Document:

<PAGE>
                                                                    EXHIBIT 10.1

Confidential materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

                       COLLABORATION AND LICENSE AGREEMENT

         THIS COLLABORATION AND LICENSE AGREEMENT (this "Agreement") is dated as
of May 16, 2005 (the "Effective Date") and is made by and between LEXICON
GENETICS INCORPORATED, a corporation organized under the laws of the State of
Delaware, United States of America ("Lexicon"), N.V. ORGANON, a registered
company organized under the laws of the Netherlands ("Organon"), and (only with
respect to Section 9.4) INTERVET Inc., a corporation organized under the laws of
the State of Delaware, United States of America ("Intervet"). Lexicon and
Organon are sometimes referred to herein individually as a "party" and
collectively as the "parties."

                                 R E C I T A L S

         WHEREAS, Lexicon and Organon are each in the business of discovering,
developing and commercializing products for the prevention or treatment of human
diseases and conditions;

         WHEREAS, Lexicon has technology for and expertise in the identification
and validation of gene and protein targets for use in the discovery of such
products, including potential antibody and protein therapeutics, as well as
expertise in the research and development of such products;

         WHEREAS, Organon has expertise in the research, development and
manufacture of such products; and

         WHEREAS, Lexicon and Organon are interested in collaborating in the
discovery and development of antibody and protein therapeutics for selected gene
and protein targets;

         NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:

                             ARTICLE 1. DEFINITIONS

         For purposes of this Agreement, the terms defined in this Article 1
shall have the respective meanings specified below:

         1.1 "Acquiring Party" has the meaning specified in Section 17.3 hereof.

         1.2 "Adverse Drug Reaction" means any untoward medical occurrence in a
patient or subject who is administered a Collaboration Product or Opt-out
Product, whether or not considered related to the Collaboration Product or
Opt-out Product, as applicable, including any undesirable sign (including
abnormal laboratory findings of clinical concern), symptom or disease temporally
associated with the use of such Collaboration Product or Opt-out Product.

         1.3 "Affiliate" means any corporation, company, partnership, joint
venture or firm that controls, is controlled by or is under common control with
a party to this Agreement. For purposes hereof, "control" means (a) in the case
of a corporate entity, direct or indirect ownership of more than fifty percent
(50%) of the stock or shares entitled to vote for the election of directors; and
(b) in the case of a non-corporate entity, direct or indirect ownership of more
than fifty percent (50%) of the equity interests with the power to direct the
management and policies of such non-corporate entity.

         1.4 "Affiliated Subcontractor" has the meaning specified in Section
2.2.4 hereof.

<PAGE>

         1.5 "Allowable Costs" means the sum of the following (without any item
being accounted for more than once): (a) Target Function Discovery Program
Costs; (b) Biotherapeutics Research Program Costs; (c) Development Costs; (d)
Product Supply Costs; and (e) reasonable out-of-pocket expenses associated with
Patent Prosecution of Program Patent Rights. For clarity, Allowable Costs shall
not include costs and expenses attributable to the research, development,
manufacture or supply of Opt-out Products from and after the effectiveness of
the relevant Opt Out.

         1.6 "Antibody" means a composition comprising a whole antibody, or any
fragment thereof.

         1.7 "Antisense Compound" means a composition comprising an
oligonucleotide or oligonucleotide analog, whether single or double-stranded,
that hybridizes to a selected mRNA or otherwise interferes with translation or
transcription of such mRNA.

         1.8 "Background Materials" means Lexicon Background Materials and
Organon Background Materials.

         1.9 "Background Technology" means Lexicon Background Technology and
Organon Background Technology.

         1.10 "Back-up Product" means a Collaboration Product selected for
Development by the Joint Management Committee as a possible [**] a
previously-designated Collaboration Product for the same Program Target;
provided, that a Collaboration Product may be deemed to have been selected as a
[**] a previously-designated Collaboration Product for the same Program Target
only if both Collaboration Products [**]. For clarity, a Collaboration Product
selected as a possible [**] a previously-designated Collaboration Product shall
be a Back-up Product if it [**].

         1.11 "BLA" means a Biologics Licensing Application (as defined in the
FDC Act) filed with the FDA and any other equivalent marketing authorization
application or other license, registration or other application seeking approval
from a Regulatory Authority to market a Collaboration Product in the
Collaboration Field in any country or region within the Territory.

         1.12 "Biotherapeutics Research" means the conduct of activities
relating to the generation of Antibodies, Antisense Compounds and Proteins
relating to Program Targets that have not become Opt-out Targets and the
identification, characterization, selection, optimization and research of
Program Antibodies, Program Antisense Compounds and Program Proteins prior to
their designation as Collaboration Products. Biotherapeutics Research may
include, without limitation, (a) the expression of Proteins comprising Program
Targets, (b) the generation of Program Antibodies that bind to Program Targets,
(c) the generation of Antisense Compounds that hybridize with mRNA encoded by
Program Targets or otherwise interfere with translation or transcription of such
mRNA, (d) the development of assays for Program Antibodies, Program Antisense
Compounds and Program Proteins to, inter alia, confirm the activity of such
Program Antibodies, Program Antisense Compounds or Program Proteins, and (e) the
optimization of such Program Antibodies, Program Antisense Compounds or Program
Proteins, as the case may be, in each case with the objective of identifying
Program Antibodies, Program Antisense Compounds and Program Proteins that are
suitable for Development and meet the criteria required for designation as
Collaboration Products.

         1.13 "Biotherapeutics Research Plan" means the plan to be developed by
the Joint Research Committee and approved by the Joint Management Committee for
each Contract Year in accordance with Section 5.2 hereof.

                                       2
<PAGE>

         1.14 "Biotherapeutics Research Program" means the conduct of
Biotherapeutics Research activities in accordance with an applicable
Biotherapeutics Research Plan.

         1.15 "Biotherapeutics Research Program Costs" means costs and expenses
that are incurred after the Effective Date by either party and Affiliated
Subcontractors in performing Biotherapeutics Research activities in accordance
with an applicable Biotherapeutics Research Plan and associated budget approved
by the Joint Management Committee, including:

                  (a) the costs of internal scientific, medical, technical and
         managerial personnel engaged in Biotherapeutics Research activities
         (together with all associated laboratory supplies, facilities and
         occupancy costs), which costs shall be determined based on FTE Costs,
         unless another basis is otherwise agreed upon by the parties in
         writing;

                  (b) out-of-pocket expenditures directly related to such
         Biotherapeutics Research activities, including payments to contract
         research organizations, consultants and other subcontractors, subject
         to Section 2.2.4; and

                  (c) any other costs expressly provided for and actually
         incurred in accordance with such Biotherapeutics Research Plan.

         1.16 "Change in Control" means, with respect to either party, the
occurrence of either (a) a Third Party becoming the "beneficial owner" (as
defined in the rules and regulations promulgated under the Securities Exchange
Act of 1934), directly or indirectly, of securities of such party representing
fifty percent (50%) or more of the combined voting power of such party's
then-outstanding voting securities or (b) the sale by such party, in one or more
related transactions, of all or substantially all of such party's property and
assets to any Third Party.

         1.17 "cGMP Requirements" means the FDA's current good manufacturing
practice requirements as promulgated under the FDC Act at 21 C.F.R. (parts 210
and 211), and as further defined by FDA guidance documents, as amended from time
to time.

         1.18 "Collaboration" means the program described in this Agreement in
which Lexicon and Organon will collaborate to identify, characterize and carry
out the Biotherapeutics Research, Development and Manufacturing of Antibodies
(and, if appropriate, Antisense Compounds) that act through and Proteins that
are encoded by Program Targets for use in the Collaboration Field.

         1.19 "Collaboration Committee" means the Joint Management Committee,
Joint Research Committee or Joint Development Committee.

         1.20 "Collaboration Field" means the diagnosis, prevention, control and
treatment in humans of any disease or condition.

         1.21 "Collaboration Product" means a Program Antibody, Program
Antisense Compound or Program Protein that has been selected for Development by
the Joint Management Committee in accordance with Section 3.4 hereof and that
has not become an Opt-out Product.

         1.22 "Collaboration Term" has the meaning specified in Section 2.1.2
hereof.

         1.23 "Confidential Information" means any proprietary information and
data received by a party or its Affiliates (the "Receiving Party") from the
other party or its Affiliates (the "Disclosing Party") in connection with this
Agreement (including, without limitation, any research, testing, clinical,

                                       3
<PAGE>

regulatory, marketing or other scientific or business information, plans, or
data pertaining to any Collaboration Product or Opt-out Product of the
Disclosing Party). Notwithstanding the foregoing, Confidential Information shall
not include any part of such information or data that:

                  (a) is or becomes part of the public domain other than by
         unauthorized acts of the Receiving Party or its Affiliates;

                  (b) can be shown by written documents to have been already in
         the possession of the Receiving Party or its Affiliates prior to
         disclosure under this Agreement, provided such Confidential Information
         was not obtained directly or indirectly from the Disclosing Party under
         an obligation of confidentiality;

                  (c) can be shown by written documents to have been disclosed
         to the Receiving Party or its Affiliates by a Third Party, provided
         such Confidential Information was not obtained directly or indirectly
         from the Disclosing Party under an obligation of confidentiality; or

                  (d) can be shown by written documents to have been
         independently developed by the Receiving Party or its Affiliates
         without use of, or access to, Confidential Information of the
         Disclosing Party.

Specific Confidential Information of a Disclosing Party shall not be deemed to
come under the foregoing exceptions merely because it is embraced by more
general information that is or becomes part of the public domain, or is known
by, disclosed to or independently developed by the Receiving Party.

         1.24 "Continuing Party" has the meaning specified in Section 10.1
hereof.

         1.25 "Contract Year" means (a) with respect to the first Contract Year,
the period beginning on the Effective Date and ending on December 31, 2005 (the
"First Contract Year"), and (b) with respect to each subsequent Contract Year,
the twelve (12) month period beginning on the day following the end of the First
Contract Year and each succeeding twelve (12) month period thereafter. Each
Contract Year (other than the First and last Contract Year, as applicable) shall
be divided into four (4) "Contract Quarters" comprised of successive three (3)
month periods. In the First Contract Year, the first Contract Quarter shall
begin on the Effective Date and end on June 30, 2005.

         1.26 "Control" or "Controlled" means, with respect to any (a) material,
document, item of information, method, data or other know-how or (b) Patent
Right or other intellectual property right, the possession (whether by ownership
or license, other than by a license granted pursuant to this Agreement) by a
party or its Affiliates of the ability to grant to the other party access,
ownership, a license or a sublicense as provided herein under such item or right
without violating the terms of any agreement or other arrangement with any Third
Party as of the time such party would first be required hereunder to grant the
other party such access, ownership, license or sublicense.

         1.27 "Cost Sharing Ratio" means (a) with respect to Lexicon, fifty
percent (50%), and (b) with respect to Organon, fifty percent (50%), subject, in
each case to adjustment in accordance with Section 11.4.

         1.28 "Cover," "Covered" or "Covering" means, with respect to a Patent
Right, that, but for rights granted to a person or entity under such Patent
Right, the practice by such person or entity of an invention claimed in such
Patent Right would infringe a Valid Claim included in such Patent Right, or in
the case of a Patent Right that is a patent application, would infringe a Valid
Claim in such patent application if it were to issue as a patent.

                                       4
<PAGE>

         1.29 "Development" or "Develop" means the conduct of all tests,
clinical and other studies and other activities (including test method
development, toxicology studies, statistical analysis and report writing,
preclinical and other testing, packaging and regulatory affairs, product
approval and registration activities) set forth in, or required to obtain the
information set forth in, applicable Development Plan(s), including such tests,
studies (including Post-Approval Studies) and other activities as may be
required or recommended from time to time by any Regulatory Authority to obtain,
maintain or expand Regulatory Approval of a Collaboration Product in the
Collaboration Field, but excluding any (a) Post-Approval Studies that are not so
required or recommended by the applicable Regulatory Authority and (b) such
studies which are required for purposes of obtaining or maintaining a pricing or
reimbursement approval.

         1.30 "Development Costs" means the costs and expenses that are incurred
by either party or their Affiliated Subcontractors in the Development of a
Collaboration Product in accordance with an applicable Development Plan and
associated budget approved by the Joint Management Committee, including (without
duplication):

                  (a) the costs of internal scientific, medical, technical and
         managerial personnel engaged in Development activities with respect to
         such Collaboration Product (together with all associated laboratory
         supplies, facilities and occupancy costs), in each case to the extent
         not accounted for in other provisions of this definition (e.g., in
         Manufacturing Development Costs under clause (c) below or in Product
         Supply Costs under clause (e) below), which costs shall be determined
         based on FTE Costs, unless another basis is otherwise agreed upon by
         the parties in writing;

                  (b) out-of-pocket expenditures directly related to the
         Development of such Collaboration Product, including (i) payments to
         investigators, contract research organizations, consultants and other
         subcontractors for preclinical studies, pharmacodynamic and
         pharmacokinetic studies, toxicology studies, data management,
         statistical design, programming and analysis, clinical studies,
         clinical trial management, document preparation and review, subject
         recruitment and reimbursement, insurance, contract negotiation and
         travel relating to such activities; (ii) payments to investigators,
         contract research organizations, consultants and other subcontractors
         in connection with the preparation, filing and submission of INDs, BLAs
         and other regulatory filings with Regulatory Authorities (including
         pharmacoeconomic studies and any other clinical studies reasonably
         necessary for Regulatory Approval by relevant Regulatory Authorities to
         sell such Collaboration Product in a given country); and (iii) filing,
         submission and similar fees payable to Regulatory Authorities in
         connection with the preparation, filing and submission of such INDs,
         BLAs and other regulatory filings; in each case, subject to Section
         2.2.4;

                  (c) Manufacturing Development Costs relating to such
         Collaboration Product;

                  (d) out-of-pocket expenditures under any Third Party licenses
         related to the Development of such Collaboration Product entered into
         (i) prior to the Effective Date and disclosed to the other party prior
         to the Effective Date or (ii) in accordance with Section 2.8, in each
         case other than royalty and other amounts paid to Third Parties in
         connection with the commercialization of such Collaboration Product or
         otherwise payable with respect to activities attributable to a given
         country and occurring after Regulatory Approval of such Collaboration
         Product in such country;

                  (e) the costs and expenses of clinical supplies and related
         charges directly related to the Development of such Collaboration
         Product as set forth in the Development Plan, including: (i) the
         Product Supply Costs of clinical supplies of such Collaboration
         Product; (ii) costs and

                                       5
<PAGE>

         expenses incurred to purchase or package comparator or combination
         drugs or devices; and (iii) costs and expenses of disposal of clinical
         samples; subject, as applicable, to Section 2.2.4; and

                  (f) any other costs expressly provided for and actually
         incurred in accordance with such Development Plan.

         1.31 "Development Plan" means the plan(s) to be developed by the Joint
Development Committee and approved by the Joint Management Committee for each
Contract Year [**] with respect to the Development of a Collaboration Product in
accordance with Section 6.3 hereof.

         1.32 "Development Program" means the conduct of Development activities
with respect to a Collaboration Product in accordance with an applicable
Development Plan.

         1.33 "Diligent Efforts" means the carrying out of obligations or tasks
by a party (or, as applicable, its Affiliates) in a sustained manner using good
faith commercially reasonable and diligent efforts, which efforts shall be
consistent with the exercise of prudent scientific and business judgment in
accordance with the efforts such party devotes to products or research,
development or marketing projects of similar scientific and commercial
potential. Diligent Efforts requires that the party or its applicable
Affiliates: (a) promptly assign responsibility for such obligations to specific
employees who are held accountable for progress and monitor such progress on an
on-going basis, (b) set and consistently seek to achieve specific and meaningful
objectives for carrying out such obligations, and (c) consistently make and
implement decisions and allocate resources designed to advance progress with
respect to such objectives.

         1.34 "Disclosing Party" has the meaning specified in Section 1.23
hereof.

         1.35 "Effective Date" means the date specified in the initial paragraph
of this Agreement.

         1.36 "EMEA" means the European Agency for the Evaluation of Medicinal
Products, or any successor thereto.

         1.37 "Event of Default" means an event described in Section 16.2
hereof.

         1.38 "FDA" means the United States Food and Drug Administration, or any
successor thereto.

         1.39 "FDC Act" means the United States Food, Drug and Cosmetic Act (or
any successor thereto), as amended, and the rules and regulations promulgated
thereunder.

         1.40 "First Commercial Sale" means the first sale for use or
consumption by the general public of a Collaboration Product or Opt-out Product
in a country after Regulatory Approval has been obtained in such country. For
clarity, First Commercial Sale shall not include the sale of any Collaboration
Product or Opt-out Product for use in clinical trials or for compassionate use
prior to the approval of a BLA.

         1.41 "FTE" means a full-time-equivalent person-year of scientific,
technical or managerial work on or directly related to Target Function Discovery
Program, Biotherapeutics Research or Development activities, as applicable.

         1.42 "FTE Costs" means the amounts (which amounts include salaries,
fringe benefits, overtime and all other costs of employing FTEs, including
overhead such as laboratory supplies, facilities

                                       6
<PAGE>

and occupancy costs) determined by multiplying (a) the number of FTEs allocated
by a party or its Affiliated Subcontractor(s) during the relevant time period,
subject to any limitations set forth in the applicable Biotherapeutics Research
Plan or Development Plan or otherwise established by the Joint Management
Committee, by (b) the applicable FTE Rate(s).

         1.43 "FTE Rate" means the agreed-upon cost per FTE by functional area,
to be adjusted annually (beginning in January 2006) for inflation using the
latest available U.S. Producer Price Index for Total Manufacturing Industries,
unadjusted (PCUOMFG#) as a simple percentage. Such adjustments shall be the
responsibility of the Joint Management Committee. The initial FTE Rate is [**]
on a per annum basis for the following areas: Biotherapeutics Research,
preclinical Development, clinical Development, regulatory affairs, technical
development, process development, technical transfer, project management and
drug safety and quality assurance. The Joint Management Committee shall approve
common FTE Rates for any new functional areas that come within the scope of the
Collaboration. Notwithstanding the foregoing, if [**], then, [**].

         1.44 "GAAP" means United States or international generally accepted
accounting principles, as they exist from time to time, consistently applied.

         1.45 "IND" means an Investigational New Drug application filed with the
FDA or a similar application for the clinical testing of a Collaboration Product
in human subjects filed with a foreign Regulatory Authority.

         1.46 "Joint Development Committee" has the meaning specified in Section
3.1.3.

         1.47 "Joint Development Project Team" has the meaning specified in
Section 3.1.3.

         1.48 "Joint Management Committee" has the meaning specified in Section
3.1.1 hereof.

         1.49 "Joint Marketing/Development Collaborator" has the meaning
specified in Section 8.3 hereof.

         1.50 "Joint Marketing/Development Collaborator Revenue" means all
license fees, royalties, milestone payments and other income or items of value
(including, without limitation, any premium received on an equity investment in
Lexicon, Organon or their respective Affiliates, as the case may be, by such
Joint Marketing/Development Collaborator) received from a Joint
Marketing/Development Collaborator in respect of a Collaboration Product (or an
Opt-out Product for which the parties entered into a definitive agreement with
such Joint Marketing/Development Collaborator prior to the effectiveness of such
Opt Out, but only with respect to countries within the Territory covered by such
definitive agreement), less any amounts specifically incurred in connection with
acquiring such revenue (e.g., attorneys' fees to establish underlying agreements
with a Joint Marketing/Development Collaborator or any potential Joint
Marketing/Development Collaborator) and less any reasonable amounts of indemnity
actually paid by either party under any agreements with a Joint
Marketing/Development Collaborator.

         1.51 "Joint Research Committee" has the meaning specified in Section
3.1.2 hereof.

         1.52 "Joint Research Project Team" has the meaning specified in Section
3.1.2 hereof.

         1.53 "[**]" means [**].

                                       7
<PAGE>

         1.54 "Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of any federal, national,
multinational, state, provincial, county, city or other political subdivision,
domestic or foreign.

         1.55 "Level 1 Phenotypic Analysis" means the analyses of the phenotypes
of Mutant Mice described in Exhibit 1.55.

         1.56 "Level 2 Phenotypic Analysis" means any one or more of the
analyses of the phenotypes of Mutant Mice described in Exhibit 1.56.

         1.57 "Lexicon Background Materials" means any Antibodies, Antisense
Compounds, Proteins, Mutant Mice, reagents, assays or other materials that are
(a) necessary or useful for the conduct of the Collaboration, (b) Controlled by
Lexicon, (c) utilized in the Collaboration (but only to the extent so utilized)
and (d) either in Lexicon's or any of its Affiliates' possession as of the
Effective Date or are discovered or acquired by Lexicon or any of its Affiliates
during the Collaboration Term but outside of the conduct of the Collaboration.
Lexicon Background Materials excludes Program Targets, Program Antibodies,
Program Antisense Compounds and Program Proteins.

         1.58 "Lexicon Background Technology" means any inventions, information,
methods, know-how, trade secrets or data that (a) are necessary or useful for
the performance of the Collaboration, (b) are Controlled by Lexicon, (c) are
utilized in the Collaboration (but only to the extent so utilized) and (d)
either are in Lexicon's or any of its Affiliates' possession as of the Effective
Date or are discovered or acquired by Lexicon or any of its Affiliates during
the Collaboration Term but outside of the conduct of the Collaboration. Lexicon
Background Technology includes any inventions, information, method, know-how,
trade secrets or data, other than Program Technology, that are first identified
or discovered in the conduct of the Target Function Discovery Program. Lexicon
Background Technology also includes any inventions, information, methods,
know-how, trade secrets or data (i) relating to research and development methods
and processes first identified or discovered by Lexicon or its Affiliated
Subcontractor(s) in the course of performing Biotherapeutics Research or
Development activities under the Collaboration or (ii) relating to manufacturing
and analytical methods and processes first identified or discovered by Lexicon
or its Affiliated Subcontractor(s) in the course of Manufacture of a
Collaboration Product, in each case that are not Program Technology.

         1.59 "Lexicon Product" means any Collaboration Product as to which
Organon has Opted Out in accordance with Section 10.1 and, if applicable [**],
any Program Antibodies, Program Antisense Compounds or Program Proteins that
have not been designated for Development relating to the same Opt-out Target.

         1.60 "Lexicon Opt-out Target" means any Program Target as to which
Organon has Opted Out in accordance with Section 10.1.

         1.61 "Major Market" means the United States, the European Union (under
the centralized process or any other process), Germany, the United Kingdom,
France, Italy, Spain or Japan.

         1.62 "Manufacturing" or "Manufacture" means all activities set forth in
the applicable Manufacturing Plan associated with the production, processing,
filling, finishing, packaging, labeling, shipping and storage of Collaboration
Products in the Collaboration Field, including stability testing, formulation,
manufacturing process development, process validation, manufacturing scale-up,
preclinical, clinical and commercial manufacture and analytical development and
quality assurance and quality control activities.

                                       8
<PAGE>

         1.63 "Manufacturing Development Costs" means, with respect to the
Development of a Collaboration Product as set forth in the applicable
Manufacturing Plan and associated budget approved by the Joint Management
Committee, (a) the reasonable internal costs of the applicable party or its
Affiliated Subcontractor(s), which costs shall be determined based on FTE Costs,
unless another basis is otherwise agreed upon by the parties in writing, plus
reasonable out-of-pocket expenditures and (b) the actual costs billed to such
party or parties or to their Affiliated Subcontractors by Third Parties, subject
to Section 2.2.4, each in accordance with the budget set forth in the applicable
Manufacturing Plan, incurred in process development, process validation, process
improvement, formulation development, facility and plant validation (which are
product-specific), manufacturing scale-up and recovery costs, the development of
standard operating procedures, batch records, and quality assurance and quality
control methods and procedures, and the production of qualification lots, all
costs incurred in obtaining and maintaining approval specifically for the
manufacture of such Collaboration Product for commercial sale, and the costs for
preparing, submitting, reviewing or developing data or information for the
purpose of a drug master file or for submission to a Regulatory Authority to
obtain or retain such approvals.

         1.64 "Manufacturing Plan" has the meaning specified in Section 7.2
hereof.

         1.65 "Mutant Mouse" means mouse cell or mouse containing a selected
mutation in the murine ortholog of a Program Target that is made or produced by
Lexicon. A "line of Mutant Mice" means Mutant Mice having the same selected
mutation.

         1.66 "Net Sales" means, with respect to a Collaboration Product or
Opt-out Product, as the case may be, the gross amount invoiced for sales of such
Collaboration Product or Opt-out Product by Lexicon and its Affiliates, Organon
and its Affiliates, Joint Marketing/Development Collaborators and their
Affiliates, and (sub)licensees of the Continuing Party and their Affiliates, in
each case as applicable, to customers which are not Affiliates (or which are
Affiliates but are end users of such Collaboration Product or Opt-out Product),
less:

                  (a) trade, quantity and cash discounts actually allowed;

                  (b) discounts, refunds, rebates, chargebacks, retroactive
         price adjustments, billing errors and any other allowances (including,
         without limitation, government-mandated and managed health
         care-negotiated rebates) actually granted which effectively reduce the
         net selling price;

                  (c) product returns credits and allowances actually granted;

                  (d) any tax imposed on the production, sale, delivery or use
         of the product (excluding federal, state or local taxes based on
         income);

                  (e) freight, postage, shipping, customs duties, excises,
         tariffs, surcharges, other governmental charges (excluding federal,
         state or local taxes based on income) and insurance charges actually
         allowed or paid for delivery of the product;

                  (f) payments or rebates paid with respect to such
         Collaboration Product or Opt-out Product, as applicable, in connection
         with state or federal Medicare, Medicaid or similar programs in the
         United States or in connection with similar programs in other countries
         in which there are sales; and

                  (g) adjustments for bad debts actually incurred.

                                       9
<PAGE>

Such amounts shall be determined from the books and records of the Lexicon and
its Affiliates, Organon and its Affiliates, Joint Marketing/Development
Collaborators and their Affiliates, and (sub)licensees of the Continuing Party
and their Affiliates, as the case may be, maintained in accordance with GAAP.

         In the event the Collaboration Product or Opt-out Product, as
applicable, is sold as part of a Combination Product (as defined below), the Net
Sales from the Combination Product, for the purposes of determining royalty
payments, will be determined by multiplying the Net Sales of the Combination
Product by the fraction, A/A+B where A is the average sale price of such
Collaboration Product or Opt-out Product when sold separately in finished form
and B is the average sale price of the other active compounds or ingredients in
the Combination Product sold separately in finished form.

         In the event that the average sale price of the Collaboration Product
or Opt-out Product, as applicable, can be determined but the average sale price
of the other active compounds or ingredients cannot be determined, Net Sales for
purposes of determining royalty payments will be calculated by multiplying the
Net Sales of the Combination Product by the fraction C/C+D where C is the
selling party's average sales price of the Collaboration Product or Opt-out
Product and D is the difference between the average selling price of the
Combination Product and the average selling price of the Collaboration Product
or Opt-out Product. If the average sale price of the other active compounds or
ingredients can be determined but the average price of the Collaboration Product
or Opt-out Product, as applicable, cannot be determined, Net Sales for purposes
of determining royalty payments will be calculated by multiplying the Net Sales
of the Combination Product by the following formula: one minus C/C+D where C is
the average selling price of the other product(s) and D is the difference
between the average selling price of the Combination Product and the average
selling price of the other active compounds or ingredients.

         In the event that the average sales price of both the Collaboration
Product or Opt-out Product, as applicable, and the other active compounds or
ingredients in the Combination Product cannot be determined, the Net Sales of
the Collaboration Product or Opt-out Product shall be negotiated in good faith
by the parties.

         The Net Sales price for a Combination Product in a given country will
be calculated once each Contract Year and such price will be used during all
applicable royalty reporting periods for the entire Contract Year for such
country, absent extraordinary conditions or events. When determining the average
sale price of a Collaboration Product or Opt-out Product, as applicable, or the
other active compounds or ingredients in the Combination Product, the average
sale price will be calculated using data arising from the twelve (12) months
preceding the calculation of the Net Sales price for the Combination Product. As
used above, the term "Combination Product" means any Collaboration Product or
Opt-out Product, as applicable, sold in conjunction with any other active
component(s) (whether packaged together or in the same therapeutic formulation).

         Free samples of Collaboration Product or Opt-out Product, as
applicable, and the disposition of Collaboration Product or Opt-out Product for,
or the use of Collaboration Product or Opt-out Product in, Phase 1 Clinical
Trials, Phase 2 Clinical Trials, Phase 3 Clinical Trials or Post-Approval
Studies in which such Collaboration Product or Opt-out Product is provided to
patients without any payment shall not result in any Net Sales.

         1.67 "Oncology/Immunology Field" means the diagnosis, prevention,
control and treatment in humans of (a) cancer and (b) diseases and conditions of
the immune system other than those associated with diabetes, obesity,
cardiovascular disease, diseases and conditions of the eye, and diseases and
conditions of the central and peripheral nervous system.

                                       10
<PAGE>

         1.68 "Opt Out" has the meaning specified in Section 10.1 hereof.

         1.69 "Opt-out Party" has the meaning specified in Section 10.1 hereof.

         1.70 "Opt-out Product" means a Lexicon Product or an Organon Product.

         1.71 "Opt-out Target" means a Lexicon Opt-out Target or an Organon
Opt-out Target.

         1.72 "Organon Background Materials" means any Antibodies, Antisense
Compounds, Proteins, assays, reagents or other materials that are (a) necessary
or useful for the conduct of the Collaboration, (b) Controlled by Organon, (c)
utilized in the Collaboration (but only to the extent so utilized) and (d)
either in Organon's or any of its Affiliates' possession as of the Effective
Date or are discovered or acquired by Organon or any of its Affiliates during
the Collaboration Term but outside of the conduct of the Collaboration. Organon
Background Materials excludes Program Targets, Program Antibodies, Program
Antisense Compounds and Program Proteins.

         1.73 "Organon Background Technology" means any inventions, information,
methods, know-how, trade secrets or data that (a) are necessary or useful for
the performance of the Collaboration, (b) are Controlled by Organon, (c) are
utilized in the Collaboration (but only to the extent so utilized) and (d)
either are in Organon's or any of its Affiliates' possession as of the Effective
Date or are discovered or acquired by Organon or any of its Affiliates during
the Collaboration Term but outside of the conduct of the Collaboration. Organon
Background Technology also includes any inventions, information, methods,
know-how, trade secrets or data (i) relating to research and development methods
and processes first identified or discovered by Organon or its Affiliated
Subcontractor(s) in the course of performing Biotherapeutics Research or
Development activities under the Collaboration or (ii) relating to manufacturing
and analytical methods and processes first identified or discovered by Organon
or its Affiliated Subcontractor(s) in the course of Manufacture of a
Collaboration Product, in each case that are not Program Technology.

         1.74 "Organon Product" means any Collaboration Product as to which
Lexicon has Opted Out in accordance with Section 10.1 and, if applicable [**],
any Program Antibodies, Program Antisense Compounds or Program Proteins that
have not been designated for Development relating to the same Opt-out Target.

         1.75 "Organon Opt-out Target" means any Program Target as to which
Lexicon has Opted Out in accordance with Section 10.1.

         1.76 "Patent Prosecution" has the meaning specified in Section 12.2.1
hereof.

         1.77 "Patent Rights" means all existing patents and patent applications
and all patent applications hereafter filed and patents hereafter issued,
including, without limitation, any continuations, continuations-in-part,
divisions, provisionals or any substitute applications, any patent issued with
respect to any such patent applications, any reissue, reexamination, renewal or
extension (including any supplemental protection certificate) of any such
patent, and any confirmation patent or registration patent or patent of addition
based on any such patent, and all foreign counterparts of any of the foregoing.

         1.78 "Phase 1 Clinical Trial" means a human clinical trial in any
country that is intended to initially evaluate the safety or pharmacological
effect of a Collaboration Product in subjects or that would otherwise satisfy
requirements of 21 CFR 312.21(a), or its foreign equivalent. For purposes of
this Agreement, "commencement of a Phase 1 Clinical Trial" for a Collaboration
Product means the first introduction of such Collaboration Product into a human
patient in a Phase 1 Clinical Trial.

                                       11
<PAGE>

         1.79 "Phase 2 Clinical Trial" means a human clinical trial in any
country that is intended to initially evaluate the effectiveness of a
Collaboration Product for a particular indication or indications in patients
with the disease or indication under study or that would otherwise satisfy
requirements of 21 CFR 312.21(b), or its foreign equivalent. For purposes of
this Agreement, "commencement of a Phase 2 Clinical Trial" for a Collaboration
Product means the first introduction of such Collaboration Product into a human
patient in a Phase 2 Clinical Trial.

         1.80 "Phase 2b Clinical Trial" means any Phase 2 Clinical Trial of a
Collaboration Product that follows the completion of an initial Phase 2 Clinical
Trial of such Collaboration Product, and that is a well-controlled clinical
trial with the purpose of evaluating safety and efficacy in subjects who have
the disease condition to be treated, diagnosed or prevented. For purposes of
this Agreement, "commencement of a Phase 2b Clinical Trial" for a Collaboration
Product means the first introduction of such Collaboration Product into a human
patient in a Phase 2b Clinical Trial.

         1.81 "Phase 3 Clinical Trial" means a pivotal human clinical trial in
any country the results of which could be used to establish safety and efficacy
of a Collaboration Product as a basis for a BLA or that would otherwise satisfy
the requirements of 21 CFR 312.21(c) or its foreign equivalent. For purposes of
this Agreement, "commencement of a Phase 3 Clinical Trial" for a Collaboration
Product means the first introduction of such Collaboration Product into a human
patient in a Phase 3 Clinical Trial.

         1.82 "Plan" means a Biotherapeutics Research Plan, Development Plan or
Manufacturing Plan, as the case may be.

         1.83 "Post-Approval Study" means a clinical trial conducted after
Regulatory Approval of the applicable Collaboration Product for the applicable
indication has been obtained in the relevant country.

         1.84 "Pre-existing Obligations" means the obligations of Lexicon or
Organon, as the case may be, existing under agreements in effect prior to the
Effective Date with respect to Background Materials and Background Technology,
in each case as disclosed to the other party as applicable during the
Collaboration Term.

         1.85 "Product Supply Costs" means (a) to the extent that a
Collaboration Product is sourced from a party or its Affiliated
Subcontractor(s), the cost of Manufacture of such Collaboration Product,
including (i) direct material and direct labor costs, (ii) manufacturing
overhead fairly allocated to such Collaboration Product and (iii) [**], all
calculated in accordance with GAAP and without regard to whether or not such
costs result in usable products or materials, and (b) to the extent that a
Collaboration Product is sourced from a Third Party, subject to Sections 2.2.4
and 7.1.2, the actual price paid to such Third Party for the manufacture, supply
and packaging of such Collaboration Product. For purposes of the foregoing, (i)
"direct material costs" means actual costs incurred in manufacturing or
purchasing materials, including freight-in costs, sales and excise taxes imposed
thereon and customs duty and charges levied by government authorities, and all
costs of packaging components; (ii) "direct labor costs" means actual cost of
employees engaged in direct manufacturing activities and quality control and
quality assurance activities who are directly employed in manufacturing and
packaging such Collaboration Product; and (iii) "manufacturing overhead"
attributable to such Collaboration Product will include a reasonable allocation
of indirect labor (not previously included in direct labor costs), a reasonable
allocation of administrative costs, and a reasonable allocation of facilities
costs, all in accordance with GAAP, but will not include corporate
administrative overhead or plant start-up costs or costs associated with excess
capacity. All allocations will be based on the assumption that such party's
plant and equipment are utilized to their reasonable full capacity (except with
respect to equipment that is specific to the Collaboration Product being
Manufactured), and all costs and allocations shall be consistent with

                                       12
<PAGE>

the methods used for such costs and allocations for such party's internal
purposes. More specifically, the components of Product Supply Costs shall
comprise: (A) direct labor (fermentation, purification personnel); (B) direct
materials; (C) facility costs (rent, property taxes, depreciation of leaseholds,
utilities, spare parts, maintenance contracts); (D) manufacturing equipment
depreciation; (E) allocations for information technology, document control,
quality engineering, purchasing, warehouse management, microbiology (with such
allocations to be based on estimated service levels, headcount or square footage
occupancy, depending on the category); (F) indirect labor (manufacturing
supervision); (G) manufacturing department overhead (uniforms, materials used in
plant maintenance); (H) quality assurance/quality control; and (I) such other
similar costs as may be reasonably included in such definition.

         1.86 "Program Director" has the meaning specified in Section 3.2
hereof.

         1.87 "Program Antibody" means an Antibody that: (a) (i) is selected by
the Joint Research Committee for research, optimization or preclinical
evaluation in the conduct of the Collaboration, (ii) is Controlled by a party,
(iii) either is in a party's or any of its Affiliates' possession as of the
Effective Date or is discovered or acquired by either or both parties or any of
their respective Affiliates during the Collaboration Term but outside the
conduct of the Collaboration, and (iv) binds to or otherwise modulates a Program
Target; (b) is first [**] in the conduct of the Collaboration; or (c) is
otherwise designated a Program Antibody by the Joint Management Committee;
provided, however, that in no event shall [**] become a Program Antibody unless
such designation is affirmatively agreed to by the Joint Management Committee
after disclosure of the nature of such Pre-existing Obligation by the applicable
party.

