Document:

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                                                                   Exhibit 10.6

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT, made and entered into as of January 1, 1999 (the
"EFFECTIVE Date"), by and between Lexicon Genetics Incorporated, a Delaware
corporation (hereafter "COMPANY"), and Randall Riggs (hereafter "EXECUTIVE"), an
individual and resident of Montgomery County, Texas.

                              W I T N E S S E T H:

     WHEREAS, Company wishes to secure the services of the Executive subject to
the terms and conditions hereafter set forth; and

     WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth,

     NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:

     1. EMPLOYMENT. During the Employment Period (as defined in Section 4
hereof), the Company shall employ Executive, and Executive shall serve, as Vice
President - Business Development. Executive's principal place of employment
shall be at the Company's principal corporate offices in The Woodlands, Texas,
or at such other location for the Company's principal corporate offices during
the Employment Period.

     2. DUTIES AND RESPONSIBILITIES OF EXECUTIVE.

          (a) During the Employment Period, Executive shall devote his services
     full time to the business of the Company and its Affiliates (as defined
     below), and perform the duties and responsibilities assigned to him by the
     Chief Executive Officer ("CEO") or Board of Directors (the "BOARD") of the
     Company to the best of his ability and with reasonable diligence. Executive
     agrees to cooperate fully with the Board, CEO and other executive officers
     of the Company, and not to engage in any activity which conflicts with or
     interferes with the performance of his duties hereunder. During the
     Employment Period, Executive shall devote his best efforts and skills to
     the business and interests of Company, do his utmost to further enhance and
     develop Company's best interests and welfare, and endeavor to improve his
     ability and knowledge of Company's business, in an effort to increase the
     value of his services for the mutual benefit of the parties hereto. During
     the Employment Period, it shall not be a violation of this Agreement for
     Executive to (1) serve on corporate, civic, or charitable boards or
     committees (except for boards or committees of a Competing Business (as
     defined in Section 11)), (2) deliver lectures, fulfill teaching or speaking

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          engagements, or (3) manage personal investments, so long as such
          activities do not materially interfere with performance of Executive's
          responsibilities under this Agreement.

               For purposes of this Agreement, "AFFILIATE" means any entity
          which owns or controls, is owned or controlled by, or is under common
          ownership or control with, the Company.

               (b) Executive represents and covenants to Company that he is not
          subject or a party to any employment agreement, noncompetition
          covenant, nondisclosure agreement, or any similar agreement, covenant,
          understanding, or restriction that would prohibit Executive from
          executing this Agreement and fully performing his duties and
          responsibilities hereunder, or would in any manner, directly or
          indirectly, limit or affect the duties and responsibilities that may
          now or in the future be assigned to Executive hereunder.

          3. COMPENSATION. During the Employment Period, the Company shall pay
     to Executive an annual base salary of $160,000, in consideration for his
     services under this Agreement, payable on a pro rata basis in not less than
     monthly installments, in conformity with the Company's customary payroll
     practices for executive salaries. Executive's base salary shall be subject
     to review at least annually, and such salary may be adjusted, depending
     upon the performance of the Company and Executive, upon the recommendation
     of the Compensation Committee of the Board (the "COMPENSATION COMMITTEE").
     All salary and any other compensation payments hereunder shall be subject
     to all applicable payroll and other taxes.

          4. TERM OF EMPLOYMENT. Executive's initial term of employment with the
     Company under this Agreement shall be for the two-year period beginning on
     the Effective Date and ending at midnight (CST) on December 31, 2000,
     unless Notice of Termination pursuant to Section 7 is given by either the
     Company or Executive to the other party. The Company and Executive shall
     each have the right to give Notice of Termination at will, with or without
     cause, at any time, subject to the terms and conditions of this Agreement
     regarding the rights and duties of the parties upon termination of
     employment. The term of employment hereunder ending on December 31, 2000,
     shall be referred to herein as the "INITIAL TERM OF EMPLOYMENT." On
     December 31, 2000 and on December 31st of each succeeding year (each such
     date being referred to as a "Renewal Date"), this Agreement shall
     automatically renew and extend for a period of one (1) additional year (a
     "RENEWAL TERM") unless written notice of nonrenewal is delivered from one
     party to the other at least sixty (60) days prior to the relevant Renewal
     Date or, alternatively, the parties may mutually agree to voluntarily enter
     into a new employment agreement at any time. The period from the Effective
     Date through the date of Executive's termination of employment at any time
     for whatever reason shall be referred to herein as the "EMPLOYMENT PERIOD."

          5. BENEFITS. Subject to the terms and conditions of this Agreement,
     during the Employment Period, Executive shall be entitled to the
     following:

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               (a) REIMBURSEMENT OF BUSINESS EXPENSES. The Company shall pay or
          reimburse Executive for all reasonable travel, entertainment and other
          expenses paid or incurred by Executive in performing his business
          obligations hereunder. Executive shall provide substantiating
          documentation for expense reimbursement requests as reasonably
          required by the Company.

