Exhibit 10.2

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

 

COLLABORATIVE RESEARCH,

 

DEVELOPMENT, COMMERCIALIZATION

 

AND LICENSE AGREEMENT

 

 

BETWEEN

 

 

SENOMYX, INC.

 

AND

 

PEPSICO, INC.

 

1

--------------------------------------------------------------------------------

 

COLLABORATIVE RESEARCH, DEVELOPMENT,
COMMERCIALIZATION AND LICENSE AGREEMENT

 

This Agreement is entered into as of August 16, 2010 (the “Effective Date”) by
and between SENOMYX, INC., a Delaware Corporation having its principal place of
business at 4767 Nexus Centre Drive, San Diego, CA 92121 (“SENOMYX”) and
PEPSICO, INC., a North Carolina Corporation, having its principal place of
business at 700 Anderson Hill Road, Purchase, NY 10577 (“PEPSICO”).

 

BACKGROUND

 

WHEREAS, SENOMYX and PEPSICO desire to enter into a research and development
agreement under which SENOMYX and PEPSICO will collaborate in the discovery
and/or commercialization of compounds that enhance the sweet taste of sucrose,
fructose and high fructose corn syrup (“HFCS”) and in the discovery and/or
commercialization of natural sweeteners, in each instance for specified fields
of use as set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and of the covenants,
representations and agreements set forth below, the parties hereby agree as
follows:

 

THE AGREEMENT

 

1.                            DEFINITIONS

 

Certain capitalized terms are defined in Appendix A and incorporated into this
Agreement by reference.

 

2.                            COLLABORATIVE R&D PROGRAM

 

2.1          The goals of each Collaborative R & D Program between PEPSICO and
SENOMYX are as set forth below.  The parties will collaborate in the specified
Synthetic Enhancing Compound Program, the Natural Enhancing Compound Program and
the Natural Sweetener Compound Program during the respective Collaborative R & D
Period for such program.

 

The Synthetic Enhancing Compound Program shall be focused on the identification
of Synthetic Enhancing Compounds with respect to the Target Sweeteners.  The
Natural Enhancing Compound Program shall be focused on the identification of
Natural Enhancing Compounds of Target Sweeteners.  The Natural Sweetener
Compound Program shall be focused on the identification of Natural Sweetener
Compounds.

 

1

--------------------------------------------------------------------------------

 

For the avoidance of doubt, SENOMYX will have no obligation under this Agreement
to pursue any research, evaluation or development of any compounds provided by
PEPSICO or PEPSICO compound libraries.  Notwithstanding the foregoing, if the
parties mutually decide, in their sole discretion, to pursue research,
evaluation or development of compounds provided by PEPSICO or PEPSICO compound
libraries, they will enter into a separate agreement related thereto.

 

2.2          During the applicable Collaborative R & D Period for a given
Collaborative R&D Program, SENOMYX will provide access to PEPSICO, during
regular business hours on reasonable notice, of individual (with respect to
[***] as set forth below) and aggregate results of research performed by SENOMYX
under such Collaborative R&D Program including, but not limited to, [***] at the
regularly scheduled quarterly meetings of each Steering Committee, with [***] in
which relevant information regarding the progress of such Collaborative R&D
Program will be presented.

 

The content of the foregoing meetings and [***] will include individual and
aggregate results and updates on [***] Collaboration Compounds that have been
[***] Collaboration Compounds for which [***].  For the avoidance of doubt, this
Section 2.2, and the information provided by SENOMYX hereunder, is designed to
give PEPSICO an understanding of the scientific progress and related results of
research performed by SENOMYX under each Collaborative R&D Program.  Subject to
the exceptions in Section 13.4, Information provided to PEPSICO hereunder will
be considered Confidential Information of SENOMYX pursuant to the Agreement.

 

During the Term of the Agreement PEPSICO will also provide updates of research
and development performed by PEPSICO and its Affiliates under this Agreement
(e.g. results of [***]. Such updates will be provided at the regularly scheduled
quarterly meetings of the applicable Steering Committee, and will be presented
either in slides or other written reports.  PEPSICO will also contractually
require and use commercially reasonable efforts to cause that its permitted
sublicensees provide Senomyx with written quarterly updates of any equivalent
activities that such sublicensees perform with respect to Selected Compounds.

 

2.3          PEPSICO shall have the one-time option (“Extension Option”) to
extend the Collaborative R & D Period of any of the Collaborative R & D Programs
for a fixed two year period following the fourth year of the applicable
Collaborative R & D Period.  For the avoidance of doubt, PEPSICO may, at its
option, exercise the Extension Option for all three Collaborative R & D Programs
or only one or two of the Collaborative R&D Programs.  In order for PEPSICO to
exercise the Extension Option, PEPSICO must notify SENOMYX at least [***] prior
to the end of the fourth year of the applicable Collaborative R & D Period and
specify the applicable Collaborative R & D Programs that it wishes to extend. 
In such event, the Collaborative R & D Period of the applicable Collaborative
R & D Program(s) shall automatically be extended for two years at [***] of the
level of annual funding set forth under Section 8.2.1for the applicable
Collaborative R & D Program except that if [***] then the funding for the [***]
shall be [***] per year.

 

2

--------------------------------------------------------------------------------

 

Each Collaborative R & D Program will conclude and expire automatically at the
end of the applicable Collaborative R & D Period for each respective program, as
extended by the Extension Option, if applicable.

 

3.                            STEERING COMMITTEE

 

3.1          Formation of Steering Committee

 

No later than ten days after the Effective Date, the parties will establish a
joint steering committee for each of the Synthetic Enhancing Compound Program,
Natural Enhancing Compound Program and Natural Sweetener Compound Program (each,
a “Steering Committee”).  Each party may elect to have its Steering Committee
members be the same for any of the respective programs.

 

3.2          Role of Steering Committee

 

The Steering Committees will manage the applicable Collaborative R&D Program and
will:

 

(a)                                 provide strategic direction and performance
criteria for the applicable Collaborative R&D Program;

 

(b)                                 monitor progress and communicate status of
the applicable Collaborative R&D Program;

 

(c)                                  facilitate the cooperation of the parties
under the applicable Collaborative R&D Program;

 

(d)                                 [***] described in Section 8.2.4 associated
with Natural Compounds for the Natural Enhancing Compound Program and the
Natural Sweetener Compound Program;

 

(e)                                  determine [***] under the applicable
Research Plan for each of the Synthetic Enhancing Compound Programs, the Natural
Enhancing Compound Program and the Natural Sweetener Compound Program;

 

(f)                                   review and amend, if necessary, the
applicable Research Plan;

 

(g)                                  designate the Intended Purpose for Selected
Enhancing Compounds;

 

(h)           provide input into the applicable Regulatory Plan;

 

(i)                                     review the Commercialization Plans for
any Selected Compounds; and

 

(j)                                    communicate during the applicable
Commercialization Period regarding the development of Selected Compound(s) under
the applicable Collaborative R & D Program and the commercialization of Products
incorporating Selected Compounds.

 

3

--------------------------------------------------------------------------------

 

3.3          Composition

 

Each Steering Committee will consist of [***] representatives officially
designated by SENOMYX and [***] representatives officially designated by
PEPSICO, all of whom may change from time to time as provided below.  The
initial Steering Committee for each of the Natural Enhancing Compound Program,
Synthetic Enhancing Compound Program and the Natural Sweetener Compound Program
shall be comprised of [***] and [***] as SENOMYX designees and [***] and [***]
as PEPSICO designees.  Each party may change its Steering Committee
representative(s) upon written notice to the other party.  If a Steering
Committee member is unable to participate in a meeting, such Steering Committee
member may delegate its voting powers to a delegate from its company.

 

3.4          Operation

 

Each official member of each Steering Committee will have one vote.  All
Steering Committee decisions will be made by unanimous vote and at a meeting
where all [***] members (or their delegates as permitted under Section 3.3)
participate.  Any unresolved disputes will be subject to the procedures outlined
in Section 16.4, or as otherwise mutually agreed upon by the parties in writing.

 

3.5          Meetings

 

Each Steering Committee will first meet no later than thirty days after the
Effective Date and, unless otherwise mutually agreed, four times per year during
the applicable Collaborative R&D Period and the applicable Commercialization
Period of this Agreement using mutually agreed upon meeting locations and
formats including teleconferencing and videoconferencing.  In order to reduce
costs, unless both parties consent, each quarterly Steering Committee meeting
for the Natural Enhancing Compound Program, Synthetic Enhancing Compound Program
and the Natural Sweetener Compound Program will take place consecutively on the
same date(s).  Each party will bear its own expenses relating to the meetings
and activities of the Steering Committees.  Subject to the approval of the
applicable Steering Committee, which shall not be unreasonably withheld, each
party may request the attendance of subject matter experts, who may or may not
be employees of either party, as desired at Steering Committee meetings as
non-voting, unofficial, ad-hoc members.

 

3.6          Minutes

 

During the Collaborative R & D Period and the Commercialization Period, SENOMYX
will promptly prepare and deliver to the members of the Steering Committee, the
minutes of meetings of the applicable Steering Committee for review and approval
by both parties.

 

4

--------------------------------------------------------------------------------

 

4.                            RESEARCH PLANS.

 

4.1          Research Plans

 

SENOMYX will prepare one Research Plan for the Synthetic Enhancing Compound
Program and a second Research Plan for both the Natural Enhancing Compound
Program and Natural Sweetener Compound Program and, after review by PEPSICO,
such Research Plans will be submitted to the applicable Steering
Committee(s) for approval at the first meeting of the Steering Committee (which
pursuant to Section 3.5 will take place within thirty days of the Effective
Date).  The Research Plans will reflect the PEPSICO Criteria, which SENOMYX will
use to help guide research priorities for the applicable Collaborative R & D
Program. The Research Plans will be attached to the minutes of the applicable
Steering Committee meeting.  The initial Research Plans will contemplate the
first [***] of the Collaborative R & D Period; however, at least thirty days
prior to the end of the [***] year of the Collaborative R & D Period, the
Steering Committee will update the Research Plans based on the progress of the
programs through such date.

 

4.2          Implementation of Research Plans and Data Packages

 

SENOMYX will use its commercially reasonable efforts, using the resources
received under Section 8.2, to perform the activities allocated to SENOMYX as
outlined in the Research Plans during the applicable Collaborative R & D Period
for each of the Synthetic Enhancing Compound Program, Natural Enhancing Compound
Program and Natural Sweetener Compound Program.  SENOMYX will designate a
project team comprising personnel with the technical qualifications and
expertise that are reasonably required to accomplish such activities outlined in
the Research Plans.  If there are any changes in the members of the project
team, SENOMYX will ensure that replacement members will have the equivalent
technical qualifications and expertise.

 

During the applicable Collaborative R & D Period under the applicable Research
Plan, SENOMYX will provide PEPSICO with information on [***] (“Data Package(s)”)
and [***] for full evaluation (the [***] shall be determined by the Steering
Committee).  The Data Package for a Collaboration Compound shall include the
information set forth in Appendix B, including, without limitation, [***] for
the specified Collaboration Compound [***].

 

PEPSICO will use commercially reasonable efforts to perform the activities
allocated to PEPSICO in accordance with the Research Plans, including the
evaluation of the Data Packages provided by SENOMYX for Collaboration Compounds.

 

Upon expiration of the applicable Collaborative R & D Period, the parties’
research and development obligations under the applicable Research Plan will
expire.

 

4.3          Notification of Selected Compound

 

By no later than [***] following receipt of a Data Package and the [***] as set
forth in Section 4.2 for a given Collaboration Compound (“Selection Date”),
PEPSICO may, upon written notice to SENOMYX, select such Collaboration Compound
for which it

 

5

--------------------------------------------------------------------------------

 

received such Data Package during the applicable Collaborative R & D Period for
development pursuant to Section 5, but in any event such selection must be made
[***]. If PEPSICO timely selects a Collaboration Compound by written notice to
SENOMYX no later than the Selection Date for such Collaboration Compound, such
Collaboration Compound will thereafter be deemed a “Selected Compound” and
PEPSICO and its Affiliates shall have the license rights to such Selected
Compound set forth in Section 9.

 

With respect to Selected Enhancing Compounds, promptly after the time of
selection, [***] will designate the specific Target Sweetener(s) that the
Selected Compound may be used to enhance under the license grants in Section 9
(“Intended Purpose”).  With respect to Selected Compounds that are Natural
Sweetener Compounds, “Intended Purpose” shall mean [***].   Fructose and HFCS
shall be treated as in the same category of Intended Purpose.  Such Selected
Compound must meet the definition of Enhancing Compound for each such designated
Target Sweetener.  The parties acknowledge and agree that the Intended Purpose
for each Selected Enhancing Compound shall be for the use of such Selected
Enhancing Compound only [***].

 

5.                            DEVELOPMENT.

 

5.1          Regulatory Approvals

 

5.1.1                     Regulatory Approvals for Selected Enhancing Compounds.

 

Promptly following selection of any Selected Enhancing Compound pursuant to
Section 4.3, SENOMYX will use commercially reasonable efforts to perform the
[***] for such Selected Enhancing Compound and to pursue the Regulatory Plan for
such Selected Enhancing Compound.  SENOMYX will provide to the Steering
Committee an updated Regulatory Plan (updated from the [***] which will include
a description of [***].   Within [***] of selection of any Selected Enhancing
Compound pursuant to Section 4.3, the Steering Committee will meet and discuss
in good faith [***].

 

SENOMYX shall solicit PEPSICO input to such Regulatory Plan during the regular
Steering Committee process, but in the event of any disagreement between the
parties SENOMYX shall have final decision making authority.

 

SENOMYX will exclusively own all regulatory filings made or filed for a Selected
Enhancing Compound, and any such regulatory filings for such Selected Enhancing
Compounds will be subject to the license grants pursuant to Section 9.

 

SENOMYX shall provide PEPSICO with copies of all such filings and approvals,
which, subject to the exceptions in Section 13.4, will be considered SENOMYX
Confidential Information.

 

The implementation of the Regulatory Plan for a Selected Enhancing Compound
will:

 

(i)            commence upon PEPSICO’s selection of such Selected Enhancing
Compound; and

 

6

--------------------------------------------------------------------------------

 

(ii)           end upon (a) [***] in the [***] Exclusive Product Categories, or
(b) upon a [***] of the Regulatory Plan by the Steering Committee.  SENOMYX will
provide PEPSICO with reasonable access, upon advance notice and during normal
business hours, to the appropriate SENOMYX personnel responsible for such
regulatory filings for the purpose of ongoing discussions of the subject matter
among the parties between regularly scheduled Steering Committee meetings.

 

5.1.2                     Regulatory Approvals for Selected Natural Sweetener
Compounds.

 

Promptly following selection of any Selected Natural Sweetener Compound pursuant
to Section 4.3, SENOMYX will use commercially reasonable efforts to perform the
anticipated safety studies (based on the Regulatory Plan) for such Selected
Natural Sweetener Compound. Within [***] of selection, the Steering Committee
will meet and discuss in good faith [***] the Regulatory Plan for such Selected
Natural Sweetener Compound.  The Steering Committee will also consider and
discuss whether the Regulatory Plan for selected Natural Sweetener Compounds
should contemplate Regulatory Approval [***].

 

SENOMYX shall solicit PEPSICO input to such Regulatory Plan during the regular
Steering Committee process, but in the event of any disagreement between the
parties SENOMYX shall have final decision making authority.

 

SENOMYX will exclusively own all regulatory filings made or filed for a Selected
Natural Sweetener Compound, and any such regulatory filings for such Selected
Natural Sweetener Compounds will be subject to the license grants pursuant to
Section 9. SENOMYX shall provide PEPSICO with copies of all such filings and
approvals, which, subject to the exceptions in Section 13.4, will be considered
SENOMYX Confidential Information. SENOMYX will provide PEPSICO with reasonable
access, upon advance notice and during normal business hours, to the appropriate
SENOMYX personnel responsible for such regulatory filings for the purpose of
ongoing discussions of the subject matter among the parties between regularly
scheduled Steering Committee meetings.

 

The implementation of the Regulatory Plan for a Selected Natural Sweetener
Compound will:

 

(i)            commence upon PEPSICO’s selection of such Selected Natural
Sweetener Compound; and

 

(ii)           end upon (a) [***] in the Exclusive Product Categories, or
(b) upon an [***] of the Regulatory Plan by the Steering Committee.

 

5.2          Costs of Regulatory Filings

 

5.2.1       Selected Enhancing Compounds

 

SENOMYX will be responsible for [***] out-of -pocket costs associated with [***]
for Regulatory Approval for each Selected Enhancing Compound.  For any
out-of-pocket

 

7

--------------------------------------------------------------------------------

 

costs associated with Regulatory Approval of any Selected Enhancing Compound in
excess of such amount,[***] as of the date when such [***], provided that [***]
such out-of-pocket costs [***], and PEPSICO will reimburse SENOMYX for [***]
after receipt of invoice (with supporting documentation) for such out-of-pocket
costs from SENOMYX, together with [***].  By way of example, (1) if [***] for
use in the Exclusive Product Categories and [***] on an exclusive basis, then
PEPSICO’s obligation to reimburse SENOMYX for out-of-pocket costs [***] for such
expenses that relate to [***]; or (2) if [***] for use in the Exclusive Product
Category and [***], then PEPSICO’s obligation to reimburse SENOMYX for
out-of-pocket costs [***].

