EXHIBIT 10.14
Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
AMENDED AND RESTATED
COLLABORATION AND LICENSE AGREEMENT
This Amended and Restated Collaboration and License Agreement (the
"Agreement") is executed as of the 19 day of November, 2003 and made effective
as of the 17 day of December, 2002 (the "Effective Date") between Genentech,
Inc., a Delaware corporation having its principal place of business at 0 XXX
Xxx, Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 ("Genentech"), and Lexicon Genetics
Incorporated, a Delaware corporation having its principal place of business at
0000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxx Xxxxxxxxx, XX 00000-0000 ("Lexicon"). The
Agreement amends and restates that certain Collaboration and License Agreement
between Genentech and Lexicon dated as of December 17, 2002 (the "Original
Agreement"). Throughout the Agreement, Genentech and Lexicon are sometimes
referred to individually as a "Party" and collectively as "Parties."
RECITALS
WHEREAS, Genentech is in the business of using human genetic
information to discover, develop, manufacture and market pharmaceutical
products; and
WHEREAS, Lexicon possesses certain knowledge and experience in the
design, generation, and phenotypic analysis of Knock-Out Mice and ES Cell Lines;
and
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
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the Parties agree as follows:
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
1.1 "ACADEMIC COLLABORATOR" means a principal investigator, employed at a
university or other not-for-profit academic research institution that has
entered into a material transfer agreement with Genentech pursuant to Section
5.10, who is performing collaborative research with Genentech involving use of a
Knock-Out Mouse or Progeny.
1.2 "ACTUAL KNOWLEDGE" of a Party means [**].
1.3 "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, X. Xxxxxxxx-Xx Xxxxx Ltd and its affiliates shall
not be considered Affiliates of Genentech for purposes of this Agreement.
1.4 "APPLICABLE LAWS" means all applicable statutes, ordinances,
regulations, rules, or orders of any kind whatsoever of any government authority
or court of competent jurisdiction.
1.5 "BLA" means a Biologics License Application filed with the FDA in the
United States or a corresponding application filed with a governmental authority
in any other country, together with all additions, deletions and supplements
thereto.
1.6 "CALENDAR QUARTER" means a period of three (3) consecutive calendar
months ending on either March 31, June 30, September 30, or December 31.
1.7 "CALENDAR YEAR" means the respective period of a year commencing on
January 1 and ending on December 31.
1.8 "COMMERCIALLY REASONABLE EFFORTS" or "commercially reasonable efforts"
means [**]. 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
[**].
1.9 "CONFIDENTIAL INFORMATION" means Lexicon Confidential Information,
Project Confidential Information and/or Genentech Confidential Information, as
applicable.
1.10 "CONTRACT SERVICE PROVIDER" means [**].
1.11 "DERIVATIVE PROTEIN" means [**].
1.12 "DOLLARS" means United States dollars.
1.13 "EFFECTIVE DATE" has the meaning set forth in the introductory
paragraph of the Agreement.
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1.14 "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. [**]
1.15 "FDA" means the U.S. Food and Drug Administration or corresponding
governmental authority in another country.
1.16 "FIELD" means any human or animal healthcare applications including,
without limitation, the diagnosis, prevention and treatment of diseases or
conditions.
1.17 "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.
1.18 "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, provided that
the Party claiming force majeure has exerted all reasonable efforts to promptly
remedy such force majeure.
1.19 "GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
1.20 "GENENTECH 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, Genentech to Lexicon or
its designees in connection with this Agreement (including, but not limited to,
Genentech Gene 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.
1.21 "GENENTECH GENE PATENTS AND KNOW HOW" means (i) all Patents which are
owned, controlled or licensed by Genentech as of the Effective Date or which are
created
3
or acquired by Genentech during the course of this Agreement and which claim a
Project Gene, polypeptides encoded by such genes and/or antibodies directed
toward such polypeptides and/or methods of treatment employing such 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 or which is created or acquired by Genentech
during the course of this Agreement which relates to any of the Project Genes
(also referred to herein as "Genentech Gene Know-How"); provided that Genentech
Gene Patents and Know-How shall not include Project Patents and Know-How. [**]
1.22 "GROSS SALES" means, with respect to a Licensed Product, the gross
amount invoiced by Genentech, its Affiliates and Product Licensees, as
applicable, for sales of such Licensed Product to Third Persons.
1.23 "IND" means an Investigational New Drug Application filed with the FDA
in the United States, or a corresponding application filed with a regulatory
agency in any other country, together with all additions, deletions, and
supplements thereto.
1.24 "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.
1.25 "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.
1.26 "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), 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:
4
(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.
1.27 "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 [**]. "Lexicon Knock-out
Technology" shall also include (A) the Know-How consisting of the Knock-Out 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 [**], 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. [**]
1.28 "LEXICON PRE-EXISTING PATENTS AND KNOW-HOW" means all Patents ("Lexicon
Pre-Existing Patents") and Know-How ("Lexicon Pre-Existing Know-How") which are
(i) owned, controlled or licensed by Lexicon as of the Effective Date, or
involve a Project Gene for which Lexicon [**] and (ii) related to a Pre-Existing
Project, a Project Gene, a Protein Candidate or a Licensed Product, provided in
each case that Lexicon Pre-Existing Patents and Know-How shall not include (a)
Lexicon Knock-Out Technology, (b) Genentech Gene Patents and Know How, (c)
Project Patents and Know How, (d) Restricted Rights Project Patents and
Know-How, (e) general Patents that cover inventions that could be used for
products other than products under which Genentech has a license pursuant to
Article 5, including, without limitation, Patents covering manufacturing or
process inventions, or (f) that portion of any such Patent or Know-How which is
beyond the scope of the work performed by Lexicon for Projects other than
Pre-Existing Projects.