               (b) BENEFITS. Executive shall be entitled to and shall receive
          all other benefits and conditions of employment available generally to
          executives of the Company pursuant to Company plans and programs,
          including, but not limited to, group health insurance benefits, dental
          benefits, life insurance benefits, disability benefits, and pension
          and retirement benefits. The Company shall not be obligated to
          institute, maintain, or refrain from changing, amending, or
          discontinuing, any such employee benefit program or plan, so long as
          such actions are similarly applicable to covered executives generally.

               Notwithstanding the previous paragraph, Company shall provide
          Executive with long-term disability ("LTD") insurance coverage, at no
          cost to Executive, that provides income replacement benefits to
          Executive, if he should incur a long-term disability covered under
          such policy, in an amount at least equal to 60% of his base salary at
          the time of such disability, which benefits shall begin after a
          waiting period that does not exceed six months. The income replacement
          benefits described in the previous sentence shall remain payable at
          least until Executive attains the age of 65 provided that he remains
          unable to perform the essential functions of his occupation during
          such period. To the extent that the Company's LTD policy which covers
          employees generally does not provide sufficient coverage to Executive,
          as described in the previous sentence, Company agrees to purchase a
          supplemental LTD policy for Executive from a reputable insurer and to
          pay the premiums on behalf of Executive during the Employment Period.

               Notwithstanding the first paragraph of this Section 3(b), the
          Company shall pay for term life insurance coverage on Executive's
          life, with the beneficiary(ies) thereof designated by Executive, with
          a death benefit in an amount not less than twice Executive's base
          salary (pursuant to Section 3(a)) as such base salary is set on each
          January 1 during the Employment Period. Upon request, Executive agrees
          to take any physical exams, and to provide such information, which are
          reasonably necessary or appropriate to secure or maintain such term
          life insurance coverage.

               (c) PAID VACATION. Executive shall be entitled to a paid annual
          vacation of three (3) weeks. Vacation time may be accumulated and
          carried over by Executive into any subsequent year(s); provided,
          however, Executive shall not be permitted to accumulate more than six
          weeks of accrued and unused vacation. In addition, the Executive shall
          be allowed up to five (5) days each year to attend professional
          continuing education meetings or seminars; provided, that attendance
          at such meetings or

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          seminars shall be planned for minimum interference with the Company's
          business.

          6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
     compensation and benefits for periods after the date on which his
     employment with the Company and its Affiliates (as defined in Section 2)
     terminates for whatever reason (the "TERMINATION DATE") shall be determined
     in accordance with this Section 6.

               (a) ACCRUED SALARY AND VACATION PAYMENTS. Executive shall be
          entitled to the following payments under this Section 6(a), in
          addition to any payments or benefits to which the Executive is
          entitled under the terms of any employee benefit plan or the following
          provisions of this Section 6:

                    (1) his accrued but unpaid salary through his Termination
               Date; and

                    (2) his accrued but unpaid vacation pay for the period
               ending on his Termination Date in accordance with Section 5(c)
               above.

               (b) SEVERANCE PAYMENTS.

                    (1) At any time prior to a Change in Control (as defined
               below), in the event that (A) Executive's employment hereunder is
               terminated by the Company at any time for any reason except (i)
               for Cause (as defined below) or (ii) due to Executive's death or
               Disability (as defined below), or (B) Executive terminates his
               own employment hereunder for Good Reason (as defined below),
               then, in either such event, Executive shall be entitled to
               receive, and the Company shall be obligated to pay, Executive's
               base salary under Section 3(a) (without regard to any bonuses or
               extraordinary compensation) then being paid to him on the
               Termination Date as salary continuation (pursuant to the
               Company's normal payroll procedures) for a period equal to six
               (6) consecutive months following the Termination Date; provided
               that if such termination occurs within 120 days following a
               reduction in Executive's base salary, such salary continuation
               payments shall be made in an amount equal to Executive's base
               salary prior to such reduction. In the event of Executive's death
               during such salary continuation period, the Company shall pay the
               sum of the present value of all remaining payments (using a 5%
               discount rate) in a single payment to the Executive's estate
               within 60 days of his death. Such severance payments shall be
               subject to Sections 10 and 11 hereof.

                    Prior to a Change in Control, in the event that Executive's
               employment is terminated through notice of nonrenewal as of the
               end of the Initial Term of Employment (pursuant to Section 4) or
               any one-year Renewal Term, Executive shall

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          not be entitled to receive any severance payments pursuant to the
          first paragraph of this Section 6(a); provided, however, Executive
          shall be entitled to receive a severance payment equal to $13,000 per
          month for each month following his Termination Date, not to exceed six
          months, that Executive is (A) not in violation of the confidential
          information, non-competition and other covenants of Sections 10 and 11
          hereof and (B) not employed by another employer, as determined by the
          Company.