         1.88 "Program Antisense Compound" means an Antisense Compound that:
(a)(i) is selected by the Joint Research Committee for research, optimization or
preclinical evaluation in the conduct of the Collaboration, (ii) is Controlled
by a party, (iii) either is in a party's or any of its Affiliates' possession as
of the Effective Date or is discovered or acquired by either or both parties or
any of their respective Affiliates during the Collaboration Term but outside the
conduct of the Collaboration, and (iv) binds to or otherwise modulates a Program
Target; (b) is first [**] in the conduct of the Collaboration; or (c) is
otherwise designated a Program Antisense Compound by the Joint Management
Committee; provided, however, that in no event shall [**] become a Program
Antisense Compound unless such designation is affirmatively agreed to by the
Joint Management Committee after disclosure of the nature of such Pre-existing
Obligation by the applicable party.

         1.89 "Program Intellectual Property" means Program Patent Rights and
any other proprietary rights in Program Material and Program Technology.

         1.90 "Program Materials" means (a) any Program Antibodies, (b) any
Program Antisense Compounds, (c) any Program Proteins, and (d) any materials
other than Program Antibodies, Program Antisense Compounds or Program Proteins
first identified or discovered in the conduct of the Collaboration.

         1.91 "Program Patent Rights" means any Patent Rights that are
Controlled by one or both parties and that Cover any Program Technology or
Program Materials. For clarification, such Program Patent Rights include the
entire scope of all of the claims contained in such Patent Rights.

         1.92 "Program Protein" means a Protein that: (a) (i) is selected by the
Joint Research Committee for research, optimization or preclinical evaluation in
the conduct of the Collaboration, (ii) is Controlled by a party, (iii) either is
in a party's or any of its Affiliates' possession as of the Effective Date or is
discovered or acquired by either or both parties or any of their respective
Affiliates during the Collaboration Term but outside the conduct of the
Collaboration, and (iv) is encoded by a Program Target

                                       13
<PAGE>

or derived from (e.g., by means of amino acid substitutions, additions,
deletions, and C- and N-terminal fusions) a Protein encoded by a Program Target;
(b) is first [**] in the conduct of the Collaboration; or (c) is otherwise
designated a Program Protein by the Joint Management Committee; provided,
however, that in no event shall [**] become a Program Protein unless such
designation is affirmatively agreed to by the Joint Management Committee after
disclosure of the nature of such Pre-existing Obligation by the applicable
party.

         1.93 "Program Target" means one of the three hundred (300) human genes
selected in accordance with Section 2.3 (in each case, identified by the
full-length cDNA or amino acid sequence of the gene or, in the event the gene
has more than one splice variant form, by the full-length cDNA or amino acid
sequence of at least one splice variant form of such gene) and the products
encoded by such gene, including, without limitation, (a) any [**] from such gene
[**], (b) any [**] encoded by any such gene, and (c) any [**] encoded by any
such gene.

         1.94 "Program Technology" means any inventions, information, methods,
know-how, trade secrets or data that (a) are Controlled by a party or jointly by
the parties and (b)(i) relate to the use of Program Antibodies, Program
Antisense Compounds or Program Proteins, (ii) relate to the use of a Program
Target to identify Antibodies or Antisense Compounds acting through such Program
Targets, and the use of such Antibodies or Antisense Compounds in the
Collaboration Field or Veterinary Field, (iii) relate to the use of Protein(s)
encoded by such Program Target in the Collaboration Field or Veterinary Field,
or (iv) are first identified or discovered in the conduct of the Collaboration.
For clarity, Program Technology excludes Program Materials. Notwithstanding the
foregoing, Program Technology does not include any inventions, information,
methods, know-how, trade secrets or data (A) relating to [**] or (B) relating to
[**], in each case that do not [**].

         1.95 "Protein" means a composition comprising a high molecular weight
(i.e., weighing more than [**]), polymer compound composed of a variety of amino
acids joined by peptide linkages, or any fragment thereof.

         1.96 "Receiving Party" has the meaning specified in Section 1.23
hereof.

         1.97 "Regulatory Approval" means any and all approvals (including any
applicable governmental price and reimbursement approvals), licenses,
registrations, or authorizations of any federal, national, multinational, state,
provincial or local regulatory agency, department bureau or other governmental
entity that are necessary for the Manufacture, use, storage, import, transport,
promotion, marketing and sale of a Collaboration Product in the Collaboration
Field in a country or group of countries.

         1.98 "Regulatory Authority" means any governmental authority in a
country or region that regulates the manufacture or sale of pharmaceutical
products, including the FDA and the EMEA, and any successors thereto.

         1.99 "Small Molecule Compound" means a composition comprising a
chemical compound, whether synthetic or naturally-derived, having a molecular
weight of less than [**]. For clarity, Small Molecule Compounds specifically
exclude: (a) Antibodies, (b) Antisense Compounds and (c) Proteins.

         1.100 "Specifications" means, with respect to any Collaboration
Product, the applicable written specifications for Manufacturing, filling,
packaging and warehousing such Collaboration Product in effect at a particular
time and approved by the Joint Development Committee, including, but not limited
to, specifications provided in any Regulatory Approval for such Collaboration
Product.

                                       14
<PAGE>

         1.101 "Target Function Discovery Program" has the meaning specified in
Section 2.1.1 hereof.

         1.102 "Target Function Discovery Program Costs" means the following
amounts:

                  (a) [**] for each Program Target for which Lexicon or its
         Affiliated Subcontractor(s) [**] in the conduct of the Target Function
         Discovery Program;

                  (b) the costs of internal scientific, medical, technical and
         managerial personnel engaged in [**] (together with all associated
         laboratory supplies, facilities and occupancy costs), which costs shall
         be determined based on FTE Costs, unless another basis is otherwise
         agreed upon by the parties in writing; and

                  (c) out-of-pocket expenditures, if any, expressly approved by
         the Joint Management Committee and actually incurred after the
         Effective Date by Lexicon or its Affiliated Subcontractor(s) in
         conducting the Target Function Discovery Program, subject to Section
         2.2.4.

         1.103 "Target Function Discovery Program Term" has the meaning
specified in Section 4.1.2 hereof.

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

         1.105 "Therapeutic Area" means any one of the following areas with
respect to which the Joint Research Committee may approve Level 2 Phenotypic
Analysis of Mutant Mice relating to a Program Target: (a) metabolism and
endocrinology, (b) cardiology, (c) neurology, (d) oncology, (e) immunology, (f)
ophthalmology and (g) any other therapeutic area for which Lexicon subsequently
develops Level 2 Phenotypic Analysis capabilities and focuses its own internal
drug discovery efforts.

         1.106 "Third Party" means any person or entity other than Lexicon,
Organon and their respective Affiliates.

         1.107 "Valid Claim" means a claim of an issued and unexpired patent
which has not been held permanently revoked, unenforceable or invalid by a
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal and that is not
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise.

         1.108 "Veterinary Field" means the diagnosis, prevention, control and
treatment in animals other than humans of any disease or condition.

                        ARTICLE 2. COLLABORATION OVERVIEW

         2.1 General.

                  2.1.1 Objectives. The parties intend to carry out their
         obligations and responsibilities under the Collaboration, consistent
         with the objectives set forth in and the resources allocated to such
         activities in the applicable Plan(s). It is intended that the
         Collaboration will be conducted as a unified collaborative effort with
         activities by the parties carried out primarily at each party's
         respective facilities, and this intent shall be reflected in the
         applicable Plan(s). It is further intended that each party shall
         contribute to Target Function Discovery Program Costs, Biotherapeutics
         Research Program Costs and Development Costs in proportion to the
         applicable Cost Sharing Ratio, and the Plans will be consistent with
         and provide for such proportional contribution. In support of the
         Collaboration, Lexicon will conduct efforts, using its technology

                                       15
<PAGE>

         for the generation and analysis of the phenotypes of Mutant Mice, to
         identify and validate Program Targets with potential utility in the
         Collaboration Field (the "Target Function Discovery Program").

                  2.1.2 Collaboration Term. The Collaboration shall commence on
         the Effective Date and continue until the earlier of (a) the time that
         one or the other party has Opted Out of all Program Targets or (b) the
         expiration or earlier termination of this Agreement pursuant to Article
         16 hereof (the "Collaboration Term").

         2.2 Conduct of Collaboration.

                  2.2.1 Efforts. The Joint Management Committee shall adopt
         project progression guidelines, including criteria for the designation
         of Collaboration Products for Development, the filing of INDs, the
         commencement of Phase 1 Clinical Trials, Phase 2 Clinical Trials and
         Phase 3 Clinical Trials, and the filing of BLAs. The parties shall
         conduct the Collaboration in good scientific manner in accordance with
         such project progression guidelines and in compliance with applicable
         Laws. Each party shall use Diligent Efforts to conduct the activities
         of the Collaboration that are assigned to it in the then-applicable
         Plan(s), and each shall devote sufficient resources to carry out such
         respective activities. While the parties acknowledge and agree that
         neither party guarantees the success of the Collaboration or any
         individual task undertaken thereunder, each party agrees that it will
         perform the activities assigned to it under the Collaboration in a
         professional manner in accordance with the highest industry standards.

                  2.2.2 Resources. Over the course of the Collaboration, tasks
         will be allocated between the parties in accordance with the following
         principles and objectives: (a) Lexicon will be solely responsible for
         conducting the Target Function Discovery Program; (b) except to the
         extent otherwise provided in an applicable Biotherapeutics Research
         Plan, Lexicon will be principally, but not exclusively, responsible for
         conducting Biotherapeutics Research activities involving the generation
         of research Program Antibodies, Program Antisense Compounds and Program
         Proteins and the conduct of in vivo research and proof of concept
         studies (although Organon may also be involved in such activities),
         Organon will be responsible for conducting Biotherapeutics Research
         activities involving [**] and the process development of Program
         Antibodies, Program Antisense Compounds and Program Proteins in
         preparation for Development, and the parties shall be allocated
         responsibility substantially pursuant to the applicable Cost Sharing
         Ratio; (c) each party's participation in Development activities (based
         on FTE utilization and out-of-pocket expenditures) will be
         substantially pursuant to the applicable Cost Sharing Ratio; and (d)
         each party's share of Target Function Discovery Program Costs,
         Biotherapeutics Research Program Costs and Development Costs will be
         substantially pursuant to the applicable Cost Sharing Ratio. Subject to
         and in accordance with the foregoing, particular tasks and
         responsibilities shall be assigned in a manner consistent with each
         party's respective capabilities, capacity and expertise. For purposes
         of this Agreement, "out-of-pocket expenditures" includes, but is not
         limited to, the cost of subcontractors related to the Collaboration,
         subject to Section 2.2.4, but specifically excludes the cost of
         laboratory supplies and facilities and occupancy costs (such as, for
         example, costs for laboratory space, equipment and utilities).

                  2.2.3 FTE Levels. The parties agree to commit to the
         Collaboration the personnel necessary to meet their respective
         responsibilities set forth in each Plan. The Plans shall set forth
         specific FTE levels for each Contract Year to be assigned to specific
         activities.

                  2.2.4 Subcontractors. In accordance with Section 2.2.2, the
         parties will endeavor to optimize the allocation of their resources for
         the conduct of the Collaboration. As necessary and

                                       16
<PAGE>

         in furtherance of the Collaboration, however, (a) Lexicon may enter
         into agreements or subcontracts for Target Function Discovery Program
         activities in accordance with this Section 2.2.4 and (b) either party
         may enter into agreements or subcontracts for Biotherapeutics Research,
         Development or Manufacturing activities in accordance with this Section
         2.2.4; provided that (i) none of the rights of the other party
         hereunder are diminished or otherwise adversely affected as a result of
         such subcontracting, (ii) such party obtains the written approval of
         the other party prior to engaging any subcontractor, which approval
         shall not be unreasonably withheld or delayed (for purposes of which it
         shall not be deemed unreasonable for a party to withhold consent when
         the withholding party is capable of conducting the activities proposed
         to be conducted by such subcontractor and is willing to do so on terms,
         including cost, time and quality, equivalent to those offered by such
         contractor), and (iii) the subcontractor undertakes in writing
         obligations of confidentiality and non-use regarding the other party's
         Confidential Information that are substantially the same as those
         undertaken by Organon and Lexicon pursuant to Article 13 hereof. In the
         event a party performs one or more of its obligations under the
         Collaboration through a subcontractor, then such party shall at all
         times be responsible for the performance of such subcontractor. The
         Joint Management Committee shall decide the allocation of the cost of
         any such agreement between the parties or if the cost is to be borne by
         one party and whether it can be allocated to offset other obligations
         set forth in the applicable Plan(s). Notwithstanding the foregoing
         provisions of this Section 2.2.4, either party may subcontract Target
         Function Discovery Program, Biotherapeutics Research, Development or
         Manufacturing activities to an Affiliate without the other party's
         prior consent (such party, an "Affiliated Subcontractor").

                  2.2.5 Reports. Lexicon shall submit [**] reports to the Joint
         Management Committee detailing its activities under the Target Function
         Discovery Program. Each party shall submit [**] reports to the Joint
         Management Committee, as may be required by the then-current Plan(s),
         detailing its activities under the Biotherapeutics Research Program and
         Development Program. The Joint Management Committee shall use such [**]
         reports to monitor the parties' respective contributions to the
         Collaboration. The Joint Management Committee may amend the Plan(s) as
         necessary to maintain substantial compliance over the course of the
         Collaboration in resources devoted and participation by the parties in
         accordance with the principles and objectives set forth in Section
         2.2.2.

                  2.2.6 Adjustments. If either party believes that the parties
         are not devoting resources and participation to the Collaboration
         substantially in accordance with the principles and objectives set
         forth in Section 2.2.2, such party may submit the matter to the Joint
         Management Committee in writing, providing a reasonably detailed
         description of its reasons for such belief. Taking into account
         historical and prospective participation and resource devotion of the
         Parties during the current [**] and the immediately following [**], the
         Joint Management Committee shall take such steps as may be reasonably
         necessary to ensure substantial compliance in resources devoted and
         participation by the parties in the Collaboration with the principles
         and objectives set forth in Section 2.2.2.

         2.3 Selection of Program Targets. Within [**] after the Effective Date,
the Joint Management Committee shall select, from the list of available genes
provided by Lexicon to Organon prior to the Effective Date, [**] Program Targets
in addition to the two Program Targets separately designated as of the Effective
Date. [**]. In the event that the Joint Management Committee is unable, within
the relevant time periods specified above, to reach agreement with respect to
the designation of the full number of Program Targets contemplated hereby,
Organon shall have the right, during the period of [**] thereafter, to designate
any remaining Program Targets from the relevant list of available genes.

                                       17
<PAGE>

         2.4 Exclusivity. During the Collaboration Term, each party shall work
exclusively with the other party under the terms of this Agreement with respect
to Biotherapeutics Research, Development and commercialization of (a) Program
Antibodies, Program Antisense Compounds and other Antibodies and Antisense
Compounds acting through Program Targets and (b) Program Proteins and other
Protein(s) encoded by Program Targets. For clarity, a Continuing Party and,
subject to Section 10.2, an Opt-out Party shall have no further obligation under
this Section 2.4 with respect to Opt-out Products and Opt-out Targets.

         2.5 Collaboration Records.

                  2.5.1 All work conducted by each party in the course of the
         Collaboration shall be completely and accurately recorded, in
         reasonable detail and in good scientific manner, in separate laboratory
         notebooks. On reasonable notice, and at reasonable intervals, each
         party shall have the right to inspect and copy all such records of the
         other party reflecting Program Technology or work done under the
         Collaboration, to the extent reasonably required to carry out its
         respective obligations and to exercise its respective rights hereunder.
         Notwithstanding the definition of "Confidential Information," all such
         records shall constitute Confidential Information of the party owning
         such records.

                  2.5.2 In order to protect the parties' Patent Rights under
         U.S. law in any inventions conceived or reduced to practice during or
         as a result of the Collaboration, each party agrees to maintain a
         policy that requires its employees to record and maintain all data and
         information developed during the Collaboration in such a manner as to
         enable the parties to use such records to establish the earliest date
         of invention or diligence to reduction to practice. At a minimum, the
         policy shall require such individuals to record all inventions
         generated by them in standard laboratory notebooks or other suitable
         means that are dated and corroborated by non-inventors on a regular,
         contemporaneous basis.

         2.6 Disclosure of Collaboration Results. Subject to restrictions
imposed by a party's confidentiality obligations to any Third Party with respect
to Background Materials or Background Technology, each party will disclose to
the Joint Research Committee or Joint Development Committee, as applicable, all
Program Technology that is discovered, invented or made by such party during the
course of the Collaboration and that is useful in or relates to the
Collaboration, including, without limitation, information regarding Program
Targets, Program Antibodies, Program Antisense Compounds and Program Proteins
and uses thereof and the results of all Biotherapeutics Research and Development
studies and other activities. Such Program Technology will be promptly disclosed
to the Joint Research Committee or Joint Development Committee, as applicable,
with meaningful discoveries or advances being communicated as promptly as
practicable after such information is obtained or its significance is
appreciated. Upon written request by any member of the Joint Research Committee
or Joint Development Committee, as applicable, each party will provide the other
with copies of the raw data generated in the course of the Collaboration, if
reasonably necessary to the other party's work under the Collaboration. Any
information disclosed pursuant to this Section 2.6 may be used by the other
party solely for the purposes of the Collaboration or as otherwise expressly
permitted in this Agreement.

         2.7 Material Transfer. In order to facilitate the Collaboration, either
party may provide to the other party certain Program Materials and Background
Materials Controlled by the supplying party (other than under this Agreement)
for use by the other party in furtherance of the Collaboration. All such Program
Materials shall be considered the Confidential Information of both parties and
shall be subject to the restrictions in Article 13. All Background Materials
shall be considered the Confidential Information of the supplying party and
shall be subject to the restrictions in Article 13. Except as otherwise provided
under this Agreement, all such Program Materials and Background Materials
delivered to the other party

                                       18
<PAGE>

shall remain the sole property of the supplying party, shall be used only in
furtherance of the Collaboration and solely under the control of the other party
and its Affiliates, shall not be used or delivered to or for the benefit of any
Third Party without the prior written consent of the supplying party and shall
not be used in research or testing involving human subjects. The Program
Materials and Background Materials supplied under this Section 2.7 must be used
with prudence and appropriate caution in any experimental work, since not all of
their characteristics may be known. THE PROGRAM MATERIALS AND BACKGROUND
MATERIALS ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT
THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF ANY THIRD PARTY.

         2.8 Third Party Licenses. Either party may propose that the Joint
Management Committee determine whether a Third Party license is required or
beneficial for Biotherapeutics Research of a Program Target or the Development
or commercialization of a Collaboration Product in the Collaboration Field. In
the event the Joint Management Committee determines that such Third Party
license is required or beneficial, the Joint Management Committee shall
determine which party shall be responsible for obtaining such license, as
applicable. In making any such determination provided for in this Section 2.8 as
to the need for or benefit of any such Third Party license, due consideration
shall be given to the advisability of seeking an opinion of counsel and the
efforts required to design around the patents at issue.

                       ARTICLE 3. COLLABORATION MANAGEMENT

         3.1 Collaboration Committees.

                  3.1.1 Joint Management Committee. As soon as practicable after
         the Effective Date, Organon and Lexicon shall establish a Joint
         Management Committee (the "Joint Management Committee") comprised of
         [**] representatives designated by Organon and [**] representatives
         designated by Lexicon, each of whom shall have experience and seniority
         sufficient to enable him or her to make decisions on behalf of the
         party he or she represents; provided that Organon and Lexicon may, by
         mutual agreement, designate an appropriate number of additional
         representatives from time to time.

                  3.1.2 Joint Research Committee. As soon as practicable after
         the Effective Date, Organon and Lexicon shall establish a Joint
         Research Committee (the "Joint Research Committee") comprised of [**]
         representatives designated by Organon and [**] representatives
         designated by Lexicon, each of whom shall have experience and seniority
         sufficient to enable him or her to make decisions on behalf of the
         party he or she represents; provided that Organon and Lexicon may, by
         mutual agreement, designate an appropriate number of additional
         representatives from time to time. From time to time during the
         Collaboration Term, the Joint Research Committee may establish one or
         more Joint Research Project Teams (each, a "Joint Research Project
         Team") to implement various aspects of the applicable Biotherapeutics
         Research Plan. Such teams shall be governed in the same manner and
         subject to the relevant requirements as set forth herein for the Joint
         Research Committee.

                  3.1.3 Joint Development Committee. As soon as practicable
         after the designation of the first Collaboration Product, Organon and
         Lexicon shall establish a Joint Development Committee (the "Joint
         Development Committee") comprised of [**] representatives designated by
         Organon and [**] representatives designated by Lexicon, each of whom
         shall have experience and seniority sufficient to enable him or her to
         make decisions on behalf of the party he or she

                                       19
<PAGE>

         represents; provided that Organon and Lexicon may, by mutual agreement,
         designate an appropriate number of additional representatives from time
         to time. From time to time during the Collaboration Term, the Joint
         Development Committee may establish one or more Joint Development
         Project Teams (each, a "Joint Development Project Team") to implement
         various aspects of the applicable Development Plan(s). Such teams shall
         be governed in the same manner and subject to the relevant requirements
         as set forth herein for the Joint Development Committee.

         3.2 Program Directors. Each party shall appoint one of its designees on
the Joint Management Committee (and who may, but need not also be, a member of
the Joint Research Committee or Joint Development Committee) to serve as a
program director (each, a "Program Director") with responsibility for overseeing
the day-to-day activities of the parties with respect to the Collaboration and
for being the primary point of contact between the parties with respect to the
Collaboration.

         3.3 Replacement of Collaboration Committee Representatives and Program
Directors. Each party shall be free to replace its representative members of any
Collaboration Committee and its Program Director with new appointees who have
authority to act on behalf of such party, on notice to the other party.

         3.4 Responsibilities of Joint Management Committee. The Joint
Management Committee shall be responsible for overseeing and directing the
parties' interaction and performance of their respective obligations under this
Agreement. Without limiting the generality of the foregoing, its duties shall
include:

                  (a) preparing such procedures as may be necessary for the
         operation of the Joint Management Committee, Joint Research Committee,
         and Joint Development Committee, and other committees the Joint
         Management Committee decides to establish to assure the efficient
         operation of the Collaboration;

                  (b) approving strategy for the overall Biotherapeutics
         Research, Development and Manufacturing of Collaboration Products in
         the Collaboration Field and for all other activities conducted by the
         parties hereunder;

                  (c) reviewing and approving the annual Biotherapeutics
         Research Plans proposed by the Joint Research Committee and approving
         the budget therefor and any modifications thereto as recommended by the
         Joint Research Committee;

                  (d) reviewing and approving the annual [**] Development Plans
         proposed by the Joint Development Committee and approving the budgets
         therefor and any modifications thereto as recommended by the Joint
         Development Committee;

                  (e) reviewing and approving the Manufacturing Plans proposed
         by Organon or its Affiliated Subcontractor(s) and approving the budget
         therefor and any modifications thereto as recommended by Organon or
         such Affiliated Subcontractor(s);

                  (f) overseeing the implementation of the Plans and allocation
         of resources and other activities in support of the Collaboration,
         including the matters contemplated by Section 2.2 hereof;

                  (g) establishing criteria for designation of Collaboration
         Products;

                  (h) designating Collaboration Products;

                                       20

<PAGE>

         (i)      facilitating the transfer of technology between the parties
through the Joint Research Committee and the Joint Development Committee;

         (j)      overseeing Patent Prosecution and other matters contemplated
by Article 12 and, if appropriate, delegating responsibility for such matters,
subject to oversight by the Joint Management Committee, to a committee appointed
by the Joint Management Committee for such purpose;

         (k)      evaluating potential licenses from Third Parties, and
determining their utility in the Collaboration (if any);

         (l)      upon the recommendation of the Joint Development Committee,
decisions with respect to the preclinical and clinical Development of
Collaboration Products, including the pursuit of additional indications;

         (m)      developing and overseeing the implementation of a strategy for
the commercialization of Collaboration Products;

         (n)      deciding whether a Collaboration Product should be
commercialized by or through one or more of the parties or their respective
Affiliates as contemplated by Section 8.2;

         (o)      deciding whether a Collaboration Product should be
commercialized by or through a Joint Marketing/Development Collaborator as
contemplated by Section 8.3, monitoring the progress of any negotiations
conducted in accordance with Section 8.3 and approving the terms of any final
agreement arising therefrom;

         (p)      evaluating the progress of the Joint Research Committee and
Joint Development Committee, and on a quarterly basis at a minimum, evaluating
the progress of the Biotherapeutics Research Plan and applicable Development
Plan(s) against their respective timelines;

         (q)      overseeing the maintenance of an inventory of the assets
generated pursuant to the Collaboration;

         (r)      resolving matters within the responsibilities of the Joint
Research Committee and Joint Development Committee as to which the members of
such Collaboration Committee are unable to reach a consensus, and dissolving
each such Collaboration Committee when its duties under the Collaboration are
complete;

         (s)      resolving disagreements between the parties with respect to
the matters contemplated by Article 8 and 10 hereof; and

         (t)      addressing issues and resolving differences that may arise
between the parties.

         The Joint Management Committee shall not have the power to amend the
terms of or waive compliance with this Agreement.

         3.5      Responsibilities of Joint Research Committee. The Joint
Research Committee shall be responsible for preparing for approval by the Joint
Management Committee and implementing the applicable annual Biotherapeutics
Research Plan, with the objective of expeditiously identifying Program
Antibodies, Program Antisense Compounds and Program Proteins meeting the
criteria for designation as Collaboration Products. Without limiting the
generality of the foregoing, its duties shall include:

                                       21
<PAGE>

         (a)      overseeing the implementation of the Target Function Discovery
Program;

         (b)      establishing criteria for the selection of Program Antibodies,
Program Antisense Compounds and Program Proteins;

         (c)      selecting Program Antibodies, Program Antisense Compounds and
Program Proteins for characterization and optimization in the conduct of the
Collaboration;

         (d)      monitoring, reviewing and reporting on the progress of the
Biotherapeutics Research Program;

         (e)      recommending Program Antibodies, Program Antisense Compounds
and Program Proteins for designation by the Joint Management Committee as
Collaboration Products; and

         (f)      performing such other activities as are contemplated by the
terms of this Agreement.

         The Joint Research Committee shall report its activities and make
proposals to the Joint Management Committee at least [**], but more frequently
as appropriate. The Joint Research Committee shall not have the power to amend
or waive compliance with this Agreement.

         3.6      Responsibilities of Joint Development Committee. The Joint
Development Committee shall be responsible for preparing for approval by the
Joint Management Committee and implementing the applicable annual [**]
Development Plan(s). Without limiting the generality of the foregoing, its
duties shall include:

         (a)      proposing and overseeing the Development strategy of
Collaboration Products;

         (b)      overseeing the filing of INDs with the FDA or other Regulatory
Authority by the designated party pursuant to Section 6.4.1;

         (c)      establishing advisory committees comprised of scientific,
medical or other appropriate experts not affiliated with either party to advise
the Joint Development Committee on matters related to the preclinical and
clinical Development of Collaboration Products;

         (d)      approving the protocol of any clinical trials of Collaboration
Products;

         (e)      overseeing the clinical trials of Collaboration Products;

         (f)      providing all appropriate information regarding the progress
of the Development Plan(s) to the Joint Management Committee in advance of each
quarterly Joint Management Committee meeting;

         (g)      overseeing the filing of BLAs with the FDA or other Regulatory
Authority by the designated party pursuant to Section 6.4.1; and

         (h)      performing such other activities as are contemplated by the
terms of this Agreement.

                                       22
<PAGE>

         The Joint Development Committee shall report its activities and make
proposals to the Joint Management Committee at least [**], but more frequently
as appropriate. The Joint Development Committee shall not have the power to
amend or waive compliance with this Agreement.

         3.7      Meetings of Collaboration Committees. As applicable, each
Collaboration Committee shall meet at least [**], and more frequently as the
parties deem appropriate, on such dates and at such times as the parties shall
agree, on [**] written notice to the other party unless such notice is waived by
the parties. The first meeting of the Joint Management Committee shall take
place within [**] after the Effective Date, at Lexicon's facility in The
Woodlands, Texas, United States of America. Each Collaboration Committee may
convene or be polled or consulted from time to time by means of
telecommunications, videoconferences or correspondence, as deemed necessary or
appropriate by the parties. To the extent that meetings are held in person, they
shall alternate between the offices of the parties unless the parties otherwise
agree.

         3.8      Decisions.

                  3.8.1    Quorum; Voting. A quorum for a meeting of a
         Collaboration Committee shall require the presence of at least one
         Lexicon member (or designee) and at least one Organon member (or
         designee) in person or by telephone. All decisions made or actions
         taken by a Collaboration Committee shall be made unanimously by its
         members, with the Lexicon members cumulatively having one vote and the
         Organon members cumulatively having one vote; provided that, in the
         event the members of the Joint Research Committee are unable to reach
         unanimity as to a decision under [**] with respect to [**], then either
         party may, in its sole discretion, [**].

         3.8.2    Dispute Resolution.

                  3.8.2.1  In the event that unanimity cannot be reached by the
         Joint Research Committee, or Joint Development Committee, as the case
         may be, with respect to a matter that is a subject of its
         decision-making authority, respectively, then the matter shall be
         referred for further review and resolution to the Joint Management
         Committee. In the event that unanimity cannot be reached by the Joint
         Management Committee with respect to a matter that is a subject of its
         decision-making authority, then the matter shall be referred for
         further review and resolution to the Chief Executive Officer of
         Organon, or such other similar position designated by Organon from time
         to time, and the Chief Executive Officer of Lexicon, or such other
         similar position designated by Lexicon from time to time. The
         designated officers of each party shall use reasonable efforts to
         resolve the matter within [**] after the matter is referred to them.

                  3.8.2.2  If the designated officers cannot resolve any matter
         pursuant to Section 3.8.2.1 within such [**] period, the matter shall
         be referred to a Third Party arbitrator or arbitrators, in accordance
         with the following procedures, whose decision shall be [**]. The
         parties shall attempt to mutually agree upon a single independent Third
         Party arbitrator (who shall be a professional with appropriate
         experience in the subject matter at issue in such disagreement) within
         [**] after the initial referral of such matter to the designated
         officers. If the parties are unable to mutually agree upon one such
         person, then each party shall appoint one independent Third Party
         professional with appropriate experience in the subject matter at issue
         in such disagreement prior to the expiration of such [**] period, and
         within [**] after the initial referral of such matter to the designated
         officers, such person(s) shall select a single independent Third Party
         arbitrator, who shall be a professional with appropriate experience in
         the subject matter at issue in such disagreement. Each party shall
         present all information presented pursuant

                                       23
<PAGE>

         to Section 3.8.2.1 and all other information as such party reasonably
         desires regarding such disagreement. Within [**] after the initial
         referral of such matter to the designated officers, the arbitrator
         shall provide written notice to the parties regarding his or her
         determination regarding such disagreement.

         3.9      Administration. The chairperson of each Collaboration
Committee shall be designated annually on an alternating basis between the
parties. The initial chairperson shall be selected by Organon. The party not
designating the chairperson shall designate one of its representative members as
secretary to such Collaboration Committee for such year. The chairperson shall
be responsible for calling meetings of such Collaboration Committee, sending
notices of meetings to all members and for leading such meetings.

         3.10     Minutes. Within [**] after each Collaboration Committee
meeting, the secretary of such Collaboration Committee shall prepare and
distribute minutes of the meeting, which shall provide a description in
reasonable detail of the discussions had at the meeting and a list of any
actions, decisions or determinations approved by such Collaboration Committee.
The secretary shall be responsible for circulation of all draft and final
minutes. Draft minutes shall be first circulated to the chairperson, edited by
the chairperson and then circulated in final draft form to all members of such
Collaboration Committee sufficiently in advance of the next meeting to allow
adequate review and comment prior to the meeting. Minutes shall be approved or
disapproved, and revised as necessary, at the next meeting. Final minutes shall
be distributed to the members of such Collaboration Committee.

         3.11     Term. The Joint Management Committee shall exist until the
termination orexpiration of the Collaboration Term. Each other Collaboration
Committee shall exist until the termination or expiration of the Collaboration
Term unless earlier dissolved by the Joint Management Committee following the
completion of its duties under the Collaboration.

         3.12     Expenses. Each party shall be responsible for all travel and
related costs for its representatives to attend meetings of, and otherwise
participate on, a Collaboration Committee.

                  ARTICLE 4. TARGET FUNCTION DISCOVERY PROGRAM

         4.1      General.

                  4.1.1    Generation and Analysis of Mutant Mice. In the Target
         Function Discovery Program, Lexicon shall use Diligent Efforts to
         complete (a) the development and Level 1 Phenotypic Analysis of Mutant
         Mice for each Program Target and (b) Level 2 Phenotypic Analysis of
         such lines of Mutant Mice that displayed a phenotype suggestive, as
         determined by the Joint Research Committee, of the potential utility of
         the corresponding Program Target in the Collaboration Field.

                  4.1.2    Target Function Discovery Program Term. The Target
         Function Discovery Program shall continue until the end of the fourth
         year of the Collaboration Term on May 16, 2009 and all work under the
         Target Function Discovery Program shall be completed by that date (the
         "Target Function Discovery Program Term").

         4.2      Annual Budget. Lexicon shall prepare and the Joint Management
Committee shall approve the annual budget for the Target Function Discovery
Program for every Contract Year (other than the First Contract Year) during the
Target Function Discovery Program Term at least [**] prior to the commencement
of such Contract Year. The annual budget for the Target Function Discovery
Program for the First Contract Year shall be prepared by Lexicon and approved by
the Joint Management

                                       24
<PAGE>

Committee within [**] after the Effective Date. Each such annual budget shall be
in writing and shall set forth with reasonable specificity expected timelines
for the development of Mutant Mice and the conduct of Level 1 Phenotypic
Analysis and Level 2 Phenotypic Analysis, together with associated Target
Function Discovery Program Costs. The Joint Research Committee may agree on
modifications, and recommend that the Joint Management Committee approve such
modifications, to the provisions of any such annual budget at any time.

         4.3      Reporting and Oversight of Target Function Discovery Program
Progress. Lexicon shall keep the Joint Research Committee fully informed of the
progress of its activities under the Target Function Discovery Program. At a
minimum, within [**] following the last day of each [**] during the Target
Function Discovery Program Term, Lexicon shall prepare, and provide to the Joint
Research Committee, a reasonably detailed written summary report which shall
describe (a) the work performed by Lexicon during the preceding [**], including,
without limitation, the status of Lexicon's development of Mutant Mice and the
conduct of Level 1 Phenotypic Analysis and Level 2 Phenotypic Analysis (or only
Level 1 Phenotypic Analysis if Level 2 Phenotypic Analysis has not been
performed) of such Mutant Mice, and (b) identify phenotypes identified through
such Level 1 Phenotypic Analysis and Level 2 Phenotypic Analysis that are
suggestive, in Lexicon's good faith scientific judgment, of the potential
utility of the corresponding Program Targets in the Collaboration Field. In
addition, Lexicon shall provide the Joint Research Committee with access to all
data, information and conclusions from such Level 1 Phenotypic Analysis and/or
Level 2 Phenotypic Analysis of Mutant Mice, in each case promptly following the
generation thereof, so as to enable the Joint Research Committee to make its own
determinations as to which Mutant Mice exhibit a phenotype suggestive of the
potential utility of the corresponding Program Target in the Collaboration
Field.

         4.4      Third Party Licenses. Notwithstanding anything herein to the
contrary, but subject to the requirement of unanimously agreed budgets set forth
in Section 4.2, Lexicon shall be responsible for the licensing of technologies
or patents owned or controlled by Third Parties that are required or beneficial
for the conduct of the Target Function Discovery Program. For the avoidance of
doubt, no such technologies or patents shall be used by Lexicon in the Target
Function Discovery Program unless the Joint Management Committee has agreed and
consented to the financial implications of such use.

                  ARTICLE 5. BIOTHERAPEUTICS RESEARCH PROGRAM

         5.1      General. The parties shall jointly pursue Biotherapeutics
Research relating to Program Targets that have not become Opt-out Targets under
the direction of the Joint Research Committee in accordance with annual
Biotherapeutics Research Plans. Unless otherwise agreed by the Joint Management
Committee, (a) Lexicon will be principally, but not exclusively, responsible for
conducting Biotherapeutics Research activities involving the generation of
research Program Antibodies, Program Antisense Compounds and Program Proteins
and the conduct of in vivo research and proof of concept studies (although
Organon may also be involved in such activities) and (b) Organon will be
responsible for conducting Biotherapeutics Research activities involving the
generation of human or humanized Program Antibodies and the process development
of Program Antibodies, Program Antisense Compounds and Program Proteins in
preparation for Development.

         5.2      Biotherapeutics Research Plans.

                  5.2.1    The Joint Research Committee shall prepare and the
         Joint Management Committee shall approve the Biotherapeutics Research
         Plan for every Contract Year (other than the First Contract Year)
         during the Collaboration Term at least [**] prior to the commencement
         of such Contract Year. The Biotherapeutics Research Plan for the First
         Contract Year shall be prepared by the Joint Research Committee and
         approved by the Joint Management Committee

                                       25
<PAGE>

         within [**] after the Effective Date. The responsibility of the Joint
         Research Committee to prepare annual Biotherapeutics Research Plans
         shall terminate upon the agreement of the parties to cease further
         Biotherapeutics Research regarding Program Targets.

