note Shares. Any
remaining balance payable to Lender in respect of the Loan shall be paid in
immediately available funds.
(b) Borrower may make payments in Note Shares only to the
extent that Borrower then has in reserve and available sufficient of its
authorized but unissued shares of Common Stock to effect such payment in Note
Shares.
B. INTEREST ON LOAN. Interest shall accrue on the sum of the daily
unpaid principal balance of the Loan outstanding on each day in lawful money of
the United States of America from the Effective Date until all such principal
amounts shall have been paid in full, which interest shall accrue at a rate
equal to eight percent (8%) per annum. Interest shall be compounded quarterly
and computed at the above rate on the basis of the actual number of days elapsed
year of 365 days; provided, however, that in no event shall Borrower be bound to
pay for the use or forbearance of the money loaned pursuant hereto, interest of
more than the maximum rate permitted by law to be charged by Lender; the right
to demand any such excess being hereby expressly waived by Lender. All accrued
and unpaid interest attributable to the principal amount of the Loan then being
paid shall be payable concurrently with such payment of principal, whether in
connection with any prepayment, on the Maturity Date or otherwise.
C. USE OF PROCEEDS. The Loan may only be used for the generation and
phenotypic analysis of knock-out mice and Over-Expression Mice for Project Genes
(as such terms are defined in the Collaboration Agreement).
3. DELIVERY AND APPLICATION OF PAYMENTS. Payment to Lender of all amounts
due hereunder shall be made in immediately available funds on the date when due
by wire transfer to a deposit account of Lender in accordance with the wire
transfer instructions set forth beneath Lender's signature to this Agreement (as
the same may be amended by written notice from Lender to Borrower). Payment to
Lender of all amounts due hereunder payable in Note Shares shall be made by
delivery of an appropriate stock certificate within two business days after the
Maturity Date (in the case of a payment pursuant to Section 2.A.(l)) or two
business days after the effective date of an election by Borrower to prepay (in
the case of a prepayment pursuant to Section 2.A.(2)), to the office of Lender
at I DNA Way, South San Francisco, California 94080,
2
Attention: Treasurer, or at such other place as may be designated in writing by
Lender from time to time. If any payment date falls on a day that is not a
business day, the payment due date shall be extended to the next business day.
Any payment or prepayment received or deemed received in respect of the Loan
shall be applied first, to accrued and unpaid interest, and then, to the
outstanding principal balance of the Note.
4. BORROWER REPRESENTATIONS AND COVENANTS. Borrower hereby represents,
warrants and covenants to Lender as follows:
A. AUTHORITY. Borrower has full right, power, authority and capacity
to enter into this Note Agreement and the Note (collectively, the "Loan
Documents") and to consummate the transactions contemplated hereby and thereby.
Upon due execution and delivery by Borrower, the Loan Documents will constitute
a legal, valid and binding obligation of Borrower enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
B. GOOD STANDING. Borrower is qualified to do business and is in good
standing in the State of Delaware and each jurisdiction in which the failure to
so qualify would have a material adverse effect on the business, operations,
financial condition or results of operations of Borrower and its subsidiaries,
taken as a whole.
C. CONSENTS. The execution and delivery of the Loan Documents, and
performance by Borrower of its obligations hereunder and thereunder, have been
duly authorized by all necessary corporate action on the part of Borrower. No
consent, approval, order or authorization of any federal, state or local
governmental authority on the part of Borrower is required in connection with
the consummation of the transactions contemplated by this Note Agreement.
D. COMPLIANCE WITH SECURITIES LAWS. Assuming the accuracy of the
representations made by Lender in Section 5 hereof, the Note Shares issuable
upon conversion of any portion of the Note will be issued to Lender in
compliance with (i) the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the registration
and qualification requirements of all applicable securities laws of the states
of the United States or (ii) applicable exemptions therefrom.
E. NO CONFLICTS. The execution and delivery by Borrower of the Loan
Documents and consummation of the transactions contemplated thereby do not and
will not (i) violate the Certificate of Incorporation or Bylaws of Borrower or
any material judgment, order, writ, decree, statute, rule or regulation
applicable to Borrower; (ii) violate any provision of, or result in the breach
of, any material mortgage, indenture, agreement, instrument, contract, judgment
or decrees to which Borrower is a party or by which it is bound; or (iii) result
in the creation or imposition of any lien upon any property, asset or revenue of
Borrower or the suspension, revocation or nonrenewal of any material permit,
license, authorization or approval applicable to Borrower, its business or
operations, or any of its assets or properties.
3
F. DISCLOSURE. No representation or warranty of Borrower contained in
the Loan Documents, the Collaboration Agreement or any other documents,
certificate or statement furnished to Lender by or on behalf of Borrower in
connection with the transactions contemplated hereby or thereby contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statement contained herein or therein nor misleading. To the best of
Borrower's knowledge, there is no fact known to Borrower that materially
adversely affects the business, operations, property, assets, condition or
prospects of Borrower that has not been disclosed in any filing with the
Securities and Exchange Commission.