               (2) At any time after a Change in Control (as defined below), in
          the event that (A) Executive's employment hereunder is terminated by
          the Company at any time for any reason except (i) for Cause (as
          defined below) or (ii) due to Executive's death or Disability (as
          defined below), or (B) Executive terminates his own employment
          hereunder for Good Reason (as defined below in this paragraph), then,
          in either such event, Executive shall be entitled to receive, and the
          Company shall be obligated to pay, Executive's base salary under
          Section 3(a) (without regard to any bonuses or extraordinary
          compensation except as provided below in this paragraph) then being
          paid to him on the Termination Date as salary continuation (pursuant
          to the Company's normal payroll procedures) for a period equal to
          twelve (12) consecutive months following the Termination Date, plus an
          additional single sum payment equal to one-half of Executive's target
          bonus (pursuant to Section 3(b)) for the Bonus Year that contains the
          Termination Date which bonus shall be payable within 30 days from the
          Termination Date; provided that if such termination occurs within 120
          days following a reduction in Executive's base salary, such salary
          continuation payments shall be made in an amount equal to Executive's
          base salary prior to such reduction. In the event of Executive's death
          during such salary continuation period, the Company shall pay the sum
          of the present value of all remaining payments in a single payment
          (using a 5% discount rate) to the Executive's estate within 60 days of
          his death.

               After a Change in Control, in the event that the Company
          terminates Executive's employment through notice of nonrenewal as of
          the end of the Initial Term of Employment (pursuant to Section 4) or
          any one-year Renewal Term, Executive shall be entitled to receive, and
          the Company shall be obligated to pay, Executive's base salary under
          Section 3(a) (without regard to any bonuses or extraordinary
          compensation) then being paid to him on the Termination Date as salary
          continuation (pursuant to the Company's normal payroll procedures) for
          a period of six (6) consecutive months following the Termination Date.

               (3) Except as otherwise specifically provided in this Section
          6(b), severance payments shall be in addition to, and shall not reduce
          or offset, any other payments that are due to Executive from the
          Company (or any other source) or under any other

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          agreements, except that severance payments hereunder shall offset any
          severance benefits otherwise due to Executive under any severance pay
          plan or program maintained by the Company that covers its employees
          generally. The provisions of this Section 6(b) shall supersede any
          conflicting provisions of this Agreement but shall not be construed to
          curtail, offset or limit Executive's rights to any other payments,
          whether contingent upon a Change in Control (as defined below) or
          otherwise, under this Agreement or any other agreement, contract, plan
          or other source of payment except as specifically provided herein.

               (4) A "CHANGE IN CONTROL" of the Company shall be deemed to have
          occurred if any of the following shall have taken place: (A) any
          "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
          Securities Exchange Act of 1934 (the "Exchange Act")) other than
          Gordon Cain is or becomes the "beneficial owner" (as defined in Rule
          13d-3 under the Exchange Act, or any successor provisions thereto),
          directly or indirectly, of securities of the Company representing
          thirty-five percent (35%) or more of the combined voting power of the
          Company's then-outstanding voting securities; (B) the approval by the
          stockholders of the Company of a reorganization, merger, or
          consolidation, in each case with respect to which persons who were
          stockholders of the Company immediately prior to such reorganization,
          merger, or consolidation do not, immediately thereafter, own or
          control more than fifty percent (50%) of the combined voting power
          entitled to vote generally in the election of directors of the
          reorganized, merged or consolidated Company's then outstanding
          securities in substantially the same proportion as their ownership of
          the Company's outstanding voting securities prior to such
          reorganization, merger or consolidation; (C) a liquidation or
          dissolution of the Company or the sale of all or substantially all of
          the Company's assets; (D) in the event any person is elected by the
          stockholders of the Company to the Board who has not been nominated
          for election by a majority of the Board or any duly appointed
          committee thereof; or (E) following the election or removal of
          directors, a majority of the Board consists of individuals who were
          not members of the Board two (2) years before such election or
          removal, unless the election of each director who is not a director at
          the beginning of such two-year period has been approved in advance by
          directors representing at least a majority of the directors then in
          office who were directors at the beginning of the two-year period. The
          Board, in its discretion, may deem any other corporate event affecting
          the Company to be a "Change in Control" hereunder.