                  5.2.2    Each annual Biotherapeutics Research Plan shall be in
         writing and shall set forth with reasonable specificity the
         Biotherapeutics Research objectives, priorities, activities,
         milestones, budgets, personnel requirements, other resources and
         allocations of responsibilities between the parties for the period
         covered by such annual Biotherapeutics Research Plan in a manner
         consistent with the terms of this Agreement, including, without
         limitation, the objectives set forth in Section 2.1.1 and the terms and
         conditions set forth in Section 2.2. The Biotherapeutics Research Plans
         shall cover all aspects of Biotherapeutics Research relating to the
         generation of Antibodies, Antisense Compounds and Proteins relating to
         Program Targets that have not become Opt-out Targets and the
         identification, characterization, selection, optimization and research
         of Program Antibodies, Program Antisense Compounds and Program Proteins
         prior to their designation as Collaboration Products, and shall
         include, with reasonable specificity, the Biotherapeutics Research
         activities to be performed by each party and the Biotherapeutics
         Research activities, if any, to be performed by subcontractors.

                  5.2.3    The Joint Research Committee may agree on
         modifications, and recommend that the Joint Management Committee
         approve such modifications, to the provisions of any Biotherapeutics
         Research Plan at any time. Without limiting the foregoing, the Joint
         Research Committee shall conduct a [**] review of each Biotherapeutics
         Research Plan and shall recommend that the Joint Management Committee
         approve such modifications to the applicable Biotherapeutics Research
         Plan as the Joint Research Committee may deem to be appropriate as a
         result of such review.

                        ARTICLE 6. DEVELOPMENT PROGRAMS

         6.1      General. The parties shall jointly pursue the Development of
Collaboration Products in the Collaboration Field under the direction of the
Joint Development Committee in accordance with annual [**] Development Plans.
Notwithstanding the foregoing, the Joint Development Committee shall consider,
and make recommendations to the Joint Management Committee regarding all other
commercially reasonable arrangements for the Development of Collaboration
Products, including proposals from one or both of the parties and proposals from
one or more Third Parties. At its option, each party may designate an Affiliated
Subcontractor to carry out its responsibilities under the Development Plan(s)
relating to any Collaboration Product, on a Collaboration
Product-by-Collaboration Product basis.

         6.2      Designation of Collaboration Products. The Joint Management
Committee shall adopt criteria for the designation of Program Antibodies,
Program Antisense Compounds and Program Proteins as Collaboration Products,
which criteria shall include, without limitation, (a) identification and
characterization by the parties of a chimeric, humanized or human Program
Antibody, a Program Antisense Compound or a human Program Protein, as
applicable, that is suitable for the initiation of preclinical studies designed
to support the filing of an IND; and (b) achievement of appropriate results in
proof of concept studies conducted in the Biotherapeutics Research Program. The
Joint Management Committee shall be responsible for designating Collaboration
Products in accordance with Section 3.4.

         6.3      Development Plans.

                  6.3.1    Following the first Contract Year in which the
         parties designate a Collaboration Product, the Joint Development
         Committee shall prepare and the Joint Management Committee

                                       26
<PAGE>

         shall approve a Development Plan for each Collaboration Product for
         every Contract Year at least [**] prior to the commencement of such
         Contract Year. In the first Contract Year in which the parties
         designate a Collaboration Product, the Joint Development Committee
         shall prepare the first Development Plan for such Collaboration Product
         as soon as commercially reasonable after its designation. The
         responsibility of the Joint Development Committee to prepare a
         Development Plan for a Collaboration Product shall terminate upon the
         earlier of (a) a party Opting Out of further Development of such
         Collaboration Product or (b) the agreement of the parties to cease
         further Development of such Collaboration Product.

                  6.3.2    Each Development Plan shall be in writing and shall
         set forth with reasonable specificity the Development objectives,
         priorities, activities, milestones, budgets, personnel requirements,
         other resources and allocations of responsibilities between the parties
         for the period covered by such Development Plan in a manner consistent
         with the terms of this Agreement, including, without limitation, the
         objectives set forth in Section 2.1.1 and the terms and conditions set
         forth in Section 2.2. The Development Plans shall cover all aspects of
         Development relating to Collaboration Products, and shall include, with
         reasonable specificity, the Development activities to be performed by
         each party and the Development activities, if any, to be performed by
         subcontractors.

                  6.3.3    The Joint Development Committee may agree on
         modifications, and recommend that the Joint Management Committee
         approve such modifications, to the provisions of any Development Plan
         at any time.

         6.4      Regulatory Matters.

                  6.4.1    Regulatory Responsibility. The preparation, filing,
         prosecution and maintenance of INDs, BLAs and other regulatory filings
         required to be filed with any Regulatory Authority with regard to each
         Collaboration Product will be in the name of and the responsibility of
         the party so designated in the Development Plan covering such
         Collaboration Product. The party so designated in the Development Plan
         covering such Collaboration Product shall oversee, monitor and
         coordinate all regulatory actions, communications and filings with and
         submissions, including filings and submissions of supplements and
         amendments thereto, to Regulatory Authorities with respect to each
         Collaboration Product, shall give the other party a reasonable
         opportunity for prior review of and comment on all such substantive
         communications, filings and submissions and shall incorporate those of
         such comments as can reasonably be incorporated into such
         communications, filings and submissions.

                  6.4.2    Regulatory Meetings and Correspondence. The party so
         designated in the Development Plan covering a particular Collaboration
         Product shall be responsible for interfacing, corresponding and meeting
         with Regulatory Authorities with respect to such Collaboration Product,
         and the other party will promptly refer any contacts or questions from
         Regulatory Authorities to the party so designated. Both parties will be
         entitled to attend all meetings and, if reasonably practicable,
         telephone conferences with Regulatory Authorities.

                  6.4.3    Reporting Adverse Drug Reactions. The parties will
         develop and agree upon safety data exchange procedures governing the
         collection, investigation, reporting, and exchange of information
         concerning Adverse Drug Reactions, product quality and product
         complaints involving Adverse Drug Reactions, sufficient to permit each
         party to comply with its legal obligations, including to the extent
         applicable, those obligations contained in ICH guidelines E2A, E2B and
         E2C and the FDC Act. The safety data exchange procedures will be
         promptly updated if required by changes in the Law or by agreement
         between the parties. The party so

                                       27
<PAGE>

         designated in the applicable Development Plan will be responsible for
         reporting all Adverse Drug Reactions to the appropriate Regulatory
         Authorities in the applicable Region(s) in accordance with applicable
         Laws.

                      ARTICLE 7. MANUFACTURING AND SUPPLY

         7.1      Designation of Manufacturing Party.

                  7.1.1    Manufacture of Collaboration Products by Organon.

                           7.1.1.1  Manufacture of Collaboration Products for
                  Development. Unless otherwise agreed by the Joint Management
                  Committee, Organon or its Affiliated Subcontractor(s) shall
                  Manufacture and supply all quantities of a Collaboration
                  Product necessary for Development; provided that Organon may
                  decline to Manufacture and supply such quantities of a
                  Collaboration Product for any reason by giving Lexicon written
                  notice to such effect no later than [**] after the Joint
                  Management Committee's designation of such Collaboration
                  Product in accordance with Section 3.4.

                           7.1.1.2  Manufacture of Collaboration Products for
                  Commercialization. Unless otherwise agreed by the Joint
                  Management Committee within [**] after the commencement of the
                  first Phase 2 Clinical Trial with respect to any Collaboration
                  Product, the parties shall enter into a Manufacturing and
                  Supply Agreement substantially in the form attached to this
                  Agreement as Exhibit 7.1.1.2 under which Organon or its
                  Affiliated Subcontractor(s) shall be responsible for the
                  Manufacture and supply all quantities of such Collaboration
                  Product necessary for commercialization; provided that Organon
                  may decline to enter into such agreement for any reason by
                  giving Lexicon written notice to such effect no later than
                  [**] after the expiration of such [**] period.

                  7.1.2    Manufacture of Collaboration Products by Third
         Parties. In the event that the Joint Management Committee determines
         that it is in the best interests of the Collaboration for any one or
         more Manufacturing activities with respect to a Collaboration Product
         to be undertaken by an identified Third Party (whether as a result of a
         decision by Organon in accordance with Section 7.1.1 not to undertake
         such Manufacturing activities or otherwise), the negotiations with such
         Third Party relating to such Manufacturing activities shall be led by
         [**]; provided that [**] (a) shall keep [**] informed of the substance
         and status of such negotiations, and allow [**] to participate in such
         negotiations and (b) shall take into account in such negotiations the
         reasonable commercial interests of [**] and the best interests of the
         Collaboration. The parties each agree to grant such (sub)licenses under
         their respective Background Materials, Background Technology, Program
         Materials and Program Technology to any such Third Party as may be
         reasonably necessary for such Third Party to manufacture the
         Collaboration Product.

                  7.1.3    Manufacture of Lexicon Products.

                           7.1.3.1  Manufacture of Lexicon Products for
                  Development. If requested by Organon within [**] following
                  Organon's Opting Out with respect to a Collaboration Product
                  Manufactured by Organon or its Affiliated Subcontractor(s) for
                  Development pursuant to Section 7.1.1.1, Lexicon shall enter
                  into good faith negotiations with Organon, for a period of
                  [**] following such request, with respect to the continued
                  manufacture of such Lexicon Product by Organon or its
                  Affiliated Subcontractor(s) for Development. In the event
                  Lexicon and Organon or its Affiliated Subcontractor(s) do not

                                       29
<PAGE>

                  enter into a definitive agreement with respect to such
                  manufacturing activities within such [**] period, Lexicon will
                  be free, at any time thereafter, to enter into negotiations
                  and agreements with one or more Third Parties for the
                  manufacture and supply of such Lexicon Product. Nothing in
                  this Section 7.1.3.1 shall be deemed to affect the rights and
                  obligations of the parties under Section 10.3.3.

                           7.1.3.2  Manufacture of Lexicon Products for
                  Commercialization. Within h [**] after the commencement of the
                  first Phase 2 Clinical Trial with respect to any Lexicon
                  Product which is manufactured for Development by Organon or
                  its Affiliated Subcontractor(s) pursuant to Section 7.1.3.1,
                  Lexicon shall offer to Organon the opportunity to manufacture
                  such Lexicon Product for commercialization. If requested by
                  Organon within [**] of such offer, Lexicon shall enter into
                  good faith negotiations with Organon, for a period of [**]
                  following such request, with respect to the continued
                  manufacture of such Lexicon Product by Organon or its
                  Affiliated Subcontractor(s) for commercialization. In the
                  event Lexicon and Organon or its Affiliated Subcontractor(s)
                  do not enter into a definitive agreement with respect to such
                  manufacturing activities within such [**] period, Lexicon will
                  be free, at any time thereafter, to enter into negotiations
                  and agreements with one or more Third Parties for the
                  manufacture and supply of such Lexicon Product [**]. Nothing
                  in this Section 7.1.3.2 shall be deemed to affect the rights
                  and obligations of the parties under Section 10.3.3.

         7.2      Manufacturing Plans. With respect to all Collaboration
Products that Organon or its Affiliated Subcontractor(s) Manufactures pursuant
to this Article 7, Organon shall be responsible for implementing all aspects of
Manufacturing necessary for Development under the direction and oversight of the
Joint Management Committee, as set forth in Section 3.4, and in accordance with
a manufacturing plan for the applicable Collaboration Product(s) in the
Collaboration Field proposed by Organon and subject to review and approval by
the Joint Management Committee, which manufacturing plan shall describe the
specific Manufacturing activities to be undertaken by Organon, shall include a
general description of the personnel and other resources to be used in the
implementation thereof and shall set forth a unanimously agreed budget for such
activities (each, as may be modified or amended and approved from time to time
in accordance with this Agreement, a "Manufacturing Plan").

         7.3      Orders; Forecasts for Clinical Requirements. If Organon or its
Affiliated Subcontractor(s) is the designated manufacturer for a particular
Collaboration Product as provided in Section 7.1.1, the party primarily
responsible for running a particular clinical trial hereunder will be
responsible for generating periodic [**] forecasts of the anticipated
requirements for such Collaboration Product that is the subject of such trial
and updates of such forecast not less than [**] thereafter, such forecasts and
updates to be promptly provided to Organon or its Affiliated Subcontractor. Not
less than [**] prior to the required delivery of a specified quantity of
Collaboration Product for such purposes, the Joint Development Committee shall
meet and agree on a demand order for the Collaboration Product so required;
provided, that if the total amount of any demand order for delivery in any [**]
period exceeds [**] of the most recent forecast for such period, Organon shall
use Diligent Efforts, but shall have no obligation, to deliver the quantities in
excess of [**] of the estimated amount for such period. Organon shall ship the
Collaboration Product to the facility or facilities designated by the party with
responsibility for distribution of clinical requirements of the Collaboration
Product at the times set forth in the relevant demand order. For clarity, this
paragraph shall not apply in the event that Organon or its Affiliated
Subcontractor is not the designated manufacturer for such Collaboration Product.

         7.4      Certain Covenants. Organon and its Affiliated Subcontractor(s)
agree and covenant that, in the event that it Manufactures a Collaboration
Product pursuant to Section 7.1.1, it will (a) use Diligent Efforts to avoid
shortfalls of supply based on the forecasts provided to it in accordance with
Section 7.3,

                                       29
<PAGE>

shall promptly notify the parties in the event it becomes aware of any probable
shortfall and shall use Diligent Efforts to remedy any shortfall of supply as
soon as practicable; (b) be responsible for Manufacturing, filling, packaging
and warehousing of the Collaboration Product in conformity with applicable cGMP
Requirements [**], and in accordance, in all material respects, with all other
applicable Law; (c) maintain or cause to be maintained all records necessary and
appropriate to demonstrate compliance with applicable cGMP Requirements and the
applicable Specifications; and (d) grant Lexicon the right, on reasonable
advance notice and during normal business hours during the term of this
Agreement, to have its personnel or representatives with quality control or
quality assurance responsibilities inspect and audit the facilities and
operations directly related to the Manufacture and supply of the Collaboration
Product in order to confirm compliance with the covenants contained in this
Section 7.4; provided that the foregoing inspection and audit right shall be
limited to [**] and [**] per visit; and provided, further, that such personnel
or representatives shall be subject to Organon's prior approval, such approval
not to be unreasonably withheld.

         7.5      Third Party Licenses. Notwithstanding anything herein to the
contrary but subject to the requirement of unanimously agreed budgets set forth
in Section 7.2, in the event that Organon or its Affiliated Subcontractor(s)
Manufactures a Collaboration Product, Organon shall be responsible for the
licensing of technologies or patents owned or controlled by Third Parties that
are required or beneficial for the Manufacturing of such Collaboration Product.
For the avoidance of doubt, no such technologies or patents shall be used by
Organon in the Development or Manufacturing of any Product unless the Joint
Management Committee has agreed and consented to the financial implications of
such use.

                          ARTICLE 8. COMMERCIALIZATION

         8.1      General. Subject to the provisions of this Article 8, the
Joint Management Committee shall consider all commercially reasonable
arrangements for the commercialization of Collaboration Products, including
proposals from one or both of the parties and proposals from one or more Third
Parties.

         8.2      Commercialization by the Parties or Their Affiliates. In the
event the Joint Management Committee determines that a particular Collaboration
Product should be commercialized entirely by or through one or more of the
parties or their respective Affiliates throughout the Territory or in one or
more particular countries or regions, then subject to the parties' entry, in
their respective sole discretion, into a definitive agreement with respect
thereto with the applicable party, parties or Affiliate(s):

                  (a)      the parties shall grant to each such applicable
         party, parties or Affiliate(s) appropriate rights and licenses under
         their respective rights in (i) the Lexicon Background Materials, the
         Lexicon Background Technology, the Organon Background Materials and the
         Organon Background Technology, including, without limitation, any
         Patent Rights Controlled by either party Covering the foregoing, and
         (ii) the Program Intellectual Property, in each case to Develop, make,
         have made, import, use, have used, offer for sale, sell and have sold
         Collaboration Products in the Collaboration Field throughout the
         Territory or in such country, countries or region(s), as applicable;
         and

                  (b)      each party shall take, or cause to be taken, all
         actions reasonably necessary to consummate and make effective any such
         agreement with such party, parties or Affiliate(s).

         8.3      Commercialization by Joint Marketing/Development
Collaborators. In the event the Joint Management Committee determines that a
particular Collaboration Product should be commercialized entirely by or through
one or more Third Parties (each, a "Joint Marketing/Development Collaborator")
throughout the Territory or in one or more particular countries or regions, then
subject to the parties'

                                       30
<PAGE>

entry, in their respective sole discretion, into a definitive agreement with
respect thereto with the applicable Joint Marketing/Development Collaborator(s):

                  (a)      the parties shall grant to each such Joint
         Marketing/Development Collaborator(s) appropriate rights and licenses
         under their respective rights in (i) the Lexicon Background Materials,
         the Lexicon Background Technology, the Organon Background Materials and
         the Organon Background Technology, including, without limitation, any
         Patent Rights Controlled by either party Covering the foregoing, and
         (ii) the Program Intellectual Property, in each case to Develop, make,
         have made, import, use, have used, offer for sale, sell and have sold
         Collaboration Products in the Collaboration Field throughout the
         Territory or in such country, countries or region(s), as applicable;
         and

                  (b)      each party shall take, or cause to be taken, all
         actions reasonably necessary to consummate and make effective any such
         agreement with such Joint Marketing/Development Collaborator.

         8.4      Option to Co-Commercialize Collaboration Products. In the
event that, within [**], there remain one or more countries with respect to
which the parties have not entered into a definitive agreement pursuant to
Section 8.2 or 8.3 for the commercialization of a Collaboration Product in the
Collaboration Field (or, if applicable, if the parties have not entered into a
definitive agreement pursuant to Section 8.2 or 8.3 with respect to the
commercialization of a Collaboration Product in the Collaboration Field in any
country within the Territory), either party may provide the other party with
written notice of its offer to enter into an agreement in the form attached
hereto as Exhibit 8.4 for the joint commercialization of such Collaboration
Product in the Collaboration Field in all countries within the Territory for
which the parties have not entered a definitive agreement pursuant to Section
8.2 or 8.3. The other party shall have the right, within the period of [**]
following such notice, to accept such offer and enter into such joint
commercialization agreement. In the event the other party fails to accept such
offer and enter into such joint commercialization agreement within such [**]
period, such other party shall be deemed to have Opted Out with respect to such
Collaboration Product pursuant to Section 10.1.1 or 10.1.2, as applicable.

         8.5      Notice of Adverse Reactions. Each party shall advise the other
as promptly as reasonably practical by facsimile or overnight delivery service
addressed to the attention of its Vice President, Regulatory Affairs (or
equivalent), of any Adverse Drug Reaction that has been brought to that party's
attention.

         8.6      Product Recall. In the event that either party determines that
an event, incident or circumstance has occurred that may result in the need for
a recall or other removal of any Collaboration Product, or any lot or lots
thereof, from a market in any Region, it shall advise and consult with the other
party with respect thereto. The owner of the relevant Regulatory Approval (or
proposed Regulatory Approval), determined in accordance with Section 6.4, shall
make the final determination to recall or otherwise remove the Collaboration
Product or any lot or lots thereof from the market.

                          ARTICLE 9. GRANTS OF RIGHTS

         9.1      Grants of Research Licenses.

                  9.1.1    By Lexicon. Subject to the terms of this Agreement
         and any applicable [**], during the Collaboration Term, Lexicon hereby
         grants to Organon and its Affiliates, within the Territory, (a) a
         non-exclusive right and license (without any right to sublicense,
         except as set forth below) under Lexicon's rights in the Lexicon
         Background Materials and the Lexicon

                                       31
<PAGE>

         Background Technology, including, without limitation, any Patent Rights
         Controlled by Lexicon Covering the foregoing, and (b) a co-exclusive
         right and license (without any right to sublicense, except as set forth
         below) under Lexicon's rights in the Program Intellectual Property, in
         each case to (i) generate Antibodies, Antisense Compounds and Proteins
         relating to Program Targets that have not become Lexicon Opt-out
         Targets and (ii) identify, characterize, select, optimize and research
         Program Antibodies, Program Antisense Compounds and Program Proteins
         relating to such Program Targets prior to their designation as
         Collaboration Products, in each case in the conduct of the
         Collaboration. Such right and license shall include the right to grant
         sublicenses to Affiliates of Organon and to Third Parties that are
         approved by the Joint Management Committee.

                  9.1.2    By Organon. Subject to the terms of this Agreement
         and any applicable [**], during the Collaboration Term, Organon hereby
         grants to Lexicon and its Affiliates, within the Territory, (a) a
         non-exclusive right and license (without any right to sublicense,
         except as set forth below) under Organon's rights in the Organon
         Background Materials and the Organon Background Technology, including,
         without limitation, any Patent Rights Controlled by Organon Covering
         the foregoing, and (b) a co-exclusive right and license (without any
         right to sublicense, except as set forth below) under Organon's rights
         in the Program Intellectual Property, in each case to (i) generate
         Antibodies, Antisense Compounds and Proteins relating to Program
         Targets that have not become Organon Opt-out Targets and (ii) identify,
         characterize, select, optimize and research Program Antibodies, Program
         Antisense Compounds and Program Proteins relating to such Program
         Targets prior to their designation as Collaboration Products, in each
         case in the conduct of the Collaboration. Such right and license shall
         include the right to grant sublicenses to Affiliates of Lexicon and to
         Third Parties that are approved by the Joint Management Committee.

                  9.1.3    Restrictions on Clinical Development of Collaboration
         Products. Neither party nor their respective Affiliates shall
         administer to humans any Program Antibody, Program Antisense Compound,
         Program Protein or Collaboration Product or Opt-out Product that
         incorporates or is derived from any Program Antibody, Program Antisense
         Compound or Program Protein, unless and until (and then only to the
         extent that) such party has received a license under Section 9.2 for
         the clinical Development of such Collaboration Product, Opt-out
         Product, Program Antibody, Program Antisense Compound or Program
         Protein.

         9.2      Grants of Development and Commercialization Licenses.

                  9.2.1    By Lexicon.

                           9.2.1.1  Development of Collaboration Products in
                  Collaboration Field. Subject to the terms of this Agreement
                  and any applicable [**], Lexicon hereby grants to Organon and
                  its Affiliates, within the Territory, a co-exclusive right and
                  license, with the limited right to sublicense (as set forth
                  below), under Lexicon's rights in (a) the Lexicon Background
                  Materials and the Lexicon Background Technology, including,
                  without limitation, any Patent Rights Controlled by Lexicon
                  Covering the foregoing, and (b) the Program Intellectual
                  Property, in each case to Develop Collaboration Products in
                  the Collaboration Field, including rights to make, have made,
                  import, use, or have used any Collaboration Products in the
                  Collaboration Field solely for purposes of such Development.
                  Such right and license shall include the right to grant
                  sublicenses to Affiliates of Organon and to Third Parties that
                  are approved by the Joint Management Committee.

                                       32
<PAGE>

                           9.2.1.2  Development and Commercialization of Organon
                  Products in Collaboration Field. Subject to the terms of this
                  Agreement and any applicable [**], Lexicon hereby grants to
                  Organon and its Affiliates, within the Territory, an exclusive
                  right and license, with the right to sublicense, under
                  Lexicon's rights in (a) the Lexicon Background Materials and
                  the Lexicon Background Technology, including, without
                  limitation, any Patent Rights Controlled by Lexicon Covering
                  the foregoing, and (b) the Program Intellectual Property to
                  Develop, make, have made, import, use, have used, offer for
                  sale, sell and have sold Organon Products (and, except for
                  Collaboration Products relating to the same Program Target as
                  to which Lexicon has not Opted Out, any Program Antibodies,
                  Program Antisense Compounds and Program Proteins relating to
                  the foregoing) in the Collaboration Field. Any such sublicense
                  shall be set forth in a written agreement containing
                  confidentiality, non-use, ownership of intellectual property
                  and audit provisions consistent with and no less restrictive
                  than those contained herein, shall be subject and subordinate
                  to the terms and conditions of this Agreement, and shall
                  obligate the (sub)licensee to make the royalty payments
                  required hereunder; provided that Organon shall remain
                  responsible for all payments due to Lexicon hereunder. Organon
                  shall provide Lexicon with a copy of each sublicense agreement
                  promptly after executing the same; provided, however, that
                  subject to the exceptions set forth in Section 1.23, each such
                  sublicense agreement shall be Confidential Information of
                  Organon.

                  9.2.2    By Organon.

                           9.2.2.1  Development of Collaboration Products in
                  Collaboration Field. Subject to the terms of this Agreement
                  and any applicable [**], Organon hereby grants to Lexicon and
                  its Affiliates, within the Territory, a co-exclusive right and
                  license, with the limited right to sublicense (as set forth
                  below), under Organon's rights in (a) the Organon Background
                  Materials and the Organon Background Technology, including,
                  without limitation, any Patent Rights Controlled by Organon
                  Covering the foregoing, and (b) the Program Intellectual
                  Property, in each case to Develop Collaboration Products in
                  the Collaboration Field, including rights to make, have made,
                  import, use, or have used any Collaboration Products in the
                  Collaboration Field solely for purposes of such Development.
                  Such right and license shall include the right to grant
                  sublicenses to Affiliates of Lexicon and to Third Parties that
                  are approved by the Joint Management Committee.

                           9.2.2.2  Development and Commercialization of Lexicon
                  Products in Collaboration Field. Subject to the terms of this
                  Agreement and any applicable [**], Organon hereby grants to
                  Lexicon and its Affiliates, within the Territory, an exclusive
                  right and license, with the right to sublicense, under
                  Organon's rights in (a) the Organon Background Materials and
                  the Organon Background Technology, including, without
                  limitation, any Patent Rights Controlled by Organon Covering
                  the foregoing, and (b) the Program Intellectual Property to
                  Develop, make, have made, import, use, have used, offer for
                  sale, sell and have sold Lexicon Products (and, except for
                  Collaboration Products relating to the same Program Target as
                  to which Organon has not Opted Out, any Program Antibodies,
                  Program Antisense Compounds and Program Proteins relating to
                  the foregoing) in the Collaboration Field. Any such sublicense
                  shall be set forth in a written agreement containing
                  confidentiality, non-use, ownership of intellectual property
                  and audit provisions consistent with and no less restrictive
                  than those contained herein, shall be subject and subordinate
                  to the terms and conditions of this Agreement, and shall
                  obligate the (sub)licensee to make the royalty payments
                  required hereunder; provided that Lexicon shall remain
                  responsible for all payments due to Organon hereunder. Lexicon

                                       33
<PAGE>

                  shall provide Organon with a copy of each sublicense agreement
                  promptly after executing the same; provided, however, that
                  subject to the exceptions set forth in Section 1.23, each such
                  sublicense agreement shall be Confidential Information of
                  Lexicon.

                  9.2.3    Restrictions on Commercialization of Collaboration
         Products. Neither party nor their respective Affiliates (a) shall make,
         have made, import, use, or have used any Collaboration Products in the
         Collaboration Field for any purpose other than Development or (b) shall
         offer for sale, sell or have sold Collaboration Products in the
         Collaboration Field, unless and until (and then only to the extent
         that) such party has received a license in accordance with Section 8.2
         or 8.4 for the commercialization of such Collaboration Product.

         9.3      Small Molecule Research and Development.

                  9.3.1    Option to Collaborate in Oncology/Immunology Field.
         Subject to the terms of this Agreement and any applicable [**], in the
         event that either party believes that (a) [**] and (b) [**], such party
         may, at any time during the Target Function Discovery Program Term
         before Opting Out with respect to such Program Target, notify the other
         party of its desire to enter into a collaboration for the research,
         development and commercialization of Small Molecule Compounds
         modulating such Program Target in the Oncology/Immunology Field.
         Promptly following such notice, Organon and Lexicon shall enter into a
         definitive agreement for the research, development and
         commercialization of Small Molecule Compounds modulating such Program
         Target in the Oncology/Immunology Field on substantially the same terms
         applicable to the research, development and commercialization of
         Collaboration Products under this Agreement. In such case, any Small
         Molecule Compound selected for Development in accordance with the terms
         of such definitive agreement that is not a Back-up Product under the
         terms of such definitive agreement shall be deemed to be a
         Collaboration Product for purposes of Sections 11.3 and 11.4 if (y)
         [**] or (z) [**].

                  9.3.2    Option to Collaborate Outside the Oncology/Immunology
         Field. Subject to the terms of this Agreement, any applicable [**], in
         the event that either party believes that (a) [**] and (b) [**], such
         party may, at any time during the Target Function Discovery Program
         Term before Opting Out with respect to such Program Target, notify the
         other party of its desire to enter into a collaboration for the
         research, development and commercialization of Small Molecule Compounds
         modulating such Program Target in the Collaboration Field outside the
         Oncology/Immunology Field. Promptly following such notice, Organon and
         Lexicon shall enter into a definitive agreement for the research,
         development and commercialization of Small Molecule Compounds
         modulating such Program Target in the Collaboration Field outside the
         Oncology/Immunology Field on substantially the same terms applicable to
         the research, development and commercialization of Collaboration
         Products under this Agreement. In such case, any Small Molecule
         Compound selected for Development in accordance with the terms of such
         definitive agreement that is not a Back-up Product under the terms of
         such definitive agreement shall be deemed to be a Collaboration Product
         for purposes of Sections 11.3 and 11.4 if (y) [**] or (z) [**]. Nothing
         herein shall obligate Lexicon to provide any notice to or enter into
         any agreement with Organon under this Section 9.3.2 with respect to a
         collaboration for the research, development and commercialization of
         Small Molecule Compounds modulating a Program Target in the
         Collaboration Field outside the Oncology/Immunology Field in the event
         Lexicon has any obligations to a Third Party with respect thereto at
         the time it proposes to commence such activities.

                  9.3.3    Organon License to Lexicon Outside the
         Oncology/Immunology Field. In the event that any applicable [**] that
         either party believes that (a) [**] and (b) [**] would preclude

                                       34
<PAGE>

         Lexicon from entering into a collaboration for the research,
         development and commercialization of Small Molecule Compounds
         modulating such Program Target in the Collaboration Field outside the
         Oncology/Immunology Field pursuant to Section 9.3.2, or if Organon
         elects not to enter into a definitive agreement with respect thereto,
         then Organon shall grant to Lexicon and its Affiliates, within the
         Territory, an exclusive right and license, with the right to
         sublicense, under Organon's rights in Program Intellectual Property, if
         any, Covering the research, development or commercialization of Small
         Molecule Compounds modulating such Program Target, to research,
         develop, make, have made, import, use, have used, offer for sale, sell
         and have sold Small Molecule Compounds that modulate such Program
         Target in all fields of use other than the Oncology/Immunology Field.
         Nothing in this Section 9.3.3 shall be deemed to grant Lexicon or its
         Affiliates any right or license under any Patent Rights or other
         intellectual property rights Controlled by Organon in or to (a) any
         inventions, information, methods, know-how, trade secrets or data
         relating to Small Molecule Compounds developed in collaboration with
         Lexicon in accordance with Section 9.3.1 or 9.3.2 or (b) any other
         inventions, information, methods, know-how, trade secrets or data other
         than Program Intellectual Property.

         9.4      Right of First Negotiation for Development and
Commercialization of Collaboration Products and Opt-out Products in the
Veterinary Field. Prior to commencing development or commercialization of any
Collaboration Product or Opt-out Product in the Veterinary Field or granting any
license or otherwise transferring any rights to any Third Party with respect
thereto, the Joint Management Committee (or the Continuing Party, in the case of
an Opt-out Product) shall first offer to Intervet (or its designated Affiliate)
the opportunity to develop and commercialize such Collaboration Product or
Opt-out Product in the Veterinary Field. If requested by Intervet within [**] of
such offer, the Joint Management Committee (or the Continuing Party, in the case
of an Opt-out Product) shall enter into good faith negotiations with Intervet,
for a period of [**] following such request, with respect to such an agreement
for the development and commercialization of such Collaboration Product or
Opt-out Product in the Veterinary Field. In the event Lexicon and Organon (or
the Continuing Party, in the case of an Opt-out Product) and Intervet do not
enter into a definitive agreement with respect to such an agreement within such
[**] period, the Joint Management Committee (or the Continuing Party, in the
case of an Opt-out Product) will be free, at any time thereafter, to enter into
negotiations and agreements with one or more Third Parties for the development
or commercialization of such Collaboration Product or Opt-out Product in the
Veterinary Field [**]. All license fees, royalties, milestone payments and other
income or items of value received from Intervet, its Affiliates or a Third Party
with respect to Collaboration Products shall be considered Joint
Marketing/Developer Collaboration Revenues under this Agreement.

         9.5      No Grant of Other Technology or Patent Rights. Except as
otherwise expressly provided in this Agreement, under no circumstances shall a
party hereto, as a result of this Agreement, obtain any ownership interest in or
other right to any technology, know-how, patents, patent applications, gene or
genomic sequence data or information, products, or biological materials of the
other party, including items owned, controlled or developed by, or licensed to,
the other party, or transferred by the other party to said party, at any time
pursuant to this Agreement.

                         ARTICLE 10. OPT-OUT PROVISIONS

         10.1     Opt Out of Program Targets and Collaboration Products.

                  10.1.1   Right to Opt Out. Either party (the "Opt-out Party")
         may decline to participate in ("Opt Out" of) any further (a)
         Biotherapeutics Research with respect to a Program Target, on a Program
         Target-by-Program Target basis, or (b) Development of a Collaboration
         Product, on a Collaboration Product-by-Collaboration Product basis, by
         providing [**] prior written notice to the other party (the "Continuing
         Party") specifying the relevant provision below under which

                                       35
<PAGE>

         such Opt-out Party is making such Opt Out election and, as applicable,
         the Program Target(s) and Collaboration Product(s) as to which such Opt
         Out election relates.

                           10.1.1.1  Opt Out of All Biotherapeutics Research,
                  Development and Commercialization Relating to a Program
                  Target. The Opt-out Party may elect to Opt Out of all further
                  Biotherapeutics Research and Development associated with a
                  Program Target and related Collaboration Products, Program
                  Antibodies, Program Antisense Compounds and Program Proteins.
                  In such event, following the end of the [**] notice period
                  specified above, such Program Target and any related
                  Collaboration Products shall become an Opt-out Target and
                  Opt-out Product(s), respectively, and the Continuing Party
                  shall have exclusive (even as to the Opt-out Party) licenses
                  under Section 9.2 with respect to such Program Target and all
                  Opt-out Products, Program Antibodies, Program Antisense
                  Compounds and Program Proteins relating thereto.

                           10.1.1.2  Opt Out of Biotherapeutics Research and
                  Development of Follow-on Collaboration Products. The Opt-out
                  Party may elect to continue to participate in the Development
                  of Collaboration Product(s) that are at a more advanced stage
                  of Development or that have been commercialized, while Opting
                  Out of all further Biotherapeutics Research, Development
                  associated with a Program Target and related Collaboration
                  Products, Program Antibodies, Program Antisense Compounds and
                  Program Proteins at an earlier stage of Development. In such
                  event, following the end of the [**] notice period specified
                  above, the Continuing Party shall have exclusive (even as to
                  the Opt-out Party) licenses under Section 9.2 with respect to
                  such Program Target and all Collaboration Products, Program
                  Antibodies, Program Antisense Compounds and Program Proteins
                  relating thereto other than the Collaboration Product(s) for
                  which the Opt-out Party continues to participate.

                  10.1.2   Deemed Opt Out. In the event that a party desires to
         proceed with (a)(i) Biotherapeutics Research with respect to a Program
         Target or (ii) designation as a Collaboration Product and the
         commencement of Development of a Program Antibody, Program Antisense
         Compound or Program Protein with respect to a Program Target, in each
         case for which no material Biotherapeutics Research activity has been
         authorized by the Joint Management Committee (in a Biotherapeutics
         Research Plan or otherwise) for a period of [**] and for which no
         Collaboration Product is then in active Development, or (b) Development
         of a Collaboration Product (i) for which no material Development
         activity has been authorized by the Joint Management Committee (in a
         Development Plan or otherwise) for a period of [**] and (ii) relating
         to a Program Target for which no material Biotherapeutics Research
         activity has been authorized by the Joint Management Committee (in a
         Biotherapeutics Research Plan or otherwise) for a period of [**] and
         for which no other Collaboration Product is then in active Development,
         such party may request that the Joint Management Committee authorize
         such Biotherapeutics Research, designation as a Collaboration Product
         and the commencement of Development of such Program Antibody, Program
         Antisense Compound or Program Protein, or Development of such
         Collaboration Product, as applicable. In the event the Joint Management
         Committee fails to approve such request within [**] (otherwise than as
         a result of the requesting party's failure to vote in favor of
         authorizing such activities), then, effective upon such failure, the
         other party shall be deemed to have Opted Out of such Program Target
         and related Opt-out Products, Program Antibodies, Program Antisense
         Compounds and Program Proteins with the same effect as if such other
         party had Opted Out under Section 10.1.1.1.

         10.2     Opt-out Party Noncompetition Covenant. For a period of [**]
from the date the Opt-out Party gives the Continuing Party a written notice
under Section 10.1.1 (or, if applicable, is deemed to

                                       36
<PAGE>

have Opted Out under Section 10.1.2), such Opt-out Party and its Affiliates
shall not research, develop or commercialize (a) any Program Antibody, Program
Antisense Compound or other Antibody or Antisense Compound acting through such
Opt-out Target or (b) any Program Protein or other Protein encoded by such
Opt-out Targets, except for the specific Collaboration Product(s), if any, for
which the Opt-out Party retains Development or commercialization rights and
obligations hereunder. For clarity, the expiration of such Opt-out Party's
obligations under this Section 10.2 shall not be deemed to grant any right or
license to such Opt-out Party.