5. LENDER REPRESENTATIONS AND COVENANTS. Lender hereby represents, warrants
and covenants to Borrower as follows:
A. AUTHORITY. Lender has full right, power, authority and capacity to
enter into this Note Agreement and to consummate the transactions contemplated
hereby. Upon due execution and delivery by Lender, this Note Agreement will
constitute a legal, valid and binding obligation of Lender enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
B. INVESTMENT EXPERIENCE; INVESTMENT INTENT; ETC. (i) Lender is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Note and the Note Shares that
may be issued in payment thereof (collectively, the "Securities"); (ii) Lender
has received all the information it considers necessary or appropriate for
deciding whether to purchase the Securities; (iii) Lender is acquiring the
Securities in the ordinary course of its business and for its own account solely
for investment and with no present intention of distributing any of such
Securities, except in accordance with an effective Registration Statement or
otherwise pursuant to an available exemption from registration under the
Securities Act, and no arrangement or understanding exists with any other person
regarding the distribution of such Securities; (iv) Lender will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) the
Securities except in compliance with the Securities Act, and the rules and
regulations promulgated thereunder; and (v) Lender is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
C. LENDER UNDERSTANDING AND AGREEMENTS. Lender acknowledges and agrees
that it will acquire the Securities being purchased by it in transactions not
involving a public offering and that such Securities are subject to certain
restrictions as to resale under the federal and state Securities laws. Lender
agrees and understands that each certificate representing Note Shares issued in
payment of the Note delivered on transfer of or in substitution for any such
certificate, shall bear a legend in substantially the following form:
THE SECURiTIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS IMPOSED BY THE SECURiTIES ACT OF 1933, AS AMENDED, AND
4
APPLICABLE STATE SECURITIES LAW. THE SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES
LAWS.
Lender agrees that it will not sell, pledge, assign, transfer or otherwise
dispose (collectively, "Transfer") of any Securities unless the Transfer will be
made pursuant to an exemption from the registration requirements of the
Securities Act or pursuant to an effective registration statement under the
Securities Act and pursuant to an exemption from any applicable state securities
laws or an effective registration or other qualification under any applicable
state securities laws.
D. CONSENTS. The execution and delivery of this Note Agreement, and
performance by Lender of its obligations hereunder, have been duly authorized by
all necessary corporate action on the part of Lender.
6. CONDITIONS TO MAKING OF LOAN. Lender's obligation to make the Loan to
Borrower under the Loan Documents is subject to satisfaction of each of the
following conditions as of the date the Loan is to be made, any of which may be
waived in whole or in part by Lender:
A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Borrower in Section 4 hereof shall be true and correct as of the date
the Loan is to be made, except that to the extent any representation or warranty
is made as of a specified date, it shall have been true and correct as of such
date.
B. NO DEFAULTS. No Event of Default or event which, with notice or
lapse of time or both would become an Event of Default, shall have occurred and
be continuing under the Loan Documents, and no breach shall have occurred and be
continuing under the Collaboration Agreement.
7. SUBORDINATION. The indebtedness evidenced by the Note is hereby
subordinated, only in right of payment to the prior payment of (a) the
indebtedness of Borrower outstanding as of the date of this Note Agreement to
banks or commercial finance or other lending institutions regularly engaged in
the business of lending money, whether or not secured ("Senior Indebtedness")
and (b) any indebtedness or debentures, notes or other evidences of indebtedness
issued in exchange for Senior Indebtedness.
8. DEFAULT AND REMEDIES. The occurrence of any one or more of the following
shall constitute an "Event of Default": (a) default in the payment of any
obligation by Borrower under the Note within five (5) business days after the
date the same became due and payable; (b) any representation or warranty made by
Borrower in Section 4 of this Note Agreement shall prove to have been untrue in
any material respect when made or deemed made; (c) except for any failure to pay
as described in clause (a) above, breach of any covenant contained in the Loan
Documents
5
if such breach shall not have been cured to the reasonable satisfaction of
Lender within sixty (60) days after Borrower shall have received written notice
thereof from Lender; (d) Borrower files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law or any other law
for the relief of, or relating to, debtors, now or hereafter in effect, or makes
any assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; (e) an involuntary petition is filed
against Borrower (unless such petition is dismissed or discharged within sixty
(60) days) under any bankruptcy statute now or hereafter in effect, or a
custodian, receiver, trustee, assignee for the benefit of creditors (or other
similar official) is appointed to take possession, custody or control of any
property, of Borrower (provided that no Loan will be made prior to the dismissal
of such proceeding); (f) Lender terminates the Collaboration Agreement pursuant
to Article 10.2 of the Collaboration Agreement; or (g) failure to pay when due
any amount in respect of Senior Indebtedness, or occurrence of any other default
in respect of Senior Indebtedness that pursuant to which the holder thereof
accelerates the due date thereof. Upon the occurrence and during the continuance
of an Event of Default, Lender may, at its option, upon notice to Borrower, do
any one or more of the following: (i) terminate its obligation to make the Loan
to Borrower as provided in Section 2 hereof if such Loan has not yet been made;
provided that in the case of an Event of Default pursuant to clause (d) or (e)
above, Lender's obligation to make the Loan to Borrower as provided in Section 3
hereof shall automatically terminate, without notice to Borrower, if such Loan
has not yet been made; (ii) declare all sums evidenced hereby immediately due
and payable; provided that in the case of an Event of Default pursuant to clause
(d) or (e) above, all sums evidenced hereby shall be automatically and
immediately due and payable, without notice to or demand on Borrower; or (iii)
exercise any remedies of an unsecured creditor under applicable law.