 

For any out-of-pocket costs associated with Regulatory Approval contemplated by
the Regulatory Plan other than [***], PEPSICO and SENOMYX will [***] as of the
date when such out-of-pocket costs [***], provided that [***] such out-of-pocket
costs [***], and PEPSICO will reimburse SENOMYX for [***] after receipt of
invoice (with supporting documentation) for such out-of-pocket costs, together
with [***].

 

All reimbursement payments under this Section 5.2.1 are non-refundable and
non-creditable.

 

5.2.2       Selected Natural Sweetener Compounds

 

SENOMYX will be responsible for [***] (based on the Regulatory Plan) of each
Selected Natural Sweetener Compound.  After such amount has been reached [***]
Selected Natural Sweetener Compound.  For any out-of-pocket costs associated
with Regulatory Approval of any Selected Natural Sweetener Compound in excess of
[***] as of the date when such out-of-pocket costs [***] provided that [***]
incurred by SENOMYX within [***] after receipt of invoice (with supporting
documentation) for such out-of-pocket costs from SENOMYX, together with such
detail relating to such costs as are reasonably required by PEPSICO.  By way of
example, (1) if [***] for use in the Exclusive Product Category and [***] on an
exclusive basis (and provided such [***]), then PEPSICO’s obligation to
reimburse SENOMYX for out-of-pocket costs [***]; or (2) if [***] for use in the
Exclusive Product Category and [***] (and provided such [***]), then PEPSICO’s
obligation to reimburse SENOMYX for out-of-pocket costs [***].

 

All reimbursement payments under this Section 5.2.2 are non-refundable and
non-creditable.

 

5.3          Safety Evaluation of Collaboration Compounds

 

SENOMYX will have sole control and manage all safety studies for any
Collaboration Compound.  PEPSICO and its Affiliates and permitted sublicensees
[***].

 

The results of all safety studies for any Collaboration Compound shall be owned
by SENOMYX and such results shall be deemed SENOMYX Confidential Information
hereunder, subject to the exceptions in Section 13.4.  SENOMYX will provide
PEPSICO with reasonable access, upon advance notice and during normal business
hours, to the appropriate personnel responsible for such safety studies for the
purpose of ongoing

 

8

--------------------------------------------------------------------------------

 

discussions of the subject matter among the parties between regularly scheduled
Steering Committee meetings.

 

During the applicable Collaborative R&D Period, SENOMYX shall provide PEPSICO
with copies of the results of all such safety studies for all Collaboration
Compounds which were part of a Data Package for PEPSICO’s internal evaluation.
SENOMYX will provide PEPSICO with such results for any Selected Compounds both
during and following the Collaborative R & D Period, for so long as such
Collaboration Compound remains a Selected Compound.

 

5.4          Cooperation

 

PEPSICO and its Affiliates will cooperate to the extent reasonably necessary to
assist SENOMYX in the performance of the foregoing activities and SENOMYX will
provide PEPSICO with copies of all regulatory filings and supporting data and
regulatory determinations on the Selected Compound(s), which, subject to the
exceptions in Section 13.4, shall be considered Confidential Information of
SENOMYX.  PEPSICO will contractually require and use commercially reasonable
efforts to cause its permitted sublicensees to cooperate to the extent
reasonably necessary to assist SENOMYX in the performance of the foregoing
activities.  SENOMYX and its Affiliates will cooperate to the extent reasonably
necessary to assist PEPSICO, its Affiliates and their permitted sublicensees in
the performance of the foregoing activities.

 

In addition, each party is obligated to:

 

(i)            [***] relating to any Compounds licensed under this Agreement and
will keep the other party updated of [***]; and

 

(ii)           report such [***].

 

With respect to (i) above, PEPSICO and its Affiliates shall involve SENOMYX in
any [***] and will provide access to SENOMYX to all related information and
SENOMYX shall involve PEPSICO in any [***] and will provide access to PEPSICO to
all related information.  PEPSICO will contractually require and use
commercially reasonable efforts to cause its sublicensees to report any such
[***] directly to SENOMYX, involve SENOMYX in any [***] and provide access to
SENOMYX to all related information.  Upon prior notice to PEPSICO,
notwithstanding Section 13 of this Agreement, each party may provide such
information to its [***] Compound.

 

6.                            COMMERCIALIZATION

 

6.1          Commercialization Plans

 

As an overall goal of the Commercialization Plans, PEPSICO desires to market
current and new Products incorporating Selected Compounds.  Within [***] of
selection of each Selected Compound pursuant to Section 4.3, PEPSICO will
prepare in good faith a detailed plan for the commercialization of Products
incorporating such Selected Compound that includes, [***] in Section 6.2 (the
“Commercialization Plan(s)”).  Each

 

9

--------------------------------------------------------------------------------

 

Commercialization Plan will reflect the mutual intention of the parties to
commence the commercialization of a Selected Compound as soon as possible
following the first Regulatory Approval of a Selected Compound in each country. 
The Commercialization Plans for each Selected Compound will be attached to the
minutes of the applicable Steering Committee meeting.  Subject to the exceptions
in Section 13.4, the Commercialization Plans will be considered Confidential
information of PEPSICO under this Agreement.

 

6.2          Format of Commercialization Plans

 

PEPSICO agrees that it will [***] each Commercialization Plan the following
information for PEPSICO, its Affiliates and permitted sublicensees:

 

(i)                                     commercially reasonable timelines
consistent with the mutual intention of the parties as set forth in Section 6.1
above;

 

(ii)                                  specific diligence timelines for PEPSICO
(and its Affiliates and permitted sublicensees) and SENOMYX; (e.g. key
activities related to [***]

 

(iii)                               the worldwide [***] Products incorporating
the applicable Selected Compound broken out by [***].

 

(iv)                              estimated [***] of Selected Compound to be
[***]

 

(v)                                 projected [***] Products incorporating the
applicable Selected Compound; and

 

(vi)                              [***] information on [***] of Products
incorporating the applicable Selected Compound.

 

Thereafter PEPSICO will update each Commercialization Plan on an annual basis in
good faith for the remainder of the applicable Commercialization Period.  Such
updated Commercialization Plans shall, [***] include quantifiable information,
including [***] submitted to SENOMYX at least [***].  PEPSICO shall [***] the
Commercialization Plans and the Steering Committee will meet as appropriate to
review and discuss progress against the Commercialization Plan.  In accordance
with the Commercialization Plans, PEPSICO will be responsible for formulating
and testing Products incorporating Selected Compounds including the cost
associated with such activities.

 

Notwithstanding the foregoing, PEPSICO is [***] and shall [***] as contemplated
by Section 8.5 of this Agreement.

 

10

--------------------------------------------------------------------------------

 

7.                            RIGHTS, OBLIGATIONS AND LIMITATIONS OF THE PARTIES

 

7.1  Exclusivity in the Exclusive Product Categories with Respect to Selected
Compounds

 

For so long as PEPSICO is paying the MARs during the Commercialization Period
for a particular Minimum Annual Royalty Category, and subject to Sections 9.5.2
and 9.6.1 and PEPSICO’s continuing compliance with the other material terms of
this Agreement, with respect to any Selected Compounds in that particular
Minimum Annual Royalty Category for which PEPSICO is paying MARs, SENOMYX agrees
not to [***] for use of such Selected Compounds [***] (e.g., for the purpose of 
[***] for which PEPSICO [***]).  Notwithstanding the foregoing, this paragraph
7.1 shall not apply with respect to [***] for which a license is converted to
non-exclusive or is terminated under Sections 8.5 ([***]), 11.1 ([***]) or
otherwise.

 

7.1.1  Synthetic Enhancing Compound Program

 

Subject to Section 9.5.2, during the applicable Collaborative R & D Period for
the Synthetic Enhancing Compound Program, SENOMYX agrees not to provide research
and development services or grant any rights to SENOMYX Technology to a Third
Party for use in the discovery or commercialization of Synthetic Compounds that
have an enhancing effect on the sweetness of a Target Sweetener and that are
intended for use as a sweetness enhancer in any Exclusive Product Category. 
Notwithstanding the foregoing, SENOMYX is permitted at any time to provide
research and development services and/or grant any rights in SENOMYX Technology
to a Third Party(ies) for use in the discovery or commercialization of Synthetic
Compounds that have a primary sweetness enhancing effect on a sweetener that is
not a Target Sweetener and that also enhance the sweetness of a Target Sweetener
[***]in in vitro assays and product prototypes at a concentration that is [***].
Such sweetness comparison will be measured in Taste Tests.  By way of
illustration, but not limitation, in Taste Tests Synthetic Compound A enhances
the sweetness of [***] and enhances the sweetness of [***] and at a
concentration of [***] Synthetic Compound A has sweetness on its own that is
[***] (based on Taste Tests).  Such Synthetic Compound is not considered an
Enhancing Compound for sucrose. Accordingly, SENOMYX would be permitted to
provide research and development services and/or grant to Third Party(ies)
rights in SENOMYX Technology for use in the discovery or commercialization of
such Synthetic Compound in an Exclusive Product Category for use as an enhancer
of the sweetness of sucralose at such concentrations or below; provided,
however, that during the applicable Collaborative R & D Period for the Synthetic
Enhancing Compound Program SENOMYX shall not grant any rights in SENOMYX
Technology for use as an enhancer of the sweeteners of a Target Sweetener and
that are intended for use as a sweetness enhancer in an Exclusive Product
Category.

 

During the Commercialization Period SENOMYX will not violate its exclusivity
commitments in Section 7.1 [***].  Subject to Section 7.1 above [***] and
Section 7.4, after expiration of the applicable Collaborative R & D Period for
the Synthetic Enhancing Compound Program and for the remainder of the Term,
SENOMYX may provide

 

11

--------------------------------------------------------------------------------

 

research and development services and/or grant rights to SENOMYX Technology to
Third Parties for use in the discovery or commercialization of Synthetic
Compounds that are not Selected Compounds in any field of use, and nothing in
this Agreement will prevent or limit the foregoing.

 

7.1.2  Natural Enhancing Compound Program

 

Subject to Section 9.5.2, during the applicable Collaborative R & D Period for
the Natural Enhancing Compound Program, SENOMYX agrees not to provide research
and development services or grant any rights to SENOMYX Technology to a Third
Party for use in the discovery or commercialization of Natural Compounds that
have an enhancing effect on the sweetness of a Target Sweetener and that are
intended for use as a sweetness enhancer in any Exclusive Product Category. 
Notwithstanding the foregoing, SENOMYX is permitted at any time to provide
research and development services or grant any rights in SENOMYX Technology to a
Third Party(ies) for use in the discovery or commercialization of Natural
Enhancing Compounds that have a primary sweetness enhancing effect on a
sweetener that is not a Target Sweetener and that also enhance the sweetness of
a Target Sweetener [***] in in vitro assays and product prototypes at a
concentration that is [***]. Such sweetness comparison will be measured in Taste
Tests.  By way of illustration, but not limitation, in Taste Tests Natural
Compound A enhances the sweetness of [***] and enhances the sweetness of [***]
and at a concentration of [***] Natural Compound A has sweetness on its own that
is [***] (based on Taste Tests).  Such Compound is not considered an Enhancing
Compound for sucrose. Accordingly, SENOMYX would be permitted to provide
research and development services and/or grant to Third Party(ies) rights in
SENOMYX Technology for use in the discovery or commercialization of such Natural
Compound in an Exclusive Product Category for use as an enhancer of the
sweetness of sucralose at such concentrations or below; provided, however, that
during the applicable Collaborative R&D Period for the Natural Enhancing
Compound Program SENOMYX shall not grant any rights in SENOMYX Technology for
use as an enhancer of the sweeteners of a Target Sweetener and that are intended
for use as a sweetness enhancer in an Exclusive Product Category.

 

During the Commercialization Period SENOMYX will not violate its exclusivity
commitments in Section 7.1 [***].  Subject to Section 7.1 above [***] and
Section 7.4, after expiration of the applicable Collaborative R & D Period for
the Natural Enhancing Compound Program, and for the remainder of the Term,
SENOMYX may provide research and development services and/or grant rights to
SENOMYX Technology to Third Parties for use in the discovery or
commercialization of Natural Compounds that are not Selected Compounds in any
field of use, and nothing in this Agreement will prevent or limit the foregoing.

 

7.1.3  Natural Sweetener Compound Program

 

Subject to Section 9.5.2, during the applicable Collaborative R & D Period for
the Natural Sweetener Compound Program, SENOMYX agrees not to provide research
and development services or grant any rights to SENOMYX Technology to a Third
Party for

 

12

--------------------------------------------------------------------------------

 

use in the discovery or commercialization of Natural Compounds that are intended
for use as a sweetener in any Exclusive Product Category.

 

Subject to the first paragraph of Section 7.1 above, after expiration of the
applicable Collaborative R & D Period for the Natural Sweetener Compound
Program, and for the remainder of the Term, SENOMYX may provide research and
development services and/or grant rights to SENOMYX Technology to Third Parties
for use in the discovery or commercialization of Natural Compounds that are not
Selected Compounds in any field of use, and nothing in this Agreement will
prevent or limit the foregoing.

 

7.2          Co-Exclusive Product Category and Outside the Fields

 

Subject to Section 7.4, nothing in this Agreement shall be deemed to restrict or
otherwise limit SENOMYX from providing research and development services and/or
granting rights to SENOMYX Technology (i) to Third Parties with respect to use
of Compounds outside the Field for any purpose (including for enhancing
sweetness of a Target Sweetener or acting as a sweetener) or for any purpose in
the Field other than enhancing the sweetness of a Target Sweetener or acting as
a sweetener, (ii) to one other party (and such party’s Affiliates) with respect
to use of Compounds as an enhancer of sweetness of a Target Sweetener in the
Co-Exclusive Product Category; or (iii) to one other party (and such party’s
Affiliates) with respect to use of Natural Compounds as a sweetener in the
Co-Exclusive Product Category.

 

7.3          Manufacturing

 

PEPSICO and its Affiliates will be responsible for all costs associated with
manufacturing and commercial scale-up of Selected Compounds including
manufacturing optimization costs.  In addition, PEPSICO and its Affiliates shall
bear all manufacturing related costs for any material required for its internal
evaluations including prototype and product development efforts.

 

If PEPSICO or its Affiliates elects to outsource the manufacture of Selected
Compounds to a Third Party, [***].

 

7.4          Right of First Negotiation Regarding [***]

 

Subject to Section 9.5.2, this Section 7.4 shall apply in the event that during
a given Collaborative R&D Period, for either the Synthetic Enhancing Compound
Program or the Natural Enhancing Compound Program, SENOMYX develops a synthetic
or natural Compound that [***] which either (i) [***], or (ii) [***] (such [***]
referred to as the “ROFN Uses”).  During the Collaborative R&D Period, before
SENOMYX (or its Affiliate) either commercializes such Compound directly or first
grants a commercial license to any Third Party to such Compound, in each case
for use in [***] for the ROFN Uses, SENOMYX will present the ROFN Uses
opportunity first to PEPSICO.  PEPSICO must inform SENOMYX of commercial
interest in such opportunity in writing [***] of written notice from SENOMYX. 
In the event that SENOMYX does not receive such written notification within such
[***] period then SENOMYX shall be free to retain such rights for itself or its
Affiliates and/or enter into agreements with one or more Third

 

13

--------------------------------------------------------------------------------

 

Parties for their commercial use of the applicable Compound in [***] for the
ROFN Uses.  If SENOMYX does receive such written notification, the parties shall
exclusively negotiate in good faith to complete a commercial license agreement
for such Compound in [***] for the ROFN Uses for a period not to exceed [***]
following PEPSICO’s delivery of such written notice. In the event that the
parties do not enter into a license agreement for such Compound within such
[***] period, then SENOMYX shall be free to retain such rights for itself or its
Affiliates and/or enter into agreements with one or more Third Parties for a
license to use the applicable Compound in [***] for the ROFN Uses. During said
[***] negotiation period, neither party may [***].  For avoidance of doubt,
PEPSICO acknowledges and agrees that SENOMYX shall have sole and absolute
discretion to determine whether the terms offered by PEPSICO during such
negotiation process, if any, are acceptable to SENOMYX and therefore SENOMYX
shall have sole and absolute discretion whether to enter into any such agreement
with PEPSICO on the terms offered.

 

8.                            FINANCIAL TERMS

 

8.1          Nonrefundable Payment

 

In consideration for (i) SENOMYX’s initiation of the Synthetic Enhancing
Compound Program, the Natural Enhancing Compound and the Natural Sweetener
Program, (ii) SENOMYX’s agreement to provide future R&D services on an exclusive
or co-exclusive basis during the applicable Collaborative R&D Period as
described by Section 7.1, and (iii) the Extension Option provided in Section 2.3
pursuant to which PEPSICO may extend the Collaborative R&D Period for one or
more of the Collaborative R&D Programs, PEPSICO shall pay to SENOMYX a
nonrefundable payment of US$30,000,000, of which US$7,500,000 has been
previously paid by PEPSICO to SENOMYX in connection with the execution of the
Term Sheet and the remaining US$22,500,000 of which shall be paid by PEPSICO to
SENOMYX within fifteen days of the Effective Date.

 

Such payment shall be non-refundable and non-creditable.

 

8.2          Research Support

 

8.2.1 Annual Funding Amount

 

Each year during the first four years of the applicable Collaborative R&D
Period, PEPSICO will pay SENOMYX annual funding as follows:

 

·                                          [***] for the Synthetic Enhancing
Compound Program

 

·                                          [***] for the Natural Sweetener
Compound Program; and

 

·                                          [***] for the Natural Enhancing
Compound Program.

 

At the end of the [***] of the applicable Collaboration R & D Period, and [***]
during the applicable Collaboration R & D Period, the Steering Committee will
[***].