         10.3     Certain Effects of Opting Out.

                  10.3.1   Opt-out Targets Generally. Following the expiration
         of the [**] notice period specified in Section 10.1.1 with respect to
         any Opt-out Target (or, if applicable, of the [**] request period under
         Section 10.1.2), (a) the Biotherapeutics Research of such Opt-out
         Target shall no longer be carried out jointly by the parties or as part
         of the Collaboration; (b) the Party that has Opted Out shall have no
         rights to develop or commercialize, or to participate in Operating
         Profits from the commercialization of, any Antibodies or Antisense
         Compounds that act through or Proteins that are encoded by such Opt-out
         Target; and (c) the Continuing Party shall be free to conduct research
         activities relating to such Opt-out Target and develop and
         commercialize any Antibodies or Antisense Compounds that act through or
         Proteins that are encoded by such Opt-out Target, either alone or with
         one or more Third Parties. For clarity, the research activities with
         respect to any Opt-out Target shall not be subject to the oversight or
         direction of the Committees and shall not be the subject of any
         Biotherapeutics Research Plans.

                  10.3.2   Opt-out Products Generally. Following the expiration
         of the [**] notice period specified in Section 10.1.1 with respect to
         any Opt-out Product (or, if applicable, of the [**] request period
         under Section 10.1.2), (a) the Development and commercialization of
         such Opt-out Product shall no longer be carried out jointly by the
         parties or as part of the Collaboration; (b) the Party that has Opted
         Out shall have no rights to develop or commercialize, or to participate
         in Net Sales (except as provided in Section 11.5) from the
         commercialization of such Opt-out Product and shall not bear any of the
         costs related to commercialization of such Opt-out Product; and (c) the
         Continuing Party shall be free to develop and commercialize such
         Opt-out Product, either alone or with one or more Third Parties. For
         clarity, the development and commercialization of any Opt-out Product
         shall not be subject to the oversight or direction of the Committees
         and shall not be the subject of any Development Plans or plans relating
         to commercialization.

                  10.3.3   Manufacturing Obligation. Subject to the other
         provisions of this Agreement regarding expiration and termination, in
         the event Organon Opts Out as to a particular Collaboration Product
         and, at the time of such Opt-Out Organon or its Affiliated
         Subcontractor(s) is manufacturing such Collaboration Product pursuant
         to Article 7, at Lexicon's election, the manufacture and supply
         provisions of Article 7 shall nonetheless apply to such Collaboration
         Product for a period of (a) [**] following such Opt Out in the event
         Organon Opts Out prior to [**] and (b) [**] following such Opt Out in
         the event Organon Opts Out after [**].

                  10.3.4   Regulatory Matters. Following an Opt Out, the
         Continuing Party shall own all INDs, BLAs and other regulatory filings
         and submissions with respect to the relevant Opt-out Product(s) and all
         Regulatory Approvals with respect thereto. To the extent any such
         regulatory filings or submissions or Regulatory Approvals are held by
         the Opt-out Party, the Opt-out Party shall use Diligent Efforts to
         effect the assignment and transfer thereof to the Continuing Party.
         Notwithstanding any Opt Out, The Continuing Party and the Opt-out Party
         shall have the same obligations under Sections 8.5 and 8.6 with respect
         to an Opt-out Product as with respect to a Collaboration Product.

                                       37
<PAGE>

                  10.3.5   Diligence Obligations with Respect to Opt-out
         Products.

                           10.3.5.1  Diligent Efforts. Each Continuing Party
                  shall use Diligent Efforts to actively Develop and obtain
                  Regulatory Approval for at least one Opt-out Product acting
                  through an Opt-out Target, and following such Regulatory
                  Approval to maximize Net Sales of such Opt-out Product.

                           10.3.5.2  Effect of Failure to Satisfy Diligence
                  Obligations.

                                    (a)      With respect to each Opt-out Target
                           for which the Continuing Party fails to timely
                           satisfy its diligence obligations under Section
                           10.3.5.1 above, at the option of the Opt-out Party as
                           its sole and exclusive remedy therefor, subject to
                           Sections 3.8.2 and 17.7 hereof, (i) the commercial
                           licenses granted under Section 9.2 with respect to
                           Opt-out Products acting through such Opt-out Target
                           shall terminate, (ii) the Continuing Party shall
                           deliver to the other party copies of all data,
                           information, registrations and applications therefor
                           relating to Opt-out Products acting through such
                           Opt-out Target, and (iii) the Opt-out Party shall
                           have the right, within the period of [**] following
                           the Continuing Party's delivery of such copies, to
                           obtain a commercial license under Section 9.2 for
                           such Opt-out Products by delivering written notice
                           thereof to the Continuing Party (in which case the
                           Opt-out Party exercising such right shall become the
                           Continuing Party with respect to such Opt-out
                           Product).

                                    (b)      With respect to each Opt-out
                           Product for which a party exercises its right, under
                           Section 10.3.5.2(a), to obtain a commercial license
                           regarding such Opt-out Product, the other party
                           promptly shall deliver to such party all materials
                           and copies of all data and information, and shall
                           assign and transfer to such party all regulatory
                           filings and submissions and Regulatory Approvals
                           relating to such Opt-out Product.

                          ARTICLE 11. FINANCIAL TERMS

         11.1     Up-Front Payment. Organon shall pay Lexicon an upfront access
fee of twenty-two million five hundred thousand dollars (U.S. $22,500,000),
which access fee shall be invoiced within [**] of the Effective Date and due and
payable in accordance with Section 11.11. For clarity, the upfront access fee
paid by Organon under this Section 11.1 shall not be considered part of, or
included in the calculation of Organon's Allowable Costs.

         11.2     Research Funding During the Target Function Discovery Program
Term. During the Target Function Discovery Program Term, Organon and/or Lexicon
shall fund its proportion of the net Allowable Costs incurred by the other party
in excess of the Cost Sharing Ratio as follows:

                  (a)      Organon shall make annual research payments to
         Lexicon of [**] for each of the first two (2) years of the Target
         Function Discovery Program Term. To the extent those payments exceed
         Organon's proportionate share of overall Allowable Costs based on the
         Cost Sharing Ratio, such payments will be credited against payments to
         be made by Organon after the second year in accordance with Section
         11.6.1.4; and

                  (b)      Subject to Section 11.6.1, Organon or Lexicon shall
         make annual research payments to the other party in the final two (2)
         years of the Target Function Discovery Program Term in an amount equal
         to such party's proportionate share of the net Allowable Costs to be

                                       38
<PAGE>

         incurred by the other party in excess of the Cost Sharing Ratio during
         such year in accordance with the annual budget agreed upon by the Joint
         Management Committee prior to the start of such year.

Notwithstanding the foregoing, the amounts payable by Organon to Lexicon under
this Section 11.2 shall not exceed an aggregate of fifty million dollars (U.S.
$50,000,000) for Allowable Costs incurred during the Target Function Discovery
Program Term, unless expressly authorized by the Joint Management Committee. The
annual research payments for each such year shall be payable in [**]
installments, which installments shall be invoiced within [**] of the start of
each [**] and due and payable in accordance with Section 11.11. Such amounts
shall be reconciled in accordance with Section 11.6.1 on a quarterly basis with
actual Allowable Costs incurred by the parties.

         11.3     Research Program Milestone Payments. Organon shall pay Lexicon
a milestone payment of [**] for each Collaboration Product in excess of five (5)
designated by the Joint Management Committee during the Collaboration Term;
provided that Back-up Products for previously-designated Collaboration Products
shall be excluded from such number. Each such milestone payment shall be
invoiced within [**] following the designation by the Joint Management Committee
of the applicable Collaboration Product and shall be due and payable in
accordance with Section 11.11. For clarity, milestone payment(s) made by Organon
under this Section 11.3 shall not be considered part of, or included in the
calculation of, Organon's Allowable Costs.

         11.4     Collaboration Revenue and Cost Sharing. All revenue from
Collaboration Products, Joint Marketing/Development Collaborator Revenue and
Allowable Costs shall be shared in accordance with the applicable Cost Sharing
Ratio. In the event that (a) fewer than five (5) Collaboration Products in total
have been designated over the course of the Collaboration Term (including, in
such number, Collaboration Products that have become Opt-out Products but
excluding Back-up Products) and (b) Organon has Opted Out with respect to all
Program Targets other than those for which Collaboration Products have been
designated, then, effective upon Organon's Opt Out with respect to the last such
Program Target, the Cost Sharing Ratio shall be adjusted [**] as follows: (i) in
the event that four (4) such Collaboration Products in total have been
designated over the course of the Collaboration Term (including, in such number,
Collaboration Products that have become Opt-out Products but excluding Back-up
Products), the Cost Sharing Ratio shall be adjusted to be, with respect to
Lexicon, [**], and with respect to Organon, [**]; (ii) in the event that three
(3) such Collaboration Products in total have been designated over the course of
the Collaboration Term (including, in such number, Collaboration Products that
have become Opt-out Products but excluding Back-up Products), the Cost Sharing
Ratio shall be adjusted to be, with respect to Lexicon, [**], and with respect
to Organon, [**]; (iii) in the event that two (2) Collaboration Products in
total have been designated over the course of the Collaboration Term (including,
in such number, Collaboration Products that have become Opt-out Products but
excluding Back-up Products), the Cost Sharing Ratio shall be adjusted to be,
with respect to Lexicon, [**], and with respect to Organon, [**]; and (iv) in
the event that one (1) Collaboration Product in total has been designated over
the course of the Collaboration Term (including, in such number, Collaboration
Products that have become Opt-out Products but excluding Back-up Products), the
Cost Sharing Ratio shall be adjusted to be, with respect to Lexicon, [**], and
with respect to Organon, [**]. Notwithstanding the foregoing, no adjustment
shall be made with respect to any Collaboration Product for which a Phase 2b
Clinical Trial shall have commenced prior to the time such adjustment would
otherwise have been made. In such event, the Cost Sharing Ratio applicable to
Collaboration Product(s) for which no Phase 2b Clinical Trial shall have
commenced shall be adjusted as set forth above, but the Cost Sharing Ratio
applicable to Collaboration Product(s) for which a Phase 2b Clinical Trial shall
have commenced shall remain unchanged from that in effect immediately prior to
such adjustment. Notwithstanding the foregoing, in the event that Lexicon has
not [**], then the previous two sentences shall not apply until such time as
[**].

                                       39
<PAGE>

         11.5     Royalties Payable with Respect to Opt-out Products in the
Collaboration Field.

                  11.5.1   Royalty Rates for Opt-out Products. The Continuing
         Party shall pay royalties on Net Sales of Opt-out Products in the
         Collaboration Field at the rates specified below:

<TABLE>
<CAPTION>
                DEVELOPMENT STATUS OF OPT-OUT PRODUCT AT THE TIME OF OPT-OUT NOTICE     ROYALTY RATE
                -------------------------------------------------------------------     ------------
                <S>                                                                     <C>
                No IND Filed                                                                 [**]%
                IND filed, but no Phase 2 Clinical Trial commenced                           [**]%
                Phase 2 Clinical Trial commenced but no Phase 3 Clinical Trial
                 commenced                                                                   [**]%
                Phase 3 Clinical Trial commenced but no Regulatory Approval
                 in a Major Market                                                           [**]%
                Regulatory Approval in a Major Market                                        [**]%
 </TABLE>

[**]. For the avoidance of doubt, no royalties shall be payable under this
Section 11.5.1 with respect to Net Sales of Opt-out Products in countries within
the Territory for which the parties share Joint Marketing/Development
Collaborator Revenue pursuant to Section 11.4.

                  11.5.2   Royalty Term. Royalties shall be payable, on a
         product-by-product and country-by-country basis, on Net Sales of
         Opt-out Products in the Collaboration Field for the longer of (a) the
         term of any Patent Rights Controlled by a party with a Valid Claim
         Covering the composition of matter or therapeutic use of such Opt-out
         Product in such country or (b) [**] after the First Commercial Sale of
         such Opt-out Product in such country.

                  11.5.3   Royalty Reduction.

                           11.5.3.1  Third Party Patents. If a Continuing
                  Party, in its reasonable judgment, is required to obtain a
                  license from any Third Party under any patent in order to
                  import, manufacture, use or sell any Opt-Out Product, and if
                  such party is required to pay to such Third Party a royalty
                  under such license calculated on sales of such Opt-out Product
                  and the infringement of such patent cannot reasonably be
                  avoided by such party, or if such party is required by a court
                  of competent jurisdiction to pay such a royalty to such a
                  Third Party (and the infringement of such patent cannot
                  reasonably be avoided by such party), then such party's
                  obligation to pay royalties under Section 11.5.1 hereof shall
                  be reduced by [**] of the amount of the royalty paid to such
                  Third Party; provided however, that the royalties payable
                  under Section 11.5.1 hereof shall not be reduced in any such
                  event below [**] of the amounts set forth in Section 11.5.1.
                  Such party shall use commercially reasonable efforts to
                  minimize the amount of any of the foregoing payments owed by
                  such party to a Third Party.

                           11.5.3.2  Generic Competition. In the event that (a)
                  an Opt-Out Product is not Covered by any Valid Claim in a
                  country providing marketing exclusivity with respect to such
                  Opt-out Product in such country and (b) generic competition
                  with respect to such Opt-out Product accounts for more than
                  [**] of the market share of units sold in that country, the
                  royalty rate with respect to such Opt-out Product (as set
                  forth in Section 11.5.1 and adjusted, if applicable, in
                  accordance with Section 11.5.3.1) shall be reduced by [**] in
                  such country for so long as such conditions exist; provided
                  however, that the royalties payable under Section 11.5.1
                  hereof shall not be reduced in any such event below [**] of
                  the amounts set forth in Section 11.5.1. For purposes of the
                  foregoing, "generic competition" with respect to such Opt-out
                  Product refers to the marketing and sale of one or more Third
                  Party products that (i) comprise the same Antibody, Antisense

                                       40
<PAGE>

                  Compound or Protein as such Opt-out Product or Collaboration
                  Product and (ii) have been approved by the relevant Regulatory
                  Authority for such country through an expedited process that
                  relies in whole or in part on safety and efficacy data
                  generated for such Opt-out Product.

         11.6     Allowable Cost, Joint Marketing/Development Collaborator
Revenue and Royalty Reports.

                  11.6.1   Allowable Cost and Joint Marketing/Development
         Collaborator Revenue Reports.

                           11.6.1.1  Reports of Allowable Costs. During the
                  term of this Agreement, each party shall, within [**] after
                  each [**], furnish to the other party a written [**] report
                  showing in reasonable detail the Allowable Costs incurred by
                  such party during such [**] in each of the categories
                  specified in Section 1.5, on a Program Target-by-Program
                  Target and Collaboration Product-by-Collaboration Product
                  basis. [**]. Reports provided by either party with respect to
                  all other activities will include, but not be limited to, a
                  breakdown of FTE Costs by category of work, including the
                  number of persons under each such category performing the work
                  and the number of hours of work performed by each such person.

                           11.6.1.2  Reports of Joint Marketing/Development
                  Collaborator Revenue. During the term of this Agreement, each
                  party shall, within [**] after each [**], furnish to the other
                  party a written [**] report showing in reasonable detail the
                  Joint Marketing/Development Collaborator Revenue received by
                  such party during such [**], on a Program Target-by-Program
                  Target and Collaboration Product-by-Collaboration Product
                  basis.

                           11.6.1.3  Lexicon Report of Net Payments Due. During
                  the term of this Agreement, Lexicon shall, within [**] after
                  each [**], furnish to Organon a written [**] report showing in
                  reasonable detail:

                                    (a)      the Allowable Costs incurred by
                           Lexicon and Organon, respectively, and in total,
                           during such Calendar Quarter in each of the
                           categories specified in Section 1.5, on a Program
                           Target-by-Program Target and Collaboration
                           Product-by-Collaboration Product basis;

                                    (b)      the Joint Marketing/Development
                           Collaborator Revenue received by Lexicon and Organon,
                           respectively, and in total, during such Calendar
                           Quarter, if any; and

                                    (c)      the amount, if any, owed by one
                           party to the other party in reconciliation of the
                           amounts set forth in subsections (a) and (b) above
                           with the Cost Sharing Ratio.

                           11.6.1.4  Payment of Amounts Owed. Following receipt
                  of the report delivered in accordance with Section
                  11.6.1.3(c), amounts shown as owed by one party shall be
                  invoiced within [**] following the delivery of such report and
                  shall be due and payable in accordance with Section 11.11.
                  Notwithstanding the foregoing, during the Target Function
                  Discovery Program Term, amounts, if any, owed by Lexicon to
                  Organon shall not be invoiced or paid under this Section
                  11.6.1.4 but instead shall be carried over

                                       41
<PAGE>

                  and credited against the amount of the next succeeding
                  research payment(s) payable by Organon under Section 11.2(b).

                           11.6.1.5  Exchange Rates. Allowable Costs and Joint
                  Marketing/Development Collaborator Revenue attributable to
                  countries other than the United States shall be calculated in
                  accordance with the standard exchange rate published in the
                  Wall Street Journal (New York edition) and otherwise in
                  accordance with conversion practices used by the reporting
                  party for financial accounting purposes. The currency
                  conversion system used by a party hereunder shall be subject
                  to audit by the other party as described in Section 11.6.3
                  and, if not determined to be a system reflecting the fair
                  market value of the currencies in question, shall be modified
                  as necessary to effect currency conversion at fair market
                  value.

                           11.6.1.6  Records. The parties shall each keep
                  accurate books and accounts of record in connection with the
                  Target Function Discovery Program, the Biotherapeutics
                  Research Program and the Development, Manufacture and
                  commercialization of Collaboration Products in a manner
                  consistent with GAAP and in sufficient detail to permit
                  accurate determination of all figures necessary for
                  verification of Allowable Costs and Net Sales hereunder.

                  11.6.2   Royalty Reporting and Payment.

                           11.6.2.1  Royalty Reports. During the term of this
                    Agreement following the First Commercial Sale of any Opt-out
                  Product (or, as applicable, of any Collaboration Product in
                  the Veterinary Field), the Continuing Party (or, as
                  applicable, Organon) shall, within [**] after each [**],
                  furnish to the other party a written [**] report showing, on a
                  product-by-product and country-by-country basis:

                                    (a)      the gross sales and Net Sales of
                           Opt-out Products (or, as applicable, of any
                           Collaboration Product in the Veterinary Field) sold
                           by such Continuing Party (or, as applicable,
                           Organon), its (sub)licensees and their respective
                           Affiliates during the reporting period and the
                           calculation of Net Sales from such gross sales;

                                    (b)      the royalties payable in United
                           States dollars which shall have accrued hereunder in
                           respect of such Net Sales;

                                    (c)      withholding taxes, if any, required
                           by law to be deducted in respect of such royalties;

                                    (d)      the dates of the First Commercial
                           Sales of Opt-out Products (or, as applicable, of
                           Collaboration Product in the Veterinary Field) in any
                           country during the reporting period; and

                                    (e)      the exchange rates used in
                           determining the amount of United States dollars
                           payable hereunder.

                  Royalties payable on sales in countries other than the United
                  States shall be calculated in accordance with the standard
                  exchange rate conversion practices used by the Continuing
                  Party (or, as applicable, Organon) for financial accounting
                  purposes. If no royalty or payment is due for any royalty
                  period hereunder, such party shall so report. Each party

                                       42
<PAGE>

                  shall keep, and shall require its (sub)licensees to keep (all
                  in accordance with generally accepted accounting principles,
                  consistently applied), complete and accurate records in
                  sufficient detail to properly reflect all gross sales and Net
                  Sales and to enable the royalties payable hereunder to be
                  determined. Each party shall include in each agreement with
                  each applicable (sub)licensee a provision requiring such
                  (sub)licensee to make reports to such party, to keep and
                  maintain records of sales made pursuant to such agreement and
                  to grant access to such records by the other party's
                  independent certified public accountant to the same extent
                  required of a party under this Agreement.

                           11.6.2.2  Royalty Payment Terms. Royalty payments
                  for each [**] shall be invoiced at the time the applicable
                  report under Section 11.6.2.1 for such [**] shall be due and
                  shall be payable in accordance with Section 11.11.

                  11.6.3   Audits. Upon the written request of a party, the
         other party shall permit an independent certified public accountant
         selected by the requesting party and acceptable to the other party,
         which acceptance shall not be unreasonably withheld, to have access, at
         reasonable times and during normal business hours, to such records of
         such other party as may be reasonably necessary to verify the accuracy
         of the reports described herein, in respect of any fiscal year ending
         not more than [**] prior to the date of such request. Each party shall
         use commercially reasonable efforts to schedule all such verifications
         within [**] after the requesting party makes its written request. All
         such verifications shall be conducted not more than [**]. The report of
         the requesting party's independent certified public accountant shall be
         made available to both parties. Subject to the other party's rights
         under Section 17.7, in the event requesting party's independent
         certified public accountant concludes that additional amounts were owed
         to the requesting party for such period, the additional amounts shall
         be paid by the other party within [**] of the date the requesting party
         delivers to the other party such independent certified public
         accountant's written report so concluding, unless such report contains
         manifest error. In the event requesting party's independent certified
         public accountant concludes that there was an overpayment to such party
         during such period, the overpayment shall be repaid by the requesting
         party within [**] of the date the requesting party received such
         independent certified public accountant's written report so concluding,
         unless such report contains manifest error. The fees charged by such
         independent certified public accountant shall be paid by the requesting
         party unless such audit discloses an underpayment or overpayment of
         more than [**] of the amount due under this Agreement for the period in
         question, in which case the party responsible for such underpayment or
         overpayment will bear the full cost of such audit. Each party agrees
         that all information subject to review under this Section 11.6.3 or
         under any agreement with a (sub)licensee of a party is confidential and
         that the party receiving such information shall cause its independent
         certified public accountant to retain all such information in
         confidence. The requesting party's independent certified public
         accountant shall only report to the requesting party as to the
         computation of Allowable Costs, Joint Marketing/Development
         Collaborator Revenue or royalties payable under this Agreement, and
         shall not disclose to the requesting party any other information of the
         other party or any (sub)licensee of a Continuing Party.

         11.7     Withholding Taxes. In the event that any royalties or other
payments due to a party are subject to withholding tax required by law to be
paid to the taxing authority of any foreign country, the amount of such tax may
be withheld from the applicable royalties or other payment due such party. The
party owing such payment shall promptly pay such tax on behalf of the party to
which such payment is owed and shall furnish the party to which such payment is
owed with a certificate of withholding tax so deducted for such party's
avoidance of duplicate taxation in multiple countries. The party owing such
payment may not deduct any other withholding or any other governmental charges
from the payments agreed upon under this Agreement, except to the extent same
are paid on behalf of, or for the benefit of,

                                       43
<PAGE>

the party to which such payment is owed. The party owing such payment shall
maintain official receipts of payment of any such withholding taxes and shall
forward such receipts to the party to which such payment is owed.

         11.8     Blocked Currency. If by law, regulation, or fiscal policy of a
particular country, conversion into United States dollars or transfer of funds
of a convertible currency to the United States is restricted or forbidden, the
party owing such payment shall give the party to which such payment is owed
prompt written notice and shall make such payment due under this Article 11
through such means or methods as are lawful in such country as the party to
which such payment is owed may reasonably designate. Failing the designation by
the party to which such payment is owed of such lawful means or methods within
[**]after such written notice is given to such party, the party owing such
payment shall deposit such royalty payment in local currency to the credit of
the party to which such payment is owed in a recognized banking institution
designated by such party, or if none is designated by such party within the [**]
period described above, in a recognized banking institution selected by the
party owing such payment and identified in a written notice to other party, and
such deposit shall fulfill all obligations of the party owing such payment to
the other party with respect to such payment.

         11.9     Interest on Late Payments. A party to which payment is owed
under this Agreement shall have the right to seek to collect interest on any
payments that are not paid on or before [**] after the date such payments are
due under this Agreement at a rate equal to [**], calculated on the total number
of days payment is delinquent. The party to which interest is owed shall send a
written notice to the delinquent party notifying it of any such delinquency;
provided, that such party shall not be required to send more than two (2) such
notices in any Contract Year and; provided, further, that the date of delivery
of such notice shall not affect the calculation of the amount of interest owed
hereunder.

         11.10    Manner of Payment. Except as provided in Section 11.8,
payments to be made by one party to the other under this Agreement shall be
payable in United States dollars and shall be paid by bank wire transfer in
immediately available funds to such bank account in the state and country in
which such principal office is located as is designated in writing by such party
from time to time.

         11.11    Invoices. All amounts to be paid under this Agreement shall be
due and payable within [**] after receipt by the party owing such payment of an
invoice setting forth the amounts owed and the calculations for determining such
amounts owed. Invoices shall be sent to the following addresses:

         For Lexicon:   Lexicon Genetics Incorporated
                        8800 Technology Forest Place
                        The Woodlands, Texas 77381
                        Attention: Accounts Payable

         For Organon:   N.V. Organon
                        Purchase Accounting (KA1041)
                        P.O. Box 20
                        5340 BH Oss
                        The Netherlands
                        Attention: Manager, Research Alliances

                                       44
<PAGE>

                        ARTICLE 12. INTELLECTUAL PROPERTY

         12.1 Ownership of Intellectual Property.

                  12.1.1 Ownership by Lexicon of the Lexicon Background
         Materials and Lexicon Background Technology. Subject to the rights and
         licenses granted under this Agreement, Lexicon (and its licensors, as
         applicable) shall own and retain all rights to the Lexicon Background
         Materials and Lexicon Background Technology.

                  12.1.2 Ownership by Organon of the Organon Background
         Materials and Organon Background Technology. Subject to the rights and
         licenses granted under this Agreement, Organon (and its licensors, as
         applicable) shall own and retain all rights to the Organon Background
         Materials and Organon Background Technology.

                  12.1.3 Ownership of Program Intellectual Property.

                           12.1.3.1 Inventorship. Inventorship for patentable
                  inventions and discoveries conceived or reduced to practice
                  during the course of the performance of activities pursuant to
                  this Agreement shall be determined in accordance with U.S.
                  patent laws for determining inventorship. In the event of a
                  dispute regarding inventorship, if the parties are unable to
                  resolve such inventorship dispute, the Joint Management
                  Committee shall establish a procedure to resolve such dispute,
                  which may include engaging a Third Party patent attorney
                  jointly selected by the parties to resolve such dispute, which
                  resolution by such patent attorney shall be binding upon the
                  parties.

                           12.1.3.2 Ownership of Program Technology and Program
                  Intellectual Property for Program Targets and Related
                  Antibodies, Antisense Compounds and Proteins. Subject to the
                  rights and licenses granted under this Agreement, the parties
                  shall jointly own all Program Technology and Program
                  Intellectual Property that directly relates to (a) a Program
                  Target, (b) the utility of such Program Target, (c) the use of
                  a Program Target to identify Antibodies or Antisense Compounds
                  acting through such Program Target, and the use of such
                  Antibodies or Antisense Compounds in the Collaboration Field
                  or Veterinary Field, (d) the use of Protein(s) encoded by such
                  Program Target in the Collaboration Field or Veterinary Field,
                  (e) Program Antibodies, (f) Program Antisense Compounds, (g)
                  Program Proteins and (h) Collaboration Products, whether
                  invented or discovered by employees, Affiliates, agents,
                  independent contractors or consultants of Lexicon, Organon or
                  both parties. In the event either party would otherwise be
                  deemed to be the sole owner of any such invention, then such
                  party shall assign to the other party an undivided joint
                  interest in such invention.

                           12.1.3.3 Ownership of Other Program Technology and
                  Program Intellectual Property. Except as set forth in Section
                  12.1.3.2, title to all Program Technology and Program
                  Intellectual Property shall be based upon the inventorship for
                  such Program Technology and Program Intellectual Property.
                  Except as set forth in Section 12.1.3.2, (a) Lexicon shall own
                  Program Technology and Program Intellectual Property invented
                  solely by employees, agents, consultants or contractors of
                  Lexicon or a Lexicon Affiliate; (b) Organon shall own Program
                  Technology and Program Intellectual Property invented solely
                  by employees, agents, consultants or contractors of Organon or
                  a Organon Affiliate; and (c) Lexicon and Organon shall jointly
                  own Program Technology and Program Intellectual Property
                  invented jointly by employees, agents, consultants or
                  contractors of both Lexicon and Organon or Affiliates of
                  Lexicon and Organon. Each

                                       45
<PAGE>

                  party shall disclose to the other party promptly any
                  inventions within the Program Technology and Program
                  Intellectual Property made by such party's Affiliates,
                  employees, agents or consultants.

         12.2 Prosecution and Maintenance of Program Patent Rights.

                  12.2.1 Primary Prosecution Rights. The responsibility for (a)
         preparing, filing and prosecuting patent applications (including, but
         not limited to, provisional, reissue, continuing, continuation,
         continuation-in-part, divisional, and substitute applications and any
         foreign counterparts thereof) Covering inventions within the Program
         Technology and Program Intellectual Property; (b) maintaining any
         Program Patent Rights; and (c) managing any interference or opposition
         or similar proceedings relating to the foregoing ((a) through (c),
         collectively, "Patent Prosecution") shall be the responsibility of
         Lexicon, unless otherwise determined by the Joint Management Committee.
         In making such determination, the Joint Management Committee shall
         consider, among other factors, the nature of the claimed subject
         matter, the relative contribution of each party to the claimed subject
         matter and the relatedness of the claimed subject matter to that in
         other patent applications being prosecuted by the parties.
         Notwithstanding the foregoing, all decisions related to (y) [**] or (z)
         [**], shall be the responsibility of the Joint Management Committee.

                  12.2.2 Secondary Prosecution Rights. If the prosecuting party
         elects not to continue pursuing Patent Prosecution for an invention
         within the Program Technology and Program Intellectual Property (and
         the other party has joint ownership of or a license under such Program
         Patent Rights pursuant to this Agreement), then the prosecuting party
         shall notify the other party in writing of such election at least [**]
         prior to the last available date for action to preserve such Program
         Patent Rights. If such other party elects to continue Patent
         Prosecution, it will not be liable to the other party in any way with
         respect to its handling of, or the results obtained from, such Patent
         Prosecution. The other party will provide the party taking over Patent
         Prosecution with such assistance and execute such documents as are
         necessary to continue or permit such Patent Prosecution.

                  12.2.3 Right of Review. The prosecuting party under Sections
         12.2.1 or 12.2.2 shall provide the other party with a reasonable
         opportunity to review and provide substantive input to material
         decisions relating to Patent Prosecution. The prosecuting party shall
         furnish to the other party copies of any substantive actions prepared
         for the U.S. Patent and Trademark Office or its foreign counterparts
         that may materially affect the Program Patent Rights being prosecuted
         or maintained reasonably in advance of the filing of such action in
         order to provide such party with a meaningful opportunity to comment
         thereon. Such action filed by the prosecuting party shall reflect any
         comments received from the other party that are received in a
         reasonably timely manner and are reasonably directed to maximizing the
         coverage of the claims of such Program Patent Rights being prosecuted
         or maintained.

                  12.2.4 Patent Prosecution Costs. All Patent Prosecution
         expenses, including attorneys' fees, incurred in the performance of
         Patent Prosecution under Section 12.2.1 or 12.2.2 shall be shared by
         the parties in accordance with the Cost Sharing Ratio.

                  12.2.5 Cooperation. Each party hereby agrees:

                           (a) to take all reasonable additional actions and
                  execute such agreements, instruments and documents as may be
                  reasonably required to perfect the other's

                                       46
<PAGE>

                  ownership interest in accordance with the intent of this
                  Agreement, including, without limitation, requiring inventors
                  to make appropriate patent assignments;

                           (b) to make its employees, Affiliates, agents,
                  independent contractors and consultants reasonably available
                  to the other party (or to the other party's authorized
                  attorneys, agents or representatives), to the extent
                  reasonably necessary to enable the prosecuting party to
                  undertake Patent Prosecution;

                           (c) to provide the other party with copies of all
                  material correspondence with the U.S. Patent and Trademark
                  Office or its foreign counterparts;

                           (d) to cooperate, if necessary and appropriate, with
                  the other party in gaining patent term extensions wherever
                  applicable to Program Patent Rights for Program Inventions;
                  and

                           (e) to endeavor in good faith to coordinate its
                  efforts with the other party to minimize or avoid interference
                  with the Patent Prosecution of the other party's patent
                  applications related to inventions within the Program
                  Technology and Program Intellectual Property.

         12.3 Patent Term Extension. Each party shall cooperate with the other
in obtaining patent term extension or supplemental protection certificates or
their equivalents in any country with respect to the Program Patent Rights.

         12.4 Enforcement of the Program Patent Rights.

                  12.4.1 Notices of Third Party Infringement. Each Party shall
         promptly provide the other Party with written notice reasonably
         detailing any known or alleged infringement of Program Patent Rights by
         a Third Party.

                  12.4.2 Hatch-Waxman Notifications. Each party shall provide to
         the other party copies of any allegations of alleged patent invalidity,
         unenforceability or non-infringement of a patent or patents with
         respect to Program Technology, Program Materials or Collaboration
         Products pursuant to a Paragraph IV Patent Certification by a Third
         Party filing an Abbreviated New Drug Application (i.e., an action under
         the Hatch-Waxman Act). Such copies shall be provided promptly after
         receipt of such certification.

                  12.4.3 Other Notifications. Each party shall provide to the
         other party copies of any notices it receives from Third Parties
         regarding any patent nullity actions, any declaratory judgment actions,
         any alleged infringement of Program Patent Rights or any alleged
         misappropriation of intellectual property with respect to Program
         Technology, Program Materials or Collaboration Products. Such copies
         shall be provided promptly following receipt thereof.

                  12.4.4 Product-Related Infringement.

                           12.4.4.1 Lexicon shall have the first right, but not
                  the obligation, to institute and direct legal proceedings
                  against any Third Party believed to be infringing the Program
                  Patent Rights of either party by the manufacture, use,
                  importation, offer for sale or sale of a product competitive
                  with a Collaboration Product (whether a clinical or commercial
                  product). Each party will bear its own costs, including
                  attorneys' fees, relating to such legal proceedings; provided
                  that Lexicon shall bear Organon's out-of-

                                       47
<PAGE>

                  pocket expenses, including attorneys' fees, incurred in
                  complying with requests for cooperation made by Lexicon. Any
                  recovery in connection with such suit or proceeding will first
                  be applied to reimburse the parties for their out-of-pocket
                  expenses, including attorneys' fees. All recoveries resulting
                  from such legal proceedings that are in excess of the parties'
                  costs of bringing or participating in such action, including
                  attorneys' fees, shall be allocated in accordance with the
                  Cost Sharing Ratio.

                           12.4.4.2 If Lexicon elects not to institute and
                  direct legal proceedings against any Third Party believed to
                  be infringing the Program Patent Rights of either party as
                  described in Section 12.4.4.1, Organon shall have the right,
                  but not the obligation, to institute and direct such legal
                  proceedings. Each party will bear its own costs, including
                  attorneys' fees, relating to such legal proceedings; provided
                  that Organon shall bear Lexicon's out-of-pocket expenses,
                  including attorneys' fees, incurred in complying with requests
                  for cooperation made by Organon. Any recovery in connection
                  with such suit or proceeding will first be applied to
                  reimburse the parties for their out-of-pocket expenses,
                  including attorneys' fees. All recoveries resulting from such
                  legal proceedings that are in excess of the parties' costs of
                  bringing or participating in such action, including attorneys'
                  fees, shall be allocated in accordance with the Cost Sharing
                  Ratio.

                           12.4.4.3 In the event that a party takes action under
                  this Section 12.4.4, the other party shall cooperate to the
                  extent reasonably necessary at the sole expense of the party
                  taking such action. Upon the reasonable request of the party
                  taking such action, the other party shall join the suit and
                  shall be represented in any such legal proceedings using
                  counsel of its own choice. Neither party shall settle or
                  otherwise agree to the final disposition of any claim or
                  proceeding relating to Program Patent Rights Controlled in
                  whole or in part by the other party or licensed under this
                  Agreement to the other party without the prior written consent
                  of such other party, which consent shall not be unreasonably
                  withheld.

                  12.4.5 Non-Product-Related Infringement. Each party shall have
         the sole right, but not the obligation, to institute and direct legal
         proceedings against any Third Party believed to be infringing the
         Program Patent Rights solely owned by such party other than
         infringement relating to a Collaboration Product. All costs, including
         attorneys' fees, relating to such legal proceedings shall be borne by
         the party instituting such legal proceedings, and all recoveries
         resulting from such legal proceedings shall be retained by such party.
         The parties shall consult with each other regarding the institution,
         prosecution and control of any action or proceeding with respect to
         infringement of any of the Program Patent Rights jointly owned by the
         parties other than infringement relating to a Collaboration Product.

         12.5 Notices of Other Proceedings.

                  12.5.1 Each party shall notify the other in writing of any
         allegations it receives from a Third Party that the manufacture, use,
         sale, offer for sale or import of Program Technology, Program Materials
         or any Collaboration Product infringes the intellectual property rights
         of such Third Party. Such notice shall be provided promptly following
         receipt of such allegations.