               (5) "DISABILITY" means a permanent and total disability which
          entitles Executive to disability income payments under the Company's
          long-term disability plan or policy as then in effect which covers
          Executive pursuant to Section 5(b). If

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          Executive is not covered under the Company's long-term disability plan
          or policy at such time for whatever reason or under a supplemental LTD
          policy provided by the Company, then the term "Disability" hereunder
          shall mean a "permanent and total disability" as defined in Section
          22(e)(3) of the Code and, in this case, the existence of any such
          Disability shall be certified by a physician acceptable to both the
          Company and Executive. In the event that the parties are not able to
          agree on the choice of a physician, each shall select a physician who,
          in turn, shall select a third physician to render such certification.
          All costs relating to the determination of whether Executive has
          incurred a Disability shall be paid by the Company.

               (6) "CODE" means the Internal Revenue Code of 1986, as amended.
          References in this Agreement to any Section of the Code shall include
          any successor provisions of the Code or its successor.

               (7) "CAUSE" means a termination of employment directly resulting
          from (1) the Executive having engaged in intentional misconduct
          causing a material violation by the Company of any state or federal
          laws, (2) the Executive having engaged in a theft of corporate funds
          or corporate assets or in a material act of fraud upon the Company,
          (3) an act of personal dishonesty taken by the Executive that was
          intended to result in substantial personal enrichment of the Executive
          at the expense of the Company, (4) Executive's final conviction (or
          the entry of a plea of nolo contendere or equivalent plea) in a court
          of competent jurisdiction of a felony, or (5) a breach by the
          Executive during the Employment Period of the provisions of Sections
          9, 10, and 11 hereof, if such breach results in a material injury to
          the Company. For purposes of this definition of "Cause", the term
          "Company" shall mean the Company or any of its Affiliates (as defined
          in Section 2).

               (8) "GOOD REASON" means the occurrence of any of the following
          events without Executive's express written consent:

                   (A) Before a Change in Control (as defined in Section 6(b)),
               (i) a five percent (5%) or greater reduction in Executive's
               annual base salary unless any such greater pay cut is applied
               across the board to the other senior officers of the Company
               except the CEO, or (ii) after a Change in Control, any reduction
               in Executive's base salary, provided that, in either event,
               Executive specifically terminates his employment for Good Reason
               hereunder within 120 days from the date that he has actual notice
               of such reduction; or

                   (B) Before or after a Change in Control, any breach by the
               Company of any material provision of this Agreement, provided
               that Executive

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          specifically terminates his employment for Good Reason
          hereunder within 120 days from the date that he has actual notice of
          such material breach; or

               (C) Only following a Change in Control (as defined in Section
          6(b)), any of the following events will constitute Good Reason,
          provided that Executive specifically terminates his employment for
          Good Reason hereunder within 12 months following his receipt of actual
          notice of an event listed below:

                    (i) the failure by the Company or its successor to expressly
               assume and agree to continue and perform this Agreement in the
               same manner and to the same extent that the Company would be
               required to perform if such Change in Control had not occurred;

                    (ii) Executive's duties or responsibilities for the Company
               or its successor are materially reduced; or

                    (iii) the Company or its successor fails to continue in
               effect any pension, medical, health-and-accident, life insurance,
               or disability income plan or program in which Executive was
               participating at the time of the Change in Control (or plans
               providing Executive with substantially similar benefits), or the
               taking of any action by the Company or its successor that would
               adversely affect Executive's participation in or materially
               reduce his benefits under any such plan that was enjoyed by him
               immediately prior to the Change in Control.

          7. NOTICE OF TERMINATION. Any termination by the Company or the
     Executive shall be communicated by Notice of Termination to the other party
     hereto. For purposes of this Agreement, the term "NOTICE OF TERMINATION"
     means a written notice that indicates the specific termination provision of
     this Agreement relied upon and sets forth in reasonable detail the facts
     and circumstances claimed to provide a basis for termination of the
     Executive's employment under the provision so indicated.

          8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate
     the amount of any payment provided for under this Agreement by seeking
     other employment or in any other manner.

          9. CONFLICTS OF INTEREST.

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               (a) In keeping with his fiduciary duties to Company, Executive
          hereby agrees that he shall not become involved in a conflict of
          interest, or upon discovery thereof, allow such a conflict to continue
          at any time during the Employment Period. Moreover, Executive agrees
          that he shall immediately disclose to the Board any facts which might
          involve a conflict of interest that has not been approved by the
          Board.

               (b) Executive and Company recognize and acknowledge that it is
          not possible to provide an exhaustive list of actions or interests
          which may constitute a "conflict of interest." Moreover, Company and
          Executive recognize there are many borderline situations. In some
          instances, full disclosure of facts by the Executive to the Board may
          be all that is necessary to enable Company to protect its interests.
          In others, if no improper motivation appears to exist and Company's
          interests have not demonstrably suffered, prompt elimination of the
          outside interest may suffice. In other serious instances, it may be
          necessary for the Company to terminate Executive's employment for
          Cause (as defined in Section 6(b)). The Board reserves the right to
          take such action as, in its good faith judgment, will resolve the
          conflict of interest.