 

14

--------------------------------------------------------------------------------

 

All such funding amounts shall be used by SENOMYX to perform the agreed
activities allocated to SENOMYX as outlined in the Research Plans  and shall be
non-refundable and non-creditable.

 

8.2.2 Timing of Payment

 

The annual funding payments under Section 8.2.1 shall be made in equal quarterly
installments in advance, with the first installment payment for each
Collaborative R & D Program to be made within 15 days following the Effective
Date and each installment payment thereafter shall be due and payable at least
[***] prior to the first day of the next full calendar quarter thereafter.

 

8.2.3 Excluded Items

 

The annual funding payments under Section 8.2.1 do not include PEPSICO’s costs
associated with providing support for the collaboration including, without
limitation, PEPSICO’s obligations related to reimbursable and advanced expenses
which PEPSICO has specifically agreed to pay under this Agreement.

 

8.2.4       Natural Compounds

 

The [***] out-of-pocket costs associated with Natural Compounds for the Natural
Enhancing Compound Program and the Natural Sweetener Program.  The [***] for the
first year of the Collaborative R & D Period will be [***], [***].  PEPSICO
shall reimburse SENOMYX for all [***] associated with Natural Compounds under
these programs (as may be [***] according to the immediately following
sentence), such as costs to [***] activities for Natural Compounds; provided,
however, that in the event that such costs exceed [***], PEPSICO shall have the
right to pre-approve the scope of such activities and their associated costs.
PEPSICO’s reimbursement obligation for such expenses shall be [***] for such
costs.  If SENOMYX is [***] for such expenses, PEPSICO will [***].

 

PEPSICO shall have no obligation to reimburse SENOMYX for work performed by
SENOMYX with respect to [***].

 

8.3          Milestone Payments

 

PEPSICO will pay SENOMYX the non-creditable, non-refundable milestone payments
described below within [***] of the occurrence of the following milestone
events, as determined by the Steering Committee.  All milestone payments are
non-refundable and non-creditable.

 

8.3.1       Synthetic Enhancing Compound Program

 

a)             Milestone #1:  [***] upon [***];

 

b)            Milestone #2:  [***] upon [***]; and

 

15

--------------------------------------------------------------------------------

 

c)                                      Milestone #3:  [***] for each [***].

 

8.3.2  Natural Enhancing Compound Program

 

a)                                      Milestone #1:  [***] upon [***];

 

b)                                     Milestone #2:   [***] upon [***]; and

 

c)                                      Milestone #3:  [***] for each [***].

 

8.3.3  Natural Sweetener Compound Program

 

a)                                      Milestone #1:  [***] upon [***];

 

b)                                     Milestone #2:   [***] upon [***]; and

 

c)                                      Milestone #3:  [***] for each [***].

 

8.4                               Royalties

 

8.4.1                     Synthetic Enhancing Compounds and Natural Enhancing
Compounds

 

With respect to licenses under Section 9 for Selected Sucrose Enhancing
Compounds, PEPSICO shall pay SENOMYX a royalty on Beverages and Beverage Bases
incorporating a Selected Enhancing Compound sold by PEPSICO and its Affiliates
equal to the amount determined in accordance with the attached Schedule
8.4.1(A).

 

With respect to licenses under Section 9 for Selected Fructose or HFCS Enhancing
Compounds, PEPSICO shall pay SENOMYX a royalty on Beverages and Beverage Bases
incorporating a Selected Enhancing Compound sold by PEPSICO and its Affiliates
equal to the amount determined in accordance with the attached Schedule
8.4.1(B).

 

The amount actually due per Unit Case will be determined separately for each
Beverage and Beverage Base based on the [***] applicable to such Beverage or
Beverage Base as reflected in Schedule 8.4.1(A) or 8.4.1(B), as the case may be,
for the applicable Calendar Quarter. In no event shall SENOMYX be entitled to
receive a royalty on a Beverage for which it has already been paid a royalty on
a Beverage Base used to manufacture that same Beverage.

 

8.4.2                     Natural Sweetener Compounds

 

With respect to licenses under Section 9 for Selected Natural Sweetener
Compounds, PEPSICO shall pay SENOMYX a royalty on Beverages and Beverage Bases
incorporating a Selected Natural Sweetener Compound

 

16

--------------------------------------------------------------------------------

 

sold by PEPSICO and its Affiliates equal to [***] of the Cost of Selected
Compound [***].  In no event shall SENOMYX be entitled to receive a royalty on a
Beverage for which it has already been paid a royalty on a Beverage Base used to
manufacture that same Beverage.

 

8.4.3                     Royalties Under Sublicenses to Ingredient Suppliers

 

With respect to sublicenses to Ingredient Suppliers under Section 9.6, PEPSICO
shall pay, or shall cause the Ingredient Supplier sublicensees to directly pay
(provided that PEPSICO guarantees such direct payments) a royalty of [***] on
Net Sales [***].  Any royalties received by SENOMYX with respect to [***] will
not count toward satisfaction of MARs due from PEPSICO under Section 8.5.

 

During the Term of this Agreement, [***]. Following the termination of this
Agreement, the provisions of Section 14.5 shall apply.

 

8.4.4                     No Off-Set.  For the avoidance of doubt, subject to
Section 8.9 below, there is no reduction or off-set of royalties for other
payments under this Agreement, such as up-front payments, research funding,
milestone payment or reimbursement payments.

 

8.4.5                     Royalty for More than One Selected Compound.  If a
particular Product incorporates more than one Selected Compound, then [***] set
forth above will be applied and the royalty shall be [***].

 

8.4.6                     Royalty Due [***].  Earned royalties under
Section 8.4.1 and 8.4.2 shall be calculated and due on sales of Beverages and
Beverage Bases incorporating Selected Compounds [***] (i) [***] at least one
Valid Claim covering [***] of the applicable Selected Compound or Beverages or
Beverage Bases incorporating such Selected Compound; (ii) [***] Beverages or
Beverages Bases incorporating the applicable Selected Compound [***] if such
Beverages or Beverage Bases [***] at least one Valid Claim covering [***] of the
applicable Selected Compound or Beverages or Beverage Bases incorporating such
Selected Compound; and (iii) where Beverages or Beverage Bases [***] that
incorporate the applicable Selected Compound that [***] where SENOMYX has at
least one Valid Claim covering the [***] Beverages or Beverage Bases
incorporating such Selected Compound.

 

8.5          Minimum Annual Royalties

 

8.5.1       Minimum Annual Royalty Schedules

 

PEPSICO shall pay SENOMYX minimum annual royalties (“MARs”) for Selected
Compound based on the schedules specified below.  MARs will be calculated on a
per Minimum Annual Royalty Category basis for the 5 Minimum Annual Royalty
Categories described below [***].

 

17

--------------------------------------------------------------------------------

 

On a Selected Compound-by-Selected Compound basis, not later than [***] months
following the receipt of the first Regulatory Approval a Selected Compound in a
Major Country that authorizes the use of the Selected Compound in any Exclusive
Product Category, PEPSICO may, upon [***] prior written notice, notify SENOMYX
of its election to not pay MARs for the applicable Minimum Annual Royalty
Category for such Selected Compound for future periods (a “Conversion Notice”).
At the end of such [***] notice period under a Conversion Notice, PEPSICO’s
licenses with respect to such Selected Compound under Section 9.3 shall be
automatically converted to non-exclusive without any further action by either
party and PepsiCo’s obligation to pay MARs for such Selected Compound in its
Minimum Royalty Category shall terminate.  For avoidance of doubt, any MARs due
for a partial Calendar Year will be calculated in a manner consistent with the
provisions of Section 14.5.  During said [***] period, and notwithstanding any
conflicting provisions of this Agreement (including Section 7.1), with respect
to any Selected Compound for which SENOMYX has received a Conversion Notice
SENOMYX shall be free to (i) grant to one or more Third Parties a right to
evaluate and perform development activities using such Selected Compound in the
Exclusive Product Categories, and to make and have made such Selected Compound
for purposes of such evaluation and development activities, and (ii) collaborate
and perform research and development activities with or on behalf of a Third
Party relating to such Selected Compound; provided, however that Senomyx may not
grant to the Third Party any rights to sell such Selected Compound or any
non-alcoholic beverage that incorporates such Selected Compound, in the
Exclusive Product Categories that is effective before the end of such [***]
notice period for the given Selected Compound.  After the end of such [***]
notice period under a Conversion Notice, the restrictions set forth in Sections
7.1 shall no longer be applicable with respect to such Selected Compound
notwithstanding any future election by PEPSICO to pay MARs for another Selected
Compound in the same Minimum Annual Royalty Category as would have applied to
the earlier Selected Compound for which PEPSICO delivered a Conversion Notice.
Such election to deliver a Conversion Notice and conversion to a non-exclusive
license for a Selected Compound shall not relieve PEPSICO from its obligations
to SENOMYX with respect to such Selected Compound under this Agreement other
than the obligation to pay the applicable MARs under this Section 8.5 after the
end of such [***] period following a Conversion Notice. Accordingly, for
avoidance of doubt, PEPSICO shall continue to be responsible for payment to
SENOMYX of any royalties as set forth in Section 8.4.

 

Unless SENOMYX has received a Conversion Notice for a given Selected Compound
during the [***] period referenced above, the MARs due thereafter for the
applicable Minimum Annual Royalty Category shall be non-cancellable and payable
during the remainder of the

 

18

--------------------------------------------------------------------------------

 

Commercialization Period for the applicable Minimum Annual Royalty Category,
except that (i) with respect to [***], the obligation to pay MARs in a given
Minimum Annual Category (i.e., Sections 8.5.1.3 and 8.5.1.4) will end in the
Calendar Year in which there no longer exists a Valid Claim covering the [***]
of a Selected Enhancing Compound in the applicable Minimum Annual Category [***]
and (ii) with respect to [***], the obligation to pay MARs in a given Minimum
Annual Category (i.e., Sections 8.5.1.1 and 8.5.1.2) will end in the Calendar
Year in which there no longer exists a Valid Claim covering the [***] of a
Enhancing Compound in the applicable Minimum Annual Category [***].

 

8.5.1.1    Selected Compounds that are [***]

 

During the Commercialization Period for Selected Compounds that are [***],
PEPSICO will pay the following MARs to SENOMYX:

 

·                                          [***] for the first Commercialization
Year;

 

·                                          [***] for the second
Commercialization Year;

 

·                                          [***] for the third Commercialization
Year;

 

·                                          [***] for the fourth
Commercialization Year; provided, however, that if any Selected Compound that is
a [***] has [***] before the beginning of the third Commercialization Year, the
payment amount for the fourth Commercialization Year will be [***]; and

 

·                                          [***] for the fifth Commercialization
Year and each Commercialization Year thereafter (subject to adjustment as
provided in Section 8.6 below); provided, however, that if any Selected Compound
that is a [***] has [***] before the beginning of the fourth Commercialization
Year, the payment amount for the fifth Commercialization Year and each
Commercialization Year thereafter will be [***] (subject to adjustment as
provided in Section 8.6 below).

 

8.5.1.2    Selected Compounds that are [***]

 

During the Commercialization Period for Selected Compounds that are [***],
PEPSICO will pay the following MARs to SENOMYX:

 

·                                          [***] for the first Commercialization
Year;

 

·                                          [***] for the second
Commercialization Year;

 

·                                          [***] for the third Commercialization
Year;

 

19

--------------------------------------------------------------------------------

 

·                                          [***] for the fourth
Commercialization Year; provided, however, that if any Selected Compound that is
a [***] has [***] before the beginning of the third Commercialization Year, the
payment amount for the fourth Commercialization Year will be [***]; and

 

·                                          [***] for the fifth Commercialization
Year and each Commercialization Year thereafter (subject to adjustment as
provided in Section 8.6 below) provided, however, that if any Selected Compound
that is a [***] has [***] before the beginning of the fourth Commercialization
Year, the payment amount for the fifth Commercialization Year and each
Commercialization Year thereafter will be [***] (subject to adjustment as
provided in Section 8.6 below).

 

8.5.1.3    Selected Compounds that are [***]

 

During the Commercialization Period for Selected Compounds that are [***],
PEPSICO will pay the following MARs to SENOMYX:

 

·                                          [***] for the first Commercialization
Year;

 

·                                          [***] for the second
Commercialization Year;

 

·                                          [***] for the third Commercialization
Year;

 

·                                          [***] for the fourth
Commercialization Year; and

 

·                                          [***] for the fifth Commercialization
Year and each Commercialization Year thereafter (subject to adjustment as
provided in Section 8.6 below).

 

8.5.1.4    Selected Compounds that are [***]

 

During the Commercialization Period for Selected Compounds that are [***],
PEPSICO will pay the following MARs to SENOMYX:

 

·                                          [***] for the first Commercialization
Year;

 

·                                          [***] for the second
Commercialization Year;

 

·                                          [***] for the third Commercialization
Year;

 

·                                          [***] for the fourth
Commercialization Year; and

 

·                                          [***] for the fifth Commercialization
Year and each Commercialization Year thereafter (subject to adjustment as
provided in Section 8.6 below).

 

20

--------------------------------------------------------------------------------

 

8.5.1.5    Selected Compounds that are [***]

 

During the Commercialization Period for Selected Compounds that are [***],
PEPSICO will pay the following MARs to SENOMYX:

 

·                                          [***] for the first Commercialization
Year;

 

·                                          [***] for the second
Commercialization Year;

 

·                                          [***] for the third Commercialization
Year;

 

·                                          [***] for the fourth
Commercialization Year; provided, however, that if any Selected Compound that is
a [***] has [***] before the beginning of the third Commercialization Year, the
payment amount for the fourth Commercialization Year will be [***]; and

 

·                                          [***] for the fifth Commercialization
Year and each Commercialization Year thereafter (subject to adjustment as
provided in Section 8.6 below) provided, however, that if any Selected Compound
that is a [***] has [***] before the beginning of the fourth Commercialization
Year, the payment amount for the fifth Commercialization Year and each
Commercialization Year thereafter will be [***] (subject to adjustment as
provided in Section 8.6 below).

 

8.5.1.6 Royalty Shortfall

 

The amount due under this Section 8.5 for any Commercialization Year is the
amount, if any, by which the MARs specified for the applicable Minimum Annual
Royalty Category for that Commercialization Year period exceeds the royalties
actually paid on Beverages and Beverage Bases incorporating Selected Compounds
with respect to the applicable Minimum Annual Royalty Category during such
Commercialization Year (“Royalty Shortfall(s)”).   The Royalty Shortfalls shall
be calculated separately for each Minimum Annual Royalty Category.

 

For the avoidance of doubt, if PEPSICO selects multiple Collaboration Compounds
within any of the five Minimum Annual Royalty Categories, the Royalty Shortfall
shall be due for that category and not for each Selected Compound within that
category.

 

8.6          Adjustment of Values for Minimum Royalties

 

With respect to each Minimum Royalty Category, the MARs will be adjusted for the
[***] year of the applicable Commercialization Period and beyond, for
inflation/deflation using the Consumer Price Index as set forth below.  The
first adjustment will be effective on the [***] anniversary of the commencement
of the applicable Commercialization Period and annually on each anniversary
thereafter, and shall be calculated as follows:

 

21

--------------------------------------------------------------------------------

 

·                  MAR for the applicable Commercialization Year = Unadjusted
Base MAR * (1 + %CPI Increase/Decrease)

 

Such amount as calculated shall be the applicable MAR for the given Minimum
Royalty Category to be paid until the next date for adjustment hereunder.

 

·                  The “Unadjusted Base MAR” for purposes of each MAR adjustment
shall be [***], as the case may be, in the case of Selected Compounds that are
[***], [***], as the case may be, in the case of Selected Compounds that are
[***], [***] in the case of Selected Compounds that are [***], [***] in the case
of  Selected Compounds that are [***]; and [***], as the case may be, in the
case of Selected Compounds that are [***].

 

·                  %CPI Increase/Decrease = (Comparison CPI – Base CPI) ÷ Base
CPI

 

·                                          The “Comparison CPI” shall be the
unadjusted Consumer Price Index for the December of the Calendar Year [***] the
applicable annual adjustment and the “Base CPI” shall be the unadjusted Consumer
Price Index for December of the Calendar Year which is [***] such Calendar Year.

 

8.7          Payment Terms

 

8.7.1 Timing

 

As set forth in this Agreement, the royalties will be paid within [***] after
the end of each calendar quarter period in which such royalties are earned
during the Commercialization Period for each Product incorporating a Selected
Compound.  All Royalty Shortfalls will be paid within [***] after the end of
each Commercialization Year.

 

8.7.2 Reporting

 

With each such quarterly payment, PEPSICO, its Affiliates and permitted
sublicensees will furnish to SENOMYX a royalty statement in sufficient detail to
permit confirmation of the accuracy of the royalty payment made in accordance
with the accounting procedures set forth in Section 8.11.1 below (the “Royalty
Report”), which sets forth on a country-by-country and sweetener-by-sweetener
basis and Product-by-Product basis the relevant sales information for PEPSICO
and the applicable Affiliates and permitted sublicensees including:

 

i.)                            In the case of sales by PEPSICO and its
Affiliates [***] incorporating a Selected Compound sold;

 

ii.)                         the royalties payable in United States dollars;

 

22

--------------------------------------------------------------------------------

 

iii.)                      the method used to calculate the royalty payment,
including the applicable PSR and Cost of Selected Compound for each Beverage or
Beverage Base incorporating a Selected Compound ;

 

iv.)                     the method used to calculate the applicable Consumer
Price Index adjustments of the MARs and adjustments of the applicable royalties
under Section 8.4.1 based on changes to the parameters described in Schedules
8.4.1(A) and 8.4.1(B);

 

v.)                        the exchange rate used;

 

vi.)                     in the case of sublicenses to Ingredient Suppliers
under Section 9.6, the Net Sales and the total number of units of each such
Ingredient Supply Product sold, if applicable; and

 

vii.)                  other information employed to calculate the royalty
payment for such Product incorporating such Selected Compound.