                  12.5.2 In the event that a party receives notice that it or
         any of its Affiliates have been individually named as a defendant in a
         legal proceeding by a Third Party alleging infringement of a Third
         Party patent or other intellectual property right as a result of the
         manufacture, use, sale, offer for sale or import of Program Technology,
         Program Materials or a Collaboration Product,

                                       48
<PAGE>

         such party shall immediately notify the other party in writing after
         the receipt of such notice. Such written notice shall include a copy of
         any summons or complaint (or the equivalent thereof) received regarding
         the foregoing.

                          ARTICLE 13. CONFIDENTIALITY

         13.1 Nondisclosure Obligations.

                  13.1.1 General. Except as otherwise provided in this Article
         13, during the term of this Agreement and for a period of five (5)
         years thereafter, each Receiving Party shall maintain the Confidential
         Information of each Disclosing Party in confidence and use it only for
         purposes specifically authorized under this Agreement.

                  13.1.2 Limitations. To the extent it is reasonably necessary
         or appropriate to fulfill its obligations or exercise its rights under
         this Agreement and subject to advance written notification to the
         Disclosing Party: (a) a party may disclose to Third Parties
         Confidential Information it is otherwise obligated not to disclose
         under this Section 13.1, to its Affiliates, (sub)licensees,
         consultants, outside contractors and clinical investigators, on a
         strict need-to-know basis for the purposes contemplated by this
         Agreement and on condition that such entities or persons agree to keep
         the Confidential Information confidential for the same time periods and
         to the same extent as such party is required to keep the Confidential
         Information confidential hereunder; and (b) a party or its
         (sub)licensees may disclose, using appropriate measures to preserve
         confidentiality, such Confidential Information to government or other
         regulatory authorities to the extent that such disclosure is reasonably
         necessary to obtain authorizations to conduct clinical trials of, and
         to commercially market, Collaboration Products pursuant to this
         Agreement. Furthermore, a Receiving Party may request permission from
         the Disclosing Party to disclose such Confidential Information to the
         extent that such disclosure is reasonably necessary to [**].

                  13.1.3 Required Disclosure. A Receiving Party may disclose
         Confidential Information pursuant to interrogatories, requests for
         information or documents, subpoena, civil investigative demand issued
         by a court or governmental agency or as otherwise required by law;
         provided, however, that the Receiving Party shall notify the Disclosing
         Party promptly upon receipt thereof, giving [**] the Disclosing Party
         sufficient advance notice to permit it to oppose, limit or seek
         confidential treatment for such disclosure; and provided, further, that
         the Receiving Party shall furnish only that portion of the Confidential
         Information which it is advised by counsel is legally required whether
         or not a protective order or other similar order is obtained by the
         Disclosing Party.

         13.2 Injunctive Relief. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 13 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 13.

         13.3 Publication. Organon and Lexicon (each, a "Submitting Party") may
each publish or present data and results relating to a Collaboration Product or
Opt-out Product for which the Submitting Party holds a commercial license under
Section 9.2 hereof, subject to the prior review of the proposed disclosure by
the other party (each, a "Reviewing Party"), solely to determine (a) whether the
proposed disclosure contains the Confidential Information of the Reviewing Party
or (b) whether the information contained in the proposed disclosure should be
the subject of a patent application to be filed by the Reviewing Party prior to
such disclosure. Each Submitting Party shall provide the Reviewing Party with

                                       49
<PAGE>

the opportunity to review any proposed abstract, manuscript or presentation by
delivering a copy thereof to the Reviewing Party no less than [**] before its
intended submission for publication or presentation. The Reviewing Party shall
have [**] from its receipt of any such abstract, manuscript or presentation in
which to notify the Submitting Party in writing of any specific objections to
the disclosure, based on either the need to seek patent protection or concern
regarding the specific disclosure of the Confidential Information of the
Reviewing Party. In the event the Reviewing Party objects to the disclosure, the
Submitting Party agrees not to submit the publication or abstract or make the
presentation containing the objected-to information until the Reviewing Party is
given a reasonable additional period of time (not to exceed an additional [**])
to seek patent protection for any material in the disclosure which the Reviewing
Party believes is patentable (subject, in all events, to Section 13.2) or, in
the case of Confidential Information, to allow the Submitting Party to delete
any Confidential Information of the Reviewing Party from the proposed
disclosure. The Submitting Party agrees to delete from the proposed disclosure
any Confidential Information of the Reviewing Party upon request.

                   ARTICLE 14. REPRESENTATIONS AND WARRANTIES

         14.1 Representations, Warranties and Covenants of Lexicon. Lexicon
represents and warrants to and covenants with Organon that:

                  14.1.1 Lexicon is a corporation duly organized, validly
         existing and in corporate good standing under the laws of the State of
         Delaware, United States of America;

                  14.1.2 Lexicon has the corporate and legal right, authority
         and power to enter into this Agreement, and to extend the rights and
         licenses granted to Organon in this Agreement;

                  14.1.3 Lexicon has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement;

                  14.1.4 upon the execution and delivery of this Agreement, this
         Agreement shall constitute a valid and binding obligation of Lexicon,
         enforceable in accordance with its terms, except as enforceability may
         be limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting creditors' and contracting
         parties' rights generally and except as enforceability may be subject
         to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  14.1.5 the performance of Lexicon's obligations under this
         Agreement will not conflict with its charter documents or result in a
         breach of any agreements, contracts or other arrangements to which it
         is a party;

                  14.1.6 Lexicon will not during the term of this Agreement
         enter into any agreements, contracts or other arrangements that would
         be inconsistent with its obligations under this Agreement;

                  14.1.7 Lexicon has no Pre-existing Obligations with respect to
         the genes in the list provided by Lexicon to Organon prior to the
         Effective Date from which Program Targets are to be selected in
         accordance with Section 2.3 to which the licenses granted by Lexicon in
         Article 9 would be subject; and

                  14.1.8 To the best of Lexicon's knowledge after reasonable
         inquiry, Lexicon is not aware of any patent or other intellectual
         property rights of any Third Party that would be

                                       50
<PAGE>

         infringed by its conduct of the Target Function Discovery Program, and
         has received no notice from any Third Party claiming any such
         infringement.

         14.2 Representations, Warranties and Covenants of Organon. Organon
represents and warrants to and covenants with Lexicon that:

                  14.2.1 Organon is a registered company duly organized, validly
         existing and in good standing under the laws of the Netherlands;

                  14.2.2 Organon has the corporate and legal right, authority
         and power to enter into this Agreement, and to extend the rights and
         licenses granted to Lexicon in this Agreement;

                  14.2.3 Organon has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement;

                  14.2.4 upon the execution and delivery of this Agreement, this
         Agreement shall constitute a valid and binding obligation of Organon
         enforceable in accordance with its terms, except as enforceability may
         be limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting creditors' and contracting
         parties' rights generally and except as enforceability may be subject
         to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  14.2.5 the performance of its obligations under this Agreement
         will not conflict with Organon's charter documents or result in a
         breach of any agreements, contracts or other arrangements to which it
         is a party; and

                  14.2.6 Organon will not after the Effective Date enter into
         any agreements, contracts or other arrangements that would be
         inconsistent with its obligations under this Agreement.

         14.3 Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY PRODUCT,
PATENT RIGHTS, GOODS, SERVICES, BACKGROUND MATERIALS OR ANY OTHER SUBJECT MATTER
OF THIS AGREEMENT, AND EACH PARTY HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING. IN ADDITION, THE PARTIES ACKNOWLEDGE
THAT THE GENERATION OR USE OF BACKGROUND MATERIALS MAY BE COVERED BY ONE OR MORE
VALID PATENTS OF THIRD PARTIES. EACH PARTY ACKNOWLEDGES THAT EXERCISE BY IT OF
THE RIGHTS AND LICENSES GRANTED TO IT PURSUANT TO ARTICLE 9 HEREOF MAY BE
COVERED BY ONE OR MORE VALID PATENTS OF THIRD PARTIES.

         14.4 Limited Liability. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT, NEITHER LEXICON NOR ORGANON WILL BE LIABLE WITH RESPECT TO ANY MATTER
ARISING UNDER THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR ANY PUNITIVE, EXEMPLARY, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS.

                             ARTICLE 15. INDEMNITY

         15.1 Lexicon Indemnity Obligations. Lexicon agrees to defend, indemnify
and hold Organon, its Affiliates and their respective employees and agents
harmless from all claims, losses, damages or

                                       51
<PAGE>

expenses (including reasonable attorneys' fees and costs of litigation) arising
as a result of: (a) actual or asserted violations of any applicable law or
regulation by Lexicon, its (sub)licensees and their respective Affiliates by
virtue of which any Lexicon Products manufactured, distributed or sold by
Lexicon hereunder as Continuing Party shall be alleged or determined to be
adulterated, misbranded, mislabeled or otherwise not in compliance with any
applicable law or regulation; (b) claims for bodily injury, death or property
damage attributable to the manufacture, distribution, sale or use of any Lexicon
Products by Lexicon as Continuing Party, its (sub)licensees and their respective
Affiliates; (c) a recall of a Lexicon Product manufactured, distributed or sold
by Lexicon hereunder as the Continuing Party ordered by a governmental agency or
required by a confirmed Lexicon Product failure as reasonably determined by the
parties hereto; or (d) Lexicon's breach of any of its representations,
warranties or covenants hereunder.

         15.2 Organon Indemnity Obligations. Organon agrees to defend, indemnify
and hold Lexicon, its Affiliates and their respective employees and agents
harmless from all claims, losses, damages or expenses (including reasonable
attorneys' fees and costs of litigation) arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by Organon, its
(sub)licensees and their respective Affiliates by virtue of which any Organon
Products manufactured, distributed or sold by Organon hereunder as the
Continuing Party shall be alleged or determined to be adulterated, misbranded,
mislabeled or otherwise not in compliance with any applicable law or regulation;
(b) claims for bodily injury, death or property damage attributable to the
manufacture, distribution, sale or use of any Organon Products by Organon as
Continuing Party hereunder, its (sub)licensees and their respective Affiliates;
(c) a recall of an Organon Product manufactured, distributed or sold by Organon
hereunder as the Continuing Party ordered by a governmental agency or required
by a confirmed Organon Product failure as reasonably determined by the parties
hereto; or (d) Organon's breach of any of its representations, warranties or
covenants hereunder.

         15.3 Limitation on Indemnity Obligations. Neither party, its Affiliates
or their respective employees and agents shall be entitled to the indemnities
set forth in Sections 15.1 or 15.2, respectively, to the comparative extent the
claim, loss, damage or expense for which indemnification is sought was caused by
a grossly negligent, reckless or intentional act or omission by such party, its
directors, officers, employees or authorized agents.

         15.4 Procedure. If a party or any of its Affiliates or their respective
employees or agents (collectively, the "Indemnitee") intends to claim
indemnification under this Article 15, the Indemnitee shall promptly notify the
other party (the "Indemnitor") of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel selected by the
Indemnitor and reasonably acceptable to the Indemnitee, provided, however, that
an Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitee, if representation of such Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
represented by such counsel in such proceedings. The Indemnitor shall have the
right to settle or compromise any claims for which it is providing
indemnification under this Article 15, provided that the consent of the
Indemnitee (which shall not be unreasonably withheld or delayed) shall be
required in the event any such settlement or compromise would adversely affect
the interests of the Indemnitee. The indemnity agreement in this Article 15
shall not apply to amounts paid in settlement of any loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Indemnitor. The failure to deliver notice to the Indemnitor within a reasonable
time after the commencement of any such action, if prejudicial to the
Indemnitor's ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 15, but the omission so to
deliver notice to the Indemnitor will not relieve it of any liability that it
may have to any Indemnitee otherwise than under this Article 15. The Indemnitee
under this Article 15, its employees and agents, shall

                                       52
<PAGE>

cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.

         15.5 Insurance. Each party shall maintain appropriate product liability
insurance with respect to Development, Manufacture and commercialization of
Collaboration Products by such party in such amount as such party customarily
maintains with respect to sales of its other products. Each party shall maintain
such insurance for so long as it continues to manufacture or sell Collaboration
Products, and thereafter for so long as such party customarily maintains
insurance with respect to sales of its other products.

                     ARTICLE 16. EXPIRATION AND TERMINATION

         16.1 Term of Agreement. The term of this Agreement shall commence on
the Effective Date and shall continue until the later of (a) the expiration or
termination of the last to expire of any Valid Claim included in the Program
Patent Rights and (b) the cessation of Development or commercialization
activities with respect to all Collaboration Products generated pursuant to the
terms hereof.

         16.2 Events of Default. An Event of Default by either party shall have
occurred upon (a) the occurrence of a material breach of this Agreement if such
party fails to remedy such breach within [**] after written notice thereof by
the non-breaching party ([**] in the event of a party's failure to make a
payment required hereunder) or, if remediation of such breach in [**] is not
practicable, if such party fails to commence and diligently pursue such
remediation during such [**] period, or (b) the commencement of any proceeding
in or for bankruptcy, insolvency, dissolution or winding up by or against such
party that is not dismissed or otherwise disposed of within [**] thereafter.

         16.3 Effect of an Event of Default. In the event of an Event of
Default, the non-defaulting party shall have the right, at its option
exercisable in its sole discretion, in addition to any other rights or remedies
available to it at law or in equity and subject to the limitations set forth in
Sections 3.8.2, 14.4 and 17.7 hereof, to terminate this Agreement upon [**]
notice thereof to the other party, in which case (a) the licenses granted to the
defaulting party pursuant to Article 9 shall terminate and (b) the defaulting
party shall return to the non-defaulting party or, upon the non-defaulting
party's written instruction, destroy all information, materials or documentation
provided by the non-defaulting party pursuant to this Agreement; provided that
such termination shall apply to the rights and licenses granted to the
defaulting party under Sections 9.1 and 9.2 with respect to a Collaboration
Product or Opt-out Product only in the event, and to the extent, that such Event
of Default relates to such specific Collaboration Product or Opt-out Product, in
which case the defaulting party shall be deemed to have Opted Out of any such
Collaboration Product with the same effect (subject to any other rights or
remedies available to the non-defaulting party at law or in equity) as if such
breaching party had Opted Out under Section 10.1.1.1. For the avoidance of
doubt, the termination rights of the non-defaulting party under this Section
16.3 shall be in addition to any other rights or remedies available to it at law
or in equity. The rights and licenses granted to the defaulting party under
Sections 9.1 and 9.2 with respect to any Collaboration Product or Opt-out
Product with respect to which no Event of Default has occurred shall, subject to
such party's applicable obligations under this Agreement with respect thereto,
continue. In the event that this Agreement is terminated pursuant to this
Section 16.3, the defaulting party's obligations under the exclusivity
provisions set forth in Section 2.4 shall survive for five (5) years following
such termination.

         16.4 Effect of Expiration or Termination of Agreement. The expiration
or termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination. The provisions of Articles 12,
13 and 15, Sections 8.5, 8.6 and 17.2 and Sections 17.4 through 17.7 hereof
shall survive the expiration or termination of this Agreement. The rights and
licenses granted to the non-defaulting party under Sections 9.1 and 9.2 hereof
shall survive any termination of this Agreement by

                                       53
<PAGE>

such non-defaulting party pursuant to Section 16.3. The provisions of Sections
11.2 through 11.11 hereof shall survive any termination of this Agreement under
which a party, its (sub)licensees or their respective Affiliates retains the
right to sell Collaboration Products until such time as this Agreement would
have expired with respect to any Collaboration Product, as the case may be, in
any country pursuant to Section 16.1 hereof had this Agreement not been earlier
terminated.

                           ARTICLE 17. MISCELLANEOUS

         17.1 Force Majeure. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any obligation under
this Agreement when such failure or delay is caused by or results from causes
beyond the reasonable control of the affected party, including but not limited
to fire, floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority; provided, however, that the party so affected shall use
reasonable commercial efforts to avoid or remove such causes of nonperformance,
and shall continue performance hereunder with reasonable dispatch whenever such
causes are removed. Either party shall provide the other party with prompt
written notice of any delay or failure to perform that occurs by reason of force
majeure. The parties shall mutually seek a resolution of the delay or the
failure to perform as noted above.

         17.2 Assignment. This Agreement may not be assigned or otherwise
transferred, in whole or in part, by either party without the consent of the
other party; provided, however, that either Lexicon or Organon may, without such
consent, assign its rights and obligations under this Agreement (i) to any
Affiliate, or (ii) in connection with a merger, consolidation or sale of such
portion of a party's assets that includes rights under this Agreement to an
unrelated Third Party; provided, further, that such party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including those business assets
that are the subject of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement, unless the parties otherwise
agree. Any permitted assignee shall also, within [**] following such assignment,
provide the continuing party with a written summary of how it intends to fulfill
its obligations under this Agreement with respect to each-Collaboration Product.

         17.3 Change in Control.

                  17.3.1 Notice of and Reasonable Assurances upon a Change in
         Control. Within [**] after any Change in Control of a party, the
         surviving party to such Change in Control (the "Acquiring Party") (a)
         will notify the other party of the occurrence of such Change in Control
         and (b) will provide the other party with reasonable assurances of its
         commitment to fulfill its obligations under this Agreement and any
         applicable Biotherapeutics Research Plan(s), Development Plan(s) and
         Manufacturing Plan(s) then in effect.

                  17.3.2 Effect of Failure to Provide Assurances upon a Change
         in Control Occurring during the Target Discovery Program Term. To the
         extent that a Change in Control occurs during the Target Function
         Discovery Program Term and the Acquiring Party fails to provide the
         assurances contemplated by Section 17.3.1 within the [**] period set
         forth therein, and does not cure such failure within [**] after notice
         from the other party, the other party shall have the right, with
         respect to any matter under Sections [**] as to which the Joint
         Management Committee is unable to reach unanimity and that remains
         unresolved following the procedures set forth in Section 3.8.2, to make
         the final decision with respect to such matter, consistent with the
         terms and conditions of this Agreement.

                                       54
<PAGE>

                  17.3.3 Effect of Failure to Provide Assurances upon a Change
         in Control Occurring after the Target Function Discovery Program Term.
         To the extent that a Change in Control occurs following the conclusion
         of the Target Function Discovery Program Term and the Acquiring Party
         fails to provide the assurances contemplated by Section 17.3.1 within
         the [**] period set forth therein, and does not cure such failure
         within [**] after notice from the other party, the Acquiring Party
         shall be deemed to have Opted Out of any Collaboration Product to which
         such failure reasonably relates, with the same effect as if the
         Acquiring Party had Opted Out under Section 10.1.1.1; provided that the
         Acquiring Party shall not [**] with respect to (a) [**] or (b) [**].

                  17.3.4 Option to Negotiate for Rights to Collaboration Product
         upon a Change in Control Occurring after the Target Function Discovery
         Program Term. Without limiting the foregoing, if requested by the other
         party at any time within the [**] period following the Acquiring
         Party's notice under Section 17.3.1 of a Change in Control occurring
         following the conclusion of the Target Function Discovery Program Term,
         the Acquiring Party and the other party shall enter into good faith
         negotiations, for a period of [**] following such request, for the
         other party to obtain from the Acquiring Party the exclusive rights to
         Develop and commercialize any Collaboration Product. In the event the
         Acquiring Party and the other party do not enter into a definitive
         agreement with respect to such exclusive rights within such [**]
         period, except to the extent set forth in Section 17.3.5 below, the
         Acquiring Party and the other party shall each maintain their
         respective rights with respect to any such Collaboration Product as
         otherwise described in this Agreement.

                  17.3.5 [**] upon a Change in Control Occurring after the
         Target Function Discovery Program Term. In the event that (a) the
         Acquiring Party and the other party enter into negotiations in
         accordance with Section 17.3.4 with respect to a Collaboration Product
         but do not enter into a definitive agreement within the [**] period
         contemplated thereby and (b) the Acquiring Party (i) [**] and (ii) has
         not [**], the other party shall have the right, by delivering written
         notice thereof within [**] after the expiration of such [**] period, to
         [**] consisting of (i) [**] and (ii) [**]. [**] at the time such notice
         is delivered or as soon thereafter as [**] in accordance with the terms
         of this Section 17.3.5. Unless otherwise agreed by the Acquiring Party
         and the other party, [**], shall be determined by binding arbitration
         in accordance with the following provisions. The parties shall attempt
         to mutually agree upon a single independent Third Party arbitrator (who
         shall be a professional with appropriate experience in [**]) within
         [**] after the other party's delivery of the written notice in
         accordance with this Section 17.3.5 of [**]. If the parties are unable
         to mutually agree upon one such person, then each party shall appoint
         one independent Third Party professional with appropriate experience in
         [**] prior to the expiration of such [**] period, and within [**] after
         the initial notice, such person(s) shall select a single independent
         Third Party arbitrator, who shall be a professional with appropriate
         experience in [**]. Each party shall present all information as such
         party reasonably desires regarding [**]. Within [**] after the initial
         notice, the arbitrator shall provide written notice to the parties
         regarding his or her determination regarding [**].

         17.4 Severability. Each party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions in lieu of such invalid provisions. In case
such valid provisions cannot be agreed upon, the invalidity of one or several
provisions of this Agreement shall

                                       55
<PAGE>

not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the parties would not have entered into this Agreement
without the invalid provisions.

         17.5 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the notification parties hereto to
the other shall be in writing, delivered personally or by facsimile (and
promptly confirmed by telephone, personal delivery or courier) or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.

         If to Lexicon:      Lexicon Genetics Incorporated
                             8800 Technology Forest Place
                             The Woodlands, Texas 77381
                             Attention:    President and Chief Executive Officer
                             Telephone:    (281) 863-3000
                             Facsimile:    (281) 863-8095

         With copies to:     Lexicon Genetics Incorporated
                             8800 Technology Forest Place
                             The Woodlands, Texas 77381
                             Attention:    Chief Financial Officer
                             Telephone:    (281) 863-3000
                             Facsimile:    (281) 863-8095

                             Lexicon Genetics Incorporated
                             8800 Technology Forest Place
                             The Woodlands, Texas 77381
                             Attention:    General Counsel
                             Telephone:    (281) 863-3000
                             Facsimile:    (281) 863-8010

         If to Organon:      N.V. Organon
                             Kloosterstraat 6
                             5349 AB Oss
                             The Netherlands
                             Attention:    General Manager
                             Telephone:    31 412 661 397
                             Facsimile:    31 412 663 529

         With a copy to:     Director Legal Affairs Akzo Nobel Pharma B.V.
                             Wethouder van Eschstraat 1
                             P.O. Box 20
                             5340 BH Oss
                             The Netherlands

         If to Intervet:     Intervet, Inc.
                             29160 Intervet Lane
                             Millsboro, Delaware 19966

                                       56
<PAGE>

                             Attention:       Director of Business Development
                             Telephone:       (302) 934-4422
                             Facsimile:       (302) 933-4015

All such communications shall be effective upon receipt.

         17.6 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of America,
without reference to the conflicts of law principles thereof.

         17.7 Dispute Resolution. Subject to Section 3.8.2, the parties hereby
agree that they will first attempt in good faith to resolve any controversy or
claim arising out of or relating to this Agreement promptly by negotiations. If
a controversy or claim should arise hereunder, the matter shall be referred to
an individual designated by the Chief Executive Officer (or the equivalent
position) of Lexicon and by the Chief Executive Officer (or the equivalent
position) of Organon (the "Representatives"). If the matter has not been
resolved within [**] of the first meeting of the Representatives of the parties
(which period may be extended by mutual agreement) concerning such matter, the
parties shall be free to pursue all available recourse both at law and in
equity.

         17.8 Entire Agreement. This Agreement, together with the exhibits and
appendices hereto and any confidentiality agreement(s) executed in contemplation
of this Agreement, contains the entire understanding of the parties with respect
to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties
hereto.

         17.9 Publicity. Lexicon and Organon each agree not to disclose any
terms or conditions of this Agreement to any Third Party without consulting the
other party prior to such disclosure. Notwithstanding the foregoing, prior to
execution of this Agreement, Lexicon and Organon shall agree upon the substance
of information that can be used as a routine reference in the usual course of
business to describe the existence and general nature of this transaction, and
Lexicon and Organon may disclose such information without consulting the other
party. The parties may thereafter from time to time mutually agree on revisions
to material to be used as a routine reference, which revisions shall be
submitted by one party for the review and approval of the other party at least
[**] prior to the anticipated use or disclosure of the revised material, such
approval not to be unreasonably withheld. The terms of this Agreement shall be
treated as the Confidential Information of Lexicon and Organon, and, except to
the extent required by applicable law, shall not be disclosed to anyone (except
for the parties' respective employees, consultants, agents and attorneys
assisting in the review and negotiation of this Agreement who have a need to
know the terms of this Agreement) without the written permission of Organon or
Lexicon. If either party desires to release a separate announcement relating to
this Agreement, it shall first allow the other party to approve in writing such
proposed announcement; provided that such approval shall not be unreasonably
withheld or delayed.

         17.10 Headings. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.

         17.11 No Partnership. It is expressly agreed that the relationship
between Lexicon and Organon shall not constitute a partnership, joint venture or
agency. Neither Lexicon nor Organon shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior consent of the other
party to do so.

                                       57
<PAGE>

         17.12 Exports. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. Lexicon and Organon agree not to export or re-export, directly
or indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. Lexicon and
Organon agree to obtain similar covenants from their licensees, (sub)licensees,
or corporate partners, as the case may be, and contractors with respect to the
subject matter of this Section 17.12.

         17.13 Waiver. The waiver by either party hereto of any right hereunder
or the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.

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

                                       58
<PAGE>

         IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute and deliver this Agreement as of the Effective Date.

LEXICON GENETICS INCORPORATED

By:                                      Date:
   -----------------------------------          --------------------------------

Name:
      --------------------------------

Title:
         -----------------------------

N.V. ORGANON

By:                                      Date:
   -----------------------------------          --------------------------------

Name:
      --------------------------------

Title:
         -----------------------------

By:                                      Date:
   -----------------------------------          --------------------------------

Name:
      --------------------------------

Title:
         -----------------------------

INTERVET INC.

By:                                      Date:
   -----------------------------------          --------------------------------

Name:
      --------------------------------

Title:
         -----------------------------

By:                                      Date:
   -----------------------------------          --------------------------------

Name:
      --------------------------------

Title:
         -----------------------------

                                       59
<PAGE>

                                  EXHIBIT 1.55

                           LEVEL 1 PHENOTYPIC ANALYSIS

         Level 1 Phenotypic Analysis is an initial screen designed to identify
primary characteristics resulting from selected mutations in Mutant Mice. Level
1 Phenotypic Analysis currently includes the following assays, which may be
changed from time to time at the Joint Research Committee's reasonable
scientific discretion.

[**]

                                       60
<PAGE>

                                  EXHIBIT 1.56

                           LEVEL 2 PHENOTYPIC ANALYSIS

         Level 2 Phenotypic Analysis is an advanced screen designed to provide
more detailed and focused data relating to primary characteristics identified as
a result of Level 1 Phenotypic Analysis. The Joint Research Committee may
determine that Level 2 Phenotypic Analysis be performed for any one or more
Therapeutic Area(s). Level 2 Phenotypic Analysis currently includes (a) assays
previously performed for Level 1 Phenotypic Analysis with respect to such
Therapeutic Area(s) (utilizing greater numbers of Mutant Mice) and (b)
additional assays represented by those described below, which may be changed
from time to time at the Joint Research Committee's reasonable scientific
discretion.

METABOLISM AND ENDOCRINOLOGY

[**]

CARDIOLOGY

[**]

NEUROLOGY

[**]

ONCOLOGY

[**]

IMMUNOLOGY

[**]

OPHTHALMOLOGY

[**]

                                       61
<PAGE>

                                 EXHIBIT 7.1.1.2

                       MANUFACTURING AND SUPPLY AGREEMENT

         THIS MANUFACTURING AND SUPPLY AGREEMENT (this "Agreement") is dated as
of _____, 2005 (the "Effective Date") and is made by and among LEXICON GENETICS
INCORPORATED, a corporation organized under the laws of the State of Delaware,
United States of America ("Lexicon"), and N.V. ORGANON, a registered company
organized under the laws of the Netherlands ("Organon"). Lexicon and Organon are
sometimes referred to herein individually as a "party" and collectively as the
"parties." All terms not otherwise defined herein shall have the meanings given
to such terms in the Collaboration Agreement (as defined below) and all exhibits
thereto.

                                 R E C I T A L S

         WHEREAS, Lexicon and Organon are parties to that certain Collaboration
and License Agreement dated as of May 16, 2005 (the "Collaboration Agreement")
under which Lexicon and Organon are collaborating in the discovery and
development of antibody and protein therapeutics for selected gene and protein
targets;

         WHEREAS, pursuant to the terms and conditions set forth in the
Collaboration Agreement, unless otherwise specified by the Joint Management
Committee or declined by Organon in accordance with the terms thereof, Organon
or its Affiliated Subcontractor(s) shall be responsible for the Manufacture and
supply of all quantities of any Collaboration Product necessary for
commercialization;

         WHEREAS, pursuant to the terms and conditions set forth in the
Collaboration Agreement, Organon or its Affiliated Subcontractor(s) shall
Manufacture and supply all quantities of the [insert Collaboration Product
description] (the "Collaboration Product") necessary for commercialization;

         NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:

                      ARTICLE 1. MANUFACTURING AND SUPPLY

         1.1 Manufacturing and Supply Generally. Organon or its Affiliated
Subcontractor(s) shall Manufacture and supply all quantities of the
Collaboration Product necessary for commercialization and shall be responsible
for implementing all aspects of Manufacturing under the direction and oversight
of the Joint Management Committee, as set forth in the Collaboration Agreement
and in accordance with the Manufacturing Plan established for the Collaboration
Product. Organon and its Affiliated Subcontractor(s) shall use their Diligent
Efforts to provide an adequate and timely supply of all properly forecasted
requirements of the Collaboration Product in accordance with this Article 1.

         1.2 Orders; Forecasts for Commercial Requirements. The party with
principal responsibility for sales and distribution of the Collaboration Product
(the "Responsible Party") will be responsible for generating periodic [**]
forecasts of the anticipated requirements for such Collaboration Product for
commercialization purposes and updates of such forecasts not less than [**]
thereafter, such forecasts and updates to be promptly provided to Organon and
its Affiliated Subcontractor(s). The Responsible Party shall provide to Organon
and its Affiliated Subcontractor(s) a firm order for the amount of Collaboration
Product to be delivered during each [**] following the filing of a BLA relating
to the Collaboration Product, such firm order to be delivered no later than [**]
prior to the requested delivery date for such order. Notwithstanding the
foregoing, (i) if the total of such party's firm orders for delivery in any
Contract Quarter is less than [**] of its most recent estimate for such Contract
Quarter, such party shall be

<PAGE>

required to purchase at least [**] of the estimate for such Contract Quarter and
(ii) if the total of such party's firm orders for delivery in any Contract
Quarter exceeds [**] of its most recent estimate for such Contract Quarter,
Organon and its Affiliated Subcontractor(s) shall use Diligent Efforts, but
shall have no obligation, to deliver quantities in excess of [**] of the
estimate for such Contract Quarter. Organon and its Affiliated Subcontractor(s)
shall package for shipment and ship all quantities of the Collaboration Product,
samples or other materials in accordance with full written and reasonable
instructions provided by the Responsible Party. Freight terms for such shipment
shall be Ex Works according to Incoterms 2000. In the event that all of the
Responsible Party's commercialization activities with respect to the
Collaboration Product become the responsibility of a Third Party in accordance
with the terms of the Collaboration Agreement, then the foregoing obligations of
such party in this Section 1.2 shall become obligations of such Third Party with
respect to the Collaboration Product; provided that in no event shall such party
be relieved of any responsibility therefor unless Organon and its Affiliated
Subcontractor(s) is a party to an agreement with such Third Party with respect
to the commercialization of the Collaboration Product (in which case such party
shall be relieved of all responsibility therefor).

         1.3 Certain Covenants. Organon and its Affiliated Subcontractor(s)
agree and covenant that it will (a) use Diligent Efforts to avoid shortfalls of
supply based on the forecasts provided to it in accordance with Section 1.2,
shall promptly notify the parties in the event it becomes aware of any probable
shortfall and shall use Diligent Efforts to remedy any shortfall of supply as
soon as practicable; (b) be responsible for Manufacturing, filling, packaging
and warehousing of the Collaboration Product in conformity with applicable cGMP
Requirements [**], and in accordance, in all material respects, with all other
applicable Law; (c) maintain or cause to be maintained all records necessary and
appropriate to demonstrate compliance with applicable cGMP Requirements and the
Specifications; and (d) grant Lexicon the right, on reasonable advance notice
and during normal business hours during the term of this Agreement, to have its
personnel or representatives with quality control or quality assurance
responsibilities inspect and audit the facilities and operations directly
related to the Manufacture and supply of the Collaboration Product in order to
confirm compliance with the covenants contained in this Section 1.3; provided
that the foregoing inspection and audit right shall be limited to [**] and [**]
per visit; and provided, further, that such personnel or representatives shall
be subject to Organon's prior approval, such approval not to be unreasonably
withheld.

                           ARTICLE 2. FINANCIAL TERMS

         2.1 Payment. Either Lexicon or Organon, as determined by the Joint
Management Committee, shall pay Organon's Affiliated Subcontractor(s) an amount
equal to the Product Supply Costs for quantities of the Collaboration Product
Manufactured and supplied by such Affiliated Subcontractor(s) hereunder, [**].
Payment for quantities of the Collaboration Product Manufactured and supplied
during each [**] shall be due within [**] of receipt of the [**] report
specified in Section 2.2, or earlier if invoiced pursuant to the Affiliated
Subcontractor's standard practices based on delivery of the applicable product
or services. Such Product Supply Costs shall be subject to review by the Joint
Management Committee and subject to audit as provided in Section 2.3.

         2.2 Reports and Records. Within [**] after each [**], Organon's
Affiliated Subcontractor(s) shall furnish to Lexicon and Organon a written [**]
report showing the Product Supply Costs for quantities of the Collaboration
Product Manufactured and supplied by the Affiliated Subcontractor during such
[**], including a reasonably detailed calculation of such Product Supply Costs.
The Affiliated Subcontractor shall keep accurate books and records in connection
with the Manufacture and supply of the Collaboration Product in a manner
consistent with GAAP and in sufficient detail to permit accurate determination
of all figures necessary for verification of Product Supply Costs for the
Collaboration Product.

                                       2

<PAGE>

         2.3 Audits. Upon the written request of Lexicon or Organon, the
Affiliated Subcontractor shall permit an independent certified public accountant
selected by the requesting party and acceptable to the Affiliated Subcontractor,
which acceptance shall not be unreasonably withheld, to have access, at
reasonable times and during normal business hours, to such records of the
Affiliated Subcontractor as may be reasonably necessary to verify the accuracy
of the Product Supply Costs for the Collaboration Product, in respect of any
fiscal year ending not more than [**] prior to the date of such request. Each
party shall use commercially reasonable efforts to schedule all such
verifications within [**] after the requesting party makes its written request.
All such verifications shall be conducted not more than [**]. The report of the
requesting party's independent certified public accountant shall be made
available to all parties. Each party agrees that all information subject to
review under this Section 2.3 is confidential and that the party receiving such
information shall cause its independent certified public accountant to retain
all such information in confidence. The requesting party's independent certified
public accountant shall only report to the requesting party as to the
computation of Product Supply Costs and shall not disclose to the requesting
party any other information of the other party.

         2.4 Interest on Late Payments. The Affiliated Subcontractor(s) shall
have the right to seek to collect interest on any payments that are not paid on
or before [**] after the date such payments are due under this Agreement at a
rate equal to [**], calculated on the total number of days payment is
delinquent.

         2.5 Manner of Payment. Payments to be made by a party to the Affiliated
Subcontractor(s) under this Agreement shall be payable in the currency of the
Affiliated Subcontractor(s) and shall be paid by bank wire transfer in
immediately available funds to such bank account in the state and country in
which such principal office is located as is designated in writing by the
Affiliated Subcontractor from time to time.

                           ARTICLE 3. CONFIDENTIALITY

         3.1 Nondisclosure Obligations.

                  3.1.1 General. Except as otherwise provided in this Article 3,
         during the term of this Agreement and for a period of [**] thereafter,
         each Receiving Party shall maintain the Confidential Information of
         each Disclosing Party in confidence and use it only for purposes
         specifically authorized under this Agreement.

                  3.1.2 Limitations. To the extent it is reasonably necessary or
         appropriate to fulfill its obligations or exercise its rights under
         this Agreement and subject to advance written notification to the
         Disclosing Party: (a) a party may disclose to Third Parties
         Confidential Information it is otherwise obligated not to disclose
         under this Section 3.1, to its Affiliates, (sub)licensees, consultants,
         outside contractors and clinical investigators, on a strict
         need-to-know basis for the purposes contemplated by this Agreement and
         on condition that such entities or persons agree to keep the
         Confidential Information confidential for the same time periods and to
         the same extent as such party is required to keep the Confidential
         Information confidential hereunder; and (b) a party or its
         (sub)licensees may disclose, using appropriate measures to preserve
         confidentiality, such Confidential Information to government or other
         regulatory authorities to the extent that such disclosure is reasonably
         necessary to Manufacture the Collaboration Product pursuant to this
         Agreement.

                  3.1.3 Required Disclosure. A Receiving Party may disclose
         Confidential Information pursuant to interrogatories, requests for
         information or documents, subpoena, civil investigative demand issued
         by a court or governmental agency or as otherwise required by law;
         provided, however, that the Receiving Party shall notify the Disclosing
         Party promptly upon receipt thereof,

                                       3

<PAGE>

         giving [**] the Disclosing Party sufficient advance notice to permit it
         to oppose, limit or seek confidential treatment for such disclosure;
         and provided, further, that the Receiving Party shall furnish only that
         portion of the Confidential Information which it is advised by counsel
         is legally required whether or not a protective order or other similar
         order is obtained by the Disclosing Party.