1.29 "LICENSED 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
Candidate or (ii) that directly modulates a Protein Candidate, or the gene that
encodes a Protein Candidate.
5
1.30 "NDA" means a New Drug Application filed with the FDA in the United
States, or a corresponding application filed with a regulatory agency in any
other country, together with all additions, deletions, and supplements thereto.
1.31 "NET SALES" means, with respect to a Licensed Product, Gross Sales of
such Licensed Product less Sales Returns and Allowances for such Licensed
Product.
1.32 "NOTE AGREEMENT" shall have the meaning set forth in Section 7.14.
1.33 [**]
1.34 [**]
1.35 "PATENT" means:
(i) a U.S. and corresponding foreign patent application (including
provisional application, division, refiling, 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).
1.36 "PHASE III CLINICAL TRIAL" means, as to a specific Licensed Product, a
controlled and lawful study in humans of the efficacy and safety of such
Licensed Product, which is prospectively designed to demonstrate statistically
whether such Licensed 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 Licensed Product in the United States or
another country for the indication being investigated by the study, as further
defined in Federal Regulation 21 C.F.R. 312.21.
1.37 "PIPELINE PROJECT" means a Project involving a Project Gene for which
Lexicon [**].
1.38 "PRE-EXISTING PROJECT" means a Pipeline Project involving a Project
Gene for which Lexicon [**].
1.39 "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 Licensed Product.
1.40 "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).
6
1.41 "PROJECT" has the meaning set forth in Section 3.1(e).
1.42 "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 that are created during the course of performing the
activities contemplated by this Agreement, 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.
1.43 "PROJECT GENE" has the meaning set forth in Section 3.1(e); provided
that a Rejected Proposed Gene shall not be a Project Gene.
1.44 "PROJECT MATERIALS" means, with respect to a Project, [**].
1.45 "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 by either Party during the course of and in
connection with this Agreement and (ii) which are based upon data and other
information reviewed by the Steering Committee related to a Project Gene or
Protein Candidate; provided in each case 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) general Patents that cover inventions that
could be used for products other than a Licensed Product, including, without
limitation, Patents covering manufacturing or process inventions, or (F) any
Patent or Know-How arising from work performed not in relation to this
Agreement. [**].
1.46 "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
7
claiming such full-length human gene sequence and the Protein believed to be
produced by such gene.
1.47 "PROTEIN" means [**].
1.48 "PROTEIN CANDIDATE" has the meaning set forth in Section 3.5, and shall
include Derivative Proteins.
1.49 "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 Licensed Product in any country or other regulatory jurisdiction. "Regulatory
Approval" shall include, without limitation, approval granted with respect to
any BLA, NDA or other foreign equivalent.
1.50 "REJECTED PROJECT GENE" means a Project Gene whose Protein is not
designated as a Protein Candidate under Section 3.5(c).
1.51 "REJECTED PROPOSED GENE" means a Proposed Gene (i) that is rejected
under Section 3.1(b), (c) or (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(a).
1.52 "RESTRICTED RIGHTS PROJECT" means a Project involving a Project Gene
[**].
1.53 "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 are (i)
owned, controlled or licensed by Lexicon as of the Effective Date or created or
acquired by Lexicon during the course of and in connection with this Agreement
and (ii) which are based upon data and other information reviewed by the
Steering Committee related to a Project Gene or Protein Candidate in connection
with a Restricted Rights Project; provided in each case that Restricted Rights
Project Patents and Know How shall not include (A) Lexicon Knock-Out Technology,
(B) Genentech Gene Patents and Know-How, (C) general Patents that cover
inventions that could be used for products other than a Licensed Product,
including, without limitation, Patents covering manufacturing or process
inventions, or (D) any Patent claims or Know-How arising from work performed not
in relation to this Agreement.
1.54 "SALES RETURNS AND ALLOWANCES" means, with respect to a Licensed
Product, the sum of (a) and (b), where: (a) is a provision, [**] for sales of
such Licensed Product under GAAP as provided hereinabove for (i) cash and
quantity discounts or rebates on such Licensed 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
8
or made for rejection or return of previously sold Licensed 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 Licensed Product, as adjusted for
rebates and refunds, (iv) charges for freight and insurance directly related to
the distribution of such Licensed 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 Licensed Product; and (b) is a periodic adjustment of the
provision determined in (a) to reflect amounts actually incurred by Genentech,
its Affiliates and Product Licensees, as applicable, for items (i), (ii), (iii),
(iv) and (v) in clause (a).
1.55 "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.
1.56 "STEERING COMMITTEE" means the committee established and described in
Article 2.
1.57 "THIRD PERSON" means any person or entity other than Lexicon, Genentech
or any Affiliate of Lexicon or Genentech.
ARTICLE 2
GOVERNANCE OF RESEARCH
2.1 CREATION OF A STEERING COMMITTEE. Within [**] of the Effective Date,
the Parties shall establish a Steering Committee to oversee the Parties'
activities under Article 3 of 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.