 

The contents of such Royalty Reports shall, subject to the exceptions in
Section 13.4, be considered Confidential Information of PEPSICO and SENOMYX
agrees not to disclose such contents except to the extent necessary for SENOMYX
to enforce its rights under this Agreement or if disclosure is permitted under
Section 13.5 or 13.7.

 

8.8          Currency of Payment

 

All payments to be made under this Agreement, including the royalties payable to
SENOMYX by PEPSICO, its Affiliates and permitted sublicensees, will be paid in
United States dollars by wire transfer (or other means acceptable to SENOMYX) to
a bank account designated by SENOMYX.

 

With respect to each quarter, for countries other than the United States,
whenever conversion of any amounts or payments from any foreign currency are
required, such conversion will be made at the rate of exchange reported in The
Wall Street Journal on the last business day of the applicable reporting period.

 

8.9          Taxes Withheld

 

Any income or other tax that PEPSICO or any of its Affiliates or permitted
sublicensees are required by a government agency to withhold and pay on behalf
of SENOMYX with respect to the royalties payable under this Agreement will be
deducted from and offset against such royalties prior to remittance to SENOMYX. 
PEPSICO will use commercially reasonable efforts to give or cause to be given to
SENOMYX by its Affiliates and permitted sublicensees such assistance as may
reasonably be necessary to enable SENOMYX to claim exemption from, or credit
for, the tax so deducted, and, in each case, will use commercially reasonable
efforts to promptly furnish to SENOMYX proper evidence of the taxes paid on
SENOMYX’s behalf.

 

23

--------------------------------------------------------------------------------

 

8.10        Late Payment

 

In the event that any payment, including royalty payments, due hereunder is not
made when due, the payment will accrue interest from that date due at the rate
of [***]; provided, however, that in no event will such rate exceed the maximum
legal annual interest rate.  The payment of such interest will not limit SENOMYX
from exercising any other rights it may have as a consequence of the lateness of
any payment.

 

8.11        Records of Unit Sales, Net Sales and Royalty Calculations

 

8.11.1     Records Relating to Royalties

 

PEPSICO will, and will cause its Affiliates and permitted sublicensees to, keep
complete and accurate records of sales and all other information necessary to
calculate royalties due to SENOMYX for any Product incorporating a Selected
Compound.  The records for a given year will be maintained by PEPSICO, its
Affiliates and permitted sublicensees for a period of [***] following submission
of the related Royalty Report for that year.  The records for a given year will
be in sufficient detail to allow the accrued royalties to be determined in
accordance with United States generally accepted accounting principles (which
shall mean the international financial reporting standards (“IFRS”) at such time
as IFRS becomes the generally accepted accounting standard in the United States
and the applicable laws require that a party use IFRS) and to verify the royalty
payments pursuant to Section 8.4.

 

8.11.2     Attestation of Records Relating to Royalties

 

SENOMYX, with reasonable written notice to PEPSICO, and no more than [***] per
calendar year, will have the right to cause a nationally recognized independent,
certified public accountant [***] to review such records relating to the royalty
payments at the place or places of business where such records are customarily
kept by PEPSICO, its Affiliates and sublicensees in order to provide an
attestation, based upon accounting procedures [***] (the “Attestation”), of the
accuracy of the reports of royalty payments.  Such accountant must execute a
confidentiality agreement prior to entering the applicable premises, obligating
such accountant to keep all information disclosed to it confidential and will
only be permitted to disclose to SENOMYX whether there was any discrepancy
between royalty payments made by PEPSICO (or its Affiliates or sublicensees)
under this Agreement and the actual royalty required to be so paid and, if so,
the extent of the discrepancy and any information necessary to explain the cause
of the discrepancy.  SENOMYX will bear the full cost of such Attestation unless
such Attestation discloses an underpayment of more than [***] from the amount of
the royalties due under this Agreement, in which event, PEPSICO will bear the
full cost of such Attestation.  Upon conclusion of such Attestation, any
underpayment shall be promptly paid by PEPSICO and any overpayment made by
PEPSICO will be promptly refunded to PEPSICO.

 

24

--------------------------------------------------------------------------------

 

PEPSICO will, and will cause its Affiliates and sublicensees to, cooperate with
the Attestation under this Section 8.11.2 including, without limitation,
promptly and at their own expense providing additional supporting information
and records in the event that the nationally recognized independent certified
public accountant performing such Attestation requests such information or
records. Such additional information and records shall relate to royalties
payable for Products sold by PEPSICO, its Affiliates or permitted sublicensees. 
In the case of the sublicense to Ingredient Suppliers pursuant to Section 9.6,
SENOMYX may obtain the information described herein directly from sublicensee or
request that PEPSICO promptly obtain such information from such  sublicensee.

 

SENOMYX agrees not to disclose Confidential Information concerning royalty
payments reports, and all other information learned in the course of an
Attestation, except to the extent necessary for SENOMYX to enforce its rights
under this Agreement or if disclosure is permitted under Section 13.5 or 13.7.

 

9.                            GRANTS

 

Subject to the terms and conditions of this Agreement, SENOMYX hereby grants to
PEPSICO and its Affiliates and PEPSICO hereby grants to SENOMYX the rights
expressly set forth below.

 

9.1                               Non-exclusive Grant by SENOMYX of Rights
Regarding Evaluation of Compounds and Collaboration Compounds

 

With respect to the Synthetic Enhancing Compound Program and the Natural
Enhancing Compound Program, subject to the terms and conditions of this
Agreement, SENOMYX hereby grants to PEPSICO and its Affiliates a
nontransferable, non-exclusive, non-sublicensable worldwide license during the
applicable Collaborative R & D Period under the Target IP to use Compounds and
Enhancing Compounds that SENOMYX delivers, in the Steering Committee’s
reasonable discretion and taking into consideration the applicable PEPSICO
Criteria, to PEPSICO in the course of the applicable Collaborative R&D Program. 
Such Compounds and Enhancing Compounds may only be used for the intended purpose
of evaluating the sweetness effect on enhancing a Target Sweetener in the Field.

 

With respect to the Natural Sweetener Compound Program, subject to the terms and
conditions of this Agreement, SENOMYX hereby grants to PEPSICO and its
Affiliates a nontransferable, non-exclusive, non-sublicensable worldwide license
during the Collaborative R & D Period for the Natural Sweetener Compound Program
under the Target IP to use Natural Sweetener Compounds that SENOMYX delivers, in
the Steering Committee’s reasonable discretion taking into consideration the
applicable PEPSICO Criteria, to PEPSICO in the course of the Collaborative R&D
Program.  Such Natural Sweetener Compounds may only be used for the intended
purpose of evaluating the effect as a sweetener in the Field.

 

25

--------------------------------------------------------------------------------

 

9.2                               Non-exclusive Grant by SENOMYX of Rights to
Make, Have Made, Use and Sell Selected Compounds

 

Subject to the terms and conditions of this Agreement, SENOMYX hereby grants to
PEPSICO and its Affiliates a nontransferable, non-exclusive, non-sublicensable
(except as provided in Section 9.6 below), worldwide license under the Target IP
for each Selected Compound during the applicable Commercialization Period, to
make, have made (including authorizing third parties to manufacture for them),
import, use and sell Selected Enhancing Compounds or Selected Natural Sweetener
Compounds, as the case may be, for incorporation into Products [***].  Each
Selected Enhancing Compound will only be used by PEPSICO and its Affiliates (or
permitted sublicensees) at an Enhancing Compound Concentration.  Only the
license under this Section 9.2 to make, use and sell Selected Enhancing
Compounds for incorporation into Ingredient Supply Products in the Third Party
Beverage Manufacturer Product Categories will be sublicensable to Ingredient
Supplier sublicensees in accordance with Section 9.6.1.

 

9.3                               Exclusive Grant of Rights by SENOMYX Regarding
Beverages and Beverage Bases that Incorporate Selected Compounds

 

Subject to the terms and conditions of this Agreement, SENOMYX hereby grants to
PEPSICO and its Affiliates a nontransferable, Exclusive (except to the extent
otherwise converted to non-exclusive as specifically contemplated by this
Agreement), non-sublicensable, worldwide license under the Target IP for each
Selected Compound  to make, have made (including authorizing third parties to
manufacture for them), import, use and sell Beverages and Beverage Bases that
incorporate the applicable Selected Enhancing Compound or Selected Natural
Sweetener Compound, as the case may be, [***].   This Exclusive license shall
continue during the term of the Commercialization Period for the applicable
Selected Compound.  Each Selected Enhancing Compound will only be used by
PEPSICO and its Affiliates at an Enhancing Compound Concentration.  For the
avoidance of doubt, the foregoing shall not be construed to prevent SENOMYX from
exercising its rights and performing its obligations under this Agreement.

 

9.4                               Co-Exclusive Grant of Rights by SENOMYX
Regarding Powdered Beverages incorporating Selected Compounds

 

Subject to the terms and conditions of this Agreement, SENOMYX hereby grants to
PEPSICO and its Affiliates a nontransferable, Co-Exclusive, non-sublicensable,
worldwide license under the Target IP for each Selected Compound to make, have
made (including authorizing third parties to manufacture for them), import, use
and sell dry powdered Beverages incorporating the applicable Selected Enhancing
Compound or Selected Natural Sweetener Compound, as the case may be, [***].  
This Co-Exclusive license shall continue during the term of the
Commercialization Period for the applicable Selected Compound.  Each Selected
Enhancing Compound will only be used by PEPSICO and its Affiliates at an
Enhancing Compound Concentration.  For the avoidance of doubt, the foregoing
shall not be construed to prevent SENOMYX from exercising its rights and
performing its obligations under this Agreement.

 

26

--------------------------------------------------------------------------------

 

9.5          Limitation on Licenses

 

9.5.1       Sales of Collaboration Compounds or Selected Compounds

 

Notwithstanding anything to the contrary in this Agreement, none of the rights
granted in this Agreement are intended to give PEPSICO or its Affiliates the
right to sell Compounds, Collaboration Compounds or Selected Compounds other
than as part of a Beverage or Beverage Base; however, PEPSICO may sublicense its
rights to Ingredient Suppliers to sell Ingredient Supply Products as expressly
authorized by Section 9.6.1.

 

9.5.2       Specifically Excluded Rights

 

Notwithstanding anything to the contrary in this Agreement, PEPSICO shall have
no rights under this Agreement with respect to Compounds S2383, S8475 and S6973
(including salt forms thereof).   SENOMYX will be free to license Compounds
S2383, S8475 and S6973 (including salt forms thereof) to an Affiliate(s) or a
Third Party(ies), and to enter into discovery and development collaborations
with an Affiliate(s) or a Third Party(ies), in the Field for the purpose of
developing and commercializing such Compounds, without restrictions or
limitations and without any obligation to PEPSICO under Section 7 above.

 

9.5.3       Restrictions; No Implied Licenses

 

Subject to the licenses expressly granted in this Section 9, SENOMYX will retain
all rights under the SENOMYX Technology and all other intellectual property
Controlled by SENOMYX, and PEPSICO and its Affiliates agree that, while a Valid
Claim is in effect covering the particular SENOMYX Technology, to not knowingly
practice, either directly or by indirectly supporting or funding the research
and development activities of an Affiliate, sublicensee or any other Third
Party, such SENOMYX Technology except pursuant to the licenses expressly granted
to PEPSICO and its Affiliates in this Section 9.  No right or license under any
Patent Rights or any Know-How of either party is granted or shall be granted by
implication.  All such rights or licenses are or shall be granted only as
expressly provided in the terms of this Agreement.

 

9.6          Sublicenses

 

9.6.1       Ingredient Suppliers

 

The licenses granted by SENOMYX to PEPSICO and its Affiliates under this
Section 9 are not sublicensable, except to Ingredient Suppliers as specifically
set forth in this Section 9.6.

 

PEPSICO will [***] to sublicense its rights under Section 9.2 to Ingredient
Suppliers to make, have made, use and sell Ingredient Supply Products to Third
Parties solely for incorporation into Third Party Manufacturer Beverages and
Third Party Manufacturer

 

27

--------------------------------------------------------------------------------

 

Beverage Bases in the Third Party Beverage Manufacturer Product Categories. 
PEPSICO’s right to sublicense in the Third Party Beverage Manufacturer Product
Categories as described in this Section 9.6.1, shall not limit PEPSICO’s
exclusivity rights in Sections 7.1 and 9.3 for the Exclusive Product
Categories.  If PEPSICO sublicenses to Ingredient Suppliers as described in this
Section 9.6, PEPSICO will be allowing the use of the Selected Enhancing
Compounds for incorporation into Third Party Manufacturer Beverages and Third
Party Manufacturer Beverage Bases in the Third Party Beverage Manufacturer
Product Categories. For avoidance of doubt, in accordance with the provisions of
Section 9.2, each Ingredient Supply Product shall only be used by Ingredient
Suppliers and Third Parties for their respective Intended Purpose and at an
Enhancing Compound Concentration.

 

With respect to each Selected Compound, if within [***] months following the
first Regulatory Approval authorizing the use of such Selected Compound in [***]
PEPSICO has not [***] sublicense of its rights under Section 9.2 to an
Ingredient Supplier whereby the Selected Compound is made available to Third
Parties [***] in the Third Party Beverage Manufacturer Product Categories, then
notwithstanding the provisions of Section 7.1 or 9.3, or any other provision of
this Agreement to the contrary, SENOMYX shall have the right to (i) license such
rights directly to any Third Party to make, have made, use and sell Ingredient
Supply Products in such country solely for incorporation into Third Party
Manufacturer Beverages and Third Party Manufacturer Beverage Bases in the Third
Party Beverage Manufacturer Product Categories,  and (ii) directly, or through
an Affiliate, manufacture and supply Ingredient Supply Products to any Third
Party for use in such country solely for incorporation into Third Party
Manufacturer Beverages and Third Party Manufacturer Beverage Bases in Third
Party Beverage Manufacturer Product Categories.

 

9.6.2  Obligations Related to Sublicenses to Ingredient Suppliers

 

PEPSICO will [***] to enforce the obligations imposed upon a permitted
Ingredient Supplier sublicensee under the applicable sublicense (including,
without limitation, the field of use limitations restricted to the Third Party
Beverage Manufacturer Product Categories and the Intended Purpose limitations).

 

If PEPSICO (or any of its Affiliates) [***] of any use by a permitted
sublicensee using Selected Compound(s) outside of the Third Party Beverage
Manufacturer Product Categories field of use that is sublicensable by PEPSICO
under this Agreement or other than for the applicable Intended Purpose or at the
applicable Enhancing Compound Concentration, then PEPSICO (and its Affiliates)
will promptly: (a) notify SENOMYX; (b) investigate the suspected activities and
[***] to remove any unauthorized use [***]; and (c) terminate the sublicense
agreement with any sublicensee that fails to immediately cease the unauthorized
activity.  PEPSICO will use commercially reasonable efforts to keep SENOMYX
updated regarding the nature of the unauthorized use and steps taken under
(b) and (c).

 

All sublicenses under this Section 9.6 will be subject to written sublicense
agreements.  The scope of the rights and licenses granted to each sublicensee
under such sublicense

 

28

--------------------------------------------------------------------------------

 

agreement shall be no greater than the scope of the rights and license granted
to PEPSICO under Section 9.2.  [***] each sublicense agreement will, to the
extent applicable, include the rights of and obligations due to SENOMYX and
contained in this Agreement (including, without limitation, royalty
obligations[***] assignment to PEPSICO of all rights to inventions and know-how
resulting from their work (which shall ultimately be assigned between PEPSICO
and SENOMYX in accordance with the intellectual property provisions of this
Agreement), the confidentiality and non-use restrictions in a manner consistent
with PEPSICO ‘s obligations under Section 13, record keeping and independent
certified public accountant attestation provisions substantially similar to
those set forth in Section 8.11, and the indemnification obligations consistent
with PEPSICO’s obligations under Sections 15.6.3 and 15.6.4).  Each sublicense
agreement must contain an affirmative statement by the sublicensee of its
agreement to comply with the relevant provisions of this Agreement.  Each
sublicense agreement will require the Ingredient Supplier sublicensee to enter
into written agreements with its purchasers of Ingredient Supply Products that
include the purchaser’s agreement to use Ingredient Supply Products solely
(i) in Third Party Manufacturer Beverages and Third Party Manufacturer Beverage
Bases in the Third Party Beverage Manufacturer Product Categories and (ii) for
their respective Intended Purpose and at an Enhancing Compound Concentration. 
PEPSICO will promptly notify SENOMYX of any sublicense agreements, but in any
case not later than [***].  PEPSICO  will keep SENOMYX informed of all such
sublicenses and will, upon request of SENOMYX, provide SENOMYX with a copy of
such written agreement(s), which shall be unredacted except that [***].  [***],
PEPSICO will collect and guarantee payment of the royalty payments (royalties on
Net Sales) due, directly or indirectly, to SENOMYX from Ingredient Supplier
sublicensees under Section 8.4.3 and summarize and deliver all reports due,
directly or indirectly, to SENOMYX from such sublicensees.  PEPSICO shall remain
responsible for the full and faithful performance of all its obligations under
this Agreement, irrespective of whether the same are delegated, expressly or by
implication, by PEPSICO to a sublicensee.  Such delegation shall not in any way
diminish, reduce or eliminate any of PEPSICO’s obligations under this Agreement,
and PEPSICO shall remain primarily liable for such obligations.