         3.2 Injunctive Relief. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 3 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 3.

                   ARTICLE 4. REPRESENTATIONS AND WARRANTIES

         4.1 Representations, Warranties and Covenants of Lexicon. Lexicon
represents and warrants to and covenants with the other parties that:

                  4.1.1 Lexicon is a corporation duly organized, validly
         existing and in corporate good standing under the laws of the State of
         Delaware, United States of America;

                  4.1.2 Lexicon has the corporate and legal right, authority and
         power to enter into this Agreement;

                  4.1.3 Lexicon has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement;

                  4.1.4 upon the execution and delivery of this Agreement, this
         Agreement shall constitute a valid and binding obligation of Lexicon,
         enforceable in accordance with its terms, except as enforceability may
         be limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting creditors' and contracting
         parties' rights generally and except as enforceability may be subject
         to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  4.1.5 the performance of Lexicon's obligations under this
         Agreement will not conflict with its charter documents or result in a
         breach of any agreements, contracts or other arrangements to which it
         is a party; and

                  4.1.6 Lexicon will not during the term of this Agreement enter
         into any agreements, contracts or other arrangements that would be
         inconsistent with its obligations under this Agreement.

         4.2 Representations, Warranties and Covenants of Organon. Organon
represents and warrants to and covenants with the other parties that:

                  4.2.1 Organon is a corporation duly organized, validly
         existing and in corporate good standing under the laws of the
         Netherlands;

                  4.2.2 Organon has the corporate and legal right, authority and
         power to enter into this Agreement, and to extend the rights and
         licenses granted to Lexicon in this Agreement;

                                       4

<PAGE>

                  4.2.3 Organon has taken all necessary action to authorize the
         execution, delivery and performance of this Agreement;

                  4.2.4 upon the execution and delivery of this Agreement, this
         Agreement shall constitute a valid and binding obligation of Organon
         enforceable in accordance with its terms, except as enforceability may
         be limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar laws affecting creditors' and contracting
         parties' rights generally and except as enforceability may be subject
         to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  4.2.5 the performance of its obligations under this Agreement
         will not conflict with Organon's charter documents or result in a
         breach of any agreements, contracts or other arrangements to which it
         is a party; and

                  4.2.6 Organon will not after the Effective Date enter into any
         agreements, contracts or other arrangements that would be inconsistent
         with its obligations under this Agreement.

         4.3 Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, NO PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY COLLABORATION PRODUCT
OR ANY OTHER SUBJECT MATTER OF THIS AGREEMENT, AND EACH PARTY HEREBY DISCLAIMS
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

         4.4 Limited Liability. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT, NO PARTY WILL BE LIABLE WITH RESPECT TO ANY MATTER ARISING UNDER THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY FOR ANY PUNITIVE, EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OR LOST PROFITS.

                     ARTICLE 5. EXPIRATION AND TERMINATION

         5.1 Term of Agreement. The term of this Agreement shall commence on the
Effective Date and shall continue until the expiration or termination of the
Collaboration Agreement.

         5.2 Events of Default. An Event of Default by a party shall have
occurred upon (a) the occurrence of a material breach of this Agreement if such
party fails to remedy such breach within [**] after written notice thereof by a
non-breaching party ([**] in the event of a party's failure to make a payment
required hereunder) or, if remediation of such breach in [**] is not
practicable, if such party fails to commence and diligently pursue such
remediation during such [**] period, or (b) the commencement of any proceeding
in or for bankruptcy, insolvency, dissolution or winding up by or against such
party that is not dismissed or otherwise disposed of within [**] thereafter.

         5.3 Effect of an Event of Default. In the event of an Event of Default,
any non-defaulting party that is not an Affiliate of the defaulting party shall
have the right, at its option exercisable in its sole discretion, in addition to
any other rights or remedies available to it at law or in equity and subject to
the limitations set forth in Sections 4.4 and 6.6 hereof, to terminate this
Agreement upon [**] notice thereof to the other party.

         5.4 Effect of Expiration or Termination of Agreement. The expiration or
termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination.

                                       5

<PAGE>

The provisions of Article 3 and Sections 6.2 through 6.6 hereof shall survive
the expiration or termination of this Agreement.

                            ARTICLE 6. MISCELLANEOUS

         6.1 Force Majeure. No party shall be held liable or responsible to any
other party nor be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any obligation under this Agreement
when such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party, including but not limited to fire,
floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority; provided, however, that the party so affected shall use
reasonable commercial efforts to avoid or remove such causes of nonperformance,
and shall continue performance hereunder with reasonable dispatch whenever such
causes are removed. Each party shall provide the other party with prompt written
notice of any delay or failure to perform that occurs by reason of force
majeure. The parties shall mutually seek a resolution of the delay or the
failure to perform as noted above.

         6.2 Assignment. This Agreement may not be assigned or otherwise
transferred, in whole or in part, by any party without the consent of the other
party; provided, however, that any party may, without such consent, assign its
rights and obligations under this Agreement (i) to any Affiliate, or (ii) in
connection with a merger, consolidation or sale of such portion of a party's
assets that includes rights under this Agreement to an unrelated Third Party;
provided, further, that such party's rights and obligations under this Agreement
shall be assumed by its successor in interest in any such transaction and shall
not be transferred separate from all or substantially all of its other business
assets, including those business assets that are the subject of this Agreement.
Any purported assignment in violation of the preceding sentence shall be void.
Any permitted assignee shall assume all obligations of its assignor under this
Agreement, unless the parties otherwise agree.

         6.3 Severability. Each party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions in lieu of such invalid provisions. In case
such valid provisions cannot be agreed upon, the invalidity of one or several
provisions of this Agreement shall not affect the validity of this Agreement as
a whole, unless the invalid provisions are of such essential importance to this
Agreement that it is to be reasonably assumed that the parties would not have
entered into this Agreement without the invalid provisions.

         6.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the notification parties hereto to
any other party shall be in writing, delivered personally or by facsimile (and
promptly confirmed by telephone, personal delivery or courier) or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.

                                       6

<PAGE>

         If to Lexicon:  Lexicon Genetics Incorporated
                         8800 Technology Forest Place
                         The Woodlands, Texas 77381
                         Attention:  President and Chief Executive Officer
                         Telephone:  (281) 863-3000
                         Facsimile:  (281) 863-8095

         With a copy to: Lexicon Genetics Incorporated
                         8800 Technology Forest Place
                         The Woodlands, Texas 77381
                         Attention:  General Counsel
                         Telephone:  (281) 863-3000
                         Facsimile:  (281) 863-8010

         If to Organon:  N.V. Organon
                         Kloosterstraat 6
                         5349 AB Oss
                         The Netherlands
                         Attention:  General Manager
                         Telephone:  31 412 661 397
                         Facsimile:  31 412 663 529

         With copies to: Akzo Nobel Pharma
                         Wethouder van Eschstraat 1
                         P.O. Box 20
                         5340 BH Oss
                         The Netherlands
                         Attention:  Director Legal Affairs

                         Organon International Inc.
                         56 Livingston Ave.
                         Roseland, New Jersey 07068
                         Attention:  General Counsel

All such communications shall be effective upon receipt.

         6.5 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, United States of America,
without reference to the conflicts of law principles thereof.

         6.6 Dispute Resolution. Subject to Section 3.8.2 of the Collaboration
Agreement, the parties hereby agree that they will first attempt in good faith
to resolve any controversy or claim arising out of or relating to this Agreement
promptly by negotiations. If a controversy or claim should arise hereunder, the
matter shall be referred to an individual designated by the Chief Executive
Officer (or the equivalent position) of Lexicon and by the Chief Executive
Officer (or the equivalent position) of Organon (the "Representatives"). If the
matter has not been resolved within [**] of the first meeting of the
Representatives of the parties (which period may be extended by mutual
agreement) concerning such matter, the parties shall be free to pursue all
available recourse both at law and in equity.

         6.7 Entire Agreement. This Agreement, together with the exhibits and
appendices hereto and any confidentiality agreement(s) executed in contemplation
of this Agreement, contains the entire

                                       7

<PAGE>

understanding of the parties with respect to the subject matter hereof. All
express or implied agreements and understandings, either oral or written,
heretofore made are expressly merged in and made a part of this Agreement. In
the event of any discrepancy between the terms and conditions contained herein
and those contained in the Collaboration Agreement, the terms and conditions of
the Collaboration Agreement shall control. This Agreement may be amended, or any
term hereof modified, only by a written instrument duly executed by both parties
hereto.

         6.8 Publicity. Each party agrees not to disclose any terms or
conditions of this Agreement to any Third Party without consulting the other
parties prior to such disclosure. Notwithstanding the foregoing, prior to
execution of this Agreement, the parties shall agree upon the substance of
information that can be used as a routine reference in the usual course of
business to describe the existence and general nature of this transaction, and
the parties may disclose such information without consulting the other party.
The parties may thereafter from time to time mutually agree on revisions to
material to be used as a routine reference, which revisions shall be submitted
by one party for the review and approval of the other parties at least [**]
prior to the anticipated use or disclosure of the revised material, such
approval not to be unreasonably withheld. The terms of this Agreement shall be
treated as the Confidential Information of the parties, and, except to the
extent required by applicable law, shall not be disclosed to anyone (except for
the parties' respective employees, consultants, agents and attorneys assisting
in the review and negotiation of this Agreement who have a need to know the
terms of this Agreement) without the written permission of the other parties. If
any party desires to release a separate announcement relating to this Agreement,
it shall first allow the other parties to approve in writing such proposed
announcement; provided that such approval shall not be unreasonably withheld or
delayed.

         6.9 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.

         6.10 No Partnership. It is expressly agreed that the relationship
between the parties shall not constitute a partnership, joint venture or agency.
No party shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on
another party, without the prior consent of the other party to do so.

         6.11 Exports. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. The parties agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. The parties
agree to obtain similar covenants from their licensees, (sub)licensees, or
corporate partners, as the case may be, and contractors with respect to the
subject matter of this Section 6.11.

         6.12 Waiver. The waiver by any party hereto of any right hereunder or
the failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.

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

                            [SIGNATURE PAGE FOLLOWS]

                                       8
<PAGE>

         IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute and deliver this Agreement as of the Effective Date.

LEXICON GENETICS INCORPORATED

By:                                   Date:
   -----------------------------             -------------------------

Name:
      --------------------------

Title:
         -----------------------

N.V. ORGANON

By:                                   Date:
   -----------------------------             -------------------------

Name:
      --------------------------

Title:
         -----------------------

                                       9
<PAGE>
                                                                     EXHIBIT 8.4

                        JOINT COMMERCIALIZATION AGREEMENT

         THIS JOINT COMMERCIALIZATION AGREEMENT (this "Agreement") is dated as
of _____, _____ (the "Effective Date") and is made by and between LEXICON
GENETICS INCORPORATED, a corporation organized under the laws of the State of
Delaware, United States of America ("Lexicon"), and N.V. ORGANON, a registered
company under the laws of the Netherlands ("Organon"). [Affiliates of Lexicon
and Organon may be designated as the signatories to this Agreement] Lexicon and
Organon are sometimes referred to herein individually as a "party" and
collectively as the "parties."

                                    RECITALS

         WHEREAS, Lexicon and Organon are parties to a Collaboration and License
Agreement dated May 16, 2005 (the "Collaboration Agreement");

         WHEREAS, Lexicon and Organon are Developing the Collaboration Product
described in Schedule A hereto (the "Licensed Product"); and

         WHEREAS, Lexicon and Organon desire to collaborate in the
commercialization of the Licensed Product in the Collaboration Field in the
Co-Commercialization Territory (as defined herein);

         NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:

                             ARTICLE 1. DEFINITIONS

         For purposes of this Agreement, the terms defined in this Article 1
shall have the respective meanings specified below:

         1.1      "Acquiring Party" has the meaning specified in Section 11.3
hereof.

         1.2      "Affiliate" means any corporation, company, partnership, joint
venture or firm that controls, is controlled by or is under common control with
a party to this Agreement. For purposes hereof, "control" means (a) in the case
of a corporate entity, direct or indirect ownership of more than fifty percent
(50%) of the stock or shares entitled to vote for the election of directors; and
(b) in the case of a non-corporate entity, direct or indirect ownership of more
than fifty percent (50%) of the equity interests with the power to direct the
management and policies of such non-corporate entity.

         1.3      "Allocable Overhead" means costs incurred by a party with
respect to the Licensed Product that (a) are attributable to such party's [**]
and (b) are allocated to company departments based on [**]. Allocable Overhead
shall not include any costs attributable to [**].

         1.4      "Allowable Commercialization Costs" means the sum of the
following (without any item being accounted for more than once): (a) Cost of
Goods Sold for Commercialization (without duplication of Product Supply Costs
for Development under the Collaboration Agreement); (b) Regulatory and Licensing
Costs; (c) Distribution Costs; and (d) Sales and Marketing Costs.

         1.5      "Background Materials" has the meaning specified in the
Collaboration Agreement.

                                       1
<PAGE>

         1.6      "Background Technology" has the meaning specified in the
Collaboration Agreement.

         1.7      "BLA" means a Biologics Licensing Application (as defined in
the FDC Act) filed with the FDA and any other equivalent marketing authorization
application or other license, registration or other application seeking approval
from a Regulatory Authority to market the Licensed Product in the Collaboration
Field in any country or region within the Co-Commercialization Territory.

         1.8      "Bundled Transaction" has the meaning specified in Section
1.40 hereof.

         1.9      "Change in Control" has the meaning specified in the
Collaboration Agreement.

         1.10     "Co-Commercialization Territory" means [all of the countries
of the world other than those for which rights have been granted to a Joint
Marketing/Development Collaborator]. For clarity, the Co-Commercialization
Territory shall not include any country for which rights have been granted to a
Joint Marketing/Development Collaborator from and after the effectiveness of the
parties' grant of such rights to such Joint Marketing/Development Collaborator.

         1.11     "Collaboration Field" has the meaning specified in the
Collaboration Agreement.

         1.12     "Combination Product" has the meaning specified in Section
1.40 hereof.

         1.13     "Commercialization" or "Commercialize" means any and all
activities associated with marketing, promoting, communicating (including
medical communications and publishing), distributing, importing, exporting or
selling the Licensed Product in the Collaboration Field as set forth in the
applicable Commercialization Plan, including the conduct of any activities
(including any Post-approval Studies) directed to obtaining pricing and
reimbursement approvals and any other Post-approval Studies not included in
Development, in each case by a party, its Affiliates or (sub)licensees.

         1.14     "Commercialization Plan" means the plan to be developed by the
Joint Commercialization Committee and approved by the Joint Management Committee
for each Contract Year with respect to the Licensed Product in accordance with
Section 4.2 hereof.

         1.15     "Confidential Information" means any information and data
received by a party or its Affiliates (the "Receiving Party") from the other
party or its Affiliates (the "Disclosing Party") in connection with this
Agreement (including, without limitation, any research, testing, clinical,
regulatory, marketing or other scientific or business information, plans, or
data pertaining to the Licensed Product). Notwithstanding the foregoing,
Confidential Information shall not include any part of such information or data
that:

                  (a)      is or becomes part of the public domain other than by
         unauthorized acts of the Receiving Party or its Affiliates;

                  (b)      can be shown by written documents to have been
         already in the possession of the Receiving Party or its Affiliates
         prior to disclosure under this Agreement, provided such Confidential
         Information was not obtained directly or indirectly from the Disclosing
         Party under an obligation of confidentiality;

                  (c)      can be shown by written documents to have been
         disclosed to the Receiving Party or its Affiliates by a Third Party,
         provided such Confidential Information was not obtained directly or
         indirectly from the Disclosing Party under an obligation of
         confidentiality; or

                                       2
<PAGE>

                  (d)      can be shown by written documents to have been
         independently developed by the Receiving Party or its Affiliates
         without use of, or access to, Confidential Information of the
         Disclosing Party.

Specific Confidential Information of a Disclosing Party shall not be deemed to
come under the foregoing exceptions merely because it is embraced by more
general information that is or becomes part of the public domain, or is known
by, disclosed to or independently developed by the Receiving Party.

         1.16     "Contract Year" means (a) with respect to the first Contract
Year, the period beginning on the Effective Date and ending on December 31,
______ (the "First Contract Year"), and (b) with respect to each subsequent
Contract Year, the twelve (12) month period beginning on the day following the
end of the First Contract Year and each succeeding twelve (12) month period
thereafter. Each Contract Year (other than the First and last Contract Year, as
applicable) shall be divided into four (4) "Contract Quarters" comprised of
successive three (3) month periods. In the First Contract Year, the first
Contract Quarter shall begin on the Effective Date and end on ______.

         1.17     "Control" or "Controlled" has the meaning specified in the
Collaboration Agreement.

         1.18     "Cost and Revenue Sharing Ratio" means (a) with respect to
Lexicon, [fifty percent (50%)], and (b) with respect to Organon, [fifty percent
(50%)]. [Ratio in effect under Collaboration Agreement when Joint
Commercialization Agreement is signed]

         1.19     "Cost of Goods Sold" means (a) to the extent that the Licensed
Product is sourced from a party, the unit cost of manufacture of the Licensed
Product (i.e., direct material and direct labor costs, plus manufacturing
overhead fairly allocated to the Licensed Product, all calculated in accordance
with GAAP), and (b) to the extent that the Licensed Product is sourced from [the
applicable Organon Affiliated Subcontractor under that certain Manufacturing and
Supply Agreement dated ____] [and/or] [a Third Party, subject to Section 2.2.3],
the actual price paid to such [Organon Affiliated Subcontractor] [and/or] [Third
Party] for the manufacture, supply and packaging of the Licensed Product. For
purposes of the foregoing, (i) "direct material costs" means actual costs
incurred in manufacturing or purchasing materials, including freight-in costs,
sales and excise taxes imposed thereon and customs duty and charges levied by
government authorities, and all costs of packaging components; (ii) "direct
labor costs" means actual cost of employees engaged in direct manufacturing
activities and quality control and quality assurance activities who are directly
employed in manufacturing and packaging the Licensed Product; and (iii)
"manufacturing overhead" attributable to the Licensed Product will include a
reasonable allocation of indirect labor (not previously included in direct labor
costs), a reasonable allocation of administrative costs, and a reasonable
allocation of facilities costs, all in accordance with GAAP, but will not
include corporate administrative overhead or plant start-up costs or costs
associated with excess capacity. All allocations will be based on the assumption
that such party's plant and equipment are utilized to their reasonable full
capacity, and all costs and allocations shall be consistent with the methods
used for such costs and allocations for such party's internal purposes. More
specifically, the components of Cost of Goods Sold shall comprise: (A) direct
labor (fermentation, purification personnel); (B) direct materials; (C) facility
costs (rent, property taxes, depreciation of leaseholds, utilities, spare parts,
maintenance contracts); (D) manufacturing equipment depreciation; (E)
allocations for information technology, document control, quality engineering,
purchasing, warehouse management, microbiology (with such allocations to be
based on estimated service levels, headcount or square footage occupancy,
depending on the category); (F) indirect labor (manufacturing supervision); (G)
manufacturing department overhead (uniforms, materials used in plant
maintenance); (H) quality assurance/quality control; and (I) such other similar
costs as may be reasonably included in such definition.

                                       3
<PAGE>

         1.20     "Detail" means a sales presentation by a professional sales
representative to a target physician involved in prescribing the Licensed
Product in which the primary purpose is to discuss the benefits and features of
the Licensed Product.

         1.21     "Detail Costs" means the direct compensation and benefits paid
to professional sales representatives making Details.

         1.22     "Development" or "Develop" has the meaning specified in the
Collaboration Agreement.

         1.23     "Diligent Efforts" has the meaning specified in the
Collaboration Agreement.

         1.24     "Disclosing Party" has the meaning specified in Section 1.15
hereof.

         1.25     "Distribution Costs" means a party's reasonable costs and
expenses (including direct labor) related to storage and distribution of the
Licensed Product incurred in accordance with a budget approved by the Joint
Management Committee, including: (a) handling and transportation to fulfill
orders; (b) customer services, including order entry, billing and adjustments,
inquiry and credit and collection; (c) cost of facilities and labor utilized for
the storage or distribution of the Licensed Product; and (d) amounts paid to
Third Parties in respect of storage or distribution of the Licensed Product.

         1.26     "Effective Date" means the date specified in the initial
paragraph of this Agreement.

         1.27     "Event of Default" means an event described in Section 10.2
hereof.

         1.28     "FDA" has the meaning specified in the Collaboration
Agreement.

         1.29     "FDC Act" has the meaning specified in the Collaboration
Agreement.

         1.30     "GAAP" means United States or international generally accepted
accounting principles, as they exist from time to time, consistently applied.

         1.31     "Joint Commercialization Committee" has the meaning specified
in Section 3.1.2 hereof.

         1.32     "Joint Management Committee" has the meaning specified in
Section 3.1.1 hereof.

         1.33     "Joint Marketing/Development Collaborator" has the meaning
specified in the Collaboration Agreement.

         1.34     "Joint Marketing/Development Collaborator Revenue" has the
meaning specified in the Collaboration Agreement.

         1.35     "[**]" means [**].

         1.36     "Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of any federal,
national, multinational, state, provincial, county, city or other political
subdivision, domestic or foreign.

         1.37     "Lexicon Background Materials" has the meaning specified in
the Collaboration Agreement.

         1.38     "Lexicon Background Technology" has the meaning specified in
the Collaboration Agreement.

                                       4
<PAGE>

         1.39     "Manufacturing" or "Manufacture" has the meaning specified in
the Collaboration Agreement.

         1.40     "Net Sales" means the gross amount invoiced for sales of the
Licensed Product by Lexicon, Organon and their respective Affiliates to
customers which are not Affiliates (or which are Affiliates but are end users of
the Licensed Product), less:

                  (a)      trade, quantity and cash discounts actually allowed;

                  (b)      discounts, refunds, rebates, chargebacks, retroactive
         price adjustments, billing errors and any other allowances (including,
         without limitation, government-mandated and managed health
         care-negotiated rebates) actually granted which effectively reduce the
         net sales price;

                  (c)      product returns credits and allowances actually
         granted;

                  (d)      any tax imposed on the production, sale, delivery or
         use of the product (excluding federal, state or local taxes based on
         income);

                  (e)      freight, postage, shipping, customs duties, excises,
         tariffs, surcharges, other governmental charges (excluding federal,
         state or local taxes based on income) and insurance charges actually
         allowed or paid for delivery of the product;

                  (f)      payments or rebates paid with respect to the Licensed
         Product in connection with state or federal Medicare, Medicaid or
         similar programs in the United States or in connection with similar
         programs in other countries in which there are sales; and

                  (g)      adjustments for bad debts.

Such amounts shall be determined from the books and records of Lexicon, Organon
and their respective Affiliates maintained in accordance with GAAP.

         In the event the Licensed Product is sold as part of a Combination
Product (as defined below), the Net Sales of the Licensed Product attributable
to the Combination Product will be determined by multiplying the Net Sales of
the Combination Product by the fraction, A/A+B where A is the average sales
price of the Licensed Product when sold separately in finished form and B is the
average sales price of the other active compounds or ingredients in the
Combination Product sold separately in finished form.

         In the event that the average sale price of the Licensed Product can be
determined but the average sales price of the other active compounds or
ingredients cannot be determined, the Net Sales of the Licensed Product
attributable to the Combination Product will be determined by multiplying the
Net Sales of the Combination Product by the fraction C/C+D where C is the
selling party's average sales price of the Licensed Product and D is the
difference between the average sales price of the Combination Product and the
average sales price of the Licensed Product. If the average sales price of the
other active compounds or ingredients can be determined but the average sales
price of the Licensed Product cannot be determined, the Net Sales of the
Licensed Product attributable to the Combination Product will be determined by
multiplying the Net Sales of the Combination Product by the following formula:
one minus C/C+D where C is the average sales price of the other product(s) and D
is the difference between the average sales price of the Combination Product and
the average sales price of the other active compounds or ingredients.

                                       5
<PAGE>

         In the event that the average sales price of both the Licensed Product,
as applicable, and the other active compounds or ingredients in the Combination
Product cannot be determined, the Net Sales of the Licensed Product attributable
to the Combination Product shall be negotiated in good faith by the parties.

         The Net Sales price for a Combination Product in a given country will
be calculated once each Contract Year and such price will be used during all
applicable revenue reporting periods for the entire Contract Year for such
country, absent extraordinary conditions or events. When determining the average
sales price of the Licensed Product or the other active compounds or ingredients
in the Combination Product, the average sales price will be calculated using
data arising from the twelve (12) months preceding the calculation of the Net
Sales price for the Combination Product. As used above, the term "Combination
Product" means the Licensed Product sold in conjunction with any other active
component(s) (whether packaged together or in the same therapeutic formulation).

         If Lexicon, Organon or their Affiliates sells the Licensed Product to a
customer which also purchases other products or services from such seller in a
bundled, combination or capitated transaction (a "Bundled Transaction"), and
such seller discounts the sales price of the Licensed Product to a greater
degree than such seller generally discounts the price of its other products to
such customer, then the aggregate amount received with respect to such Bundled
Transaction shall be allocated to Net Sales pursuant to the formula set forth in
Exhibit 1.40 hereto. For purposes of the foregoing, "discounting" includes
establishing the list price at lower than the seller's normal pricing level.

         Free samples of Licensed Product and the disposition of Licensed
Product for, or the use of Licensed Product in Post-approval Studies in which
such Licensed Product is provided to patients without any payment shall not
result in any Net Sales.

         1.41 "Operating Profit/Loss" means (a) Net Sales of the Licensed
Product in the Collaboration Field in the Co-Commercialization Territory during
the relevant time period less (b) the Allowable Commercialization Costs incurred
by Lexicon and Organon in respect of the Licensed Product during such time
period. For clarity, Operating Profit/Loss shall not include (i) Net Sales or
Regulatory and Licensing Costs from and after the effectiveness of a party's
Opting Out of the Licensed Product or (ii) Joint Marketing/Development
Collaborator Revenue.

         1.42     "Opt Out" has the meaning specified in the Collaboration
Agreement.

         1.43     "Organon Background Materials" has the meaning specified in
the Collaboration Agreement.

         1.44     "Organon Background Technology" has the meaning specified in
the Collaboration Agreement.

         1.45     "Patent Rights" has the meaning specified in the Collaboration
Agreement.

         1.46     "Post-approval Study" means a clinical trial conducted after
Regulatory Approval of the Licensed Product for the applicable indication has
been obtained in the relevant country.

         1.47     "Pre-existing Obligations" has the meaning specified in the
Collaboration Agreement.

         1.48     "Product Collaboration" has the meaning specified in Section
2.1.1 hereof.

         1.49     "Product Collaboration Committee" means the Joint Management
Committee or Joint Commercialization Committee.

                                       6
<PAGE>

         1.50     "Product Trademark" means one or more trademarks or logos that
are used for the Commercialization of the Licensed Product in the Collaboration
Field in the Co-Commercialization Territory.

         1.51     "Program Director" has the meaning specified in Section 3.2
hereof.

         1.52     "Program Intellectual Property" has the meaning specified in
the Collaboration Agreement.

         1.53     "Receiving Party" has the meaning specified in Section 1.15
hereof.

         1.54     "Regulatory Approval" means any and all approvals (including
any applicable governmental price and reimbursement approvals), licenses,
registrations, or authorizations of any federal, national, multinational, state,
provincial or local regulatory agency, department bureau or other governmental
entity that are necessary for the manufacture, use, storage, import, transport,
promotion, marketing and sale of the Licensed Product in the Collaboration Field
in a country or group of countries within the Co-Commercialization Territory.

         1.55     "Regulatory Authority" has the meaning specified in the
Collaboration Agreement.

         1.56     "Regulatory and Licensing Costs" means the following costs and
expenses attributable to Commercialization of the Licensed Product that are
incurred in accordance with an applicable Commercialization Plan and associated
budget approved by the Joint Management Committee, including direct labor costs
and Allocable Overhead: (a) costs and expenses related to Post-approval Studies
related to the Licensed Product; (b) infrastructure required to support and
maintain patient/safety surveillance as required by applicable Regulatory
Authorities attributable to the Licensed Product, including medical staff
support and pharmacovigilance systems and procedures; (c) out-of-pocket costs
and expenses of maintaining Regulatory Approvals; (d) royalty and other amounts
paid to Third Parties related to the Commercialization of the Licensed Product
under Third Party licenses entered into (i) prior to the Effective Date and
disclosed to the other party prior to the Effective Date or (ii) in accordance
with the Collaboration Agreement; (e) the costs of product recalls, product
liability claims, awards and damages which are not subject to the indemnities
set forth in Article 9, and Licensed Product liability insurance premiums; and
(f) costs and expenses incurred in connection with pricing and reimbursement
matters, managed care and formulary management, and governmental affairs
activities directly relating to the Licensed Product.

         1.57     "Sales and Marketing Costs" means all costs and expenses
attributable to the distribution, sale, promotion and marketing of the Licensed
Product other than Cost of Goods Sold, Regulatory and Licensing Costs,
Distribution Costs and Detail Costs. Sales and Marketing Costs include the
following:

                  (a)      all costs and expenses associated with advertising of
         the Licensed Product;

                  (b)      all costs and expenses associated with programs to
         promote the Licensed Product directly to the prescriber or end user,
         including expenses associated with promoting the Licensed Product
         directly to the professional community such as professional samples,
         professional literature, promotional material costs, patient aids and
         detailing aids;

                  (c)      all costs and expenses associated with professional
         education with respect to the Licensed Product through any means,
         including articles appearing in journals, newspapers, magazines or
         other media; seminars, and conventions; symposia, advisory boards and
         opinion leader development activities; and the costs and expense of
         medical liaisons;

                                       7
<PAGE>

                  (d)      all compensation and departmental expenses for market
         and consumer research personnel and payments to Third Parties related
         to conducting and monitoring professional and consumer appraisals of
         existing, new or proposed competitors to the Licensed Product, such as
         market share services (e.g., IMS data), special research testing and
         focus groups;

                  (e)      all product management and sales promotion management
         compensation and departmental costs and expenses, including costs
         associated with developing overall sales and marketing strategies
         (e.g., product line or customer segment), as well as planning and
         programs for the Licensed Product; and

                  (f)      all field sales force management and departmental
         costs and expenses, including costs associated with field sales
         offices; district, regional and home offices; staffs directly involved
         in the management of the selling functions; sales training and
         meetings; and call reporting and other monitoring/tracking activities.

         1.58     "Third Party" means any person or entity other than Lexicon,
Organon and their respective Affiliates.

         1.59     "Valid Claim" has the meaning specified in the Collaboration
Agreement.

                       ARTICLE 2. COLLABORATION OVERVIEW

         2.1      General. The parties intend to carry out a program in which
Lexicon and Organon will collaborate to Commercialize the Licensed Product in
the Collaboration Field in the Co-Commercialization Territory (the
"Collaboration"), consistent with the objectives set forth in and the resources
allocated to such activities in the applicable Commercialization Plan(s). It is
intended that the Collaboration will be conducted as a unified collaborative
effort, and this intent shall be reflected in the applicable Commercialization
Plan(s). It is intended that each party shall bear its own Detail Costs;
provided, however, that one party may retain the other party at a commercially
reasonable rate to perform all or a part of its obligations with respect to
Details. It is further intended that each party shall contribute to Allowable
Commercialization Costs in proportion to the Cost and Revenue Sharing Ratio, and
the Commercialization Plan(s) will be consistent with and provide for such
proportional contribution.

         2.2      Conduct of Collaboration.

                  2.2.1    Efforts. The Joint Management Committee shall adopt
         project progression guidelines for Commercialization activities. The
         parties shall conduct the Collaboration in good scientific manner in
         accordance with such project progression guidelines and in compliance
         with applicable Laws. Each party shall use Diligent Efforts to conduct
         the activities of the Collaboration that are assigned to it in the
         then-applicable Commercialization Plan(s), and each shall devote
         sufficient resources to carry out such respective activities. While the
         parties acknowledge and agree that neither party guarantees the success
         of the Collaboration or any individual task undertaken thereunder, each
         party agrees that it will perform the activities assigned to it under
         the Collaboration in a professional manner in accordance with the
         highest industry standards.

                  2.2.2    Personnel. The parties agree to commit to the
         Collaboration the personnel necessary to meet their respective
         responsibilities set forth in each Commercialization Plan.

                  2.2.3    Subcontractors. As necessary and in furtherance of
         the Collaboration, either party may enter into agreements or
         subcontracts for Commercialization activities in accordance with

                                       8
<PAGE>

         this Section 2.2.3; provided that (a) none of the rights of the other
         party hereunder are diminished or otherwise adversely affected as a
         result of such subcontracting, (b) such party obtains the written
         approval of the other party prior to engaging any subcontractor, which
         approval shall not be unreasonably withheld or delayed (for purposes of
         which it shall not be deemed unreasonable for a party to withhold
         consent when the withholding party is capable of conducting the
         activities proposed to be conducted by such subcontractor and is
         willing to do so on terms, including cost, time and quality, equivalent
         to those offered by such contractor), and (c) the subcontractor
         undertakes in writing obligations of confidentiality and non-use
         regarding the other party's Confidential Information that are
         substantially the same as those undertaken by Organon and Lexicon
         pursuant to Article 7 hereof. In the event a party performs one or more
         of its obligations under the Collaboration through a subcontractor,
         then such party shall at all times be responsible for the performance
         of such subcontractor. The Joint Management Committee shall decide the
         allocation of the cost of any such agreement between the parties or if
         the cost is to be borne by one party and whether it can be allocated to
         offset other obligations set forth in the applicable Commercialization
         Plan(s).

                  2.2.4    Reports. Each party shall submit [**] reports to the
         Joint Management Committee, as may be required by the then-current
         Commercialization Plan(s), detailing its activities under the
         Collaboration. The Joint Management Committee shall use such [**]
         reports to monitor the parties' respective contributions to the
         Collaboration. The Joint Management Committee may amend the
         Commercialization Plan(s) as necessary to maintain substantial
         compliance over the course of the Collaboration in resources devoted
         and participation by the parties in accordance with the principles and
         objectives set forth in Section 2.2.2.

         2.3      Conduct of Post-approval Studies. All Post-approval Studies
shall be conducted and the results thereof recorded and reported to the parties
in accordance with the terms and conditions set forth in Sections 2.5 through
2.7 of the Collaboration Agreement. Any inventions, information, methods,
know-how, trade secrets or data that (a) are Controlled by a party or jointly by
the parties and (b)(i) relate to the use of the Licensed Product or (ii) are
first identified or discovered in the conduct of Post-approval Studies shall be
deemed to be Program Technology and shall be subject to the provisions of
Article 12 of the Collaboration Agreement.

         2.4      Opt Out Rights. The rights of either party to Opt Out with
respect to the Licensed Product shall be governed by Article 10 of the
Collaboration Agreement.

                      ARTICLE 3. COLLABORATION MANAGEMENT

         3.1      Product Collaboration Committees.

                  3.1.1    Joint Management Committee. As soon as practicable
         after the Effective Date, Organon and Lexicon shall establish a Joint
         Management Committee (the "Joint Management Committee") comprised of
         [**] representatives designated by Organon and [**] representatives
         designated by Lexicon, each of whom shall have experience and seniority
         sufficient to enable him or her to make decisions on behalf of the
         party he or she represents; provided that Organon and Lexicon may, by
         mutual agreement, designate an appropriate number of additional
         representatives from time to time.

                  3.1.2    Joint Commercialization Committee. As soon as
         practicable after the Effective Date, Organon and Lexicon shall
         establish a Joint Commercialization Committee (the "Joint
         Commercialization Committee") comprised of [**] representatives
         designated by Organon and [**] representatives designated by Lexicon,
         each of whom shall have experience and seniority

                                       9
<PAGE>

         sufficient to enable him or her to make decisions on behalf of the
         party he or she represents; provided that Organon and Lexicon may, by
         mutual agreement, designate an appropriate number of additional
         representatives from time to time

         3.2      Program Directors. Each party shall appoint one of its
designees on the Joint Management Committee (and who may, but need not also be,
a member of the Joint Commercialization Committee) to serve as a program
director (each, a "Program Director") with responsibility for overseeing the
day-to-day activities of the parties with respect to the Collaboration and for
being the primary point of contact between the parties with respect to the
Collaboration.

         3.3      Replacement of Product Collaboration Committee Representatives
and Program Directors. Each party shall be free to replace its representative
members of any Product Collaboration Committee and its Program Director with new
appointees who have authority to act on behalf of such party, on notice to the
other party.