2.2 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 and [**];
9
(ii) receiving notices from the Parties as set forth herein,
including without limitation notices of delays or stalled
research pursuant to Section 3.3(a);
(iii) the designation of Project Genes and Protein Candidates under
Sections 3.1 and 3.5, respectively;
(iv) coordinating the activities of the Parties hereunder;
(v) developing and implementing a publicity strategy and policy
for the review and approval of press releases and publications
in accordance with Section 9.4;
(vi) settling disputes or disagreements that arise between the
parties as set forth in Article 13; and
(vii) performing such other functions as appropriate to further the
purposes of this Agreement, as determined by the Parties.
2.3 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.
2.4 STEERING COMMITTEE MEETINGS. Within [**] 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 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.
2.5 DISSOLUTION OF THE STEERING COMMITTEE. Upon the expiration of [**]
after all of the activities of Lexicon that have been approved by the Steering
Committee have been completed, the Steering Committee will have no further
responsibilities or authority under this Agreement and will be considered
dissolved by the Parties.
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ARTICLE 3
KNOCK-OUT MICE PROJECTS
3.1 GENENTECH SUBMISSION OF PROPOSED GENES.
(a) Initial Submission of Proposed Genes. Genentech, within [**],
will provide the Steering Committee with a written list of [**] 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), (c) or (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) [**].
If so, Lexicon shall additionally notify Genentech which Proposed Gene(s) are
the subject of such patents or intellectual property rights [**].
(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
11
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 hereunder 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. [**] 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.
(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 subsection 3.1(f)
in respect of the Project Gene being removed (for purposes of which, "allocable
overhead" shall mean [**]. Any such removed Project Gene shall be considered a
Rejected Proposed Gene for purposes of this Agreement.
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 [**] reports regarding its
efforts. 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
12
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
Sections 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) [**], and (ii) for Projects other than Pipeline Projects, [**].
3.3 LEXICON'S CREATION AND TESTING OF KNOCK-OUT MICE AND ES CELL LINES.
(a) Activities Performed by Lexicon. 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) [**]. Lexicon agrees to
use Commercially Reasonable Efforts to perform and complete such activities on a
Project within [**] 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. Genentech shall have the right to terminate this Agreement under
certain circumstances, as set forth in Section 10.2.
(b) Reports; Consultation and Site Visits. Within [**] after the
end of [**], Lexicon will provide each Steering Committee member with a written
report describing the status of its work on each Project, and, [**], Lexicon
will provide a Genentech Steering Committee member with the same [**] 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
13
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 9 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.
3.4 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
(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 9.
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 9.
Genentech also agrees to maintain appropriate security measures no less
stringent than measures that are customary in the industry.
3.5 REVIEW OF FIRST PASS PHENOTYPIC ANALYSIS; DESIGNATION OF PROTEIN
CANDIDATES.
(a) Review of First Pass Phenotypic Analysis. Once 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. After reviewing this information from a Project, the Steering
Committee will determine by [**], within [**]
14
following the submission of the First Pass Phenotypic Analysis on such Project,
whether Lexicon has [**] for such Project Gene.
(b) Designation of Protein Candidates. The Protein produced by
each such Project Gene for which the Steering Committee [**] votes that Lexicon
has [**] shall be designated as a "Protein Candidate." In the event that the
Steering Committee designates [**] Proteins produced by Project Genes as Protein
Candidates, then Lexicon shall have the right to designate an additional number
of Proteins produced by Project Genes as Protein Candidates, so that there are a
total of [**]; provided that Lexicon shall make such designations no later than
[**] following the submission to the Steering Committee of the last First Pass
Phenotypic Analysis to be submitted under this Agreement. Genentech shall have
the rights and obligations set forth in Article 4 and 6 with regard to such
Protein Candidates.
(c) Rejected Project Genes. Any Project Gene the Protein product
of which has not been designated as a Protein Candidate pursuant to subsection
(b) above, shall be deemed a Rejected Project Gene for purposes of this
Agreement. Genentech shall have the rights and obligations set forth in Articles
5 and 6 with regard to such Rejected Project Genes.
3.6 [**]
ARTICLE 4
LICENSED PRODUCTS
4.1 GENENTECH'S EXCLUSIVE RIGHT TO DEVELOP AND COMMERCIALIZE LICENSED
PRODUCTS. Genentech shall have the sole right and responsibility for, and
control over, developing and commercializing Licensed Products; provided,
however, that with regard to Restricted Rights Projects, nothing in this Section
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.
4.2 TRANSFER TO GENENTECH OF LEXICON PRE-EXISTING KNOW-HOW AND PROJECT
KNOW-HOW RELATED TO PROTEIN Candidates. Within [**] after designation of a
Protein Candidate pursuant to Section 3.5, 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 Know-How related to such
Protein Candidate in Lexicon's possession or control.
4.3 GENENTECH RESPONSIBLE FOR DEVELOPMENT COSTS. Genentech shall bear
all costs and expenses associated with, and shall have sole control over,
developing and commercializing Licensed Products.
15
4.4 PRODUCT LICENSEES. Genentech agrees to notify Lexicon promptly of any
(sub)license that it enters into with a Product Licensee, and Genentech further
covenants that any such (sub)licence shall contain terms and conditions
consistent with Genentech's obligations under this Agreement.
ARTICLE 5
GRANT OF LICENSE RIGHTS
5.1 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 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 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 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
Product Licensee shall relieve Genentech of primary responsibility for all
payments and royalties due to Lexicon under Article 7 with respect to Licensed
Product(s) licensed to such Product Licensee.
5.2 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 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
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 5.2, 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
16
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.