 

For the avoidance of doubt, all Co-Exclusive and Exclusive licenses granted to
PEPSICO under this Agreement are not sublicensable. In addition, if any
Exclusive or Co-Exclusive license is converted to a non-exclusive license under
Sections 8.5, 11.1 or otherwise, the non-exclusive (converted) license will
continue to be non-sublicensable.

 

9.7  Obligations Relating to Affiliates

 

PEPSICO assumes the responsibility for performance due by its Affiliates of all
obligations imposed upon PEPSICO under this Agreement.  PEPSICO is also
responsible for and guarantees payment to SENOMYX of royalties due on sales of
Beverages and Beverage Bases by an Affiliate.   In the event that an Affiliate
of PEPSICO ceases to meet the definition of “Affiliate” at any time, the
licenses granted to such Affiliate under this Agreement will automatically
terminate.

 

29

--------------------------------------------------------------------------------

 

9.8                               Non-Exclusive Grant of Rights from PEPSICO to
SENOMYX for Research Purposes

 

Subject to the terms and conditions of this Agreement, PEPSICO and its
Affiliates hereby grants to SENOMYX a royalty free, non-exclusive, worldwide
license during the Collaboration R & D Period to use the PEPSICO Technology for
research purposes related to any given Collaborative R & D Program under this
Agreement, with the right to grant sublicenses for such research purposes only;
provided, however, that any such sublicense shall be subject to the prior
written approval of PEPSICO, which shall not be unreasonably withheld.

 

All sublicenses under this Section 9.8 will be subject to written sublicense
agreements.  The scope of the rights and licenses granted to each sublicensee
under such sublicense agreement shall be no greater than the scope of the rights
and license granted to SENOMYX under this Agreement.  The sublicense agreements
will, to the extent applicable, include all of the rights of and obligations due
to PEPSICO and contained in this Agreement.  Each sublicense agreement must
contain an affirmative statement by the sublicensee of its agreement to comply
with the relevant provisions of this Agreement.  SENOMYX shall remain
responsible for the full and faithful performance of all of its obligations
under this Agreement, and shall assume liability for any breaches by any SENOMYX
sublicensee.

 

10.                     OWNERSHIP OF INTELLECTUAL PROPERTY

 

10.1        Transfer of Rights

 

Each of the parties retains all rights not expressly licensed or assigned in
this Agreement.  Except as otherwise expressly provided in this Agreement,
nothing in this Agreement is intended to convey or transfer ownership or the
grant of any license or sublicense by one party to the other party of any rights
in any Confidential Information, Patent Rights or Know-How Controlled by a
party.

 

10.2        SENOMYX Inventions

 

SENOMYX will own all Inventions and other Know-How made solely by its employees
and agents and all Patent Rights claiming such Inventions and Know-How;
provided, however, SENOMYX hereby irrevocably assigns to PEPSICO all interest in
and to any such Inventions and Know-How that consist solely of [***], and all
Patent Rights claiming such Inventions and other Know-How, and SENOMYX agrees to
give PEPSICO prompt notice of the making, conceiving or reducing to practice of
any such Inventions. Any such Inventions and Know-How to be assigned to PEPSICO
shall be deemed PEPSICO Confidential Information.  In the event that SENOMYX is
legally unable to assign such rights to PEPSICO, then SENOMYX agrees either to
waive the enforcement of such rights against PEPSICO and any sublicensees and
assignees, or to grant PEPSICO an exclusive, irrevocable, perpetual, worldwide,
fully-paid license, with right to sublicense through multiple tiers of
sublicense, to such rights.

 

30

--------------------------------------------------------------------------------

 

10.3        PEPSICO Inventions

 

PEPSICO will own all Inventions and other Know-How made solely by its employees
and agents, including those related to [***], to the extent that such Inventions
and other Know-How do not [***], and all Patent Rights claiming such Inventions
and Know-How, and SENOMYX will have no rights to such Inventions, Know-How and
[***] except as set forth in Section 9.8.  Nothing herein shall grant to SENOMYX
any rights to [***] that incorporate Selected Compounds.

 

PEPSICO and its Affiliates hereby irrevocably assign to SENOMYX all interest in
and to any such Inventions and other Know-How that consist solely of [***] and
all Patent Rights claiming such Inventions and Know-How, and PEPSICO and its
Affiliates agree to give SENOMYX prompt notice of the making, conceiving or
reducing to practice of any such Inventions.  Any such Inventions and Know-How
to be assigned to SENOMYX shall be deemed SENOMYX Confidential Information. In
the event that PEPSICO or its Affiliates are legally unable to assign such
rights to SENOMYX, then PEPSICO and its Affiliates agree either to waive the
enforcement of such rights against SENOMYX and any sublicensees and assignees,
or to grant SENOMYX an exclusive, irrevocable, perpetual, worldwide, fully-paid
license, with right to sublicense through multiple tiers of sublicense, to such
rights.

 

10.4        Joint Inventions

 

All Inventions conceived jointly by one or more employees or agents of SENOMYX
or of any of its Affiliates and one or more employees or agents of PEPSICO or of
any of its Affiliates (the “Joint Inventions”) and all Joint Patent Rights will
be owned jointly by PEPSICO and SENOMYX, except as provided below.

 

PEPSICO and its Affiliates hereby irrevocably assign to SENOMYX all interest in
and to any Joint Inventions that consist solely of [***] and all Joint Patent
Rights claiming such Joint Inventions. In the event that PEPSICO or its
Affiliate is legally unable to assign such rights to SENOMYX, then PEPSICO and
its Affiliates agree either to waive the enforcement of such rights against
SENOMYX and any sublicensees and assignees, or to grant SENOMYX an exclusive,
irrevocable, perpetual, worldwide, fully-paid license, with right to sublicense
through multiple tiers of sublicense, to such rights.  For the avoidance of
doubt, Inventions assigned to SENOMYX under this Section 10.4, will no longer be
considered Joint Inventions/Joint Patent Rights and will thereafter be
considered SENOMYX Technology and will be deemed SENOMYX Confidential
Information.

 

SENOMYX hereby irrevocably assigns to PEPSICO all interest in and to any Joint
Inventions that consist solely of [***] to the extent that such [***] and all
Joint Patent Rights claiming such Joint Inventions. In the event that SENOMYX is
legally unable to assign such rights to PEPSICO, then SENOMYX agrees either to
waive the enforcement of such rights against PEPSICO and any sublicensees and
assignees, or to grant PEPSICO an exclusive, irrevocable, perpetual, worldwide,
fully-paid license, with right to sublicense through multiple tiers of
sublicense, to such rights. For the avoidance of

 

31

--------------------------------------------------------------------------------

 

doubt, Inventions assigned to PEPSICO under this Section 10.4, will no longer be
considered Joint Inventions/Joint Patent Rights and will thereafter be
considered PEPSICO Technology and will be deemed PEPSICO Confidential
Information.

 

10.5        Other Inventions

 

Any Inventions not included in Sections 10.2, 10.3, or 10.4 will be owned by
their inventors.

 

10.6        Markings, Inventorship and Assignment of Inventions

 

PEPSICO agrees to mark and to cause any Affiliate, Bottler or permitted
sublicensee to mark any Products (or their containers or labels) made, sold or
otherwise disposed of by it or them with any notice of Patent Rights, which
shall be made in accordance with applicable law, if mutually desirable by the
parties or necessary under applicable law to enable the SENOMYX Patent Rights or
Joint Patent Rights, as applicable, to be enforced to their full extent in any
country where Beverages or Beverage Bases incorporating Selected Compounds are
made, used, or sold.

 

United States patent law will determine inventorship of patentable inventions. 
SENOMYX and PEPSICO agree to execute all documentation necessary to perfect all
assignments of Inventions, Know-How and Patent Rights contemplated in this
Agreement.

 

11.                     PATENT PROSECUTION AND MAINTENANCE

 

11.1        Prosecution of Patent Rights Solely Owned by a Party

 

Subject to Section 12.3 below, each party will solely control the right to file,
prosecute (including an opposition or interference) and maintain Patent Rights
solely owned by that party or assigned to that party.  Each party will bear the
cost of filing, prosecuting and maintaining the patents and patent applications
associated with inventions solely owned by that party or assigned to that
party.  With respect to Target IP for Selected Compound(s), PEPSICO will
reimburse SENOMYX for [***].   By way of example, patent applications directed
to composition of matter of a Selected Compound, use of a Selected Compound in
comestible compositions, and methods of making a Selected Compound would be
subject to a reimbursement obligation.

 

With respect to each Selected Compound, for so long as PEPSICO maintains its
exclusive license under Section 9.3 for such Selected Compound, in the case
where SENOMYX [***] directed to Target IP for such Selected Compound [***], then
at least [***].  SENOMYX agrees to [***] with respect to such patent
applications that are [***]. SENOMYX will [***] of all proceedings related to
the [***] for Selected Compounds [***] SENOMYX hereunder, including, without
limitation, by [***]. SENOMYX will provide to PEPSICO invoices (with supporting
documentation) to establish the reasonable out-of-pocket cost incurred for
filing, prosecuting and maintaining each patent or patent application in each
country.  Such invoices may be [***]. With respect to patent applications after
PEPSICO has selected a Selected Compound, the parties will discuss

 

32

--------------------------------------------------------------------------------

 

and agree at least [***] before the due date of international filings or at
least [***] before the due date of [***], in which countries/regions to file
patent applications claiming Selected Compounds.  Notwithstanding the foregoing,
if PEPSICO decides it does not wish to have a patent application claiming a
Selected Compound(s) either (i) filed or (ii) prosecuted in a particular country
or PEPSICO decides that it does not wish to have maintained a patent claiming a
Selected Compound(s), in a particular country, SENOMYX may still (a) file or
(b) prosecute such patent application, or may maintain such patent in such
country; provided, however, that if SENOMYX actually files or prosecutes such
patent application or maintains such patent in such country, [***], and any
rights granted to PEPSICO, its Affiliates and sublicensees under Sections 7 and
9 with respect to any such patents in such country will terminate or become
non-exclusive at the sole discretion of SENOMYX.  In such event, SENOMYX may
provide research and development services and/or grant rights to SENOMYX
Technology to Third Parties for the applicable Selected Compounds in such
country in any field of use, and nothing in this Agreement will prevent or limit
the foregoing.

 

PEPSICO shall hold all such information disclosed to it under this Section 11,
subject to the exceptions in Section 13.4, as Confidential Information of
SENOMYX.

 

11.2        Prosecution of Joint Patent Rights

 

SENOMYX will have the first right to file, prosecute (including an opposition or
interference) and maintain Joint Patent Rights.  PEPSICO will use commercially
reasonable efforts to cooperate in, the filing, prosecution and maintenance of
Joint Patent Rights and will share equally in reasonable expenses incurred with
respect thereto.

 

12.                     INTELLECTUAL PROPERTY ENFORCEMENT AND DEFENSE OF CLAIMS

 

12.1        Defense of Infringement Claims for SENOMYX Technology

 

PEPSICO and its Affiliates and permitted sublicensees will cooperate with
SENOMYX, at SENOMYX’s expense, in the defense of any suit, action or proceeding
against SENOMYX or SENOMYX’s Affiliates alleging the infringement of the
intellectual property rights of a Third Party due to SENOMYX’s or PEPSICO’s or
any of their Affiliates’ or sublicensees’ use of any SENOMYX Technology or any
technology claimed under Joint Patent Rights under this Agreement.

 

The parties must notify each other promptly in writing of the commencement of
any such suit, action, proceeding or claim of infringement.

 

At the expense of SENOMYX, PEPSICO and its Affiliates and permitted sublicensees
will give to SENOMYX full and sole authority, information and assistance
necessary to defend, hire counsel, make decisions or settle on any terms, any
such suit, action or proceeding against SENOMYX or SENOMYX’s Affiliates and
PEPSICO and its Affiliates and permitted sublicensees will in good faith execute
all documents, provide pertinent records, and take all other actions, including
requiring persons within its control to give testimony, which may be reasonably
required in connection with the defense or settlement of such litigation. 
SENOMYX will bear the expense of the defense or

 

33

--------------------------------------------------------------------------------

 

settlement of any such suit.  SENOMYX will have full and sole authority to
settle any such suit except that SENOMYX will not settle any such suit in a
manner that is reasonably likely to have a material adverse impact to PEPSICO
without the prior written consent of PEPSICO, which shall not be unreasonably
withheld.

 

12.2        Defense of Infringement Claims for PEPSICO Technology

 

SENOMYX will cooperate with PEPSICO, at PEPSICO’s expense, in the defense of any
suit, action or proceeding against PEPSICO or PEPSICO’s Affiliates alleging the
infringement of the intellectual property rights of a Third Party due to
PEPSICO’s or SENOMYX’s or any of their Affiliates’ use of any PEPSICO Technology
or any technology claimed under Joint Patent Rights under this Agreement.

 

The parties must notify each other promptly in writing of the commencement of
any such suit, action, proceeding or claim of infringement.

 

At the expense of PEPSICO, SENOMYX will give to PEPSICO full and sole authority,
information and assistance necessary to defend, hire counsel, make decisions or
settle on any terms, any such suit, action or proceeding against PEPSICO or
PEPSICO’s Affiliates and SENOMYX will in good faith execute all documents,
provide pertinent records, and take all other actions, including requiring
persons within its control to give testimony, which may be reasonably required
in connection with the defense or settlement of such litigation.  PEPSICO will
bear the expense of the defense or settlement of any such suit.  PEPSICO will
have full and sole authority to settle any such suit except that PEPSICO will
not settle any such suit in a manner that is reasonably likely to have a
material adverse impact to SENOMYX without the prior written consent of SENOMYX,
which shall not be unreasonably withheld.

 

12.3        Intellectual Property Enforcement

 

With respect to Target IP for use of a Selected Compound in the Exclusive
Product Categories, SENOMYX shall have the first right, but not the obligation
to commence a particular infringement action against a Third Party or take other
steps to resolve such alleged infringement; provided that, if SENOMYX does not
bring such action or take such other steps within [***] of receiving notice,
PEPSICO, after notifying SENOMYX in writing, will be entitled to bring such
infringement action or any other appropriate action or claim at its own expense;
provided, however, that if SENOMYX has commenced negotiations with an alleged
infringer for discontinuance of such infringement within such [***] period,
SENOMYX shall have an additional [***] to conclude its negotiations before
PEPSICO may bring suit for such infringement or take other similar action.  In
the event PEPSICO brings such suit for infringement or takes other similar
action, SENOMYX shall have the right to join in such infringement suit or
similar action at its own expense (and SENOMYX will join if required by the laws
of the jurisdiction).  In any such action, both SENOMYX and PEPSICO may employ
counsel of its own choice at its own expense.  The party conducting such action
will consider in good faith the other party’s comments on the conduct of such
action and will have full and sole authority, information and assistance
necessary to defend, hire counsel, make

 

34

--------------------------------------------------------------------------------

 

decisions or settle on any terms, any such suit, action or proceeding and the
other party will in good faith execute all documents, provide pertinent records,
and take all other actions, including requiring persons within its control to
give testimony, which may be reasonably required in connection with the defense
or settlement of such litigation.  In the event SENOMYX brings such suit,
SENOMYX will be entitled to retain the entire recovery, if any.  In the event
PEPSICO brings such suit, any recovery will be applied first to [***] expenses
and [***].  The party conducting the action will have the right to deduct all
court costs it pays for such enforcement from any recovery from any settlement
or judgment that is attributable to the losses of the other party under such
action.

 

13.                     TREATMENT OF CONFIDENTIAL INFORMATION: REPORTING
REQUIREMENTS, PUBLICITY, LAW AND REGULATIONS

 

13.1        Confidentiality

 

Subject to the terms and conditions of this Agreement, SENOMYX and PEPSICO each
agree that, during the Term and for a period of [***] thereafter, it will keep
confidential, and will cause its Affiliates to keep confidential, all
Confidential Information that is disclosed to it or to any of its Affiliates by
the other party.  Neither SENOMYX nor PEPSICO nor any of their respective
Affiliates will use the other party’s Confidential Information except as
expressly permitted in this Agreement.

 

13.2        Disclosure to Related Parties

 

SENOMYX and PEPSICO each agree that any disclosure of the other party’s
Confidential Information to any officer, employee, contractor, consultant,
sublicensee or agent of the other party or of their respective Affiliates:

 

i)                                         will be made only if and to the
extent necessary to carry out its responsibilities under this Agreement and to
exercise the rights granted hereunder;

 

ii)                                      will be limited to the extent
consistent with such responsibilities and rights; and

 

iii)                                   will be provided only to such persons or
entities who are under an obligation of confidentiality no less stringent than
as set forth in this Agreement.

 

Each party will use reasonable efforts to take such action, and to cause its
Affiliates to take such action, to preserve the confidentiality of each other’s
Confidential Information, which will be the same efforts as it would customarily
take to preserve the confidentiality of its own similar Confidential
Information.

 

13.3        Return of Confidential Material

 

Upon termination of this Agreement, each party, upon the other party’s request,
will return or destroy all Confidential Information received from the other
party, including all

 

35

--------------------------------------------------------------------------------

 

copies and extracts of documents, within 30 days of the request of the other
party; provided, however, one copy of the Confidential Information may be
retained in a secure location with limited access for legal purposes only.