9. GOVERNING LAW. This Agreement shall be deemed to have been made in the
State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
10. MISCELLANEOUS PROVISIONS.
A. Nothing herein shall in any way limit the effect of the conditions
set forth in any other security or other agreement executed by Borrower, but
each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Lender, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Note Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Note Agreement and any related
documents are for convenience only and shall not have any substantive effect.
6
E. This Note Agreement may be executed in any number of counterparts,
each of which when so delivered shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. Each such
agreement shall become effective upon the execution of a counterpart hereof or
thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Lender.
F. Neither party shall assign any of its rights or obligations
hereunder except:
(a) as incident to the merger, consolidation, reorganization or acquisition of
stock or assets affecting substantially all of the assets or voting control of
the assigning party; (b) to any wholly-owned Affiliate of such party; provided,
however, that such assignment shall not relieve the assigning party of its
responsibilities for performance of its obligations under this Note Agreement;
or (c) with the prior written consent of the other party (in its sole
discretion). This Note Agreement shall be binding upon the successors and
permitted assigns of the parties, and the name of a party appearing herein shall
be deemed to include the names of such party's successor's and permitted assigns
to the extent necessary to carry out the intent of this Agreement. Any
assignment not in accordance with this section shall be null and void.
(Signature page follows)
7
IN WITNESS WHEREOF, the parties hereto have caused this Note Agreement to
be executed as of the date first written above.
LENDER: BORROWER:
GENENTECH, INC., LEXICON GENETICS INCORPORATED,
a Delaware corporation a Delaware corporation
By: By:
--------------------------------- ------------------------------------
Name: Thomas T. Thomas Name:
Title: Treasurer ----------------------------------
Title:
---------------------------------
Wire Transfer Instructions: Wire Transfer Instructions:
8
EXHIBIT A
FORM OF CONVERTIBLE PROMISSORY NOTE
THIS CONVERTIBLE PROMISSORY NOTE IS SUBJECT TO RESTRICTIONS IMPOSED BY THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAW. THIS
NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE
SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
$4,000,000.00 [DATE]
FOR VALUE RECEIVED, LEXICON GENETICS INCORPORATED, a Delaware corporation
("Borrower"), hereby promises to pay to the order of GENENTECH, INC., a Delaware
corporation ("Lender"), in lawful money of the United States of America and in
immediately available funds, the principal sum of $4,000,000.00 or such lesser
amount as shall have been advanced by Lender and shall remain outstanding (the
"Loan"), together with accrued and unpaid interest thereon, due and payable on
the date and in the manner set forth below.
This Convertible Promissory Note ("Note") is the note referred to in and is
executed and delivered in connection with the Note Agreement dated as of
December 17, 2002, between Borrower and Lender (the "Note Agreement").
Additional rights and obligations of Lender and Borrower are set forth in the
Note Agreement. All capitalized terms used herein and not otherwise defined
shall have the respective meanings given to them in the Note Agreement.
1. MATURITY DATE. Subject to Section 3 below, all amounts payable hereunder
shall be due and payable on the Maturity Date. This Note may be, prepaid in
whole or in part at any time without penalty, in accordance with the terms of
the Note Agreement.
2. INTEREST RATE AND PAYMENT. Borrower further promises to pay interest on
the outstanding Loan amount, which interest shall accrue from the date hereof
and shall be added to the principal balance of the Loan. Interest shall accrue
on the sum of the daily unpaid principal balance of the Loan outstanding on each
day in lawful money of the United States of America, from the Effective Date
until all such principal amounts shall have been paid in full, which interest
shall accrue at a rate equal to eight percent (8%) per annum. Interest shall be
compounded quarterly and computed at the above rate on the basis of the actual
number of days elapsed year of 365 days; provided, however, that in no event
shall Borrower be bound to pay for the use or forbearance of the money loaned
pursuant hereto, interest of more than the maximum rate permitted by law to be
charged by Lender; the right to demand any such excess being hereby expressly
waived by Lender. All accrued and unpaid interest attributable to the principal
amount of the Loan then being paid shall be payable concurrently with such
payment of principal, whether in connection with any prepayment, on the Maturity
Date or otherwise.
3. PAYMENT. At Borrower's sole option and subject to the limitations
contained in Section 2.A.(3) of the Note Agreement, (a) on the Maturity Date,
the outstanding principal balance of, and accrued interest on, this Note shall
be payable in (i) shares of Borrower's Common Stock, (ii) immediately available
funds, or (iii) a combination of Common Stock and
immediately available funds; and (b) on any date upon which Borrower desires to
prepay all or any portion of the outstanding principal balance of, and accrued
interest on the amount so prepaid, such prepayment shall be payable in (i)
Common Stock, (ii) immediately available funds, or (iii) a combination of Common
Stock and immediately available funds. The number of shares of Common Stock
which shall be issuable to make any payment under this Note, including, without
limitation, any optional prepayment amount, which may be made by Borrower shall
be determined by dividing the amount of such payment by the Fair Market Value.
"Fair Market Value" shall mean the average of the closing prices for Borrower's
Common Stock as reported in The Wall Street Journal (Western Edition) for the
twenty (20) trading days immediately preceding the Maturity Date or the date
upon which an optional prepayment amount is paid, as the case may be.