5.3 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 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. 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 Genentech 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 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 5.3, subject to the restrictions, if any, on Project Materials set forth
in Section 5.5.
5.4 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 5.5, 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 Academic 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 5.10, 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.
5.5 [**]
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5.6 [**]
5.7 RESERVATION OF RIGHTS. Notwithstanding the non-exclusive rights and
licenses granted to Genentech under Sections 5.2 and 5.4, but subject to the
exclusive rights and licenses granted to Genentech under Sections 5.1 and 5.2
[**]:
(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.
5.8 LIMITED LICENSE TO GENENTECH GENE 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 3.6, such
Knock-Out Mice;
(iv) conduct a First Pass Phenotypic Analysis on such Project Gene
under Section 3.3(a); and
(v) [**]
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, or the completion
of Lexicon's activities under this article 5.8.
5.9 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
18
result of this Agreement, obtain any ownership interest in or other right to any
technology, know-how, patents, patent applications, gene or genomic xxxxxxxx
xxxx 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.
5.10 TRANSFERS TO ACADEMIC COLLABORATOR OR CONTRACT SERVICE PROVIDERS.
Genentech shall have the right to transfer a Knock-Out Mouse or Progeny made
pursuant to this Agreement to an Academic Collaborator or Contract Service
Providers, provided that such Academic Collaborator or Contract Service
Providers shall have entered into a material transfer agreement with Genentech
containing terms relating to the transfer of such material that expressly (i)
prohibit the use of such Knock-Out Mice or Progeny thereof for any purpose other
than such Academic Collaborator's collaborative research 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 Academic Collaborator or
Contract Service Provider to any Third Party. Within [**] of entering into any
such material transfer agreement, Genentech shall provide Lexicon with a copy
thereof.
5.11 LICENSE TO LEXICON ISOGENIC TECHNOLOGY. On the Effective Date, Lexicon
and Genentech shall enter into the Sublicense Agreement attached hereto as
Exhibit B.
ARTICLE 6
REQUEST FOR AND DELIVERY OF KNOCK-OUT MICE
6.1 REQUESTS FOR PROJECT MATERIALS BY GENENTECH. During the period of [**]
following the submission to the Steering Committee of the data from the First
Pass Phenotypic Analysis for a Project Gene in accordance with Section 3.5(a),
Genentech shall have the option, subject to the terms and conditions of this
Agreement, to have Lexicon deliver to Genentech [**] the Knock-Out Mice for such
Project Gene, by delivering written notice of such request to Lexicon. During
the period beginning on the date of the submission to the Steering Committee of
the data from the First Pass Phenotypic Analysis for a Project Gene in
accordance with Section 3.5(a) and ending on [**], 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.
Genentech may also have, during such period, [**]. Lexicon shall have no further
obligation to deliver Project Materials to Genentech following such period;
provided that, following such period, Genentech may [**].
6.2 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 6.1, Lexicon shall retain a small back-up colony of [**] such Knock-Out
Mice [**], for the purpose of replacing mice shipped to Genentech under this
Article 6 which die or are otherwise unable to breed during or within [**] after
shipment to Genentech hereunder.
19
Thereafter, until the expiration of six (6) months following the submission to
the Steering Committee of the data from the last First Pass Phenotypic Analysis
to be submitted under this Agreement, Lexicon shall [**], if requested by
Genentech. In the event Genentech requests that Lexicon maintain any such colony
for a period of more than [**], 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.
6.3 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 [**] Knock-Out Mice, [**], promptly following its receipt of
written notice that Genentech is prepared to accept shipment. Risk of loss with
respect to any Knock-Out Mice to be transferred under this Section 6.3 shall
pass to Genentech upon delivery thereof to the shipping company designated as
specified herein. 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 6.1, Genentech shall pay
Lexicon a storage and maintenance charge of [**] for such requested line of
Knock-Out Mice for each week thereafter until Lexicon receives such notice.
ARTICLE 7
PAYMENTS
7.1 UP-FRONT FEE. As partial consideration for the work to be performed by
Lexicon under this Agreement, Genentech shall pay Lexicon a fee of [**], which
fee shall be payable within ten (10) days of the Effective Date.
7.2 PERFORMANCE PAYMENTS. Within [**] (of achieving each of the research
milestones listed below, Genentech shall pay to Lexicon the following amounts:
[**]
7.3 OPTION FEE. In the event Genentech exercises its option under [**] with
respect to a [**], Genentech shall pay Lexicon [**] concurrently with its
delivery of its notice exercising such option.
20
7.4 [**] FUNDING. To the extent the Steering Committee elects to have
Lexicon produce [**], Genentech shall pay Lexicon funding of [**] for each
additional [**], which funding shall be payable within [**] of such election.
7.5 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
3.5(a), that Lexicon [**], Genentech shall pay Lexicon a fee of [**]
concurrently with its delivery of such request.
7.6 FEE FOR DELIVERY OF MATERIALS [**]. 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 and (ii) [**] following the date of submission to the Steering
Committee of the data from the First Pass Phenotypic Analysis for a Project
Gene, that [**], Genentech shall pay Lexicon a fee of [**] within [**] of
Lexicon's notice that [**].
7.7 MILESTONE PAYMENTS. With respect to the first Licensed 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:
[**]
For purposes of clarification, with respect to each Project Gene whose Protein
is designated as a Protein Candidate, Genentech shall only be required to pay
Lexicon for each of the above development milestones once upon the first
occurrence of the respective event. All milestone payments hereunder are to be
made by wire transfer of immediately available funds. Such milestone payments
are non-refundable and non-creditable against any other payments hereunder.