         3.4      Responsibilities of Joint Management Committee. The Joint
Management Committee shall be responsible for overseeing and directing the
parties' interaction and performance of their respective obligations under this
Agreement. Without limiting the generality of the foregoing, its duties shall
include:

                  (a)      preparing such procedures as may be necessary for the
         operation of the Joint Management Committee and Joint Commercialization
         Committee, and other committees the Joint Management Committee decides
         to establish to assure the efficient operation of the Collaboration;

                  (b)      approving strategy for the overall Commercialization
         of the Licensed Product in the Collaboration Field in the
         Co-Commercialization Territory and for all other activities conducted
         by the parties hereunder;

                  (c)      reviewing and approving the annual Commercialization
         Plans proposed by the Joint Commercialization Committee and approving
         any modifications thereto as recommended by the Joint Commercialization
         Committee;

                  (d)      in connection with such annual Commercialization
         Plans, approving the budget(s) for Regulatory and Licensing Costs and
         Third Party Sales and Marketing Costs associated therewith and
         approving any modifications thereto as recommended by the Joint
         Commercialization Committee;

                  (e)      overseeing the implementation of the
         Commercialization Plans and allocation of resources and other
         activities in support of the Collaboration, including the matters
         contemplated by Section 2.2 hereof;

                  (f)      coordinating with the Joint Management Committee
         under the Collaboration Agreement with respect to (i) deciding whether
         the Licensed Product should be Commercialized by or through a Joint
         Marketing/Development Collaborator in any country or countries within
         the Co-Commercialization Territory; (ii) overseeing the progress of the
         applicable Development Plan(s) for the Licensed Product under the
         Collaboration Agreement and evaluating such progress against their
         respective timelines; and (iii) overseeing Manufacturing and supply of
         the Licensed Product;

                                       10
<PAGE>

                  (g)      resolving matters within the responsibilities of the
         Joint Commercialization Committee as to which the members thereof are
         unable to reach a consensus; and

                  (h)      addressing issues and resolving differences that may
         arise between the parties.

         The Joint Management Committee shall not have the power to amend the
terms of or waive compliance with this Agreement.

         3.5      Responsibilities of Joint Commercialization Committee. The
Joint Commercialization Committee shall be responsible for preparing for
approval by the Joint Management Committee and implementing the
Commercialization Plans. Without limiting the generality of the foregoing, its
duties shall include:

                  (a)      proposing to the Joint Management Committee the
         Commercialization strategy for the Licensed Product throughout the
         Co-Commercialization Territory;

                  (b)      reviewing and overseeing the activities of the
         parties with respect to the Commercialization of the Licensed Product
         in such countries and regions;

                  (c)      providing all appropriate information regarding the
         progress of the Commercialization Plan(s) to the Joint Management
         Committee in advance of each [**] Joint Management Committee meeting;
         and

                  (d)      performing such other activities as are contemplated
         by the terms of this Agreement.

         The Joint Commercialization Committee shall report its activities and
make proposals to the Joint Management Committee at least once each [**], but
more frequently as appropriate. The Joint Commercialization Committee shall not
have the power to amend or waive compliance with this Agreement.

         3.6      Meetings of Product Collaboration Committees. As applicable,
each Product Collaboration Committee shall meet at least [**], and more
frequently as the parties deem appropriate, on such dates and at such times as
the parties shall agree, on [**] written notice to the other party unless such
notice is waived by the parties. The first meeting of the Joint Management
Committee shall take place within [**] after the Effective Date, at Lexicon's
facility in The Woodlands, Texas, United States of America. Each Product
Collaboration Committee may convene or be polled or consulted from time to time
by means of telecommunications, videoconferences or correspondence, as deemed
necessary or appropriate by the parties. To the extent that meetings are held in
person, they shall alternate between the offices of the parties unless the
parties otherwise agree.

         3.7      Decisions.

                  3.7.1    Quorum; Voting. A quorum for a meeting of a Product
         Collaboration Committee shall require the presence of at least one
         Lexicon member (or designee) and at least one Organon member (or
         designee) in person or by telephone. All decisions made or actions
         taken by a Product Collaboration Committee shall be made unanimously by
         its members, with the Lexicon members cumulatively having one vote and
         the Organon members cumulatively having one vote.

                                       11
<PAGE>

                  3.7.2    Dispute Resolution.

                           3.7.2.1  In the event that unanimity cannot be
                  reached by Joint Commercialization Committee with respect to a
                  matter that is a subject of its decision-making authority,
                  then the matter shall be referred for further review and
                  resolution to the Joint Management Committee. In the event
                  that unanimity cannot be reached by the Joint Management
                  Committee with respect to a matter that is a subject of its
                  decision-making authority, then the matter shall be referred
                  for further review and resolution to the Chief Executive
                  Officer of Organon, or such other similar position designated
                  by Organon from time to time, and the Chief Executive Officer
                  of Lexicon, or such other similar position designated by
                  Lexicon from time to time. The designated officers of each
                  party shall use reasonable efforts to resolve the matter
                  within [**] after the matter is referred to them.

                           3.7.2.2  If the designated officers cannot resolve
                  any matter pursuant to Section 3.7.2.1 within such [**]
                  period, the matter shall be referred to a Third Party
                  arbitrator or arbitrators, in accordance with the following
                  procedures, whose decision shall be [**]. The parties shall
                  attempt to mutually agree upon a single independent Third
                  Party arbitrator (who shall be a professional with appropriate
                  experience in the subject matter at issue in such
                  disagreement) within [**] after the initial referral of such
                  matter to the designated officers. If the parties are unable
                  to mutually agree upon one such person, then each party shall
                  appoint one independent Third Party professional with
                  appropriate experience in the subject matter at issue in such
                  disagreement prior to the expiration of such [**] period, and
                  within [**] after the initial referral of such matter to the
                  designated officers, such person(s) shall select a single
                  independent Third Party arbitrator, who shall be a
                  professional with appropriate experience in the subject matter
                  at issue in such disagreement. Each party shall present all
                  information presented pursuant to Section 3.7.2.1 and all
                  other information as such party reasonably desires regarding
                  such disagreement. Within [**] after the initial referral of
                  such matter to the designated officers, the arbitrator shall
                  provide written notice to the parties regarding his or her
                  determination regarding such disagreement.

         3.8      Administration. The chairperson of each Product Collaboration
Committee shall be designated annually on an alternating basis between the
parties. The initial chairperson shall be selected by Organon. The party not
designating the chairperson shall designate one of its representative members as
secretary to such Product Collaboration Committee for such year. The chairperson
shall be responsible for calling meetings of such Product Collaboration
Committee, sending notices of meetings to all members and for leading such
meetings.

         3.9      Minutes. Within [**] after each Product Collaboration
Committee meeting, the secretary of such Product Collaboration Committee shall
prepare and distribute minutes of the meeting, which shall provide a description
in reasonable detail of the discussions had at the meeting and a list of any
actions, decisions or determinations approved by such Product Collaboration
Committee. The secretary shall be responsible for circulation of all draft and
final minutes. Draft minutes shall be first circulated to the chairperson,
edited by the chairperson and then circulated in final draft form to all members
of such Product Collaboration Committee sufficiently in advance of the next
meeting to allow adequate review and comment prior to the meeting. Minutes shall
be approved or disapproved, and revised as necessary, at the next meeting. Final
minutes shall be distributed to the members of such Product Collaboration
Committee.

                                       12
<PAGE>

         3.10     Expenses. Each party shall be responsible for all travel and
related costs for its representatives to attend meetings of, and otherwise
participate on, a Product Collaboration Committee.

                          ARTICLE 4. COMMERCIALIZATION

         4.1      General. The parties shall jointly pursue the
Commercialization of the Licensed Products in the Collaboration Field under the
direction of the Joint Commercialization Committee in accordance with annual
Commercialization Plans.

         4.2      Commercialization Plans.

                  4.2.1    The Joint Commercialization Committee shall prepare
         the first Commercialization Plan for the Licensed Product as soon as
         commercially reasonable after the Effective Date and annually
         thereafter.

                  4.2.2    Each annual Commercialization Plan shall be in
         writing and shall set forth with reasonable specificity the
         Commercialization objectives, priorities, activities, milestones,
         personnel requirements, other resources and allocations of
         responsibilities between the parties for the period covered by such
         annual Commercialization Plan, together with budget(s) for Regulatory
         and Licensing Costs and Sales and Marketing Costs associated therewith
         and for the Details to be performed by each party in connection
         therewith, in a manner consistent with the terms of this Agreement,
         including, without limitation, the objectives set forth in Section 2.1
         and the terms and conditions set forth in Section 2.2. The
         Commercialization Plans shall cover all aspects of Commercialization
         relating to the Licensed Product, and shall include, with reasonable
         specificity, the Commercialization activities to be performed by each
         party and the Commercialization activities, if any, to be performed by
         subcontractors.

                  4.2.3    The Joint Commercialization Committee may agree on
         modifications, and recommend that the Joint Management Committee
         approve such modifications, to the provisions of any Commercialization
         Plan at any time.

         4.3      Marketing and Marketing Plans. The Joint Commercialization
Committee shall coordinate and implement the marketing and detailing strategies
and tactics, sales force training programs, sales forecasts and Post-approval
Studies for the Licensed Product for each Contract Year in the
Co-Commercialization Territory.

         4.4      Sales Force. Except to the extent otherwise agreed by the
Joint Management Committee, the parties shall be responsible for providing
Details in proportion to their respective Cost and Revenue Sharing Ratio.
Notwithstanding the foregoing, if either party elects to provide less than its
proportionate share of Details, it may pay the other party to fulfill those
obligations at a commercially reasonable rate. For clarity, the measurement of
the provision of Details by each party will be made based on the number of
Details provided and not based on the Detail Costs.

         4.5      Labeling and Promotion. Unless otherwise agreed with a Joint
Marketing/Development Collaborator: (a) the Licensed Product will be marketed in
each country with one label and will bear one or more Product Trademarks; and
(b) all advertising and promotional material in respect of the Licensed Product
in each country (including any Licensed Product labeling or packaging inserts to
the extent permitted by law or required by any Regulatory Authority and approved
by the Joint Commercialization Committee) will include both parties' respective
name and address, with the size and placement of each such name and address to
be determined by the Joint Commercialization Committee.

                                       13
<PAGE>

         4.6      Regulatory and Other Inquiries. Upon being contacted by any
Regulatory Authority for any regulatory purpose pertaining to this Agreement or
to the Licensed Product, each party shall promptly notify and consult with the
other, and the party that prepared the relevant portion(s) of the regulatory
filing to which such contact relates (or, in the event the contact does not
relate to a particular portion of a regulatory filing, the owner (or proposed
owner) of the relevant Regulatory Approval (or proposed Regulatory Approval),
determined in accordance with Section 6.4 of the Collaboration Agreement) shall
prepare a response as it deems appropriate, and such party shall (a) have
principal responsibility for responding to all inquiries to either party, as the
case may be, regarding such portion of such regulatory filing (or, in the event
the contact does not relate to a particular portion of a regulatory filing, such
Regulatory Approval or proposed Regulatory Approval), (b) give the other party a
reasonable opportunity for prior review of and comment on all such responses,
(c) consider in good faith the incorporation of such comments and (d)
incorporate into such responses those of such comments as are reasonable and not
inconsistent with the overall response initially prepared by such party.

         4.7      Product Recall. In the event that either party determines that
an event, incident or circumstance has occurred that may result in the need for
a recall or other removal of the Licensed Product, or any lot or lots thereof,
from a market in any country, it shall advise and consult with the other party
with respect thereto. The owner of the relevant Regulatory Approval (or proposed
Regulatory Approval), determined in accordance with Section 6.4 of the
Collaboration Agreement, shall make the final determination to recall or
otherwise remove the Licensed Product or any lot or lots thereof from the
market. The costs and expenses of such recall or removal in each country,
including expenses and other costs or obligations to Third Parties, the cost and
expense of notifying customers and costs and expenses associated with shipment
of the recalled Licensed Product from a customer to either party shall be
included in Regulatory and Licensing Costs.

                          ARTICLE 5. GRANTS OF RIGHTS

         5.1      Grants of Commercialization Licenses.

                  5.1.1    By Lexicon. Subject to the terms of this Agreement
         and any applicable [**], Lexicon hereby grants to Organon and its
         Affiliates, within the Co-Commercialization Territory, a co-exclusive
         right and license, with the limited right to sublicense (as set forth
         below), under Lexicon's rights in (a) the Lexicon Background Materials
         and the Lexicon Background Technology, including, without limitation,
         any Patent Rights Controlled by Lexicon Covering the foregoing, and (b)
         the Program Intellectual Property, in each case to make, have made,
         import, use, have used, offer for sale, sell and have sold the Licensed
         Product in the Collaboration Field. Such right and license shall
         include the right to grant sublicenses to Affiliates of Organon and to
         Third Parties that are approved by the Joint Management Committee.

                  5.1.2    By Organon. Subject to the terms of this Agreement
         and any applicable [**], Organon hereby grants to Lexicon and its
         Affiliates, within the Co-Commercialization Territory, a co-exclusive
         right and license, with the limited right to sublicense (as set forth
         below), under Organon's rights in (a) the Organon Background Materials
         and the Organon Background Technology, including, without limitation,
         any Patent Rights Controlled by Organon Covering the foregoing, and (b)
         the Program Intellectual Property, in each case to make, have made,
         import, use, have used, offer for sale, sell and have sold the Licensed
         Product in the Collaboration Field. Such right and license shall
         include the right to grant sublicenses to Affiliates of Lexicon and to
         Third Parties that are approved by the Joint Management Committee.

         5.2      No Grant of Other Technology or Patent Rights. Except as
otherwise expressly provided in this Agreement, under no circumstances shall a
party hereto, as a result of this Agreement, obtain any

                                       14
<PAGE>

ownership interest in or other right to any technology, know-how, patents,
patent applications, gene or genomic sequence data or information, products, or
biological materials of the other party, including items owned, controlled or
developed by, or licensed to, the other party, or transferred by the other party
to said party, at any time pursuant to this Agreement.

                           ARTICLE 6. FINANCIAL TERMS

         6.1      Collaboration Cost and Revenue Sharing. Beginning with the
Effective Date and throughout the term of this Agreement, all Operating
Profit/Loss shall be shared in accordance with the Cost and Revenue Sharing
Ratio.

         6.2      Reporting of Operating Profit/Loss and Detail Efforts

                  6.2.1    Reports of Net Sales, Allowable Commercialization
         Costs and Details. During the term of this Agreement, each party shall,
         within [**] after each [**], furnish to the other party a written [**]
         report showing in reasonable detail (a) Net Sales and, [**], gross
         sales of the Licensed Product sold by such party, its (sub)licensees
         and their respective Affiliates during such [**] and, [**], the
         calculation of Net Sales from such gross sales, in each case on a
         country-by-country basis, (b) the Allowable Commercialization Costs
         incurred by such party during such [**] in each of the categories
         specified in Section 1.4, and (c) the Details performed by such party
         during such [**] in accordance with the applicable Commercialization
         Plan.

                  6.2.2    Consolidated Report of Operating Profit/Loss and
         Detail Efforts. During the term of this Agreement, Lexicon shall,
         within [**] after each [**], furnish to Organon a written [**] report
         showing in reasonable detail and in United States Dollars:

                           (a)      the Net Sales and, [**], gross sales of the
                  Licensed Product sold by the parties and their respective
                  (sub)licensees and Affiliates during such [**] and, [**], the
                  calculation of Net Sales from such gross sales, in each case
                  on a country-by-country basis;

                           (b)      the Allowable Commercialization Costs
                  incurred by Lexicon and Organon, respectively, and in total,
                  during such [**] in each of the categories specified in
                  Section 1.4;

                           (c)      Operating Profit/Loss for such [**], and the
                  amount, if any, owed by one party to the other party in
                  respect thereof; and

                           (d)      the Details performed by Lexicon and
                  Organon, respectively, and in total, during such [**] in
                  accordance with the applicable Commercialization Plan, and the
                  amount, if any, owed by one party to the other party in
                  respect thereof.

         6.3      Payment of Operating Profit/Loss Amounts Owed. Amounts shown
as owed by one party to the other party under the report delivered in accordance
with Section 6.2.2 shall be payable within [**] following the delivery of such
report.

         6.4      Exchange Rates. Gross sales, Net Sales, Allowable
Commercialization Costs and Operating Profit/Loss attributable to countries
other than the United States shall be calculated in accordance with the standard
exchange rates published in the Wall Street Journal (New York edition) and
otherwise in accordance with the standard exchange rate conversion practices
used by the reporting party for financial accounting purposes.

                                       15
<PAGE>

         6.5      Records. The parties shall each keep accurate books and
accounts of record in connection with the Commercialization of the Licensed
Product in a manner consistent with GAAP and in sufficient detail to permit
accurate determination of all figures necessary for verification of gross sales,
Net Sales, Allowable Commercialization Costs, Operating Profit/Loss and Details
performed hereunder.

         6.6      Audits. Upon the written request of a party, the other party
shall permit an independent certified public accountant selected by the
requesting party and acceptable to the other party, which acceptance shall not
be unreasonably withheld, to have access, at reasonable times and during normal
business hours, to such records of such other party as may be reasonably
necessary to verify the accuracy of the reports described herein (and, if not
included in such reports, the gross sales of the Licensed Product sold by such
party, its (sub)licensees and their respective Affiliates along with the
calculation of Net Sales from such gross sales, in each case, on a
country-by-country basis), in respect of any fiscal year ending not more than
[**] prior to the date of such request. Each party shall use commercially
reasonable efforts to schedule all such verifications within [**] after the
requesting party makes its written request. All such verifications shall be
conducted not more than [**]. The report of the requesting party's independent
certified public accountant shall be made available to both parties. Subject to
the other party's rights under Section 11.7, in the event requesting party's
independent certified public accountant concludes that additional amounts were
owed to the requesting party for such period, the additional amounts shall be
paid by the other party within [**] of the date the requesting party delivers to
the other party such independent certified public accountant's written report so
concluding, unless such report contains manifest error. In the event requesting
party's independent certified public accountant concludes that there was an
overpayment to such party during such period, the overpayment shall be repaid by
the requesting party within [**] of the date the requesting party received such
independent certified public accountant's written report so concluding, unless
such report contains manifest error. The fees charged by such independent
certified public accountant shall be paid by the requesting party unless such
audit discloses an underpayment or overpayment of more than [**] of the amount
due under this Agreement for the period in question, in which case the party
responsible for such underpayment or overpayment will bear the full cost of such
audit. Each party agrees that all information subject to review under this
Section 6.6 or under any agreement with a (sub)licensee of a party is
confidential and that the party receiving such information shall cause its
independent certified public accountant to retain all such information in
confidence. The requesting party's independent certified public accountant shall
only report to the requesting party as to the computation of Operating
Profit/Loss or royalties payable under this Agreement, as applicable, and shall
not disclose to the requesting party any other information of the other party or
any (sub)licensee of a Continuing Party.

         6.7      Withholding Taxes. In the event that any royalties or other
payments due to a party are subject to withholding tax required by law to be
paid to the taxing authority of any foreign country, the amount of such tax may
be withheld from the applicable royalties or other payment due such party. The
party owing such payment shall promptly pay such tax on behalf of the party to
which such payment is owed and shall furnish the party to which such payment is
owed with a certificate of withholding tax so deducted for such party's
avoidance of duplicate taxation in multiple countries. The party owing such
payment may not deduct any other withholding or any other governmental charges
from the payments agreed upon under this Agreement, except to the extent same
are paid on behalf of, or for the benefit of, the party to which such payment is
owed. The party owing such payment shall maintain official receipts of payment
of any such withholding taxes and shall forward such receipts to the party to
which such payment is owed.

         6.8      Blocked Currency. If by law, regulation, or fiscal policy of a
particular country, conversion into United States dollars or transfer of funds
of a convertible currency to the United States is restricted or forbidden, the
party owing such payment shall give the party to which such payment is owed
prompt written notice and shall make such payment due under this Article 6
through such means or

                                       16
<PAGE>

methods as are lawful in such country as the party to which such payment is owed
may reasonably designate. Failing the designation by the party to which such
payment is owed of such lawful means or methods within [**] after such written
notice is given to such party, the party owing such payment shall deposit such
royalty payment in local currency to the credit of the party to which such
payment is owed in a recognized banking institution designated by such party, or
if none is designated by such party within the [**] period described above, in a
recognized banking institution selected by the party owing such payment and
identified in a written notice to other party, and such deposit shall fulfill
all obligations of the party owing such payment to the other party with respect
to such payment.

         6.9      Interest on Late Payments. A party to which payment is owed
under this Agreement shall have the right to seek to collect interest on any
payments that are not paid on or before [**] after the date such payments are
due under this Agreement at a rate equal to [**], calculated on the total number
of days payment is delinquent.

         6.10     Manner of Payment. Except as provided in Section 6.8, payments
to be made by one party to the other under this Agreement shall be payable in
United States dollars and shall be paid by bank wire transfer in immediately
available funds to such bank account in the state and country in which such
principal office is located as is designated in writing by such party from time
to time.

                           ARTICLE 7. CONFIDENTIALITY

         7.1      Nondisclosure Obligations.

                  7.1.1    General. Except as otherwise provided in this Article
         7, during the term of this Agreement and for a period of five (5) years
         thereafter, each Receiving Party shall maintain the Confidential
         Information of each Disclosing Party in confidence and use it only for
         purposes specifically authorized under this Agreement.

                  7.1.2    Limitations. To the extent it is reasonably necessary
         or appropriate to fulfill its obligations or exercise its rights under
         this Agreement and subject to advance written notification to the
         Disclosing Party: (a) a party may disclose to Third Parties
         Confidential Information it is otherwise obligated not to disclose
         under this Section 7.1, to its Affiliates, (sub)licensees, consultants,
         outside contractors and clinical investigators, on a strict
         need-to-know basis for the purposes contemplated by this Agreement and
         on condition that such entities or persons agree to keep the
         Confidential Information confidential for the same time periods and to
         the same extent as such party is required to keep the Confidential
         Information confidential hereunder; and (b) a party or its
         (sub)licensees may disclose, using appropriate measures to preserve
         confidentiality, such Confidential Information to government or other
         regulatory authorities to the extent that such disclosure is reasonably
         necessary to obtain authorizations to conduct clinical trials of, and
         to commercially market, the Licensed Product pursuant to this
         Agreement. Furthermore, a Receiving Party may request permission from
         the Disclosing Party to disclose such Confidential Information to the
         extent that such disclosure is reasonably necessary [**].

                  7.1.3    Required Disclosure. A Receiving Party may disclose
         Confidential Information pursuant to interrogatories, requests for
         information or documents, subpoena, civil investigative demand issued
         by a court or governmental agency or as otherwise required by law;
         provided, however, that the Receiving Party shall notify the Disclosing
         Party promptly upon receipt thereof, giving [**] the Disclosing Party
         sufficient advance notice to permit it to oppose, limit or seek
         confidential treatment for such disclosure; and provided, further, that
         the Receiving Party shall furnish only that portion of the Confidential
         Information which it is advised by counsel is legally

                                       17
<PAGE>

         required whether or not a protective order or other similar order is
         obtained by the Disclosing Party.

         7.2      Injunctive Relief. The parties hereto understand and agree
that remedies at law may be inadequate to protect against any breach of any of
the provisions of this Article 7 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 7.

         7.3      Publication. Organon and Lexicon (each, a "Submitting Party")
may each publish or present data and results relating to the Licensed Product,
subject to the prior review of the proposed disclosure by the other party (each,
a "Reviewing Party"), solely to determine (a) whether the proposed disclosure
contains the Confidential Information of the Reviewing Party or (b) whether the
information contained in the proposed disclosure should be the subject of a
patent application to be filed by the Reviewing Party prior to such disclosure.
Each Submitting Party shall provide the Reviewing Party with the opportunity to
review any proposed abstract, manuscript or presentation by delivering a copy
thereof to the Reviewing Party no less than [**] before its intended submission
for publication or presentation. The Reviewing Party shall have [**] from its
receipt of any such abstract, manuscript or presentation in which to notify the
Submitting Party in writing of any specific objections to the disclosure, based
on either the need to seek patent protection or concern regarding the specific
disclosure of the Confidential Information of the Reviewing Party. In the event
the Reviewing Party objects to the disclosure, the Submitting Party agrees not
to submit the publication or abstract or make the presentation containing the
objected-to information until the Reviewing Party is given a reasonable
additional period of time (not to exceed an additional [**]) to seek patent
protection for any material in the disclosure which the Reviewing Party believes
is patentable (subject, in all events, to Section 7.2) or, in the case of
Confidential Information, to allow the Submitting Party to delete any
Confidential Information of the Reviewing Party from the proposed disclosure.
The Submitting Party agrees to delete from the proposed disclosure any
Confidential Information of the Reviewing Party upon request.

                   ARTICLE 8. REPRESENTATIONS AND WARRANTIES

         8.1      Representations, Warranties and Covenants of Lexicon. Lexicon
represents and warrants to and covenants with Organon that:

                  8.1.1    Lexicon is a corporation duly organized, validly
         existing and in corporate good standing under the laws of the State of
         Delaware, United States of America;

                  8.1.2    Lexicon has the corporate and legal right, authority
         and power to enter into this Agreement, and to extend the rights and
         licenses granted to Organon in this Agreement;

                  8.1.3    Lexicon has taken all necessary action to authorize
         the execution, delivery and performance of this Agreement;

                  8.1.4    upon the execution and delivery of this Agreement,
         this Agreement shall constitute a valid and binding obligation of
         Lexicon, enforceable in accordance with its terms, except as
         enforceability may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or similar laws affecting creditors' and
         contracting parties' rights generally and except as enforceability may
         be subject to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                                       18
<PAGE>

                  8.1.5    the performance of Lexicon's obligations under this
         Agreement will not conflict with its charter documents or result in a
         breach of any agreements, contracts or other arrangements to which it
         is a party; and

                  8.1.6    Lexicon will not during the term of this Agreement
         enter into any agreements, contracts or other arrangements that would
         be inconsistent with its obligations under this Agreement.

         8.2      Representations, Warranties and Covenants of Organon. Organon
represents and warrants to and covenants with Lexicon that:

                  8.2.1    Organon is a corporation duly organized, validly
         existing and in corporate good standing under the laws of the
         Netherlands;

                  8.2.2    Organon has the corporate and legal right, authority
         and power to enter into this Agreement, and to extend the rights and
         licenses granted to Lexicon in this Agreement;

                  8.2.3    Organon has taken all necessary action to authorize
         the execution, delivery and performance of this Agreement;

                  8.2.4    upon the execution and delivery of this Agreement,
         this Agreement shall constitute a valid and binding obligation of
         Organon enforceable in accordance with its terms, except as
         enforceability may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or similar laws affecting creditors' and
         contracting parties' rights generally and except as enforceability may
         be subject to general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  8.2.5    the performance of its obligations under this
         Agreement will not conflict with Organon's charter documents or result
         in a breach of any agreements, contracts or other arrangements to which
         it is a party; and

                  8.2.6    Organon will not after the Effective Date enter into
         any agreements, contracts or other arrangements that would be
         inconsistent with its obligations under this Agreement.

         8.3      Warranty Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY PRODUCT,
PATENT RIGHTS, GOODS, SERVICES, BACKGROUND MATERIALS OR ANY OTHER SUBJECT MATTER
OF THIS AGREEMENT, AND EACH PARTY HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING. IN ADDITION, THE PARTIES ACKNOWLEDGE
THAT THE GENERATION OR USE OF BACKGROUND MATERIALS MAY BE COVERED BY ONE OR MORE
VALID PATENTS OF THIRD PARTIES. EACH PARTY ACKNOWLEDGES THAT EXERCISE BY IT OF
THE RIGHTS AND LICENSES GRANTED TO IT PURSUANT TO ARTICLE 5 HEREOF MAY BE
COVERED BY ONE OR MORE VALID PATENTS OF THIRD PARTIES.

         8.4      Limited Liability. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT, NEITHER LEXICON NOR ORGANON WILL BE LIABLE WITH RESPECT TO ANY MATTER
ARISING UNDER THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR ANY PUNITIVE, EXEMPLARY, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS.

                                       19
<PAGE>

                              ARTICLE 9. INDEMNITY

         9.1      Lexicon Indemnity Obligations. Lexicon agrees to defend,
indemnify and hold Organon, its Affiliates and their respective employees and
agents harmless from all claims, losses, damages or expenses (including
reasonable attorneys' fees and costs of litigation) arising as a result of
Lexicon's breach of any of its representations, warranties or covenants
hereunder.

         9.2      Organon Indemnity Obligations. Organon agrees to defend,
indemnify and hold Lexicon, its Affiliates and their respective employees and
agents harmless from all claims, losses, damages or expenses (including
reasonable attorneys' fees and costs of litigation) arising as a result of
Organon's breach of any of its representations, warranties or covenants
hereunder.

         9.3      Limitation on Indemnity Obligations. Neither party, its
Affiliates or their respective employees and agents shall be entitled to the
indemnities set forth in Sections 9.1 or 9.2, respectively, to the comparative
extent the claim, loss, damage or expense for which indemnification is sought
was caused by a grossly negligent, reckless or intentional act or omission by
such party, its directors, officers, employees or authorized agents.

         9.4      Procedure. If a party or any of its Affiliates or their
respective employees or agents (collectively, the "Indemnitee") intends to claim
indemnification under this Article 9, the Indemnitee shall promptly notify the
other party (the "Indemnitor") of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel selected by the
Indemnitor and reasonably acceptable to the Indemnitee, provided, however, that
an Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitee, if representation of such Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
represented by such counsel in such proceedings. The Indemnitor shall have the
right to settle or compromise any claims for which it is providing
indemnification under this Article 15, provided that the consent of the
Indemnitee (which shall not be unreasonably withheld or delayed) shall be
required in the event any such settlement or compromise would adversely affect
the interests of the Indemnitee. The indemnity agreement in this Article 9 shall
not apply to amounts paid in settlement of any loss, claim, damage, liability or
action if such settlement is effected without the consent of the Indemnitor. The
failure to deliver notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to the Indemnitor's ability to
defend such action, shall relieve such Indemnitor of any liability to the
Indemnitee under this Article 9, but the omission so to deliver notice to the
Indemnitor will not relieve it of any liability that it may have to any
Indemnitee otherwise than under this Article 9. The Indemnitee under this
Article 9, its employees and agents, shall cooperate fully with the Indemnitor
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification.

         9.5      Insurance. Each party shall maintain appropriate product
liability insurance with respect to Commercialization of the Licensed Product by
such party in such amount as such party customarily maintains with respect to
sales of its other products. Each party shall maintain such insurance for so
long as it continues to manufacture or sell the Licensed Product, and thereafter
for so long as such party customarily maintains insurance with respect to sales
of its other products.

                     ARTICLE 10. EXPIRATION AND TERMINATION

         10.1     Term of Agreement. The term of this Agreement shall commence
on the Effective Date and shall continue until the earliest to occur of (a) a
party Opting Out of the Licensed Product, (b) the parties' grant of
Commercialization rights with respect to the Licensed Product to a Joint

                                       20
<PAGE>

Marketing/Development Collaborator in all countries within the
Co-Commercialization Territory or (c) the agreement of the parties to cease all
Development and Commercialization of the Licensed Product.

         10.2     Events of Default. An Event of Default by either party shall
have occurred upon (a) the occurrence of a material breach of this Agreement if
such party fails to remedy such breach within [**] after written notice thereof
by the non-breaching party ([**] in the event of a party's failure to make a
payment required hereunder) or, if remediation of such breach in [**] is not
practicable, if such party fails to commence and diligently pursue such
remediation during such [**] period, or (b) the commencement of any proceeding
in or for bankruptcy, insolvency, dissolution or winding up by or against such
party that is not dismissed or otherwise disposed of within [**] thereafter.

         10.3     Effect of an Event of Default. In the event of an Event of
Default, the non-defaulting party shall have the right, at its option
exercisable in its sole discretion, in addition to any other rights or remedies
available to it at law or in equity and subject to the limitations set forth in
Sections 3.7.2, 9.4 and 11.7 hereof, to terminate this Agreement upon [**]
notice thereof to the other party, in which case (a) the defaulting party shall
be deemed to have Opted Out with respect to the Licensed Product and (b) the
defaulting party shall return to the non-defaulting party or, upon the
non-defaulting party's written instruction, destroy all information, materials
or documentation provided by the non-defaulting party pursuant to this
Agreement.

         10.4     Effect of Expiration or Termination of Agreement. The
expiration or termination of this Agreement shall not relieve the parties of any
obligation accruing prior to such expiration or termination. The provisions of
Articles 7 and 9 and Sections 11.2 and 11.4 through 11.7 hereof shall survive
the expiration or termination of this Agreement.

                           ARTICLE 11. MISCELLANEOUS

         11.1     Force Majeure. Neither party shall be held liable or
responsible to the other party nor be deemed to have defaulted under or breached
this Agreement for failure or delay in fulfilling or performing any obligation
under this Agreement when such failure or delay is caused by or results from
causes beyond the reasonable control of the affected party, including but not
limited to fire, floods, embargoes, war, acts of war (whether war is declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority; provided, however, that the party so affected shall use
reasonable commercial efforts to avoid or remove such causes of nonperformance,
and shall continue performance hereunder with reasonable dispatch whenever such
causes are removed. Either party shall provide the other party with prompt
written notice of any delay or failure to perform that occurs by reason of force
majeure. The parties shall mutually seek a resolution of the delay or the
failure to perform as noted above.

         11.2     Assignment. This Agreement may not be assigned or otherwise
transferred, in whole or in part, by either party without the consent of the
other party; provided, however, that either Lexicon or Organon may, without such
consent, assign its rights and obligations under this Agreement (i) to any
Affiliate, or (ii) in connection with a merger, consolidation or sale of such
portion of a party's assets that includes rights under this Agreement to an
unrelated Third Party; provided, further, that such party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including those business assets
that are the subject of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement, unless the parties otherwise
agree.

                                       21
<PAGE>

         11.3     Change in Control.

                  11.3.1   Notice of and Reasonable Assurances upon a Change in
         Control. Within [**] after any Change in Control of a party, the
         surviving party to such Change in Control (the "Acquiring Party") (a)
         will notify the other party of the occurrence of such Change in Control
         and (b) will provide the other party with reasonable assurances of its
         commitment to fulfill its obligations under this Agreement and the
         applicable Commercialization Plan(s) then in effect.

                  11.3.2   Effect of Failure to Provide Assurances upon a Change
         in Control. If the Acquiring Party fails to provide the assurances
         contemplated by Section 11.3.1 within the [**] period set forth
         therein, and does not cure such failure within [**] after notice from
         the other party, the Acquiring Party shall be deemed to have Opted Out
         of the Licensed Product, with the same effect as if the Acquiring Party
         had Opted Out under Section 10.1.1.1 of the Collaboration Agreement;
         provided that the Acquiring Party shall not [**] with respect to (a)
         [**] or (b) [**].

                  11.3.3   Option to Negotiate for Rights to Collaboration
         Product. Without limiting the foregoing, if requested by the other
         party at any time within the [**] period following the Acquiring
         Party's notice under Section 11.3.1 of a Change in Control, the
         Acquiring Party and the other party shall enter into good faith
         negotiations, for a period of [**] following such request, for the
         other party to obtain from the Acquiring Party the exclusive rights to
         Commercialize the Licensed Product. In the event the Acquiring Party
         and the other party do not enter into a definitive agreement with
         respect to such exclusive rights within such [**] period, except to the
         extent set forth in Section 11.3.4 below, the Acquiring Party and the
         other party shall each maintain their respective rights with respect to
         the Commercialization of the Licensed Product as otherwise described in
         this Agreement.

                  11.3.4   [**] upon a Change in Control. In the event that (a)
         the Acquiring Party and the other party enter into negotiations in
         accordance with Section 11.3.3 with respect to the Licensed Product but
         do not enter into a definitive agreement within the [**] period
         contemplated thereby and (b) the Acquiring Party (i) [**] and (ii) has
         not [**], the other party shall have the right, by delivering written
         notice thereof within [**] after the expiration of such [**] period, to
         [**] consisting of (i) [**] and (ii) [**]. [**]at the time such notice
         is delivered or as soon thereafter as [**] in accordance with the terms
         of this Section 11.3.4. Unless otherwise agreed by the Acquiring Party
         and the other party, [**], shall be determined by binding arbitration
         in accordance with the following provisions. The parties shall attempt
         to mutually agree upon a single independent Third Party arbitrator (who
         shall be a professional with appropriate experience in [**]) within
         [**] after the other party's delivery of the written notice in
         accordance with this Section 11.3.4 of [**]. If the parties are unable
         to mutually agree upon one such person, then each party shall appoint
         one independent Third Party professional with appropriate experience in
         [**] prior to the expiration of such [**] period, and within [**] after
         the initial notice, such person(s) shall select a single independent
         Third Party arbitrator, who shall be a professional with appropriate
         experience in [**]. Each party shall present all information as such
         party reasonably desires regarding [**]. Within [**] after the initial
         notice, the arbitrator shall provide written notice to the parties
         regarding his or her determination regarding [**].

         11.4     Severability. Each party hereby agrees that it does not intend
to violate any public policy, statutory or common laws, rules, regulations,
treaty or decision of any government agency or executive body thereof of any
country or community or association of countries. Should one or more provisions
of this Agreement be or become invalid, the parties hereto shall substitute, by
mutual consent, valid provisions for such invalid provisions which valid
provisions in their economic effect are sufficiently similar to the invalid
provisions that it can be reasonably assumed that the parties would have entered
into this Agreement with such valid provisions in lieu of such invalid
provisions. In case such valid provisions cannot be agreed upon, the invalidity
of one or several provisions of this Agreement shall

                                       22
<PAGE>

not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the parties would not have entered into this Agreement
without the invalid provisions.

         11.5     Notices. Any consent, notice or report required or permitted
to be given or made under this Agreement by one of the notification parties
hereto to the other shall be in writing, delivered personally or by facsimile
(and promptly confirmed by telephone, personal delivery or courier) or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.