A. MECHANICS AND EFFECT OF PAYMENT IN COMMON STOCK. No fractional
shares of Common Stock shall be issued in payment of this Note. In lieu of
Borrower issuing any fractional shares to Lender upon payment of this Note (or
any amount thereof) in Common Stock, Borrower shall pay to Lender in cash the
amount of any such payment that is not so paid in Common Stock, such payment to
be in the form provided below. Upon payment of this Note in full pursuant to
this Section 3, Lender shall surrender this Note, duly endorsed, at the
principal office of Borrower. The payment in Common Stock shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of this Note or the date any optional prepayment amount is paid, as
the case may be, and the person or persons entitled to receive the shares of
Common Stock issuable upon such payment shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date.
Borrower shall, in accordance with Section 2 of the Note Agreement, issue and
deliver to Lender at such principal office a certificate or certificates for the
number of shares of Common Stock to which Lender shall be entitled upon such
payment bearing such legends as are required by applicable state and federal
securities laws and pursuant to Section S.C. of the Note Agreement, together
with any other securities and property to which Lender is entitled upon such
payment under the terms of this Note, including a check payable to Lender for
any cash amounts payable as described above.
4. SUBORDINATION. The indebtedness evidenced by this Note is hereby
subordinated, only to the extent set forth in Section 7 of the Note Agreement,
in right of payment to the prior payment of the Senior Indebtedness.
5. PLACE OF PAYMENT. All amounts payable hereunder shall be payable in
accordance with terms of the Note Agreement, unless otherwise specified in
writing by Lender.
6. APPLICATION OF PAYMENTS. Payment on this Note shall be applied first to
accrued interest, and thereafter to the outstanding principal balance hereof.
7. DEFAULT. The occurrence of an "Event of Default" under and as defined in
the Note Agreement shall constitute an "Event of Default" hereunder. Upon the
occurrence of an Event of Default, Lender shall have such rights and remedies as
are provided under the Note Agreement or by law.
2
8. GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
9. SUCCESSORS AND ASSIGNS. Subject to the limitations of Section 10.F. of
the Note Agreement, the provisions of this Note shall inure to the benefit of
and be binding on any successor to Borrower and shall extend to any holder
hereof.
BORROWER:
LEXICON GENETICS INCORPORATED
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
3
EXHIBIT D
ADVANCED PHENOTYPIC PANELS
[**]
EXHIBIT E
EXCLUDED GENES
[**]
EXHIBIT F
FINANCIAL APPENDIX
1. SCOPE
As described in Section 8.14(b) of the Agreement, this Financial Appendix
addresses the terms related to calculating Operating Profits (Losses) and the
principles of reporting and communication between the Parties for Genentech IND
Opted Products and Genentech Phase II Opted Products.
Defined terms are capitalized and may be used in the singular or plural.
Capitalized terms used in this Financial Appendix and without definition herein
shall be defined as in the Agreement.
2. PRINCIPLES OF REPORTING
Determination of Operating Profits (Losses), for a Genentech IND Opted Product
or Genentech Phase II Opted Product will be based on each Party's respective
financial information. A Party may choose to provide a consolidated worldwide
pro-forma financial statement for itself and its respective Genentech Product
Licensees or Lexicon Product Licensees, rather than separate financial
statements for itself and its respective Genentech Product Licensees or Lexicon
Product Licensees, in the following reporting format. The interpretation of the
defined terms in such report shall be in accordance with GAAP (with the
exception of certain Stock Based Compensation as described below) and this
Agreement.
Gross Sales
less Sales Returns and Allowances
= Net Sales
less Cost of Sales
= Gross Profits
less Marketing Costs
less Sales Costs
less Research Costs
less Development Costs
less Other Operating Income/Expense
less Distribution Costs
less General and Administrative Costs
= Operating Profits (Losses)
If necessary, a Party will make the appropriate adjustments to the financial
information it supplies under the Agreement to conform to the above format of
reporting results of operations. Without limiting the foregoing, prior to the
time that Gross Sales are obtained and if there are no incurred costs related to
marketing, sales or sales support, the Parties may eliminate the above line
items related thereto, and the costs thereof, and use only those terms relevant
to the sharing of Research Costs and Development Costs. The Parties shall
calculate Operating Profits (Losses) without duplication of any item in the
categories set forth above.
Exhibit F - Financial Appendix Page 1
3. FREQUENCY OF REPORTING
The fiscal year for the Agreement will be a Calendar Year.
Reporting will be at the times set forth in the following Report Table, with
submissions due on the date indicated or the next business day if such date is a
weekend or U.S. holiday:
[**]
The Parties may agree to modify the foregoing reporting cycles and deadlines. In
the event that a Party substantially or materially changes its internal
reporting cycles and deadlines generally, then the Parties shall discuss, in
good faith, appropriate revisions to the foregoing reporting cycles and
deadlines to reasonably accommodate such change.
Unless otherwise agreed by the Parties consistent with their responsibilities
for sales and marketing, Genentech shall record all sales. [**].
Each Party will make available a financial representative to discuss the
following, at the request of the other Party:
- Development Costs
- Research Costs
- Actual Results
- Forecasts
- Budgets
- Long Range Plans
- Gross Sales
- Sales Returns and Allowances
- Inventory Levels
- Sales and Marketing Costs
- other financial matters as appropriate, including methodologies for
determining costs, actual amounts, forecasts, budgets and long range
plans and the results of applying such methodologies
4. PAYMENTS BETWEEN THE PARTIES FOR OPERATING PROFITS (LOSSES)
Settlement payments based upon the agreed upon percentages of Operating Profits
(Losses) per Section 8.14 will be made to the appropriate Party by the other
Party via wire transfer of immediately available funds to an account designated
by the receiving Party in writing within [**] of the time specified for the
Final Consolidation & Variance report in the Report Table. A statement
specifying how each payment was calculated shall also be submitted with each
payment to the non-paying Party.