               (c) Executive hereby agrees that any direct or indirect interest
          in, connection with, or benefit from any outside activities,
          particularly commercial activities, which interest might adversely
          affect the Company or any of its Affiliates (as defined in Section 2),
          involves a possible conflict of interest. Circumstances in which a
          conflict of interest on the part of Executive would or might arise,
          and which must be reported immediately to the Board, include, but are
          not limited to, any of the following:

                    (1) Ownership by the Executive and his immediate family
               members of more than a two percent (2%) interest, on an
               aggregated basis, in any lender, supplier, contractor, customer
               or other entity with which Company or any of its Affiliates does
               business;

                    (2) Misuse of information, property or facilities to which
               Executive has access in a manner which is demonstrably and
               materially injurious to the interests of Company or any of its
               Affiliates, including its business, reputation or goodwill; or

                    (3) Materially trading in products or services connected
               with products or services designed or marketed by or for the
               Company or any of its Affiliates.

          10. CONFIDENTIAL INFORMATION.

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               (a) NON-DISCLOSURE OBLIGATION OF EXECUTIVE. For purposes of this
          Section 10, all references to Company shall mean and include its
          Affiliates (as defined in Section 2). Executive hereby acknowledges,
          understands and agrees that all Confidential Information, as defined
          in Section 10(b), whether developed by Executive or others employed by
          or in any way associated with Executive or Company, is the exclusive
          and confidential property of Company and shall be regarded, treated
          and protected as such in accordance with this Agreement. Executive
          acknowledges that all such Confidential Information is in the nature
          of a trade secret. Failure to mark any writing confidential shall not
          affect the confidential nature of such writing or the information
          contained therein.

               (b) DEFINITION OF CONFIDENTIAL INFORMATION. The term
          "CONFIDENTIAL INFORMATION" shall mean information, whether or not
          originated by Executive, which is used in Company's business and (1)
          is proprietary to, about or created by Company; (2) gives Company some
          competitive business advantage or the opportunity of obtaining such
          advantage, or the disclosure of which could be detrimental to the
          interests of Company; (3) is designated as Confidential Information by
          Company, known by the Executive to be considered confidential by
          Company, or from all the relevant circumstances considered
          confidential by Company, or from all the relevant circumstances should
          reasonably be assumed by Executive to be confidential and proprietary
          to Company; or (4) is not generally known by non-Company personnel.
          Such Confidential Information includes, but is not limited to, the
          following types of information and other information of a similar
          nature (whether or not reduced to writing or designated as
          confidential):

                    (1) Work product resulting from or related to the research,
               development or production of the programs of the Company
               including, without limitation, OmniBank(TM), homologous
               recombination, DNA sequencing, phenotypic analysis, drug target
               validation and drug discovery;

                    (2) Internal Company personnel and financial information,
               vendor names and other vendor information (including vendor
               characteristics, services and agreements), purchasing and
               internal cost information, internal service and operational
               manuals, and the manner and methods of conducting Company's
               business;

                    (3) Marketing, partnering and business and development
               plans, price and cost data, price and fee amounts, pricing and
               billing policies, quoting procedures, marketing techniques and
               methods of obtaining business, forecasts and forecast assumptions
               and volumes, and future plans and potential strategies of the
               Company which have been or are being discussed; and

                    (4) Business acquisition and other business opportunities.

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               (c) EXCLUSIONS FROM CONFIDENTIAL INFORMATION. The term
          "CONFIDENTIAL INFORMATION" shall not include information publicly
          known other than as a result of a disclosure by Executive in breach of
          Section 10(a), and the general skills and experience gained during
          Executive's work with the Company which Executive could reasonably
          have been expected to acquire in similar work with another company.

               (d) COVENANTS OF EXECUTIVE. As a consequence of Executive's
          acquisition or anticipated acquisition of Confidential Information,
          Executive shall occupy a position of trust and confidence with respect
          to Company's affairs and business. In view of the foregoing and of the
          consideration to be provided to Executive, Executive agrees that it is
          reasonable and necessary that Executive make the following covenants:

                    (1) At any time during the Employment Period and within ten
               (10) years after the Employment Period, Executive shall not
               disclose Confidential Information to any person or entity, either
               inside or outside of Company, other than as necessary in carrying
               out duties on behalf of Company, without obtaining Company's
               prior written consent (unless such disclosure is compelled
               pursuant to court order or subpoena, and at which time Executive
               gives notice of such proceedings to Company), and Executive will
               take all reasonable precautions to prevent inadvertent disclosure
               of such Confidential Information. This prohibition against
               Executive's disclosure of Confidential Information includes, but
               is not limited to, disclosing the fact that any similarity exists
               between the Confidential Information and information
               independently developed by another person or entity, and
               Executive understands that such similarity does not excuse
               Executive from abiding by his covenants or other obligations
               under this Agreement.