Genentech shall give Lexicon written notice of the achievement of any milestone
event no later than [**] after such achievement.
7.8 ROYALTIES ON LICENSED PRODUCTS. As consideration for its exclusive
rights with respect to Licensed 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 Licensed 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 Licensed Product in such country; provided that, in the event the worldwide
Net Sales of such Licensed 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 Licensed Product that
exceeds [**] in such Calendar Year. The royalty payable hereunder shall be
payable only once with respect to the same unit of Licensed Product.
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7.9 PAYMENT OF ROYALTY; REPORTING; EXCHANGE RATES. Within [**] after the
end of each [**], Genentech will pay (and/or cause its Affiliates and/or 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 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 Licensed Products in any country during the reporting period, if
applicable; and (v) the exchange rates used in determining the amount of Dollars
payable hereunder. Royalties payable on sales in countries other than the United
States shall be calculated in accordance with the standard exchange rate
conversion practices used by Genentech, its Affiliates or the Product Licensee,
as applicable, for financial accounting purposes. If no royalty or payment is
due for any royalty period hereunder, Genentech shall so report. Genentech shall
keep, and shall require its Affiliates and Product Licensees 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.
7.10 U.S. CURRENCY; WIRE TRANSFERS. All payments, including any interest
pursuant to Section 7.12, payable by Genentech, its Affiliates and Product
Licensees to Lexicon under this Agreement will be paid in Dollars and will be
made by wire transfer, in immediately available funds, to an account designated
in writing by Lexicon.
7.11 TAXES. Any and all taxes levied on any payments from Genentech to
Lexicon under this Agreement will be the liability of, and paid by, Lexicon.
However, if Applicable Laws require the withholding of such taxes, Genentech
will deduct such taxes from its payment to Lexicon and remit such withheld
amount to the proper tax authority. Genentech will provide proof of payment to
Lexicon within [**] of such payment. This Agreement shall not be considered a
partnership for tax reporting purposes.
7.12 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 annual rate equal to
the [**]. Payment of accrued interest will accompany payment of the outstanding
payment.
7.13 ROYALTY RECORDS; AUDIT RIGHTS. Genentech will keep, and maintain for a
period of [**] following the end of a Calendar Year, accurate records in
sufficient detail to enable royalties under this Agreement for such Calendar
Year to be determined. Lexicon has the right, upon prior written notice to
Genentech, not more than [**], through an independent certified public
accountant selected by Lexicon and acceptable to Genentech (which acceptance
shall not be unreasonably refused) to have access during normal business hours
to those records of Genentech as may be reasonably necessary to verify the
accuracy of the royalty reports furnished by Genentech under this Agreement for
the previous Calendar Year. Prior to implementing an audit, Lexicon agrees to
submit an
22
audit plan, including audit scope, to Genentech for Genentech's approval (which
shall not be unreasonably withheld). Lexicon's independent certified public
accountant will keep confidential all information obtained during such audit and
will report to Lexicon only the amount of Genentech's Gross Sales and Net Sales
made during, and royalties due for, the Calendar Year in question. Genentech
shall have the right, at its own expense, to have its own independent certified
public accountant review and confirm the results of the audit performed by
Lexicon'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.
Lexicon is solely responsible for all the expenses of an audit, unless the
independent certified public accountant's report correctly shows any
underpayment of royalties by Genentech exceeding [**] of the total royalties it
owed for the Calendar Year then being reviewed. If the independent certified
public accountant's report correctly shows that Genentech underpaid its
royalties by more than [**], Genentech is responsible for the reasonable
expenses incurred by Lexicon for the independent certified public accountant's
services.
If the independent certified public accountant's report correctly shows any
underpayment of royalties by Genentech, Genentech shall remit to Lexicon within
[**] after the Genentech receipt of such report:
(i) the amount of such royalty underpayment;
(ii) interest on the amount being paid in (i), which interest shall
be calculated pursuant to Section 7.12; and
(iii) if such royalty underpayment exceeds [**] of Genentech's total
royalties owed for the Calendar Year then being reviewed, the
reasonable expenses incurred by Lexicon for the independent
certified public accountant's services.
If the independent certified public accountant's report correctly shows any
overpayment of royalties by Genentech, such overpayment shall be fully
creditable against future royalties payable by Genentech in subsequent royalty
periods.
The calculation of royalties payable 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 [**], is on-going or (ii) Lexicon has, in good
faith and through written notice to Genentech, disputed such calculation before
the expiration of such [**] or, if applicable, within [**] after receipt of the
audit report.
7.14 CONVERTIBLE NOTE. Simultaneously with the execution and delivery of
this Agreement, the parties hereto shall enter into a Note Agreement (the "Note
Agreement"),
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dated as of the date hereof, substantially in the form attached as
Exhibit C hereto. Under the Note Agreement, Genentech shall loan 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.
ARTICLE 8
INTELLECTUAL PROPERTY RESPONSIBILITIES
8.1 OWNERSHIP.
(a) Lexicon shall own all Lexicon Knock-Out Technology, Lexicon
Pre-Existing Patents and Know-How and Restricted Rights Project Patents and
Know-How. Genentech shall own all Genentech Gene Patents and Know-How and
Project Patents and Know-How.