 

13.4        Exceptions to Confidential Information

 

Confidential Information will not include any information, which the receiving
party can prove by competent written evidence:

 

i)                                         is now, or hereafter becomes, through
no act or failure to act on the part of the receiving party, generally known or
available to the public;

 

ii)                                      is known by the receiving party at the
time of receiving such information, as evidenced by its records;

 

iii)                                   is hereafter furnished to the receiving
party without restriction as to disclosure or use by a Third Party lawfully
entitled to furnish such information;

 

iv)                                  is independently developed by the
employees, agents or contractors of the receiving party without the aid,
application or use of the disclosing party’s Confidential Information; or

 

v)                                     is the subject of a written permission to
disclose provided by the disclosing party.

 

A party may also disclose Confidential Information of the other party where
required to do so by law or legal process; provided, however, that, in such
event, the party required to disclose such information must give advance written
notice of such disclosure to the other party and must cooperate with the other
party’s efforts to seek, at the request and expense of the other party, all
confidential treatment and protection for such disclosure as is permitted by
applicable law.

 

13.5        Confidential Material Terms

 

The parties agree that the material terms, including financial terms, of this
Agreement will be considered Confidential Information of both parties. 
Notwithstanding the foregoing, either party may disclose such material terms and
the contents of any Royalty Report (and in the case of [***] in legal
proceedings or as are required to be disclosed in its financial statements, by
law, or under an obligation of confidentiality to bona fide potential
sublicensees (in the case of disclosure to a sublicensee, only those portions of
the Agreement that are applicable to the potential sublicense may be
disclosed).  Either party will have the further right to disclose such material
terms of this Agreement and the contents of any Royalty Report under an
obligation of confidentiality to any potential acquirer, merger partner, bank,
venture capital firm, or other investor or financial institution for the purpose
of evaluating such investment, transaction or to obtain financing.

 

36

--------------------------------------------------------------------------------

 

13.6        Confidential Research Information

 

The parties agree that all results and data generated from the research under
each Collaborative R&D Program will be owned exclusively by SENOMYX and, subject
to the exceptions in Section 13.4, considered Confidential Information of
SENOMYX, subject to the confidentiality requirements of Section 13. 
Accordingly, for the avoidance of doubt, the parties further agree that Senomyx
shall have the authority to include any results and data that it generates in
the course of each Collaborative R&D Program in any patent application , or in
connection with the prosecution, maintenance or enforcement of any patent or
patent application, or in connection with regulatory filings or other
submissions to regulatory authorities without the prior consent or approval of
PEPSICO. PEPSICO will not provide to a Third Party any Materials provided by
SENOMYX to PEPSICO.

 

13.7        Permitted Use and Disclosures

 

Each party may use or disclose Confidential Information disclosed to it by the
other party

 

i)                                         to the extent such information is
included in the PEPSICO Technology, SENOMYX Technology or Joint Patent Rights,
and

 

ii)                                      to the extent such use or disclosure is
reasonably necessary and permitted in the exercise of the rights granted
hereunder in:

 

a)             filing or prosecuting patent applications;

 

b)             prosecuting or defending litigation;

 

c)              complying with applicable governmental regulations, or court
orders or otherwise submitting information to tax or other governmental
authorities;

 

d)             conducting clinical trials or other safety studies for Selected
Compounds or other regulatory approval applications for Selected Compounds;

 

e)              submitting information for food additive approval applications
or other regulatory approval applications for Selected Compounds; or

 

f)               making a permitted sublicense or otherwise exercising rights
expressly granted to the other party pursuant to the terms of this Agreement.

 

If a party is required to make any such disclosure of the other party’s
Confidential Information as described in this Section 13.7, it will give
reasonable advance notice of such disclosure to the other party where reasonably
possible and will use its reasonable efforts to secure confidential treatment of
such Confidential Information in consultation with the other party prior to such
disclosure (whether through protective orders or otherwise) and disclose only
the minimum necessary to comply with such requirements.

 

37

--------------------------------------------------------------------------------

 

13.8        Use of Data for Promotional Purposes

 

Either party may (i) make public statements regarding Collaboration Compounds,
Selected Compounds, or Beverages or Beverage Bases incorporating Selected
Compounds by announcing the achievement of milestones therefor, following
consultation with the other party and with the written consent of the other
party to the form and content of the public statement which shall not be
unreasonably withheld, conditioned or delayed, and (ii) without the prior
consent of the other party, make public statements regarding the overall success
rate(s) (excluding any competitively sensitive information of PEPSICO) achieved
by and/or for its customers with the use SENOMYX Technology; provided, however,
that it may not disclose any chemical structures, screens or the other party’s
identity.

 

13.9        Publication of Results

 

Subject to the express provisions of this Agreement, results and data obtained
by either party in the course of the collaboration may be submitted for
publication by SENOMYX to the extent such publication [***], in each case in
accordance with SENOMYX’s customary practices.  SENOMYX will send a copy of the
proposed publication to PEPSICO for its approval which shall not be unreasonably
withheld, conditioned or delayed.

 

13.10      Publicity

 

Except as required by law and as provided in this Agreement, neither party may
make any public announcement or otherwise disclose the terms of this Agreement
without the prior written consent of the other party, which consent will not be
unreasonably withheld. Notwithstanding the foregoing, not more than two
(2) business days following the Effective Date, the parties will issue a joint
press release in a form mutually acceptable to both parties and not more than
four (4) business days following the Effective Date SENOMYX shall file a current
report on Form 8-K that will publicly disclose the material terms of this
Agreement as required under applicable securities laws. Thereafter, PEPSICO and
SENOMYX may each disclose to Third Parties the information contained in such
press release or current report without the need for further approval by the
other party

 

14.                     TERM, EARLY CONCLUSION, AND TERMINATION

 

14.1        Term

 

The term of this Agreement will begin on the Effective Date and will continue
through the end of the Commercialization Period, unless terminated earlier in
accordance with the provisions of Section 14.2, 14.3 or 14.4 hereof (the
“Term”).

 

14.2        Termination for Breach

 

A party has the right to terminate this Agreement at any time for a material
breach of this Agreement by the other party, provided that the breaching party
has not cured such

 

38

--------------------------------------------------------------------------------

 

breach within sixty (60) days after written notice thereof by the non-breaching
party, except that in the case of failure to timely pay amounts owed such cure
period shall be fifteen (15) days.  In the event of a termination by SENOMYX due
to PEPSICO’s material breach, PEPSICO shall continue to be responsible for
reimbursement of its portion off any non-cancellable expenditures that SENOMYX
has incurred prior to receipt of such notice of termination and which PEPSICO
agreed to pay under this Agreement.  The non-breaching party, upon termination
of this Agreement, may seek any damages and remedies available to it at law or
in equity.

 

14.3        Termination By Mutual Agreement

 

The parties may terminate this Agreement at any time, in whole or in part, by
mutual written agreement executed by both parties.

 

14.4        Termination By PEPSICO

 

PEPSICO may terminate this Agreement in its entirety upon written notice to
SENOMYX not later than sixty days following (i) the merger or consolidation of
SENOMYX with a Direct PEPSICO Competitor or (ii) the acquisition by a Direct
PEPSICO Competitor of ownership or control of more than 30% of the outstanding
securities having voting rights for the election of directors of SENOMYX.  For
purposes of this Section 14.4, “control” shall mean direct or indirect
beneficial ownership.

 

Following conclusion of the Collaborative R & D Period for all three
Collaborative R & D Programs, PEPSICO may terminate this Agreement in its
entirety without cause upon ninety (90) days prior written notice to SENOMYX.

 

In the event of termination of this Agreement by PEPSICO under this
Section 14.4, PEPSICO shall continue to be responsible for reimbursement of its
portion of any non-cancellable expenditures that SENOMYX has incurred prior to
receipt of such notice of termination and which PEPSICO agreed to pay under this
Agreement.

 

14.5        Effect of Termination

 

Upon termination of this Agreement, all rights and obligations of the parties
under this Agreement will terminate, except as expressly provided in this
Section 14.5 and Section 14.6, and, without limiting the generality of the
foregoing, PEPSICO and its Affiliates will have no right to practice the Target
IP or use the Target IP, and SENOMYX shall have full and unfettered rights to
exploit the Target IP, and all rights, title and interest in and to the Target
IP shall remain the sole property of SENOMYX.

 

Expiration or termination of this Agreement will not relieve the parties of any
obligation accruing before such expiration or termination (including, without
limitation, payment of accrued royalties). PEPSICO will be obligated to pay
SENOMYX a pro rata portion of all MARs due as of the effective date of
termination (as described in further detail below).

 

39

--------------------------------------------------------------------------------

 

In the event of the expiration or termination of this Agreement, the MARs for
the final Commercialization Year for each Selected Compound shall be calculated
by [***] (i) [***] under Section 8.4.1 and Section 8.4.2 in such final
Commercialization Year for each Minimum Annual Royalty Category from (ii) the
[***] (a) [***] by (b) the [***] in such Commercialization Year.

 

Upon termination of this Agreement for any reason, SENOMYX, at its sole
discretion, shall determine whether PEPSICO shall cancel or assign to SENOMYX
any and all sublicense agreements executed by Ingredient Suppliers. 
Notwithstanding the foregoing, in the event that PEPSICO has sublicensed the
rights applicable to a given Selected Enhancing Compound [***] under
Section 9.6.1 and this Agreement terminates for any reason (other than [***],
then SENOMYX shall promptly notify [***]. Not later than [***] following [***]
receipt of such notice, [***] that were properly sublicensed (in accordance with
Section 9.6 of this Agreement) by PEPSICO [***] prior to the termination of this
Agreement [***] such licensed rights and of [***] to (i) [***] applicable to
PEPSICO relating to the sublicensed Selected Enhancing Compounds under this
Agreement (including the [***] set forth in this Agreement) and (ii) [***] with
PEPSICO, which in no case [***] of this Agreement. All [***] under this
Agreement shall be deemed to [***] notwithstanding the termination of this
Agreement and [***]. In that circumstance, notwithstanding the [***] properly
made by PEPSICO under Section 9.6.1 and [***], SENOMYX shall not be deemed to
[***].

 

14.6        Survival

 

The obligations and rights of the parties under Sections 5.1.1 (third paragraph
only), 5.1.2 (third paragraph only), 5.3 (second paragraph only), 5.4 (other
than first paragraph), 8.10, 8.11, 10, 11, 12, 13, 14.5, 14.6, 15, 16 and
Appendix A, will survive termination or expiration of this Agreement.

 

15.                     Warranties and Indemnification

 

15.1        Mutual Representations and Warranties

 

The parties make the following representations and warranties to each other:

 

15.2        Corporate Power

 

Each party hereby represents and warrants that as of the Effective Date, such
party:

 

(i)                                     is duly organized, validly existing
under the laws of the state of its incorporation, and in good standing;

 

(ii)                                  has all requisite corporate power and
authority and the legal right to own and operate its property and assets, to
lease the property and assets it operates under lease, and to carry on its
business as it is now being conducted; and

 

40

--------------------------------------------------------------------------------

 

(iii)                               is in compliance with all requirements of
applicable law, except to the extent that any noncompliance would not have a
material adverse effect on its ability to perform its obligations under this
Agreement.

 

15.3        Due Authorization

 

Each party hereby represents and warrants that as of the Effective Date, such
party:

 

(i)                                     has the requisite corporate power and
authority and the legal right to execute and deliver this Agreement and to
perform its obligations hereunder;

 

(ii)                                  has taken all necessary action on its part
to authorize the execution and delivery of this Agreement, the performance of
its obligations hereunder and the grant of rights extended by it hereunder, and
no action or corporate procedure is necessary to authorize this Agreement, the
performance of its obligations hereunder or the grant of rights extended
hereunder.

 

15.4        Binding Agreement

 

Each party hereby represents and warrants to the other that as of the Effective
Date:

 

(i)                                     this Agreement has been duly executed
and delivered on its behalf and is a legal and valid obligation binding upon it
and is enforceable in accordance with its terms;

 

(ii)                                  the execution, delivery and performance of
this Agreement by such party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which it may be
bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having authority over it; and

 

(iii)                               all necessary consents, approvals and
authorizations of all governmental authorities and other persons required to be
obtained by it in connection with the Agreement have been obtained.

 

15.5        Warranties Regarding SENOMYX Technology

 

SENOMYX warrants to PEPSICO as of the Effective Date the following:

 

15.5.1              SENOMYX Express Warranties

 

As of the Effective Date:

 

(i)                                     To the best of SENOMYX’s knowledge,
SENOMYX has the lawful right to license the Target IP in existence on the
Effective Date to PEPSICO in accordance with the terms of this Agreement;

 

41

--------------------------------------------------------------------------------

 

(ii)                                  SENOMYX is not precluded under any license
or other agreement with a Third Party from entering into this Agreement and
granting the rights to PEPSICO provided hereunder;

 

(iii)                               To the best of SENOMYX’s knowledge, the
activities to be performed by SENOMYX under this Agreement will not infringe any
patents, copyrights, trademarks or other intellectual property rights of a Third
Party; and

 

(iv)                              SENOMYX has not been served with a Third Party
suit, nor otherwise received written notice, or verbal notice to any current
SENOMYX officer, of any allegation of infringement, relating to the SENOMYX
Technology.

 

15.5.2              SENOMYX Disclaimer

 

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES SET FORTH IN SECTION 15.5.1, SENOMYX (INCLUDING ITS OFFICERS,
EMPLOYEES AND AGENTS) EXPRESSLY DISCLAIMS ANY FURTHER REPRESENTATIONS AND
WARRANTIES, WHETHER EXPRESS OR IMPLIED, RELATING TO SENOMYX TECHNOLOGY;
INCLUDING ANY EXPRESS OR IMPLIED WARRANTY

 

(i)                                     OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF SENOMYX TECHNOLOGY OR SENOMYX PATENT RIGHTS; AND

 

(ii)                                  THAT THE PRACTICE OF SENOMYX TECHNOLOGY
WILL NOT INFRINGE A PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHT OF A THIRD
PARTY; AND

 

(iii)                               REGARDING THE PATENTABILITY OF ANY SENOMYX
TECHNOLOGY, INCLUDING SENOMYX TECHNOLOGY CLAIMED IN PATENT APPLICATIONS AS
PART OF SENOMYX PATENT RIGHTS.

 

15.5.3              SENOMYX Indemnification.

 

SENOMYX hereby agrees to defend and indemnify PEPSICO, and its respective
officers, directors, employees, agents and Affiliates (collectively, the
“PEPSICO Indemnitees”) from and against all damages or other amounts payable by
PEPSICO Indemnitees to a Third Party, including reasonable attorneys’ fees and
costs of litigation, resulting from a claim, demand, action, suit or other
proceeding brought or threatened by a Third Party against a PEPSICO Indemnitee
based on SENOMYX’s material breach of the terms of this Agreement (including any
material breach of any warranties) or SENOMYX’s negligence or willful misconduct
including but not limited to, product liability claims arising out of any tests
conducted solely by SENOMYX on any Compounds and any environmental claims
against PEPSICO Indeminitees relating to

 

42

--------------------------------------------------------------------------------

 

SENOMYX’s performance or failure to perform under this Agreement.  IN NO EVENT
WILL SENOMYX BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED BY
PEPSICO RESULTING FROM THIS AGREEMENT.

 

15.6        Warranties Relating to PEPSICO Technology

 

PEPSICO represents and warrants to SENOMYX as of the Effective Date the
following:

 

15.6.1              PEPSICO Express Warranties

 

As of the Effective Date:

 

(i)                                     To the best of PEPSICO’s knowledge,
PEPSICO has the lawful right to license (or sublicense, as the case may be) the
PEPSICO Technology to SENOMYX in accordance with the terms of this Agreement;
and

 

(ii)                                  PEPSICO is not precluded under any license
or other agreement with a Third Party from entering into this Agreement and
granting the rights to SENOMYX provided hereunder.

 

15.6.2              PEPSICO Disclaimer

 

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, INCLUDING WITHOUT LIMITATION
THE WARRANTIES SET FORTH IN SECTION 15.6.1, PEPSICO (INCLUDING ITS OFFICERS,
EMPLOYEES AND AGENTS) EXPRESSLY DISCLAIMS ANY FURTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, RELATING TO PEPSICO
TECHNOLOGY, INCLUDING ANY EXPRESS OR IMPLIED WARRANTY

 

(i)                                     OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF PEPSICO TECHNOLOGY OR PEPSICO PATENT RIGHTS; AND

 

(ii)                                  THAT THE PRACTICE OF PEPSICO TECHNOLOGY
WILL NOT INFRINGE A PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHT OF A THIRD
PARTY; AND

 

(iii)                               REGARDING THE PATENTABILITY OF ANY PEPSICO
TECHNOLOGY, INCLUDING PEPSICO TECHNOLOGY CLAIMED IN PATENT APPLICATIONS AS
PART OF PEPSICO PATENT RIGHTS.