                    (2) At any time during or after the Employment Period,
               Executive shall not use, copy or transfer Confidential
               Information other than as necessary in carrying out his duties on
               behalf of Company, without first obtaining Company's prior
               written consent, and will take all reasonable precautions to
               prevent inadvertent use, copying or transfer of such Confidential
               Information. This prohibition against Executive's use, copying,
               or transfer of Confidential Information includes, but is not
               limited to, selling, licensing or otherwise exploiting, directly
               or indirectly, any products or services (including databases,
               written documents and software in any form) which embody or are
               derived from Confidential Information, or exercising judgment in
               performing analyses based upon knowledge of Confidential
               Information.

               (e) RETURN OF CONFIDENTIAL MATERIAL. Executive shall promptly
          turn over to the person designated by the Board or CEO all originals
          and copies of materials containing Confidential Information in the
          Executive's possession, custody, or control upon request or upon
          termination of Executive's employment with Company. Executive agrees
          to attend a termination interview with the person or persons
          designated by the Board or CEO in the

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         Company's offices for a reasonable time period. The purposes of the
         termination interview shall be (1) to confirm turnover of all
         Confidential Information, (2) discuss any questions Executive may have
         about his continuing obligations under this Agreement, (3) answer
         questions related to his duties and on-going projects to allow a
         temporary or permanent successor to obtain a better understanding of
         the employment position, (4) confirm the number of any outstanding
         stock options, or other long-term incentive awards, and their vested
         percentages and other terms and conditions, and (5) any other topics
         relating to the business affairs of Company or its Affiliates as
         determined by the Company.

                  (f) INVENTIONS. Any and all inventions, products, discoveries,
         improvements, copyrightable or patentable works or products,
         trademarks, service marks, ideas, processes, formulae, methods,
         designs, techniques and trade secrets (collectively hereinafter
         referred to as "INVENTIONS") made, developed, conceived or resulting
         from work performed by Executive (alone or in conjunction with others,
         during regular hours of work or otherwise) while he is employed by
         Company and which may be directly or indirectly useful in, or related
         to, the business of Company (including, without limitation, research
         and development activities of Company), or which are made using any
         equipment, facilities, Confidential Information, materials, labor,
         money, time or other resources of Company, shall be promptly disclosed
         by Executive to the person or persons designated by the Board or CEO,
         shall be deemed Confidential Information for purposes of this
         Agreement, and shall be Company's exclusive property. Executive shall,
         upon Company's reasonable request during or after the Employment
         Period, execute any documents and perform all such acts and things
         which are necessary or advisable in the opinion of Company to cause
         issuance of patents to, or otherwise obtain recorded protection of
         right to intellectual property for, Company with respect to Inventions
         that are to be Company's exclusive property under this Section 10, or
         to transfer to and vest in Company full and exclusive right, title and
         interest in and to such Inventions; provided, however, that the expense
         of securing any such protection of right to Inventions shall be borne
         by Company. In addition, during or after the Employment Period,
         Executive shall, at Company's expense, reasonably assist the Company in
         any reasonable and proper manner in enforcing any Inventions which are
         to be or become Company's exclusive property hereunder against
         infringement by others. Executive shall keep confidential and will hold
         for Company's sole use and benefit any Invention that is to be
         Company's exclusive property under this Section 10 for which full
         recorded protection of right has not been or cannot be obtained.

                  (g) PROPERTY RIGHTS. In keeping with his fiduciary duties to
         Company, Executive hereby covenants and agrees that during his
         Employment Period, and for a period of three (3) months following his
         Termination Date, Executive shall promptly disclose in writing to
         Company any and all Inventions, which are conceived, developed, made or
         acquired by Executive, either individually or jointly with others, and
         which directly relate to the business, products or services of Company.
         In consideration for his employment hereunder, Executive

                                                                Initials:_______

                                                                Initials:_______

                                       12
<PAGE>   13

     hereby specifically sells, assigns and transfers to Company all of his
     worldwide right, title and interest in and to all such Inventions.

          If during the Employment Period, Executive creates any original work
     of authorship or other property fixed in any tangible medium of expression
     which (1) is the subject matter of copyright (including computer programs)
     and (2) directly relates to Company's present or planned business,
     products, or services, whether such property is created solely by Executive
     or jointly with others, such property shall be deemed a work for hire, with
     the copyright automatically vesting in Company. To the extent that any such
     writing or other property is determined not to be a work for hire for
     whatever reason, Executive hereby consents and agrees to the unconditional
     waiver of "moral rights" in such writing or other property, and to assign
     to Company all of his right, title and interest, including copyright, in
     such writing or other property.