(b) Lexicon shall assign all right, title and interest in
inventions 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. 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 (a) for perfecting the right,
title and interest herein conveyed; (b) for prosecuting any of said
applications; (c) for filing and prosecuting applications for reissuance of any
of said patents; (d) for interference or other priority proceedings involving
said invention; and (e) for legal proceedings involving said invention and any
applications therefor 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.
8.2 PATENT PROSECUTION OF LEXICON KNOCK-OUT TECHNOLOGY, LEXICON
PRE-EXISTING PATENTS AND RESTRICTED RIGHTS PROJECT PATENTS.
(a) Patentable Inventions. Lexicon shall be responsible, at its
sole discretion and expense, for filing, prosecuting, and maintaining Lexicon
Knock-Out Technology, Lexicon Pre-Existing Patents and Restricted Rights Project
Patents; provided that Genentech shall be responsible, at its sole discretion,
for filing, prosecuting, and maintaining Lexicon Pre-Existing Patents and
Restricted Rights Project Patents (to the
24
extent exclusively licensed to Genentech) claiming Protein Candidates and uses
thereof following their designation as Protein Candidates.
(b) Review and Comment. Lexicon shall provide Genentech with a
copy of any patent application (including any provisional applications) within
Lexicon Knock-Out Technology specifically related to a Protein Candidate prior
to filing in any jurisdiction, for review and comment by Genentech. Lexicon
shall reasonably consider comments and suggestions provided in a timely manner
by Genentech. Genentech shall maintain any such applications in confidence.
(c) Notice of Decision. If Lexicon decides not to file an
application within Lexicon Knock-Out Technology specifically related to a
Protein Candidate in any country, it shall give Genentech prompt notice to this
effect. After such notice, Genentech may file, prosecute (including any
interference), and maintain, at its own expense, such application in such
country, and Lexicon shall execute such documents and perform such acts as may
be reasonably necessary for Genentech to continue such filing, prosecution, or
maintenance.
(d) Prosecution and Maintenance. Lexicon agrees to use reasonable
diligence to prosecute and maintain the Lexicon Knock-Out Technology
specifically related to a Protein Candidate it filed and to prosecute any
interference proceedings with respect thereto, unless it provides Genentech
notice under Subsection (c) or (e). Upon Genentech's request, Lexicon shall
provide Genentech with (i) a copy of communications with any patent office with
respect to any Lexicon Knock-Out Technology specifically related to a Protein
Candidate and (ii) the opportunity to review and comment on any or all such
communications. Genentech shall provide its comments on any such communication
within [**] after receipt of such communication, and should no comments be
received by Lexicon on or before the [**], then it shall be deemed that
Genentech has no comment to make on such communication. Lexicon shall reasonably
consider comments and suggestions provided in a timely manner by Genentech.
Genentech shall maintain any such communications in confidence. All such
communications provided to Genentech pursuant to this Section shall be sent to a
person to be designated by Genentech by written notice to Lexicon.
(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 Lexicon Knock-Out
Technology specifically related to a Protein Candidate 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.
8.3 PATENT PROSECUTION OF GENENTECH GENE PATENTS, PROJECT PATENTS AND
LEXICON PRE-EXISTING PATENTS AND RESTRICTED RIGHTS PROJECT PATENTS CLAIMING
PROTEIN CANDIDATES.
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(a) Patentable Inventions. Genentech shall be responsible, at its
sole discretion and expense, for filing, prosecuting, and maintaining Genentech
Gene Patents, Project Patents and, following designation of a Protein Candidate,
any Lexicon Pre-Existing Patents and Restricted Rights Project Patents (to the
extent exclusively licensed to Genentech) related to such Protein Candidate.
(b) Review and Comment. Genentech shall provide Lexicon with a
copy of any patent application (including any provisional applications) within
(i) Project Patents and (ii) Lexicon Pre-Existing Patents or Restricted Rights
Project Patents relating to Protein Candidates prior to filing in any
jurisdiction for review and comment by Lexicon. Genentech shall reasonably
consider comments and suggestions provided in a timely manner by Lexicon.
Lexicon shall maintain any such applications in confidence.
(c) Notice of Decision. If Genentech decides not to file an
application within (i) Project Patents related to a specific Project or (ii)
Lexicon Pre-Existing Patents or Restricted Rights Project Patents related to a
Protein Candidate in any country, it shall give Lexicon prompt notice to this
effect. After such notice, Lexicon may file, prosecute (including any
interference), and maintain, at its own expense, such application in such
country, and Genentech shall execute such documents and perform such acts as may
be reasonably necessary for Lexicon to continue such filing, prosecution, or
maintenance.
(d) Prosecution and Maintenance. Genentech agrees to use
reasonable diligence to prosecute and maintain (i) Project Patents and (ii)
Lexicon Pre-Existing Patents and Restricted Rights Project Patents related to
Protein Candidates it filed and to prosecute any interference proceedings with
respect thereto, unless it provides Lexicon notice under Subsection (c) or (e).
Upon Lexicon's request, Genentech shall provide Lexicon with (i) a copy of
communications with any patent office with respect to any (A) Project Patents
and (B) Lexicon Pre-Existing Patents and Restricted Rights Project Patents
related to Protein Candidates and (ii) the opportunity to review and comment on
any or all such communications. Lexicon shall provide its comments on any such
communication within [**] after receipt of such communication, and should no
comments be received by Genentech on or before the [**], then it shall be deemed
that Lexicon has no comment to make on such communication. Genentech shall
reasonably consider comments and suggestions provided in a timely manner by
Lexicon. Lexicon shall maintain any such communications in confidence. All such
communications provided to Lexicon pursuant to this Section shall be sent to a
person to be designated by Lexicon by written notice to Genentech.