Sharing of Operating Profits (Losses) shall be based on actual amounts.
5. BUDGETS
Exhibit F - Financial Appendix Page 2
Genentech shall prepare [**] budget for each Genentech IND Opted Product and
Genentech Phase II Opted Product that describes the projected activities and
related amounts pertaining to each line item of the calculation of Operating
Profits (Losses) by Calendar Quarter. Lexicon will provide Genentech with its
budget information for the foregoing products (by Calendar Quarter) to the
extent that Lexicon is directly responsible for activities that impact the
calculation of Operating Profits (Losses).
From time to time, Genentech may supplement the budgets under this Exhibit F
with additional detail describing the projected activities and related amounts
for U.S. (or ex-U.S., as appropriate) clinical trials and applications for
Regulatory Approval.
[**]
6. RESPONSIBILITY FOR REPORTING
Genentech is responsible for generating consolidated reports. Lexicon will
provide Genentech with financial statements within [**] for its activities,
prepared in accordance with the terms contained in this Exhibit F in order for
Genentech to prepare the consolidated reports. Genentech shall provide Lexicon
with a copy of the consolidated reporting and other calculations that form the
basis of determining payments between the Parties for Operating Profits (Losses)
for Genentech IND Opted Products and Genentech Phase II Opted Products.
7. STOCK BASED COMPENSATION
For each of Allocable Overhead, Research Costs, Development Costs, Sales Costs,
Cost of Sales, Distribution Costs, Marketing Costs, and General and
Administrative Costs, the Parties will not include any costs associated with
those components of stock based compensation that are required, under Statement
of Financial Accounting Standards #123(R) (SFAS 123R) or successor thereto, to
be recorded as an expense under GAAP.
8. DEFINITIONS
"Allocable Overhead" means fully-burdened costs incurred by a Party that are
attributable to that Party's supervisory, shared services (e.g., dedicated sales
and commercial support, market development, managed care, or the equivalent of
the foregoing), occupancy, facility and equipment (excluding idle capacity
charges for facilities and equipment), corporate bonus (to the extent not
directly charged) and to its payroll, information systems, human relations and
purchasing functions, and, in each case, which are reasonably allocated to
company departments based on space occupied or headcount or other activity-based
methods consistently applied by a Party. Allocable Overhead shall not include
[**], and shall not duplicate General & Administrative Expenses hereunder.
"Cost of Sales" means the sum of: (a) Fully Burdened Manufacturing Cost (as
defined below) of a Genentech IND Opted Product or Genentech Phase II Opted
Product (in whatever form); (b) freight, insurance, customs charges, duty,
temporary storage and other costs of shipping Genentech IND Opted Products and
Genentech Phase II Opted Products to customers (to the extent actually incurred
by the shipping Party and not reimbursed by the customer); and (c) any payments
due to third parties with respect to the research, development, manufacture,
use, sale,
Exhibit F - Financial Appendix Page 3
offer for sale or import of Genentech IND Opted Products or Genentech Phase II
Opted Products and incurred in accordance with Article 9, excluding any
royalties already accounted for in Fully Burdened Manufacturing Cost.
"Development Costs" shall include, but are not limited to, costs of studies
using cGMP materials in accordance with current Good Laboratory Practices and/or
current Good Clinical Practices on the toxicological, pharmacokinetic, metabolic
or clinical aspects of (i) a Lexicon Advanced Research Protein Candidate and
associated Lexicon Advanced Research Product(s), (ii) a Genentech IND Opted
Product or (iii) a Genentech Phase II Opted Product, as applicable, which
studies are conducted internally or by individual investigators or consultants
in each case as necessary for obtaining, maintaining and/or expanding marketing
approval of such Genentech IND Opted Product and/or Genentech Phase II Opted
Product, process development, process improvement, and recovery costs, failed
clinical lots, qualification lots, and costs for preparing, submitting,
reviewing or developing data or information for the purpose of submission to a
governmental authority to obtain, maintain and/or expand marketing approval of a
Genentech IND Opted Product and/or Genentech Phase II Opted Product. Such costs
will include internal costs (e.g., salaries, benefits, travel, supplies and
materials), applicable Allocable Overhead, and outside services and expenses. In
determining "Development Costs" chargeable under this Agreement, each Party will
use its respective project accounting systems, as consistently applied across
all its projects.
"Distribution Costs" means the costs, including applicable Allocable Overhead,
specifically identifiable to the distribution of a Genentech IND Opted Product
or Genentech Phase II Opted Product by a Party, including customer services,
collection of data about sales to hospitals and other end users, order entry,
billing, shipping, logistics, credit and collection and other such activities.