          Executive hereby agrees to (1) assist Company or its nominee at all
     times in the protection of any property that is subject to this Section 10,
     (2) not to disclose any such property to others without the written consent
     of Company or its nominee, except as required by his employment hereunder,
     and (3) at the request of Company, to execute such assignments,
     certificates or other interests as Company or its nominee may from time to
     time deem desirable to evidence, establish, maintain, perfect, protect or
     enforce its rights, title or interests in or to any such property.

         (h) EMPLOYEE PROPRIETARY INFORMATION AGREEMENT. The provisions of this
     Section 10 shall not supersede the Employee Proprietary Information
     Agreement (the "Proprietary Agreement") between Employee and the Company
     (or any other agreement of similar intent) which shall remain in full force
     and effect and, moreover, this Agreement, the Proprietary Agreement and any
     such other similar agreement between the parties shall be construed and
     applied as being mutually consistent to the full extent possible.

         (i) REMEDIES. In the event of a breach or threatened breach of any of
     the provisions of this Section 10, Company shall be entitled to an
     injunction ordering the return of all such Confidential Information and
     Inventions, and restraining Executive from using or disclosing, for his
     benefit or the benefit of others, in whole or in part, any Confidential
     Information or Inventions. Executive further agrees that any breach or
     threatened breach of any of the provisions of this Section 10 would cause
     irreparable injury to Company, for which it would have no adequate remedy
     at law. Nothing herein shall be construed as prohibiting Company from
     pursuing any other remedies available to it for any such breach or
     threatened breach, including the recovery of damages.

     11. AGREEMENT NOT TO COMPETE. All references in this Section 11 to
"COMPANY" shall mean and include its Affiliates (as defined in Section 2).

                                                                Initials:_______

                                                                Initials:_______

                                       13
<PAGE>   14

              (a) PROHIBITED EXECUTIVE ACTIVITIES. Executive agrees that
         except in the ordinary course and scope of his employment hereunder
         during the Employment Period, Executive shall not while employed by
         Company and, except as specifically provided below in this Section
         11(a), for a period of six (6) months following his Termination Date,
         within the continental United States:

                         (1) Directly or indirectly, engage or invest in, own,
                    manage, operate, control or participate in the ownership,
                    management, operation or control of, be employed by,
                    associated or in any manner connected with, or render
                    services or advice to, any Competing Business (as defined
                    below); provided, however, Executive may invest in the
                    securities of any enterprise with the power to vote up to
                    two percent (2%) of the capital stock of such enterprise
                    (but without otherwise participating in the activities of
                    such enterprise) if such securities are listed on any
                    national or regional securities exchange or have been
                    registered under Section 12(g) of the Securities Exchange
                    Act of 1934;

                         (2) Directly or indirectly, either as principal, agent,
                    independent contractor, consultant, director, officer,
                    employee, employer, advisor (whether paid or unpaid),
                    stockholder, partner or in any other individual or
                    representative capacity whatsoever, either for his own
                    benefit or for the benefit of any other person or entity,
                    solicit, divert or take away, any customers, clients, or
                    business acquisition or other business opportunities of
                    Company; or

                         (3) Directly or indirectly, either as principal, agent,
                    independent contractor, consultant, director, officer,
                    employee, advisor (whether paid or unpaid), stockholder,
                    partner or in any other individual or representative
                    capacity whatsoever, either for his own benefit or for the
                    benefit of any other person or entity, either (A) hire,
                    attempt to hire, contact or solicit with respect to hiring
                    any employee of Company, (B) induce or otherwise counsel,
                    advise or encourage any employee of Company to leave the
                    employment of Company, or (C) induce any distributor,
                    representative or agent of Company to terminate or modify
                    its relationship with Company.

                         In the event that Executive's Termination Date occurs
                    after a Change in Control (as defined in Section 6(b)), then
                    notwithstanding any provisions of this Section 11 to the
                    contrary, all of the non-compete restrictions set forth in
                    this Section 11 shall not apply to, or be enforced against,
                    Executive if his employment with the Company or its
                    successor is terminated (1) by Executive for Good Reason (as
                    defined in Section 6(b)), (2) by the Company or its
                    successor without Cause (as defined in Section 6(b), or (3)
                    upon notice of nonrenewal pursuant to Section 4. Therefore,
                    following a Change in Control, in the event that Executive
                    terminates his

                                                                Initials:_______

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                                       14
<PAGE>   15

         employment for Good Reason or upon notice of nonrenewal, or the Company
         or its successor terminates Executive's employment without Cause or
         upon nonrenewal, Executive shall not be subject to the provisions of
         Section 11.