(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
related to a specific Project or (ii) Lexicon Pre-Existing Patents or Restricted
Rights Project Patents related to a Protein Candidate 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
26
such documents and perform such acts as may be reasonably necessary for Lexicon
to continue such prosecution or maintenance.
8.4 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 Knock-Out Technology, Project Patents
and Lexicon Pre-Existing Patents involving Small Molecule Drugs, and Restricted
Rights Project Patents. 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, (ii) Project Patents and
Lexicon Pre-Existing Patents involving infringement or alleged infringement of a
Small Molecule Drug, and (iii) Restricted Rights Project Patents (except to the
extent exclusively licensed to Genentech), 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.
(c) Notwithstanding the above, if the infringement or alleged
infringement relates to Lexicon Knock-Out Technology specifically related to a
Protein Candidate or to Project Patents and Lexicon Pre-Existing Patents
involving infringement or alleged infringement of a Small Molecule Drug, 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 Protein Candidate
or to Project Patents and Lexicon Pre-Existing Patents involving infringement or
alleged infringement of a Small Molecule Drug not later than [**] following its
discovery or notice of alleged infringement of Lexicon Knock-Out Technology
specifically related to a Protein Candidate or to Project Patents and Lexicon
Pre-Existing Patents involving infringement or alleged infringement of a Small
Molecule Drug. 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 Protein Candidate or to Project Patents and
Lexicon Pre-Existing Patents involving infringement or alleged infringement of a
Small Molecule Drug, 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
27
the suit shall execute such legal papers necessary for such suit as may be
reasonably requested by the Party bringing suit.
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, proceding or legal action in its
own name. In such event, the licenses to Genentech under such a Project Patent
shall remain unaffected.
If Lexicon brings an action under this Subsection, 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 Subsection, 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
(d) Infringement of Genentech Gene Patents and Know-How, Project
Patents and Know-How, and Lexicon Pre-Existing Patents and Know-How and
Restricted Rights Project Patents related to Protein Candidates. Genentech shall
have the sole right, but not the obligation, to take appropriate steps to remove
the infringement or alleged infringement of (i) Genentech Gene Patents and
Know-How, and (ii) (A) Project Patents and Know-How and (B) Lexicon Pre-Existing
Patents and Know-How (except to the extent such infringement or alleged
infringement relates to the development of Small Molecule Drugs, which shall be
controlled by subsection (c) above) and Restricted Rights Project Patents and
Know-How (to the extent exclusively licensed to Genentech) related to Protein
Candidates, 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.
(e) If Genentech brings action under Subsection (d) above with
respect to (i) Project Patents and Know-How or (ii) Lexicon Pre-Existing Patents
and Know-How or Restricted Rights Project Patents and Know-How (to the extent
exclusively licensed to Genentech) related to Protein Candidates, 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
Genentech Net Sales. If any balance remains after Lexicon's retained amount,
such balance shall be the property of Genentech.
8.5 NOTICE OF INFRINGEMENT BY A PARTY. If the making, using, importing,
offer for sale, or selling a Licensed Product results in a claim against a Party
of patent
28
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 Licensed 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.
8.6 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 8, including without limitation, the fees and expenses of that
Party's counsel.
8.7 SETTLEMENT APPROVAL. No settlement, consent judgment or other voluntary
final disposition of a suit being prosecuted by a Party under this Article 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.
8.8 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.
8.9 AUDIT RIGHTS REGARDING INVOICES. In the event there is a good faith
dispute over an amount owed by a Party under this Article, the disputed payment
may be delayed, and such payment will not be considered delinquent pending a
resolution of the Parties' dispute. Section 7.13 (i.e., "Royalty and Reasonable
Expenses Records; Audit Rights") is applicable with regard to all invoices
submitted by a Party to the other Party under this Article.
ARTICLE 9
CONFIDENTIALITY
9.1 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 9.2), the other Party's Confidential
Information or any Project Confidential Information; and
29
(ii) not use such Confidential Information for any purpose except
as contemplated in this Agreement.
9.2 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:
(i) required by Applicable Law; or
(ii) 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 Subsection (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.
(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.
30
(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.
9.3 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 of the other Party, except as authorized under
Subsections (a), (b), (c), or (d) of Section 9.2. 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.
9.4 PUBLICITY ABOUT THE AGREEMENT. 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; provided that such approval shall not be
unreasonably withheld if 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").
All press releases and other publicity will conform to the publicity strategy
and policy developed by the Steering Committee in accordance with Section
2.2(v). 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. Neither Party may use any trademarks, logos,
or symbols associated with the other Party without the prior written permission
of such other Party. 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. Notwithstanding
the foregoing, Genentech shall not be prohibited from making a statement
regarding the development or commercialization of a Protein Candidate, Licensed
Product or Small Molecule Drug and Lexicon shall not be prohibited from making a
statement regarding the development or commercialization of a Small Molecule
Drug.
31
9.5 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 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 8) 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 9.5
ARTICLE 10
TERM AND TERMINATION OF AGREEMENT
10.1 TERM. This Agreement commences on the Effective Date and will remain in
full force and effect, unless earlier terminated as provided in this Article 10,
until the later of: (i) [**] after the last Project Gene becomes a Rejected
Project hereunder; or (ii) the expiration of all royalty obligations under this
Agreement between the Parties.
10.2 [**]
10.3 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;
32
(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.