"FTE" means the equivalent of one employee working on a dedicated full time
basis for one year (consisting of at least a total of [**] per year of dedicated
effort) performing scientific, technical or managerial work on or directly
related to the research of a Lexicon Advanced Research Candidate and associated
Lexicon Advanced Research Product(s), Genentech IND Opted Product or Genentech
Phase II Opted Product, as applicable. Any given employee performing such
scientific, technical or managerial work will be [**] for the purposes of
calculating FTE costs. For the purposes of calculating FTEs for a given period,
Lexicon shall divide the cumulative hours charged to the foregoing program(s)
based on its project accounting system (and subject to the foregoing annual hour
limits for each employee) by [**] for a calendar year (or the appropriate
fraction thereof). For purposes of clarity the denominator of the foregoing
calculation for [**].
"FTE Costs" means the amounts (which amounts include salaries, fringe benefits,
overtime, travel, supplies and Allocable Overhead) determined by multiplying (i)
the number of FTEs allocated by a Party during the relevant time period, subject
to any limitations set forth in the applicable Clinical Development Plan, by
(ii) the applicable FTE Rate(s).
"FTE Rate" means [**], to be adjusted annually (beginning in [**]) for inflation
using the latest available [**] as a simple percentage. Such adjustments shall
be the responsibility of the Steering Committee.
Exhibit F - Financial Appendix Page 4
"Fully Burdened Manufacturing Cost" or "FBMC" means [**] of a Party's
manufacturing cost (as defined in the Party's accounting policies consistently
applied), which shall comprise the sum of:
(a) the actual cost of goods produced, as determined by a Party
manufacturing or contracting with a Third Party for each stage of the
manufacturing process, in accordance with GAAP (as used in this definition of
FBMC, the "Cost of Goods"), including product quality assurance/control costs,
plus applicable Allocable Overhead; and
(b) all royalties payable under license(s) taken by a Party under a Third
Person's patents or patent applications in accordance with Article 9 that, but
for such license(s), would be infringed by the manufacture of a Genentech IND
Opted Product or Genentech Phase II Opted Product by such Party.
[**].
"General and Administrative Costs" or "G&A Costs" means costs equal to [**].
"Gross Sales" has the meaning in Section 1.44 of the Agreement.
"Interest Rate" has the meaning in Section 1.48 of the Agreement.
"Marketing Costs" means the specific direct costs incurred by a Party directly
on account of a Collaboration Product for marketing, promotion, advertising,
promotional materials, professional education, product related public relations,
relationships with opinion leaders and professional societies, market research
(before and after product approval), healthcare economics studies,
post-marketing studies not required to maintain product approvals (e.g.,
investigator sponsored trials, product registries and medical information), and
other similar activities. Such costs will include both internal costs (e.g.,
salaries, benefits, travel, supplies and materials), applicable Allocable
Overhead, and outside services and expenses (e.g., consultants, agency fees,
meeting costs), in all cases as directly applicable to a specific Genentech IND
Opted Product or Genentech Phase II Opted Product. "Marketing Costs" shall also
include activities related to obtaining reimbursement from payers and costs of
sales and marketing data, in all cases only as directly applicable to a specific
Genentech IND Opted Product or Genentech Phase II Opted Product. "Marketing
Costs" will specifically exclude the costs of activities that promote either
Party's business as a whole without being product specific (e.g., corporate
image advertising).
"Operating Profits (Losses)" means Gross Sales of all Genentech IND Opted
Products or Genentech Phase II Opted Products less the following items with
respect to each Genentech IND Opted Product or Genentech Phase II Opted Product
Collaboration Product, all for a given period: Sales Returns and Allowances,
Cost of Sales, Marketing Costs, Sales Costs, Research Costs, Development Costs,
Other Operating Income/Expense, Distribution Costs, and General and
Administrative Costs, all of which as properly chargeable and allocable on a
product-by-product basis. All calculations will be made using, and all defined
and undefined terms will be construed in accordance with GAAP and consistent
with generally accepted costing methods (including appropriate Allocable
Overhead) for similar products in the pharmaceutical industry.
"Other Operating Income/Expense" means any of the following:
Exhibit F - Financial Appendix Page 5
- actual inventory write-offs of any Genentech IND Opted Product or
Genentech Phase II Opted Product, to the extent not previously
captured
- third party indemnification expenses
- Patent and Trademark costs
- product liability insurance
Other Operating Income/Expense shall not include any costs that are already
included in Cost of Sales, Research Costs, Development Costs, Marketing Costs,
Sales Costs, Distribution Costs, General and Administrative Costs, Sales Returns
and Allowances, and Allocable Overhead for any of the foregoing cost categories,
and in every case shall only include costs directly allocable to a Genentech IND
Opted Product or Genentech Phase II Opted Product in accordance with GAAP.
"Patent and Trademark Costs" means the fees and expenses paid to outside legal
counsel and experts, and filing and maintenance expenses, incurred after the
date on which Genentech exercises its IND Opt-In or Phase II Opt-In (as
applicable) in connection with the establishment and maintenance of (i) Project
Patents related to Genentech IND Opted Products and Genentech Phase II Opted
Products and (ii) Genentech Trademarks, in each case including the costs of any
interference, reexamination, reissue, opposition and revocation proceedings.
"Report Table" means the table set forth in paragraph 3 of this Exhibit F that
specifies the frequency and timing of submissions for specific reporting events.