 

15.6.3              PEPSICO Indemnification

 

PEPSICO hereby agrees to defend and indemnify SENOMYX, its Affiliates and its
and their respective officers, directors, employees and agents (collectively,
the “SENOMYX Indemnitees”) from and against all damages or other amounts payable
by SENOMYX

 

43

--------------------------------------------------------------------------------

 

Indemnitees to a Third Party, including reasonable attorneys’ fees and costs of
litigation, resulting from a claim, demand, action, suit or other proceeding
brought or threatened by a Third Party against a SENOMYX Indemnitee based on:

 

(i)                                     material breach by PEPSICO of the terms
of this Agreement (including any material breach of any warranties) or
negligence or willful misconduct of PEPSICO or its Affiliates including but not
limited to, product liability claims arising out of any tests conducted solely
by PEPSICO or its Affiliates on any Compounds and any environmental claims
against SENOMYX Indeminitees relating to PEPSICO’s (or any of its Affiliates)
performance or failure to perform under this Agreement;

 

(ii)                                  any development, testing, manufacture,
use, handling, storage, sale, or other disposition of a Selected Compound or
Beverage or Beverage Base incorporating a Selected Compound or other Product by
or through PEPSICO or its Affiliates or Bottlers or its permitted sublicensees;

 

(iii)                               a product liability claim on any Product;
and

 

(iv)                              the practice by PEPSICO, its Affiliates or its
permitted sublicensees of any license granted hereunder.

 

IN NO EVENT WILL PEPSICO BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
SUFFERED BY SENOMYX RESULTING FROM THE EXERCISE OF ANY RIGHTS GRANTED IN
ACCORDANCE WITH THIS AGREEMENT.

 

15.6.4              PEPSICO Indemnification Of Certain SENOMYX Licensors

 

PEPSICO hereby agrees to indemnify, defend and hold [***] and its respective
officers, sponsors, directors, employees, and agents harmless from and against
all damages or other amounts payable to a Third Party, including reasonable
attorneys’ fees and costs, of any (i) [***] arising out of the development,
testing, manufacture, use, handling, storage, sale or other disposition by
PEPSICO or its Affiliates of a Selected Compound, Beverages or Beverage Bases
incorporating a Selected Compound and (ii) resulting or arising from the
exercise of rights by PEPSICO and its Affiliates under the licenses granted
under Section 9.

 

16.                     MISCELLANEOUS

 

16.1        Force Majeure

 

Neither party will lose any rights hereunder or be liable to the other party for
damages or losses on account of failure of performance by the defaulting party
(other than a payment default) if the failure is occasioned by war, fire,
explosion, flood, (e.g. El Niño), earthquake, strike, lockout, embargo, act of
God, or any other similar cause beyond the control of the defaulting party;
provided, however, that the party claiming force majeure has exerted all
reasonable efforts to avoid or remedy such force majeure and thereafter

 

44

--------------------------------------------------------------------------------

 

takes all reasonable steps to mitigate any such delay in performance hereunder
and any damages that may be incurred by the other party thereby.

 

16.2        Governing Law and Jurisdiction

 

This Agreement will be governed by the laws of the State of Delaware, as such
laws are applied to contracts entered into and to be performed entirely within
such state.

 

16.3        Binding Effect

 

This Agreement will be binding upon and inure to the benefit of the successors
and permitted assigns of the parties.

 

16.4        Dispute Resolution

 

The parties recognize that disputes as to certain matters may, from time to
time, arise during the Term, which relate to either party’s rights and/or
obligations hereunder.  It is the objective of the parties to establish
procedures to facilitate the resolution of disputes arising under this Agreement
in an expedient manner by mutual cooperation and without resort to arbitration. 
The parties agree that prior to any arbitration concerning this Agreement,
SENOMYX’s [***] and PEPSICO’s [***], or another corporate officer of PEPSICO
with the title of Executive Vice President or higher, will meet in person, or by
video-conferencing and will use best efforts to resolve any disputes concerning
this Agreement.

 

Within 30 days of a formal request by either party to the other party, either
party may, by written notice to the other party, have such dispute referred to
their respective officers designated, or their successors, for attempted
resolution by good faith negotiations, such good faith negotiations to begin
within thirty days after such notice is received.  Any dispute arising out of or
relating to this Agreement which is not resolved between the parties or the
designated officers of the parties pursuant to this Section 16.4  will be
resolved by final and binding arbitration conducted in New York, New York
(unless the parties mutually agree to another location) in accordance with the
rules of the American Arbitration Association.  The arbitration will be
conducted by a single, neutral arbitrator who is knowledgeable in the general
subject matter at issue in the dispute.

 

The parties will agree on the arbitrator and if they cannot agree, the
arbitrator will be selected in accordance with the procedures of the American
Arbitration Association.

 

In conducting the arbitration, the arbitrator will

 

(i)                                     determine what discovery will be
permitted, consistent with the goal of limiting the cost and time which the
parties must expend for discovery (and provided that the arbitrators will permit
such discovery they deem necessary to permit an equitable resolution of the
dispute),

 

(ii)                                  ensure that the total time of the
arbitration from filing to a final decision or executed settlement agreement is
less than six months, and

 

45

--------------------------------------------------------------------------------

 

(iii)                               be able to decree any and all relief of an
equitable nature, including, but not limited to, such relief as a temporary
restraining order, a preliminary injunction, a permanent injunction, specific
performance or repletion of property.

 

The arbitrator will also be able to award damages and recommend injunctions.

 

The parties will share equally the arbitrator’s fees and expenses pending the
resolution of the arbitration.

 

The decision of the arbitrator will be final and binding on the parties and may
be sued on or enforced by the party in whose favor it runs in any court of
competent jurisdiction at the option of such party.

 

Notwithstanding anything to the contrary in this Section 16.4, either party may
seek immediate injunctive or other interim relief from any court of competent
jurisdiction with respect to any breach of Sections 10 or 13 hereof, or
otherwise to enforce and protect the Patent Rights, copyrights, trademarks, or
other intellectual property rights Controlled by such party.  In addition,
arbitration will not be used to resolve disputes concerning Patent Rights. 
Disputes concerning Patent Rights, including, but not limited to, disputes
concerning patent ownership, claim language, claim scope and issues of validity
will be settled in a court of law.  Any arbitration ruling that relies on an
interpretation of Patent Rights will have no binding effect in a court of law on
any Patent Rights related to this Agreement, unless such Patent Rights have been
adjudicated in a court of law.  In no event will a demand for arbitration be
made after the date when the institution of a legal or equitable proceeding
based on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations.  Notwithstanding the foregoing or the outcome
of the arbitration proceeding, each party will bear its own expenses including,
without limitation, attorneys fees and court costs, even if the arbitrators have
the discretion to award such fees and costs to the prevailing party.

 

16.5        Severability

 

If any term of this Agreement or the application thereof to any party or
circumstance is, to any extent, held to be invalid or unenforceable, then the
remainder of this Agreement, or the application of such term to parties or
circumstances other than those as to which it is held invalid or unenforceable,
will not be affected thereby and each term of this Agreement will be valid and
enforced to the fullest extent permitted by law.  The parties agree to
renegotiate such term in good faith in order to provide a reasonably acceptable
alternative to the term that is invalid or unenforceable, it being the intent of
the parties that the basic purposes of this Agreement are to be effectuated.

 

16.6        Independent Contractors

 

It is expressly agreed that PEPSICO and SENOMYX will be independent contractors
and that the relationship between the parties will not constitute a partnership
or agency of any kind.  Neither PEPSICO nor SENOMYX will have the authority to
make any statements,

 

46

--------------------------------------------------------------------------------

 

representations or commitments of any kind, or to take any action, which will be
binding on the other party, without the prior written authorization of the other
party to do so.

 

16.7        Entire Agreement

 

This Agreement sets forth all of the covenants, promises, agreements,
warranties, representations, conditions and understandings between the parties,
on the Effective Date, and supersedes and terminates all prior agreements and
understandings between the parties, with respect to the subject matter hereof
(including, without limitation, the Term Sheet with the exception of the
indemnity provisions therein which shall expressly survive and continue in full
force and effect).  For the avoidance of doubt, the Mutual Nondisclosure
Agreement shall continue to apply with respect to the activities of the parties
prior to the Effective Date.  There are no prior or contemporaneous covenants,
promises, agreements, warranties, representations, conditions or understandings,
either oral or written, between the parties other than as set forth in this
Agreement.

 

16.8        Amendment

 

No subsequent alteration, amendment, change or addition to this Agreement will
be binding upon the parties unless reduced to writing and signed by the
respective authorized officers of the parties.

 

16.9        Interpretation

 

This Agreement will not be strictly construed against either party.  Any
conflict between the terms set forth in the text of this Agreement and the terms
of any Appendix hereto will be resolved in favor of the text of this Agreement.

 

16.10      Waiver

 

Except as specifically provided for in this Agreement, the waiver from time to
time by either of the parties of any rights or the failure to exercise any
remedy will not operate or be construed as a continuing waiver of the same right
or remedy or any of the other of such party’s rights or remedies provided in
this Agreement.

 

16.11      Construction

 

The term “Article” or “Section” can refer to any single paragraph level found in
this Agreement or any collection of multiple paragraphs.

 

16.12      No Third Party Beneficiaries

 

No Third Party, including any employee of any party to this Agreement (except as
specifically provided in this Agreement) will have or acquire any rights by
reason of this Agreement.  Nothing contained in this Agreement will be deemed to
constitute the parties partners with each other or any Third Party.

 

47

--------------------------------------------------------------------------------

 

16.13      Notices

 

Any notices or communications provided for in this Agreement to be made by
either party to the other party must be in writing, in English, and will be made
by prepaid air mail or overnight carrier with return receipt addressed to the
other party at its address set forth below.  Any such notice or communication
may also be given by hand, or facsimile to the appropriate designation.  Notices
will be sent:

 

If to SENOMYX, to:

 

SENOMYX, Inc.

 

 

4767 Nexus Centre Drive

 

 

San Diego, CA 92121

 

 

Facsimile number: (858) 404-0750

 

 

 

Attention: [***]

 

 

 

 

 

If to PEPSICO, to:

 

PepsiCo, Inc.

 

 

700 Anderson Hill Road

 

 

Purchase, New York 10577

 

 

Facsimile number: (914) 249-8339

 

 

 

Attention: [***]

 

 

 

By like notice, either party may specify or change an address to which notices
and communications must be thereafter sent.  Notices sent by mail, facsimile or
overnight carrier will be effective upon receipt and notices given by hand will
be effective when delivered.

 

16.14      Assignment

 

Neither party may assign any of its rights or obligations under this Agreement
in any country to any Third Party without the prior written consent of the
non-assigning party, which consent may be withheld in the sole discretion of the
non-assigning party.

 

Notwithstanding the preceding sentence, either party may assign its rights and
obligations under this Agreement without the consent of the other party:

 

(i)                                     to a successor to substantially all of
the business of such party to which this Agreement relates, whether by merger,
sale of stock, sale of assets or other transaction; or

 

(ii)                                  to any Affiliate.

 

Notwithstanding the foregoing, any such assignment to an Affiliate will not
relieve the assigning party of its responsibilities for performance of its
obligations under this agreement.

 

48

--------------------------------------------------------------------------------

 

Subject to the foregoing, this Agreement shall inure to the benefit of each
party, its successors and permitted assigns.  Any assignment of this Agreement
in contravention of this Section 16.14 shall be null and void.

 

16.15      Merger or Consolidation

 

This Agreement will survive any merger or consolidation of either party with or
into another party and no consent for any such merger, consolidation or similar
reorganization will be required.

 

16.16      Counterparts

 

This Agreement may be executed in two or more counterparts, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument.

 

16.17 Law and Regulation

 

While carrying out the obligations set forth in the Agreement, the parties will
ensure compliance with all applicable laws and regulations, including, without
limitation, all environmental, competition and import and export laws and
regulations.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

49

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties, through their authorized officers, have
executed this Agreement as of the Effective Date.

 

 

SENOMYX, INC.

 

PEPSICO, INC.

 

 

 

 

 

 

By:

/s/ Kent Snyder

 

By:

/s/ Massimo d’Amore

 

 

 

 

 

Name:

Kent Snyder

 

Name:

Massimo d’Amore

 

 

 

 

 

Title:

Chairman and Chief Executive Officer

 

Title:

CEO, PepsiCo Beverages Americas

 

 

 

 

 

Date:

August 16, 2010

 

Date:

August 16, 2010

 

[SIGNATURE PAGE TO COLLABORATIVE RESEARCH, DEVELOPMENT, COMMERCIALIZATION
AND LICENSE AGREEMENT BETWEEN SENOMYX, INC. AND PEPSICO, INC.]

 

50

--------------------------------------------------------------------------------

 

COLLABORATIVE RESEARCH, DEVELOPMENT,
COMMERCIALIZATION AND LICENSE AGREEMENT

 

APPENDIX A - DEFINITIONS

 

“Affiliate” means any corporation, company, partnership, joint venture,
association or other entity, which directly or indirectly controls, is
controlled by or is under common control with a party.  As used in this
definition, the term “control” means direct or indirect beneficial ownership of
fifty percent or more of the outstanding securities having voting rights for the
election of directors in a corporation or of the comparable equity interest in
any other type of entity.  With respect to PEPSICO, “Affiliate” includes [***].

 

“Agreement” means this agreement, together with all appendices attached hereto,
as it may be amended or supplemented from time to time hereafter by a written
agreement executed by authorized representatives of both parties.

 

“Beverages” means non-alcoholic beverages sold under the trademark(s) of PEPSICO
or its Affiliates (including, without limitation, [***] packaged and sold for
use or consumption by an end user, whether in a ready-to-drink format, or as a
dry-powdered, liquid or frozen concentrate.

 

“Beverage Base” means concentrated flavor combinations made and sold by PEPSICO
or its Affiliates, such as bases sold to a Bottler or for foodservice for use in
fountain drinks, which are then used to make Beverages which are intended for
use or consumption by an end user.  For the avoidance of doubt, the Beverage
Base is not packaged and sold for end use by consumers.

 

“Bottlers” means bottlers of Beverages authorized by PEPSICO or one of its
Affiliates to sell Beverages under the trademarks of PEPSICO or one of its
Affiliates.

 

“Calendar Quarter” means each three month period during a Calendar Year
commencing on January 1, April 1, July 1 and October 1.

 

“Calendar Year” means a period of a year beginning January 1 and ending
December 31.

 

“Co-Exclusive” means, with reference to a license granted by SENOMYX under
Section 9.4, that, in addition to the license granted to PEPSICO and its
Affiliates under Section 9.4, SENOMYX may grant a comparable license (i.e., a
worldwide license under SENOMYX’s intellectual property to make, have made, use
and sell dry-powdered non-alcoholic beverages incorporating Compounds) to only
one (1) party (and such party’s Affiliates).  SENOMYX and PEPSICO acknowledge
and agree that such other co-exclusive licensee may be an Ingredient Supplier
that is authorized to manufacture and sell a Selected Compound to a Third Party
manufacturer of non-alcoholic beverages.

 

“Co-Exclusive Product Category” means all dry-powdered non-alcoholic beverages.
For the avoidance of doubt, the Co-Excusive Product Category does not include
any

 

51

--------------------------------------------------------------------------------

 

Therapeutics or other products which are not non-alcoholic beverages such as
table top or bulk packaged sweeteners/enhancers, powdered coffee creamers
(whether dairy or non-dairy) or semi-liquid products, such as drinkable,
spoonable or squeezable yogurt.

 

“Collaboration Compounds” means Enhancing Compounds and Natural Sweetener
Compounds.

 

“Collaborative R&D Period” means with respect to each of the Synthetic Enhancing
Compound Program, the Natural Enhancing Compound Program, and the Natural
Sweetener Compound Program, the period beginning on the Effective Date and
ending four years thereafter, as such period may be extended with respect to
such program(s) by PEPSICO’s exercise of the Extension Option in accordance with
Section 2.3.

 

“Collaborative R&D Program” means any of the Synthetic Enhancing Compound
Program, Natural Enhancing Compound Program and/or Natural Sweetener Program.

 

“Commercialization Period” (determined with respect to each Selected Compound
individually) means the period (a) beginning on the earlier of (i) with respect
to a Selected Enhancing Compound, the first anniversary of the date of the first
[***] for use of such Selected Enhancing Compound in at least one product
category licensed to PEPSICO under this Agreement, (ii) with respect to a
Selected Natural Sweetener Compound, the first anniversary of the date of the
first Regulatory Approval of such Selected Natural Sweetener Compound
authorizing the use of such Selected Natural Sweetener Compound in a Major
Country in at least one product category licensed to PEPSICO under this
Agreement, or (iii) the first commercial sale by PEPSICO or any of its
Affiliates or permitted sublicensee of a Product incorporating such Selected
Compound and (b) ending on the date that there no longer exists a Valid Claim in
a Patent Right Controlled by SENOMYX or its Affiliates covering the manufacture,
use or sale of such Selected Compound(s) or Product incorporating such Selected
Compound(s) in any country in which the Selected Compound is manufactured or
sold, or where Products incorporating Selected Compounds are manufactured or
sold.  In the event that PEPSICO does not select at least one Selected Compound
under a given Collaborative R&D Program as contemplated by Section 4.3, then
with respect to that Collaborative R&D Program the Commercialization Period will
automatically expire and terminate.

 

“Commercialization Plan” has the meaning set forth in Section 6.

 

“Commercialization Year” means with respect to each Selected Compound, the
twelve (12) month periods beginning the first day of the calendar quarter
immediately following commencement of the applicable Commercialization Period
and each twelve (12) month period thereafter.

 

“Compound(s)” means (i) a substance(s) that enhances the sweetness intensity of
a sweetener, or (ii) a Natural Compound that is a sweetener.