10.4 SURVIVING OBLIGATIONS. The rights and obligations of the Parties under
Article 1 (Definitions), Article 9 (Confidentiality), Article 11 (Disclaimers,
Representations and Warranties), Article 12 (Indemnification), and Article 13
(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 8 (Intellectual Property Responsibilities) and, to
the extent applicable, the effects of termination contained in Sections 10.2
through 10.4. [**] The provisions of Sections 7.7 through 7.13 shall survive
termination of this Agreement [**]. 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 survives the termination or expiration of this
Agreement for any reason.
33
ARTICLE 11
DISCLAIMERS, REPRESENTATIONS, AND WARRANTIES
11.1 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
(ii) it has the full authority to enter into and perform all of the
duties and obligations contemplated under this Agreement.
11.2 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).
11.3 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.
11.4 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 in writing to such other Party. If, at any time, a Party breaches a
covenant under this Section, the breaching Party shall immediately notify the
other Party of such fact.
11.5 REPRESENTATIONS AND WARRANTIES REGARDING LICENSES. With regard to each
license granted under this Agreement, the Party granting such license (the
"Granting
34
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;
(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-xxx with respect to the licensed intellectual property rights,
which, in the case of licenses or covenants not-to-xxx, would conflict with the
rights granted herein.
11.6 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.
11.7 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 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION
RIGHTS OR OBLIGATIONS OF ANY PARTY.
35
ARTICLE 12
INDEMNIFICATION
12.1 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;
(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 Licensed Product, Protein Candidate 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").
[**] Genentech's obligations under this Subsection 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 (any of clauses (i) through (ii), a
"Genentech Third Person Claim"); or
36
(iii) the development, manufacture, marketing, sale or other
disposition, offer to sell, use, importation, or exportation
of a Small Molecule Drug by Lexicon or Lexicon's Affiliates,
sublicensees, subcontractors, or customers, or the customers
of Lexicon's Affiliates and sublicensees.
[**] Lexicon's obligations under this Subsection shall survive expiration or
termination of this Agreement for any reason.
12.2 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 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 [**] 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;
37
(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 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.
12.3 INSURANCE.
(a) During the term of this Agreement, each Party shall maintain
an ongoing basis, Commercial General Liability ("CGL") insurance, including
contractual liability, 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.
38
(b) Commencing not later than [**] prior to the first use in
humans of the first potential 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), 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 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) In addition, the Parties agree with respect to (a) and (b)
above that:
(i) The Parties shall use Commercially Reasonable Efforts to name
each other as additional insureds 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 13
DISPUTE RESOLUTION
13.1 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 13.1. 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).
13.2 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:
39
(a) The arbitration tribunal shall consist of three arbitrators.
Each party shall nominate in the request for arbitration and the answer thereto
one arbitrator and the two 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 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 judgement 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 14
GENERAL PROVISIONS
14.1 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 identifying, acquiring, operating, and maintaining such hardware,
software, and services.
14.2 LEGAL COMPLIANCE. Each Party will comply with all Applicable Laws in
the performance of its obligations or the exercise of its rights hereunder.
14.3 ASSIGNMENT. (a) Neither Party may assign this Agreement (nor any part
thereof) without the prior written consent of the other Party. Notwithstanding
the foregoing, if either Party is a party to a merger 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 so long as the surviving or new entity
expressly agrees in writing to assume all obligations of such Party under this
Agreement.
40
(b) Any attempted assignment of this Agreement, other than as
allowed in this Section, will be of no force or effect. Subject to the
provisions set forth in this Section, this Agreement will be binding upon and
will inure to the benefit of the successors and permitted assigns of the
Parties.
14.4 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.
14.5 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.
14.6 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
Origianl Agreement, are superceded as of the Effective Date. This Agreement has
been prepared jointly and will not be strictly construed against either Party.
14.7 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.
41
14.8 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 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.
14.9 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.
14.10 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: Lexicon Genetics Incorporated
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Phone: (000) 000-0000
Attn: President, CEO
With a copy to: General Counsel
To Genentech: Genentech, Inc.
0 XXX Xxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Phone: (000) 000-0000
Attn: Corporate Secretary
With a copy to: Vice President, Research
Notice will be deemed to have been given when delivered if personally delivered
on a business day, on the [**] after dispatch if sent by a professional courier,
and on the [**] 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.
42
14.11 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 14.11, of any provision or requirement
hereunder will neither be deemed nor operate as a future waiver of such or any
other provision or requirement.
14.12 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.
14.13 HEADINGS. All headings and captions used in this Agreement are for
convenience only, and are not intended to have any substantive effect.
14.14 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.
14.15 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.
14.16 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.
14.17 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.
[The rest of this page is blank]
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14.18 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.
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
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxx
------------------------------------- ----------------------------
By: Xxxxxx X. Xxxxxxxx By: Xxxxxx X. Xxxxx
Title: CEO Title: President and CEO
44
EXHIBIT A
Comprehensive Therapeutic Protein Discovery & Validation Program
First Pass Phenotypic Analysis of Project Genes
[**]
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,
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.
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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:
----------------------------
Name: Xxxxxx X. Xxxxxx Title:
--------------------------
Title: Treasurer
Wire Transfer Instructions: Wire Transfer Instructions:
-------------------------- --------------------------
Account Name: Genentech, Inc.
Account Number: 040-1699
Bank Name: Mellon Bank, Pittsburgh, PA
ABA Number: 000-000-000
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:
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