"Research Costs" means the costs other than Development Costs incurred for
screening, lead optimization, in vitro and in vivo testing of (i) a Lexicon
Advanced Research Candidate and associated Lexicon Advanced Research Product(s),
(ii) a Genentech IND Opted Product or (iii) a Genentech Phase II Opted Product,
as applicable, including the costs of studies on the toxicological,
pharmacokinetic and metabolic aspects of the foregoing. Research Costs will
include internal costs (e.g., salaries, benefits, travel, supplies and
materials), applicable Allocable Overhead, and outside services and expenses.
Research Costs shall not duplicate Development Costs or costs incurred by
Lexicon in conducting Advanced Research Phenotypic Panels. The parties agree and
understand that, except for out-of-pocket costs incurred for Third Person
contracts and services, Research Costs incurred by Lexicon shall be calculated
on the basis of FTE Costs. In determining "Research Costs" chargeable under this
Agreement, Lexicon will use its project accounting system, as consistently
applied across all its projects.
"Sales Costs" means costs, including Allocable Overhead, approved as a part of
the budget incorporated in the then-current commercialization plan for a
Genentech IND Opted Product or Genentech Phase II Opted Product, incurred by a
Party or for its account and specifically identifiable to the sales efforts of
Genentech IND Opted Products or Genentech Phase II Opted Products to all
markets, including the managed care market. "Sales Costs" shall include costs
associated with sales representatives for Genentech IND Opted Products and
Genentech Phase II Opted Products, including compensation, benefits and travel,
supervision and training of the sales representatives, sales meetings, and other
sales expenses. "Sales Costs" will not include the start-up costs associated
with a Party's sales force, including recruiting, relocation and other
Exhibit F - Financial Appendix Page 6
similar costs. Sales Costs shall not include any costs that are already included
in Cost of Sales, Development Costs, Marketing Costs, Distribution Costs, Other
Operating Income/Expense, Sales Returns and Allowances, General and
Administrative Costs, and Allocable Overhead for any of the foregoing cost
categories, and in every case shall only include costs directly allocable to a
Genentech IND Opted Product or Genentech Phase II Opted Product in accordance
with GAAP.
"Sales Returns and Allowances" has the meaning in Section 1.98 of the Agreement.
Exhibit F - Financial Appendix Page 7
EXHIBIT G
GENENTECH EXCLUDED IP
[**]
EXHIBIT H
[**]
EXHIBIT I
[**]
Exhibit J
Press Release
Page 2
(LEXICON LOGO)
NEWS RELEASE
FOR IMMEDIATE RELEASE
LEXICON GENETICS EXPANDS ALLIANCE WITH GENENTECH
TO DISCOVER AND DEVELOP BIOTHERAPEUTIC DRUGS
Broad alliance to accelerate the development and commercialization of drugs
from Genentech's SPDI program
THE WOODLANDS, TEXAS, DECEMBER 1, 2005 - Lexicon Genetics Incorporated (Nasdaq:
LEXG) announced the expansion of its drug discovery alliance with Genentech,
Inc. (NYSE: DNA) to include the advanced research, development and
commercialization of new biologic drugs. Under the expanded alliance, Lexicon
will conduct advanced research on a broad subset of targets included in
Genentech's Secreted Protein Discovery Initiative (SPDI) program and validated
using Lexicon's proprietary gene knockout technology. Lexicon may develop and
commercialize drugs modulating up to six of these targets. Genentech retains an
option on the potential development and commercialization of these drugs under a
cost and profit sharing arrangement, with Lexicon having certain conditional
rights to co-promote drugs on a worldwide basis.
Lexicon will receive a total of $25 million in upfront and milestone payments
and research funding during the three-year advanced research portion of the
expanded alliance. Lexicon will also receive payments from Genentech upon
achievement of milestones related to the development and regulatory approval of
certain drugs resulting from the alliance that are developed and commercialized
by Genentech. Lexicon is entitled to receive royalties on net sales of these
products, provided they are not included in a cost and profit sharing
arrangement. Genentech is entitled to receive milestone payments in the event of
regulatory approval and royalties on net sales of products commercialized by
Lexicon outside of a cost and profit sharing arrangement.
The expanded alliance is designed to combine Lexicon's novel target validation
capabilities with Genentech's expertise in research, clinical development,
biologics manufacturing and commercialization to advance the development of
targets within Genentech's SPDI program. Lexicon will conduct advanced
preclinical research to further elucidate the functions of certain potential
therapeutic proteins and antibody targets identified in the companies' initial
alliance. Genentech has granted Lexicon the exclusive right to develop and
commercialize drugs modulating up to six of these targets. Two targets for
metabolic disease have already been designated as Lexicon targets and are
currently in preclinical research at Lexicon. Lexicon retains non-exclusive
rights for the development and commercialization of small molecule drugs
addressing the targets included in the alliance.
"The expansion of our alliance with Genentech reflects the success of our
initial collaboration and is a validation of our gene knockout approach to
defining gene function for drug discovery," said Arthur T. Sands, M.D., Ph.D.,
president and chief executive officer of Lexicon. "The next phase of the
alliance entails further advancing Genentech's SPDI program and is a signal of
our progress in biologic drug development. We look forward to working closely
with a proven leader like Genentech in an effort to develop new drugs for
patients in need."
Page 3
LEXICON ANALYST AND INVESTOR EVENT:
Lexicon will discuss its expanded alliance with Genentech at its analyst and
investor luncheon in New York City at noon today, Thursday, December 1, 2005, at
the New York Palace Hotel. Dr. Arthur T. Sands, president and chief executive
officer of Lexicon, will host the event. Materials from the presentation will be
posted on Lexicon's corporate website, www.lexicon-genetics.com.