 

“Confidential Information” means all information, Inventions and Know-How
disclosed by one party to the other party, whether pursuant to this Agreement,
or the Mutual Nondisclosure Agreement, including, without limitation,
information and material

 

52

--------------------------------------------------------------------------------

 

(whether or not patentable) regarding technology, products, research,
development, manufacturing, marketing, finances, personnel or other business
information or objectives which is designated as confidential in writing by the
disclosing party, whether by letter or by the use of an appropriate stamp or
legend, prior to or at the time any such material, trade secret or other
information is disclosed by the disclosing party to the other party. 
Notwithstanding the foregoing to the contrary, Inventions, Know-How or other
information which is orally, electronically or visually disclosed by a party, or
is disclosed in writing without an appropriate letter, stamp or legend, will
constitute Confidential Information of a party if the disclosing party, within
30 days after such disclosure, delivers to the other party a written document or
documents describing the Inventions, Know-How or other information and
referencing the place and date of such oral, visual, electronic or written
disclosure and the names of the persons to whom such disclosure was made.

 

“Control” or “Controlled” means, with respect to intellectual property,
information or Materials, possession by a party, as of the Effective Date or
during the applicable Collaborative R&D Period, of the ability to grant a
license or sublicense in accordance with the terms of this Agreement, without
violating the terms of any agreement between  such party and any Third Party
that is in effect on the Effective Date.

 

“Consumer Price Index” means the Consumer Price Index for All Urban Consumers
(CPI-U) U.S. City Average, by expenditure category and commodity and service
group, for the food and beverages expenditure category, as published by the
United States Department of Labor, Bureau of Labor Statistics (1982-84 = 100). 
If the 1982-84 base of the Consumer Price Index is hereafter changed, then the
new base will be converted to the 1982-84 base and the base as so converted
shall be used.  In the event that the Bureau ceases to publish the Consumer
Price Index at least once a year, then the successor or most nearly comparable
Index thereto selected by SENOMYX and approved by PEPSICO shall be used. 
Changes in the Consumer Price Index will be measured based on annual average
(e.g. percent change in annual average from 2010 to 2011).

 

“Cost of Selected Compound” means the actual gross amount invoiced (in US$) to
PEPSICO or its Affiliate by a Third Party in good faith in an arm’s length
transaction for the manufacture, sale and delivery of a Selected Compound on a
per Unit Case basis, including [***]. The Cost of Selected Compound will be
calculated for each Calendar Quarter during the Commercialization Period, for
each Beverage and Beverage Base, based on actual amounts purchased by PEPSICO
and its Affiliates of the Selected Compound [***] and the actual amounts of such
Selected Compound used in a given Beverage or Beverage Base, as the case may be.
In the event that PEPSICO or any of its Affiliates elect to manufacture a
Selected Compound, then the Cost of a Selected Compound will be the actual cost
for such Selected Compound, determined on a per Unit Case basis for a given
Beverage and Beverage Base, during the applicable Calendar Quarter.  Actual
costs of such Selected Compound shall be comprised of [***].  If the Selected
Compound is purchased from a Third Party [***], and not [***], then the gross
amount invoiced for the Selected Compound will be deemed [***] during the
applicable period.  If the Selected Compound is purchased [***] and not [***],
then any [***] as the Cost of Selected Compound [***] of Selected Compound
[***].

 

53

--------------------------------------------------------------------------------

 

“Data Package” has the meaning set forth in Section 4.2.

 

“Direct PEPSICO Competitor” means, as of the relevant date of determination, a
company which has [***] and in which greater than [***] for the last full fiscal
year of such company is generated by [***].

 

“Effective Date” means the latest date on which this Agreement is signed by the
last of the parties required to execute it.

 

“Enhancing Compound(s)” means Natural Enhancing Compound(s) and/or Synthetic
Enhancing Compound(s).

 

“Enhancing Compound Concentration” means the Enhancing Compound is [***] at
which such Enhancing Compound [***] as measured in Taste Tests.

 

“European Regulatory Approval” means Regulatory Approval by the European Food
Safety Authority (“EFSA”).

 

“Exclusive” means, with reference to a license granted by SENOMYX under
Section 9.3, exclusive as to Third Parties and SENOMYX.

 

“Exclusive Product Categories” means all non-alcoholic beverage product
categories including liquid and frozen concentrates, but excluding the
Co-Exclusive Product Category. For the avoidance of doubt, the Exclusive Product
Categories do not include any Therapeutics, or other products which are not
non-alcoholic beverages such as [***].

 

“Extension Option” shall have the meaning set forth in Section 2.3.

 

“FEMA” means the Flavor and Extract Manufacturers Association.

 

“FEMA GRAS” means the process by which a compound is determined to be Generally
Recognized as Safe by the FEMA expert panel.

 

“FEMA GRAS Determination” means receipt of notification from FEMA of
determination as Generally Recognized As Safe (“GRAS”).

 

“FEMA GRAS Studies” means the safety studies and manufacture of GMP material to
support FEMA GRAS Determination set forth in the applicable Research
Plan.SENOMYX, in its sole discretion, may supplement the list of FEMA GRAS
Studies at any time, which will be reflected in the minutes for the applicable
Steering Committee meeting.

 

“Field” means the Exclusive Product Categories and the Co-Exclusive Product
Category.

 

“[***] Categories” means the following subset of the Third Party Beverage
Manufacturer Product Categories:  [***].  For the avoidance of doubt, each of
the [***] Categories must be within the definition of Third Party Beverage
Manufacturer Product Categories.

 

54

--------------------------------------------------------------------------------

 

[***].

 

“Ingredient Supplier” means a company that is primarily in the business of
providing ingredients, flavors or food additives to food or beverage customers.

 

“Ingredient Supply Product(s)” means Selected Enhancing Compound(s) sold as
[***] intended for use in a nonalcoholic beverage; and [***] in each case
intended for use in a Third Party Beverage Manufacturer Product Category.

 

“Initial Regulatory Plan” has the meaning set forth in Section 4.2.

 

“Intended Purpose” has the meaning set forth in Section 4.3.

 

“Invention” means any invention, including any new and useful process, method,
or composition of matter, or improvement thereto, whether or not patentable,
made in the course of the applicable Collaborative R&D Program.

 

“Joint Invention” has the meaning set forth in Section 10.4 .

 

“Joint Patent Rights” means all Patent Rights containing one or more claims to a
Joint Invention.

 

“Know-How” means information and data, whether or not patentable, which is not
generally known to the public, including, without limitation, designs, concepts,
formulae, software, techniques, practices, processes, methods, knowledge, skill,
experience, expertise, technical information and data, including
pharmacological, toxicological and clinical test data, analytical and quality
control data, patent and legal data or marketing, sales and manufacturing data.

 

“Major Countries” means [***].  A “Major Country” means any of the foregoing.

 

“MARs” has the meaning set forth in Section 8.5.1.

 

“Materials” mean antagonists, agonists, inhibitors, compounds, and chemicals,
including without limitation, Compounds, Collaboration Compounds and Selected
Compounds.

 

“Minimum Annual Royalty Categories” means the following categories and “Minimum
Annual Royalty Category” means any one of the following categories:  [***].

 

“Mutual Nondisclosure Agreement” means the Mutual Nondisclosure Agreement
entered into between SENOMYX and Pepsi Cola Company dated [***], as amended on
[***] and [***].

 

“Natural Ago-Enhancing Compounds” means a Natural Compound under the Control of
SENOMYX that when [***] that is equivalent to [***] in an in vitro assay and in
Taste Tests.

 

“Natural Compound(s)” means a compound(s) that is discovered in extracts from
natural materials that would meet the definition of “Natural flavouring
substances” set forth in

 

55

--------------------------------------------------------------------------------

 

Codex Alimentarius Commission Guidelines for the Use of Flavourings (CAC/GL
66-2008).

 

“Natural Enhancing Compound(s)” means a Natural Compound under the Control of
SENOMYX that has an enhancing effect on the sweetness of a Target Sweetener of
at least [***] in an in vitro assay and in Taste Tests when used [***].

 

“Natural Enhancing Compound Program” means the research and development program
to discover Natural Enhancing Compounds and develop any Selected Natural
Enhancing Compounds, pursuant to the applicable Research Plan.

 

“Natural Sweetener Compound(s)” means a Natural Compound(s) under the Control of
SENOMYX that (a) is a sweetener and is not an Enhancing Compound, or (b) is a
Natural Ago-Enhancing Compound , in either case where such Natural
Compound(s) meets the desired criteria set forth by the Steering Committee and
incorporated into the minutes of the applicable Steering Committee.

 

“Natural Sweetener Compound Program” means the research and development program
to discover Natural Sweetener Compounds and develop any Selected Natural
Sweetener Compounds pursuant to the applicable Research Plan.

 

“Net Sales” means, with respect to any Ingredient Supply Product, [***] by
Ingredient Suppliers on any sales or other transfer of the Ingredient Supply
Product, less the following items:

 

i)                 [***];

 

ii)              [***];

 

iii)           [***];

 

iv)          [***]; and

 

v)             [***].

 

“Patent Rights” means all rights associated with all U.S. or foreign (including
regional authorities such as the European Patent Office) regular or provisional
patents or patent applications, including any continuation,
continuation-in-part, renewal, request for continued examination or division
thereof or any substitute application therefor or equivalent thereof, and any
patent issuing thereon, including any reissue, reexamination or extension
thereof and any confirmation patent, substitutions, confirmations,
revalidations, revisions or registration patent or patent of additions based on
any such patent.

 

“PEPSICO Criteria” means the list of criteria that PEPSICO has established as
desirable for PEPSICO’s evaluation of a Collaboration Compound (including, for
example, [***] which shall be presented to the applicable Steering Committee and
reflected in the minutes at the meeting at which such criteria are first
presented, which shall be not later

 

56

--------------------------------------------------------------------------------

 

than [***], as such criteria may be updated by [***], and which will be
reflected in the minutes for the applicable Steering Committee meeting.

 

“PEPSICO Know-How” means all Know-How Controlled by PEPSICO as of the Effective
Date that is not covered by PEPSICO’s Patent Rights and that is provided to
SENOMYX and necessary or appropriate for the activities to be conducted by
SENOMYX under this Agreement.

 

“PEPSICO Patent Rights” means all Patent Rights Controlled by PEPSICO as of the
Effective Date, including, without limitation, any Patent Rights containing one
or more claims to an Invention made solely by employees or agents of PEPSICO,
but excluding any Joint Patent Rights, that are provided to SENOMYX for the
activities to be conducted under this Agreement.

 

“PEPSICO Technology” means PEPSICO Patent Rights and PEPSICO Know-How.

 

“Percentage of Sweetener Reduction or PSR” means [***]. The PSR will be adjusted
on a [***] basis to reflect any changes to a product formula that were
implemented [***]. With respect to a Beverage Base, the PSR will be calculated
by [***].

 

With respect to a Beverage that is a [***] of a product that PEPSICO or its
Affiliates [***], the Selected Compound’s PSR will be calculated as (a) the
total [***] the total [***] by (b) the total [***] the Selected Compound);

 

With respect to a Beverage for which PEPSICO or its Affiliates does not [***],
the Selected Compound’s PSR will be calculated in accordance with [***].

 

“Products” means Beverages, Beverage Bases, and Ingredient Supply Products.

 

“Regulatory Approval” means, with respect to a Collaboration Compound, any
regulatory approvals, licenses, permits or consents issued by any governmental
authority, authorizing the use of such Collaboration Compound in the Field.

 

“Regulatory Plan” means an Initial Regulatory Plan as updated as contemplated
under Section 5.1.

 

“Research Plans” means the detailed scientific research and development plans
that define the key activities, responsibilities of the parties, research
milestones and timelines for the Synthetic Enhancing Compound Program, Natural
Enhancing Compound Program and Natural Sweetener Program.

 

“Royalty Report” has the meaning set forth in Section 8.7.2.

 

“Royalty Shortfall” has the meaning set forth in Section 8.5.1.6.

 

“Selected Compound(s)” has the meaning set forth in Section 4.3.

 

57

--------------------------------------------------------------------------------

 

“Selected Enhancing Compound(s)” means a Selected Compound(s) that is an
Enhancing Compound(s)

 

“Selected Natural Enhancing Compound(s)” means a Selected Compound(s) that is a
Natural Enhancing Compound(s).

 

“Selected Natural Sweetener Compound(s)” means a Selected Compound(s) that is a
Natural Sweetener Compound(s).

 

“Selected Synthetic Enhancing Compound(s)” means a Selected Compound(s) that is
a Synthetic Enhancing Compound(s).

 

“SENOMYX Know-How” means all Know-How that is not covered by the SENOMYX Patent
Rights and that is necessary or appropriate for the activities to be conducted
under this Agreement, and which is Controlled by SENOMYX as of the Effective
Date or developed by SENOMYX in the course of the Collaborative R&D Program.

 

“SENOMYX Patent Rights” mean all Patent Rights that are necessary or appropriate
for the activities to be conducted under this Agreement, and which are
Controlled by SENOMYX as of the Effective Date or developed by SENOMYX in the
course of the Collaborative R&D Program, but excluding any Joint Patent Rights.

 

“SENOMYX Technology” means all of the SENOMYX Patent Rights and SENOMYX
Know-How, including Target IP.

 

“Synthetic Compound” means any Compound that is not a Natural Compound.

 

“Synthetic Enhancing Compound” means a Synthetic Compound under the Control of
SENOMYX  that has an enhancing effect on the sweetness of a Target Sweetener of
at least [***] in in vitro assays and Taste Tests when used [***].

 

“Synthetic Enhancing Compound Program” means the research and development
program to discover Synthetic Enhancing Compounds and develop any Selected
Synthetic Enhancing Compounds, pursuant to the applicable Research Plan.

 

“Target IP” means the SENOMYX Patent Rights and SENOMYX Know-How claiming or
covering [***].

 

“Target Sweetener(s)” means sucrose, fructose and high fructose corn syrup
(“HFCS”).

 

“Taste Tests” means based on the [***].

 

“Term” has the meaning set forth in Section 14.1.

 

“Term Sheet” means the Term Sheet entered into between the parties dated
June 23, 2010.

 

“Therapeutics” means any Compound(s) which [***].

 

58

--------------------------------------------------------------------------------

 

“Third Party(ies)” means any party other than SENOMYX or PEPSICO or their
respective Affiliates.

 

“Third Party Beverage Manufacturer Product Categories” means all Third Party
Manufacturer Beverages and Third Party Manufacturer Beverage Bases in the
Exclusive Product Categories, except for the following specified product
categories: Carbonated Soft Drinks, Hydration Beverages, Juices and Juice
Flavored Drinks, and RTD Tea.

 

[***].

 

Notwithstanding the foregoing, each of the above-referenced product categories
(Carbonated Soft Drinks, Hydration Beverages, Juices and Juice Flavored Drinks,
and RTD Tea) specifically excludes all beverages that contain [***]% or greater
milk (or milk substitute, such as soy milk) content.

 

“Third Party Manufacturer Beverages” means non-alcoholic beverages sold under
the trademark(s) of a Third Party intended for use or consumption by an end
user, whether in a ready-to-drink format, or as a liquid or frozen concentrate. 
Third Party Manufacturer Beverages excludes all dry-powdered beverages.

 

“Third Party Manufacturer Beverage Bases” means concentrated flavor combinations
made and sold by a Third Party (such as bases sold to a bottler or for
foodservice for use in fountain drinks) which are then used to make
non-alcoholic beverages that are intended for use or consumption by an end user.

 

“Unit Case” means the equivalent of [***].  With respect to powdered, liquid and
frozen concentrates, it means [***].

 

“Valid Claim” means a claim of a pending patent application or an issued patent
within the Patent Rights Controlled by SENOMYX or any of its Affiliates, which
has not (i) expired or been canceled; (ii) been declared invalid by an
unreversed and unappealable decision of a court or other appropriate body of
competent jurisdiction; (iii) been admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise; or (iv) been abandoned.

 

59

--------------------------------------------------------------------------------

 

COLLABORATIVE RESEARCH, DEVELOPMENT,
COMMERCIALIZATION AND LICENSE AGREEMENT

 

Appendix B — Data Package Information

 

The following is a summary of the information to be provided in each Data
Package. From time to time, the Steering Committee may consider revisions to
this Appendix B. Any such revisions are subject to the approval of the Steering
Committee and will be attached to the minutes of the applicable Steering
Committee.

 

1.              Data Package Contents

 

a.              [***] for applicable Collaboration Compound

i.                                          [***] will be included in an
appendix.

 

b.              [***] of applicable Collaboration Compound

i.                                          [***].

 

c.               Summary of [***] of applicable Collaboration Compound in [***]

 

A summary will be provided of the [***].  The [***] will be included in an
appendix. The results of the [***] will reflect the following with respect to
SENOMYX’s [***]:

 

i.                                          [***]

 

d.              [***] for the applicable Enhancing Compound (applies to [***]
Only)

i.                                          [***].

 

e.               [***] Plan

 

SENOMYX’s preliminary plan to pursue regulatory approval for the applicable
Collaboration Compound as set forth in Section 4.2 of the Agreement. The Initial
Regulatory Plan will confirm [***].

 

2.              Additional Data Package Contents for [***]

 

In addition to the information set forth above, for a [***] the Data
Package(s) will also include a section regarding [***].

 

60

--------------------------------------------------------------------------------

 

SCHEDULE 8.4.1 (A)

 

ROYALTIES PER UNIT CASE — SUCROSE ENHANCING COMPOUNDS

 

[***]

 

61

--------------------------------------------------------------------------------

 

SCHEDULE 8.4.1 (B)

 

ROYALTIES PER UNIT CASE — FRUCTOSE ENHANCING COMPOUNDS

 

[***]

 

62

--------------------------------------------------------------------------------