         If to Lexicon:     Lexicon Genetics Incorporated
                            8800 Technology Forest Place
                            The Woodlands, Texas 77381
                            Attention:   President and Chief Executive Officer
                            Telephone:   (281) 863-3000
                            Facsimile:   (281) 863-8095

         With copies to:    Lexicon Genetics Incorporated
                            8800 Technology Forest Place
                            The Woodlands, Texas 77381
                            Attention:   Chief Financial Officer
                            Telephone:   (281) 863-3000
                            Facsimile:   (281) 863-8095

                            Lexicon Genetics Incorporated
                            8800 Technology Forest Place
                            The Woodlands, Texas 77381
                            Attention:   General Counsel
                            Telephone:   (281) 863-3000
                            Facsimile:   (281) 863-8010

         If to Organon:     N.V. Organon
                            Kloosterstraat 6
                            5349 AB Oss
                            The Netherlands
                            Attention:   General Manager
                            Telephone:   31 412 661 397
                            Facsimile:   31 412 663 529

         With a copy to:    Director Legal Affairs Akzo Nobel Pharma B.V.
                            Wethouder van Eschstraat 1
                            P.O. Box 20
                            5340 BH Oss
                            The Netherlands

All such communications shall be effective upon receipt.

         11.6     Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, United States of
America, without reference to the conflicts of law principles thereof.

                                       23
<PAGE>

         11.7     Dispute Resolution. Subject to Section 3.7.2, the parties
hereby agree that they will first attempt in good faith to resolve any
controversy or claim arising out of or relating to this Agreement promptly by
negotiations. If a controversy or claim should arise hereunder, the matter shall
be referred to an individual designated by the Chief Executive Officer (or the
equivalent position) of Lexicon and by the Chief Executive Officer (or the
equivalent position) of Organon (the "Representatives"). If the matter has not
been resolved within [**] of the first meeting of the Representatives of the
parties (which period may be extended by mutual agreement) concerning such
matter, the parties shall be free to pursue all available recourse both at law
and in equity.

         11.8     Entire Agreement. This Agreement, together with the exhibits
and appendices hereto and any confidentiality agreement(s) executed in
contemplation of this Agreement, contains the entire understanding of the
parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by both parties hereto.

         11.9     Publicity. Lexicon and Organon each agree not to disclose any
terms or conditions of this Agreement to any Third Party without consulting the
other party prior to such disclosure. Notwithstanding the foregoing, prior to
execution of this Agreement, Lexicon and Organon shall agree upon the substance
of information that can be used as a routine reference in the usual course of
business to describe the existence and general nature of this transaction, and
Lexicon and Organon may disclose such information without consulting the other
party. The parties may thereafter from time to time mutually agree on revisions
to material to be used as a routine reference, which revisions shall be
submitted by one party for the review and approval of the other party at least
[**] prior to the anticipated use or disclosure of the revised material, such
approval not to be unreasonably withheld. The terms of this Agreement shall be
treated as the Confidential Information of Lexicon and Organon, and, except to
the extent required by applicable law, shall not be disclosed to anyone (except
for the parties' respective employees, consultants, agents and attorneys
assisting in the review and negotiation of this Agreement who have a need to
know the terms of this Agreement) without the written permission of Organon or
Lexicon. If either party desires to release a separate announcement relating to
this Agreement, it shall first allow the other party to approve in writing such
proposed announcement; provided that such approval shall not be unreasonably
withheld or delayed.

         11.10    Headings. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.

         11.11    No Partnership. It is expressly agreed that the relationship
between Lexicon and Organon shall not constitute a partnership, joint venture or
agency. Neither Lexicon nor Organon shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior consent of the other
party to do so.

         11.12    Exports. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. Lexicon and Organon agree not to export or re-export, directly
or indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. Lexicon and
Organon agree to obtain similar covenants from their licensees, (sub)licensees,
or corporate partners, as the case may be, and contractors with respect to the
subject matter of this Section 11.12.

                                       24
<PAGE>

         11.13    Waiver. The waiver by either party hereto of any right
hereunder or the failure to perform or of a breach by the other party shall not
be deemed a waiver of any other right hereunder or of any other breach or
failure by said other party whether of a similar nature or otherwise.

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

                                       25
<PAGE>

         IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute and deliver this Agreement as of the Effective Date.

LEXICON GENETICS INCORPORATED

By:                                             Date:
   ---------------------------------------             ----------------------

Name:
     -------------------------------------

Title:
      ------------------------------------

N.V. ORGANON

By:                                             Date:
   ---------------------------------------             ----------------------

Name:
     -------------------------------------

Title:
      ------------------------------------

By:                                             Date:
   ---------------------------------------             ----------------------

Name:
     -------------------------------------

Title:
      ------------------------------------

                                       26
<PAGE>

                                  EXHIBIT 1.40

                 ALLOCATION OF NET SALES IN BUNDLED TRANSACTION

         With respect to Licensed Product sold in a Bundled Transaction in which
Organon, Lexicon or any of their respective Affiliates or (sub)licensees
discounts the sales price of the Licensed Product to a greater degree than such
seller generally discounts the price of its other products to such customer, the
amount to be included in Net Sales of the Licensed Product shall be calculated
in accordance with the following formula:

                                   ASP-P x N-P
                   NS-P = ______________________________x BTF
                             (SIGMA)=1 ASP-pi x N-pi

         Where:

                  NS-P       =     Amount allocated to Net Sales of the Licensed
                                   Product

                  ASP-P      =     Average Selling Price (as defined below) per
                                   unit, during the applicable period, of the
                                   Licensed Product when sold alone

                  ASP-pi     =     Average Selling Price per unit,
                                   during the applicable period, of the
                                   Licensed Product or each product
                                   other than a Licensed Product in the
                                   Bundled Transaction when sold alone

                  N-P        =     Total number of units of Licensed Product
                                   included in the Bundled Transaction during
                                   the applicable period

                  N-pi       =     Total number of units (i.e., corresponding to
                                   the same ASP-pi) of the Licensed Product or
                                   product other than a Licensed Product
                                   included in the Bundled Transaction during
                                   the applicable period

                  (SIGMA)=1  =     The sum of the products of the
                                   formula ASP-pi ? N-pi for each and
                                   every Licensed Product or product
                                   other than a Licensed Product
                                   included in the Bundled Transaction
                                   during the applicable period

                  BTF        =     The aggregate amounts paid to the seller for
                                   the Bundled Transaction during the applicable
                                   period

         The Average Selling Price shall be based on the actual average selling
price of the Licensed Product or product other than a Licensed Product, as the
case may be, determined for the applicable period.

         If the Licensed Product or other product is not sold separately and no
bona fide list price exists for the Licensed Product or other product, the
parties shall agree upon an imputed bona fide list price for the Licensed
Product or other product, and Net Sales with respect thereto shall be based on
such imputed list price.exv10w1

 

Exhibit 10.1

SAFENET, INC.

2001 OMNIBUS STOCK PLAN

1. Establishment, Purpose and Types of Awards

     SafeNet, Inc. hereby amends and restates the SafeNet, Inc. 2001 Omnibus Stock Plan (the
“Plan”) to read as provided herein. The purpose of the Plan is to promote the long-term growth and
profitability of SafeNet, Inc. (the “Corporation”) by (i) providing key people with incentives to
improve stockholder value and to contribute to the growth and financial success of the Corporation,
and (ii) enabling the Corporation to attract, retain and reward the best available persons for
positions of substantial responsibility.

     The Plan permits the granting of stock options (including nonqualified stock options and
incentive stock options qualifying under Section 422 of the Code), stock appreciation rights
(including free-standing, tandem and limited stock appreciation rights), restricted or unrestricted
share awards, phantom stock, performance awards, or any combination of the foregoing (collectively,
“Awards”).

2. Definitions

     Under this Plan, except where the context otherwise indicates, the following definitions
apply:

     (a) “Board” shall mean the Board of Directors of the Corporation.

     (b) “Change in Control” shall mean: (i) any sale, exchange or other disposition of substantially all of the
Corporation’s assets or over 50% of its Common Stock; or (ii) any merger, share exchange, consolidation or other
reorganization or business combination in which the Corporation is not the surviving or continuing corporation,
or in which the Corporation’s stockholders become entitled to receive cash, securities of the Corporation other
than voting common stock, or securities of another issuer.

     (c) “Code” shall mean the Internal Revenue Code of 1986, as amended, and any regulations issued there under.

     (d) “Committee” shall mean the Board or committee of Board members appointed pursuant to Section 3 of the Plan
to administer the Plan.

     (e) “Common Stock” shall mean shares of the Corporation’s common stock.

     (f) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     (g) “Fair Market Value” of a share of the Corporation’s Common Stock for any purpose on a particular date shall
be determined as follows: (1) if there is a public market for the Common Stock, the Fair Market Value per share
shall be the average of the bid and asked prices of the Common Stock for such day if the Common Stock is then
included for quotation on the NASDAQ Small-Cap Market or, the Fair Market Value per share shall be the closing
price of the Common Stock for such day if the Common Stock is then included on the NASDAQ National Market or
listed on the New York, American or Pacific Stock Exchange, or (2) if there is no public market for the Common
Stock, the Fair Market Value of the Common Stock shall be determined in good faith by the Board or Committee in
such manner as it may deem equitable for Plan purposes. The Board or the Committee may rely upon published
quotations in The Wall Street Journal or a comparable publication for purposes of the calculation of the Fair
Market Value per share as set forth above.

     (h) “Grant Agreement” shall mean a written agreement between the Corporation and a grantee memorializing the
terms and conditions of an Award granted pursuant to the Plan.

     (i) “Grant Date” shall mean the date on which the Committee formally acts to grant an Award to a grantee or such
other date as the Committee shall so designate at the time of taking such formal action.

     (j) “Parent” shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of “parent
corporation” provided in Section 424(e) of the Code, or any
successor thereto of similar import.

     (k) “Rule 16b-3” shall mean Rule 16b-3 as in effect under the
Exchange Act on the effective date of the Plan, or any successor
provision prescribing conditions necessary to exempt the issuance of
securities under the Plan (and further transactions in such
securities) from Section 16(b) of the Exchange Act.

     (l) “Subsidiary” and “subsidiaries” shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning
of the definition of “subsidiary corporation” provided in Section
424(f) of the Code, or any successor thereto of similar import.

 

 

3. Administration

     (a) Procedure. The Plan shall be administered by the Board. In the alternative, the Board may
appoint a Committee to administer the Plan consisting solely of two (2) or more members of the
Board who are “nonemployee directors” within the meaning of Rule 16b-3 and “outside directors”
within the meaning of Code Section 162(m). Once appointed, the Committee shall continue to serve
until otherwise directed by the Board. From time to time, the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefore, fill vacancies, however caused, and remove all
members of the Committee and, thereafter, directly administer the Plan. In the event that the Board
is the administrator of the Plan in lieu of a Committee, the term “Committee” as used herein shall
be deemed to mean the Board.

     Members of the Board or Committee who are either eligible for Awards or have been granted
Awards may vote on any matters affecting the administration of the Plan or the grant of Awards
pursuant to the Plan.

     The Committee shall meet at such times and places and upon such notice as it may determine. A
majority of the Committee shall constitute a quorum. Any acts by the Committee may be taken at any
meeting at which a quorum is present and shall be by majority vote of those members present.
Additionally, any acts reduced to writing or approved in writing by all of the members of the
Committee shall be valid acts of the Committee.

     (b) Powers of the Committee. The Committee shall have all the powers vested in it by the terms
of the Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards
under the Plan, prescribe Grant Agreements evidencing such Awards and establish programs for
granting Awards. The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not limited to, the
authority to:

     (i) determine the eligible persons to whom, and the time or times at which Awards shall be granted,

     (ii) determine the types of Awards to be granted,

     (iii) determine the number of shares to be covered by or used for reference purposes for each Award,

     (iv) impose such terms, limitations, restrictions and conditions upon any such Award as the Committee
shall deem appropriate,

     (v) modify, extend or renew outstanding Awards, provided that the Committee shall not reprice such
Awards or substitute new Awards for such Awards, and provided further that no such action shall be taken
with respect to any outstanding Award which would adversely affect the grantee without the grantee’s
consent,

     (vi) accelerate or otherwise change the time in which an Award may be exercised or becomes payable and
to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to
such Award, including, but not limited to, any restriction or condition with respect to the vesting or
exercisability of an Award following termination of any grantee’s employment, and

     (vii) to establish objectives and conditions, if any, for earning
Awards and determining whether Awards will be paid after the end of
a performance period.

The Committee shall have full power and authority to administer and interpret the Plan and to
adopt such rules, regulations, agreements, guidelines and instruments for the administration of the
Plan and for the conduct of its business as the Committee deems necessary or advisable and to
interpret same, all within the Committee’s sole and absolute discretion.

     (c) Limited Liability. To the maximum extent permitted by law, no member of the Board or
Committee shall be liable for any action taken or decision made in good faith relating to the Plan
or any Award there under.

     (d) Indemnification. To the maximum extent permitted by law, the members of the Board and
Committee shall be indemnified by the Corporation in respect of all their activities under the
Plan.

     (e) Effect of Committee’s Decision. All actions taken and decisions and determinations made by
the Committee on all matters relating to the Plan pursuant to the powers vested in it hereunder
shall be in the Committee’s sole and absolute discretion and shall be conclusive and binding on all
parties concerned, including the Corporation, its stockholders, any participants in the Plan and
any other employee of the Corporation, and their respective successors in interest.

 

 

4. Shares Available for the Plan; Maximum Awards

     Subject to adjustments as provided in Section 12 of the Plan, the shares of stock that may be
delivered or purchased or used for
reference purposes (with respect to stock appreciation rights, phantom stock units or performance
awards payable in cash) with respect to Awards granted under the Plan, including with respect to
incentive stock options intended to qualify under Section 422 of the Code, shall not exceed an
aggregate of 5,000,000 shares of Common Stock of the Corporation. The Corporation shall reserve
said number of shares for Awards under the Plan, subject to adjustments as provided in Section 12
of the Plan. If any Award, or portion of an Award, under the Plan expires or terminates
unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares without the delivery of shares of Common Stock or other consideration, the shares
subject to such Award shall thereafter be available for further Awards under the Plan. The maximum
number of shares listed above does not include 400,000 shares of Common Stock reserved for stock
options under the SafeNet, Inc. 2000 Nonqualified Stock Option Plan which stock options and shares
shall be administered under the Plan.

     The maximum number of shares of Common Stock subject to Awards of any combination that may be
granted during any one calendar year to any one individual shall be limited to 200,000. To the
extent required by Section 162(m) of the Code and so long as Section 162(m) of the Code is
applicable to persons eligible to participate in the Plan, shares of Common Stock subject to the
foregoing limit with respect to which the related Award is terminated, surrendered or canceled
shall not again be available for grant under this limit.

     Stock Awards under Section 8 may not be issued after July 26, 2005, including stock Awards
that may be issued as performance awards under Section 9. Stock Awards under Section 8 may not
become vested based on less than 3 years of service after the grant date, unless vesting is based
on meeting performance goals as specified in Section 9, in which case vesting of stock Awards may
occur one year after the grant date, provided that the Committee may accelerate these vesting
periods, in the Committee’s discretion, in the even of death, disability, change of control, or
retirement.

5. Participation

     Participation in the Plan shall be open to all employees, officers, directors and consultants
of the Corporation, or of any Parent or Subsidiary of the Corporation, as may be selected by the
Committee from time to time. Notwithstanding the foregoing, participation in the Plan with respect
to Awards of incentive stock options shall be limited to employees of the Corporation or of any
Parent or Subsidiary of the Corporation.

     Awards may be granted to such eligible persons and for or with respect to such number of
shares of Common Stock as the Committee shall determine, subject to the limitations in Section 4 of
the Plan. A grant of any type of Award made in any one year to an eligible person shall neither
guarantee nor preclude a further grant of that or any other type of Award to such person in that
year or subsequent years.

6. Stock Options

     Subject to the other applicable provisions of the Plan, the Committee may from time to time
grant to eligible participants Awards of nonqualified stock options or incentive stock options as
that term is defined in Section 422 of the Code. The stock option Awards granted shall be subject
to the following terms and conditions.

     (a) Grant of Option. The grant of a stock option shall be evidenced by a Grant Agreement,
executed by the Corporation and the grantee, stating the number of shares of Common Stock subject
to the stock option evidenced thereby and the terms and conditions of such stock option, in such
form as the Committee may from time to time determine.

     (b) Price. The price per share payable upon the exercise of each stock option (“exercise
price”) shall be determined by the Committee, but shall be no less than the Fair Market Value of
such shares on the date of grant. Not withstanding Section 3(b)(v) or any other provision hereof,
the Committee shall not authorize the amendment of any outstanding stock option to reduce the
exercise price thereof.

     (c) Payment. Stock options may be exercised in whole or in part by payment of the exercise
price of the shares to be acquired in accordance with the provisions of the Grant Agreement, and/or
such rules and regulations as the Committee may have prescribed, and/or such determinations,
orders, or decisions as the Committee may have made. Payment may be made in cash (or cash
equivalents acceptable to the Committee) or, if approved by the Committee, in shares of Common
Stock or a combination of cash and shares of Common Stock, or by such other means as the Committee
may prescribe. The Fair Market Value of shares of Common Stock delivered on exercise of stock
options shall be determined as of the date of exercise. Shares of Common Stock delivered in payment
of the exercise price may be previously owned shares or, if approved by the Committee, shares
acquired upon exercise of the stock option. Any fractional share will be paid in cash. If approved
by the Board of Directors, the Corporation may make or guarantee loans to grantees to assist
grantees in exercising stock options and satisfying any related withholding tax obligations.

 

 

     If the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the
Committee, subject to such limitations as it may determine, may authorize payment of the exercise
price, in whole or in part, by delivery of a properly executed exercise notice, together with
irrevocable instructions, to: (i) a brokerage firm to deliver promptly to the Corporation the
aggregate amount of sale or loan proceeds to pay the exercise price and any withholding tax
obligations that may arise in connection with the exercise, and (ii) the
Corporation to deliver the certificates for such purchased shares directly to such brokerage firm.

     (d) Terms of Options. The term during which each stock option may be exercised shall be
determined by the Committee; provided, however, that in no event shall a stock option be
exercisable more than ten years from the date it is granted. Prior to the exercise of the stock
option and delivery of the shares certificates represented thereby, the grantee shall have none of
the rights of a stockholder with respect to any shares represented by an outstanding stock option.

     (e) Restrictions on Incentive Stock Options. Incentive stock option Awards granted under the
Plan shall comply in all respects with Code Section 422 and, as such, shall meet the following
additional requirements:

     (i) Grant Date. An incentive stock option must be granted within 10
years of the earlier of the Plan’s adoption by the Board of
Directors or approval by the Corporation’s shareholders.

     (ii) Exercise Price and Term. The exercise price of an incentive
stock option shall not be less than 100% of the Fair Market Value of
the shares on the date the stock option is granted and the term of
the stock option shall not exceed ten years. Also, the exercise
price of any incentive stock option granted to a grantee who owns
(within the meaning of Section 422(b)(6) of the Code, after the
application of the attribution rules in Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of
shares of the Corporation or its Parent or Subsidiary corporations
(within the meaning of Sections 422 and 424 of the Code) shall be
not less than 110% of the Fair Market Value of the Common Stock on
the grant date and the term of such stock option shall not exceed
five years.

     (iii) Maximum Grant. The aggregate Fair Market Value (determined as
of the Grant Date) of shares of Common Stock with respect to which
all incentive stock options first become exercisable by any grantee
in any calendar year under this or any other plan of the Corporation
and its Parent and Subsidiary corporations may not exceed $100,000
or such other amount as may be permitted from time to time under
Section 422 of the Code. To the extent that such aggregate Fair
Market Value shall exceed $100,000, or other applicable amount, such
stock options shall be treated as nonqualified stock options. In
such case, the Corporation may designate the shares of Common Stock
that are to be treated as stock acquired pursuant to the exercise of
an incentive stock option by issuing a separate certificate for such
shares and identifying the certificate as incentive stock option
shares in the stock transfer records of the Corporation.

     (iv) Grantee. Incentive stock options shall only be issued to
employees of the Corporation, or of a Parent or Subsidiary of the
Corporation.

     (v) Designation. No stock option shall be an incentive stock option
unless so designated by the Committee at the time of grant or in the
Grant Agreement evidencing such stock option.

     (vi) Stockholder Approval. No stock option issued under the Plan
shall be an incentive stock option unless the Plan is approved by
the shareholders of the Corporation within 12 months of its adoption
by the Board in accordance with the Bylaws and Articles of the
Corporation and governing law relating to such matters.

     (f) Other Terms and Conditions. Stock options may contain such other provisions, not
inconsistent with the provisions of the Plan, as the Committee shall determine appropriate from
time to time.

7. Stock Appreciation Rights

     (a) Award of Stock Appreciation Rights. Subject to the other applicable provisions of the
Plan, the Committee may at any time and from time to time grant stock appreciation rights (“SARs”)
to eligible participants, either on a free-standing basis (without regard to or in addition to the
grant of a stock option) or on a tandem basis (related to the grant of an underlying stock option),
as it determines. SARs granted in tandem with or in addition to a stock option may be granted
either at the same time as the stock option or at a later time; provided, however, that a tandem
SAR shall not be granted with respect to any outstanding incentive stock option Award without the
consent of the grantee. SARs shall be evidenced by Grant Agreements, executed by the Corporation
and the grantee, stating the number of shares of Common Stock subject to the SAR evidenced thereby
and the terms and conditions of such SAR, in such form as the Committee may from time to time
determine. The term during which each SAR may be exercised shall be determined by the Committee. In
no event shall a SAR be exercisable more than ten years from the date it is granted. The grantee
shall have none of the rights of a stockholder with respect to any shares of Common Stock
represented by a SAR.

     (b) Restrictions of Tandem SARs. No incentive stock option may be surrendered in connection
with the exercise of a tandem SAR unless the Fair Market Value of the Common Stock subject to the
incentive stock option is greater than the exercise price for such incentive stock option. SARs
granted in tandem with stock options shall be exercisable only to the same extent and subject to
the same conditions as the stock options related thereto are exercisable. The Committee may, in its
discretion, prescribe additional conditions to the exercise of any such tandem SAR.

 

 

     (c) Amount of Payment Upon Exercise of SARs. A SAR shall entitle the grantee to receive,
subject to the provisions of the Plan and the Grant Agreement, a payment having an aggregate value
equal to the product of (i) the excess of (A) the Fair Market Value on the exercise date of one
share of Common Stock over (B) the base price per share specified in the Grant Agreement, times
(ii) the number
of shares specified by the SAR, or portion thereof, which is exercised. In the case of exercise of
a tandem SAR, such payment shall be made in exchange for the surrender of the unexercised related
stock option (or any portion or portions thereof which the grantee from time to time determines to
surrender for this purpose).

     (d) Form of Payment Upon Exercise of SARs. Payment by the Corporation of the amount receivable
upon any exercise of a SAR may be made by the delivery of Common Stock or cash, or any combination
of Common Stock and cash, as determined in the sole discretion of the Committee from time to time.
If upon settlement of the exercise of a SAR a grantee is to receive a portion of such payment in
shares of Common Stock, the number of shares shall be determined by dividing such portion by the
Fair Market Value of a share of Common Stock on the exercise date. No fractional shares shall be
used for such payment and the Committee shall determine whether cash shall be given in lieu of such
fractional shares or whether such fractional shares shall be eliminated.

8. Stock Awards (Including Restricted and Unrestricted Shares and Phantom Stock)

     (a) Stock Awards, In General. Subject to the other applicable provisions of the Plan, the
Committee may at any time and from time to time grant stock Awards to eligible participants in such
amounts and for such consideration, including no consideration or such minimum consideration as may
be required by law, as it determines. A stock Award may be denominated in shares of Common Stock or
stock-equivalent units (“phantom stock”), and may be paid in Common Stock, in cash, or in a
combination of Common Stock and cash, as determined in the sole discretion of the Committee from
time to time.

     (b) Restricted Shares. Each stock Award shall specify the applicable restrictions, if any, on
such shares of Common Stock, the duration of such restrictions, and the time or times at which such
restrictions shall lapse with respect to all or a specified number of shares of Common Stock that
are part of the Award. Notwithstanding the foregoing, the Committee may reduce or shorten the
duration of any restriction applicable to any shares of Common Stock awarded to any grantee under
the Plan. Share certificates with respect to restricted shares of Common Stock granted pursuant to
a stock Award may be issued at the time of grant of the stock Award, subject to forfeiture if the
restrictions do not lapse, or upon lapse of the restrictions. If share certificates are issued at
the time of grant of the stock Award, the certificates shall bear an appropriate legend with
respect to the restrictions applicable to such stock Award or, alternatively, the grantee may be
required to deposit the certificates with the Corporation during the period of any restriction
thereon and to execute a blank stock power or other instrument of transfer therefor. Except as
otherwise provided by the Committee, during such period of restriction following issuance of share
certificates, the grantee shall have all of the rights of a holder of Common Stock, including but
not limited to the rights to receive dividends (or amounts equivalent to dividends) and to vote
with respect to the restricted shares. If share certificates are issued upon lapse of restrictions
on a stock Award, the Committee may provide that the grantee will be entitled to receive any
amounts per share pursuant to any dividend or distribution paid by the Corporation on its Common
Stock to stockholders of record after grant of the stock Award and prior to the issuance of the
share certificates.

     (c) Phantom Stock. The grant of phantom stock units shall be evidenced by a Grant Agreement,
executed by the Corporation and the grantee, that incorporates the terms of the Plan and states the
number of phantom stock units evidenced thereby and the terms and conditions of such phantom stock
units in such form as the Committee may from time to time determine. Phantom stock units granted to
a participant shall be credited to a bookkeeping reserve account solely for accounting purposes and
shall not require a segregation of any of the Corporation’s assets. Phantom stock units may be
exercised in whole or in part by delivery of an appropriate exercise notice to the Committee in
accordance with the provisions of the Grant Agreement, and/or such rules and regulations as the
Committee may prescribe, and/or such determinations, orders, or decisions as the Committee may
make. Except as otherwise provided in the applicable Grant Agreement, the grantee shall have none
of the rights of a stockholder with respect to any shares of Common Stock represented by a phantom
stock unit as a result of the grant of a phantom stock unit to the grantee. Phantom stock units may
contain such other provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time.

9. Performance Awards

     The Committee may in its discretion grant performance Awards which become payable on account
of attainment of one or more performance goals established by the Committee. Performance Awards may
be paid by the delivery of Common Stock or cash, or any combination of Common Stock and cash, as
determined in the sole discretion of the Committee from time to time. Performance goals established
by the Committee may be based on the Corporation’s operating income or one or more other business
criteria selected by the Committee that apply to an individual or group of individuals, a business
unit, or the Corporation as a whole, over such performance period as the Committee may designate.
The Committee in its discretion may recommend to the Board of Directors of the Corporation that the
material terms of any Performance Award or program with respect to some or all eligible
participants be submitted for approval by the stockholders.

 

 

10. Withholding of Taxes

     The Corporation may require, as a condition to the grant of any Award under the Plan or
exercise pursuant to such Award or to the delivery of certificates for shares issued or payments of
cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter collectively referred to
as a “taxable event”), that the grantee pay to the Corporation, in cash or, if approved by the
Corporation, in
shares of Common Stock, including shares acquired upon grant of the Award or exercise of the Award,
valued at Fair Market Value on the date as of which the withholding tax liability is determined,
any federal, state or local taxes of any kind required by law to be withheld with respect to any
taxable event under the Plan. The Corporation, to the extent permitted or required by law, shall
have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to
a grantee any federal, state or local taxes of any kind required by law to be withheld with respect
to any taxable event under the Plan, or to retain or sell without notice a sufficient number of the
shares to be issued to such grantee to cover any such taxes.

11. Transferability

     No Award granted under the Plan shall be transferable by a grantee otherwise than by will or
the laws of descent and distribution. Unless otherwise determined by the Committee in accord with
the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime
of the grantee, only by the grantee or, during the period the grantee is under a legal disability,
by the grantee’s guardian or legal representative. Notwithstanding the foregoing, a nonqualified
stock option Award may, in the Committee’s sole discretion, be transferable by gift or domestic
order relations to (i) the grantee’s child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, daughter-in-law,
brother-in-law or sister-in-law, including adoptive relationships (such persons, “Family Members”),
(ii) a corporation, partnership, limited liability company or other business entity whose only
stockholders, partners or members, as applicable are the grantee and/or Family Members, or (iii) a
trust in which the grantee and/or Family Members have all of the beneficial interests, and
subsequent to any such transfer any such nonqualified stock option Award may be exercised by any
such transferee.

12. Adjustments; Business Combinations

     In the event of a reclassification, recapitalization, stock split, reverse stock split, stock
dividend, combination of shares, or other similar event, the maximum number and kind of shares
reserved for issuance or with respect to which Awards may be granted under the Plan as provided in
Section 4 shall be adjusted to reflect such event, and the Committee shall make such adjustments as
it deems appropriate and equitable in the number, kind and price of shares covered by outstanding
Awards made under the Plan, and in any other matters which relate to Awards and which are affected
by the changes in the Common Stock referred to above.

     In the event of any proposed Change in Control, the Committee shall take such action as it
deems appropriate and equitable to effectuate the purposes of this Plan and to protect the grantees
of Awards, which action may include, but without limitation, any one or more of the following: (i)
acceleration or change of the exercise and/or expiration dates of any Award to require that
exercise be made, if at all, prior to the Change in Control; (ii) cancellation of any Award upon
payment to the holder in cash of the Fair Market Value of the Common Stock subject to such Award as
of the date of (and, to the extent applicable, as established for purposes of) the Change in
Control, less the aggregate exercise price, if any, of the Award; and (iii) in any case where
equity securities of another entity are proposed to be delivered in exchange for or with respect to
Common Stock of the Corporation, arrangements to have such other entity replace the Awards granted
hereunder with awards with respect to such other securities, with appropriate adjustments in the
number of shares subject to, and the exercise prices under, the award.

     The Committee is authorized to make adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in the preceding two paragraphs of this Section 12) affecting the
Corporation, or the financial statements of the Corporation or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee determines that such
adjustments are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.

     In the event the Corporation dissolves and liquidates (other than pursuant to a plan of merger
or reorganization), then notwithstanding any restrictions on exercise set forth in this Plan or any
Grant Agreement, or other agreement evidencing a stock option, stock appreciation right or
restricted stock Award: (i) each grantee shall have the right to exercise his stock option or stock
appreciation right, or to require delivery of share certificates representing any such restricted
stock Award, at any time up to ten (10) days prior to the effective date of such liquidation and
dissolution; and (ii) the Committee may make arrangements with the grantees for the payment of
appropriate consideration to them for the cancellation and surrender of any stock option, stock
appreciation right or restricted stock Award that is so canceled or surrendered at any time up to
ten (10) days prior to the effective date of such liquidation and dissolution. The Committee may
establish a different period (and different conditions) for such exercise, delivery, cancellation,
or surrender to avoid subjecting the grantee to liability under Section 16(b) of the Exchange Act.
Any stock option or stock appreciation right not so exercised, canceled, or surrendered shall
terminate on the last day for exercise prior to such effective date; and any restricted stock as to
which there has not been such delivery of share certificates or that has not been so canceled or
surrendered, shall be forfeited on the last day prior to such effective date. The Committee shall
give to each grantee written notice of the commencement of any proceedings for such liquidation and
dissolution of the Corporation and the grantee’s rights with respect to his outstanding Award.

 

 

     Except as hereinbefore expressly provided, issuance by the Corporation of shares of stock of
any class or securities convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warranty to subscribe therefore, or upon
conversion of shares or obligations of the Corporation convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the
number of shares of Common Stock subject to Awards theretofore granted or the purchase price per
share of Common Stock subject to Awards.

13. Termination and Modification of the Plan

     The Board, without further approval of the stockholders, may modify or terminate the Plan or
any portion thereof at any time, except that no modification shall become effective without prior
approval of the stockholders of the Corporation (i) to increase the number of shares of Common
Stock subject to the Plan, (ii) to increase the benefits accruing to participants under the Plan,
except as expressly stated herein, (iii) to materially modify eligibility requirements for
participation in the Plan, or (iv) if stockholder approval is necessary to comply with any tax or
regulatory requirement or rule of any exchange or NASDAQ System upon which the Common Stock is
listed or quoted (including for this purpose stockholder approval that is required for continued
compliance with Rule 16b-3 or stockholder approval that is required to enable the Committee to
grant incentive stock options pursuant to the Plan).

     The Committee shall be authorized to make minor or administrative modifications to the Plan as
well as modifications to the Plan that may be dictated by requirements of federal or state laws
applicable to the Corporation or that may be authorized or made desirable by such laws. The
Committee may amend or modify the grant of any outstanding Award in any manner to the extent that
the Committee would have had the authority to make such Award as so modified or amended. No
modification may be made that would materially adversely affect any Award previously made under the
Plan without the approval of the grantee.

14. Non-Guarantee of Employment

     Nothing in the Plan or in any Grant Agreement there under shall confer any right on an
employee to continue in the employ of the Corporation or shall interfere in any way with the right
of the Corporation to terminate an employee at any time.

15. Termination of Employment

     For purposes of maintaining a grantee’s continuous status as an employee and accrual of rights
under any Award, transfer of an employee among the Corporation and the Corporation’s Parent or
Subsidiaries shall not be considered a termination of employment. Nor shall it be considered a
termination of employment for such purposes if an employee is placed on military or sick leave or
such other leave of absence which is considered as continuing intact the employment relationship;
in such a case, the employment relationship shall be continued until the date when an employee’s
right to reemployment shall no longer be guaranteed either by law or contract.

16. Written Agreement

     Each Grant Agreement entered into between the Corporation and a grantee with respect to an
Award granted under the Plan shall incorporate the terms of this Plan and shall contain such
provisions, consistent with the provisions of the Plan, as may be established by the Committee.

17. Non-Uniform Determinations

     The Committee’s determinations under the Plan (including without limitation determinations of
the persons to receive Awards, the form, amount and time of such Awards, the terms and provisions
of such Awards and the agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.

18. Limitation on Benefits

     With respect to persons subject to Section 16 of the Exchange Act, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.

19. Listing and Registration

     If the Corporation determines that the listing, registration or qualification upon any
securities exchange or upon any listing or quotation system established by the National Association
of Securities Dealers, Inc. (“NASDAQ System”) or under any law, of shares subject to any Award is
necessary or desirable as a condition of, or in connection with, the granting of same or the issue
or purchase of shares there under, no such Award may be exercised in whole or in part and no
restrictions on such Award shall lapse, unless such
listing, registration or qualification is effected free of any conditions not acceptable to the
Corporation.

 

 

20. Compliance with Securities Law

     Common Stock shall not be issued with respect to an Award granted under the Plan unless the
exercise of such Award and the issuance and delivery of share certificates there under for such
Common Stock pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated there under, and the requirements of any national securities exchange or NASDAQ System
upon which the Common Stock may then be listed or quoted, and shall be further subject to the
approval of counsel for the Corporation with respect to such compliance to the extent such approval
is sought by the Committee.

     Stock certificates evidencing unregistered shares acquired upon the exercise of Options shall
contain a restrictive securities legend substantially as follows:

     “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES
MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND APPLICABLE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”

21. No Trust or Fund Created

     Neither the Plan nor any Award shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Corporation and a grantee or any other person.
To the extent that any grantee or other person acquires a right to receive payments from the
Corporation pursuant to an Award, such right shall be no greater than the right of any unsecured
general creditor of the Corporation.

22. No Limit on Other Compensation Arrangements

     Nothing contained in the Plan shall prevent the Corporation or its Parent or Subsidiary
corporations from adopting or continuing in effect other compensation arrangements (whether such
arrangements be generally applicable or applicable only in specific cases) as the Committee in its
discretion determines desirable, including without limitation the granting of stock options, stock
awards, stock appreciation rights or phantom stock units otherwise than under the Plan.

23. No Restriction of Corporate Action

     Nothing contained in the Plan shall be construed to prevent the Corporation or any Parent or
Subsidiary from taking any corporate action which is deemed by the Corporation or such Parent or
Subsidiary to be appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award issued under the Plan. No employee, beneficiary or other
person shall have any claim against the Corporation or any Parent or Subsidiary as a result of such
action.

24. Governing Law

     The validity, construction and effect of the Plan, of Grant Agreements entered into pursuant
to the Plan, and of any rules, regulations, determinations or decisions made by the Board or
Committee relating to the Plan or such Grant Agreements, and the rights of any and all persons
having or claiming to have any interest therein or there under, shall be determined exclusively in
accordance with applicable federal laws and the laws of the State of Delaware, without regard to
its conflict of laws rules and principles.

25. Plan Subject to Charter and By-Laws

     This Plan is subject to the Articles and By-Laws of the Corporation, as they may be amended
from time to time.

26. Effective Date; Termination Date

     The Plan, as amended and restated herein, is effective as of the date on which the amendment
and restatement of the Plan was adopted by the Board; provided that the amendment and restatement
of the Plan shall be null and void unless approved within
12 months thereafter by the shareholders of the Corporation. No Award shall be granted under the
Plan after the close of business on the day immediately preceding the tenth anniversary of the
effective date of the Plan. Subject to other applicable provisions of the Plan, all Awards made
under the Plan prior to such termination of the Plan shall remain in effect until such Awards have
been satisfied or terminated in accordance with the Plan and the terms of such Awards.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}]]