ABOUT LEXICON GENETICS
Lexicon Genetics is a biopharmaceutical company focused on the discovery and
development of breakthrough treatments for human disease. Lexicon is
systematically discovering the physiological and behavioral functions of genes
to identify potential points of therapeutic intervention, or drug targets.
Lexicon makes these discoveries using its proprietary gene knockout technology
to model the physiological effects that could be expected from prospective drugs
directed against novel targets. The Company has advanced knockout-validated
targets into drug discovery programs in six therapeutic areas: diabetes and
obesity, cardiovascular disease, psychiatric and neurological disorders, cancer,
immune system disorders and ophthalmic disease. Lexicon is working both
independently and through strategic collaborations and alliances to accelerate
the development and commercialization of its discoveries. Additional information
about Lexicon is available through its corporate website,
www.lexicon-genetics.com.
SAFE HARBOR STATEMENT
This press release contains "forward-looking statements," including statements
about Lexicon's growth and future operating results, discovery and development
of products, strategic alliances and intellectual property, as well as other
matters that are not historical facts or information. These forward-looking
statements are based on management's current assumptions and expectations and
involve risks, uncertainties and other important factors, specifically including
those relating to Lexicon's ability to successfully conduct preclinical
development of its drug candidates and advance such candidates into clinical
development, achieve its operational objectives, obtain patent protection for
its discoveries and establish strategic alliances, as well as those relating to
manufacturing, the regulatory process, intellectual property rights, and the
therapeutic or commercial value of its drug candidates, that may cause Lexicon's
actual results to be materially different from any future results expressed or
implied by such forward-looking statements. Information identifying such
important factors is contained under "Factors Affecting Forward-Looking
Statements" and "Business - Risk Factors" in Lexicon's annual report on Form
10-K for the year ended December 31, 2004, as filed with the Securities and
Exchange Commission. Lexicon undertakes no obligation to update or revise any
such forward-looking statements, whether as a result of new information, future
events or otherwise.
# # #
CONTACT FOR LEXICON GENETICS:
Bobbie Faulkner
Manager, Investor Relations
281/863-3503
bfaulkner@lexgen.com
EXHIBIT K
[**] OVEREXPRESSION ANALYSIS
[**]
EXHIBIT L
AMENDMENT NO. 1 TO NOTE AGREEMENT
THIS AMENDMENT NO. 1 TO NOTE AGREEMENT is entered into as of November 30,
2005 (this "Amendment"), by and between LEXICON GENETICS INCORPORATED, a
Delaware corporation (herein called "Borrower"), and GENENTECH, INC., a Delaware
corporation (herein called "Lender"). Capitalized terms not otherwise defined
herein shall have their respective meanings in the Note Agreement (as defined
below).
WHEREAS, Borrower and Lender are parties to that certain Note Agreement,
dated as of December 17, 2002 (the "Note Agreement"), pursuant to which Lender
loaned to Borrower a principal amount equal to $4,000,000.00; and
WHEREAS, Borrower and Lender are parties to that certain Second Amended and
Restated Collaboration and License Agreement of even date herewith (the
"Collaboration Agreement"); and
WHEREAS, in connection with the Collaboration Agreement and in
consideration of two non-SPDI mouse knock-outs to be provided to Lender by
Borrower, the parties wish to amend the Note Agreement as set forth below.
NOW, THEREFORE, Borrower and Lender hereby agree as follows:
1. In Section 1 of the Note Agreement, "Section 8.25" shall replace
"Article 7.14".
2. Section 2(A) of the Note Agreement shall be amended and restated in its
entirety to read as follows:
"MATURITY DATE. Borrower promises to pay to Lender the entire outstanding
principal balance (and all accrued interest thereon) of the Loan on or before
the date (the "Maturity Date") that is the earlier of (i) December 31, 2006,
(ii) six (6) months after the termination of the Collaboration Agreement or
(iii) the date of an Event of Default as set forth in Section 8 below."
3. Section 4(A) of the Note Agreement shall be amended to include this
Amendment in the definition of "Loan Documents."
4. Borrower hereby confirms that the representations in Section 4 of the
Note Agreement are true and correct as of the date of this Amendment. Any
references to "Note Agreement" in this Section 4 shall mean the Amendment.
5. Lender hereby confirms that the representations in Section 5 of the Note
Agreement are true and correct as of the date of this Amendment. Any references
to "Note Agreement" in this Section 5 shall mean the Amendment.
6. No other changes. Except as expressly modified by this Amendment, all of
the terms and conditions of the Note Agreement shall remain in full force and
effect. This Amendment constitutes the entire understanding of the parties with
respect to the subject matter hereof and supersedes any prior understanding,
oral or written, between the parties with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Note Agreement to
be executed as of the date first written above.
LENDER: BORROWER:
GENENTECH, INC. LEXICON GENETICS INCORPORATED
By: By:
--------------------------------- ------------------------------------
Name: David A. Ebersman Name:
Title: Senior Vice President and ----------------------------------
Chief Financial Officer Title:
---------------------------------
2
EXHIBIT M
CERTAIN PROJECT GENES
[**]
Dates Referenced Herein and Documents Incorporated by Reference
3 Subsequent Filings that Reference this Filing
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