                  "COMPETING BUSINESS" means any individual, business, firm,
         company, partnership, joint venture, organization, or other entity
         whose products or services compete, in whole or in part, at any time
         during the Employment Period with the products or services (or planned
         products and services) of Company including, without limitation,
         genomics research, development and products including, without
         limitation, OmniBank(TM), homologous recombination, DNA sequencing,
         phenotypic analysis, drug validation and drug discovery.

         (b) ESSENTIAL NATURE OF NON-COMPETE OBLIGATION. It is acknowledged,
understood and agreed by and between the parties hereto that the covenants made
by Executive in this Section 11 are essential elements of this Agreement and
that, but for the agreement of the Executive to comply with such covenants,
Company would not have entered into this Agreement.

         (c) NECESSITY AND REASONABLENESS OF NON-COMPETE OBLIGATION. Executive
hereby specifically acknowledges and agrees that:

                  (1) Company has expended and will continue to expend
         substantial time, money and effort in developing its business;

                  (2) Executive will, in the course of his employment, be
         personally entrusted with and exposed to Confidential Information (as
         defined in Section 10);

                  (3) Company, during the Employment Period and thereafter, will
         be engaged in its highly competitive business in which many firms,
         including Company, compete;

                  (4) Executive could, after having access to Company's
         financial records, contracts, and other Confidential Information and
         know-how and, after receiving training by and experience with the
         Company, become a competitor;

                  (5) Company will suffer great loss and irreparable harm if
         Executive terminates his employment and enters, directly or indirectly,
         into competition with Company;

                  (6) The temporal and other restrictions contained in this
         Section 11 are in all respects reasonable and necessary to protect the
         business goodwill, trade secrets, prospects and other reasonable
         business interests of Company;

                                                                Initials:_______

                                                                Initials:_______

                                       15
<PAGE>   16

                          (7) The enforcement of this Agreement in general, and
                  of this Section 11 in particular, will not work an undue or
                  unfair hardship on Executive or otherwise be oppressive to
                  him; it being specifically acknowledged and agreed by
                  Executive that he has activities and other business interests
                  and opportunities which will provide him adequate means of
                  support if the provisions of this Section 11 are enforced
                  after the Termination Date; and

                          (8) the enforcement of this Agreement in general, and
                  of this Section 11 in particular, will neither deprive the
                  public of needed goods or services nor otherwise be injurious
                  to the public.

                  (d) JUDICIAL MODIFICATION. Executive agrees that if an
         arbitrator (pursuant to Section 21) or a court of competent
         jurisdiction determines that the length of time or any other
         restriction, or portion thereof, set forth in this Section 11 is overly
         restrictive and unenforceable, the arbitrator or court shall reduce or
         modify such restrictions to those which it deems reasonable and
         enforceable under the circumstances, and as so reduced or modified, the
         parties hereto agree that the restrictions of this Section 11 shall
         remain in full force and effect. Executive further agrees that if an
         arbitrator or court of competent jurisdiction determines that any
         provision of this Section 11 is invalid or against public policy, the
         remaining provisions of this Section 11 and the remainder of this
         Agreement shall not be affected thereby, and shall remain in full force
         and effect.

         12. REMEDIES. In the event of any pending, threatened or actual breach
of any of the covenants or provisions of Section 9, 10, or 11, it is understood
and agreed by Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and in
equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required to
post any bond in connection therewith. Should a court of competent jurisdiction
or an arbitrator (pursuant to Section 21) declare any provision of Section 9,
10, or 11 to be unenforceable due to an unreasonable restriction of duration or
geographical area, or for any other reason, such court or arbitrator is hereby
granted the consent of each of the Executive and Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of Sections 9, 10, and 11 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with Section 9, 10, or 11, Company shall be entitled to all equitable and legal
remedies, including, but not limited to, injunctive relief and compensatory
damages.

                                                                Initials:_______

                                                                Initials:_______

                                       16
<PAGE>   17

         13. DEFENSE OF CLAIMS. Executive agrees that, during the Employment
Period and for a period of two (2) years after his Termination Date, upon
request from the Company, he will cooperate with the Company and its Affiliates
in the defense of any claims or actions that may be made by or against the
Company or any of its Affiliates that affect his prior areas of responsibility,
except if Executive's reasonable interests are adverse to the Company or
Affiliates in such claim or action. To the extent travel is required to comply
with the requirements of this Section 13, the Company shall, to the extent
possible, provide Executive with notice at least 10 days prior to the date on
which such travel would be required. The Company agrees to promptly pay or
reimburse Executive upon demand for all of his reasonable travel and other
direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this Section 13.

         14. DETERMINATIONS BY THE BOARD OF DIRECTORS.

                  (a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control
         (as defined in Section 6(b)), any question as to whether and when there
         has been a termination of Executive's employment, the cause of such
         termination, and the Termination Date, shall be determined by the
         Compensation Committee in its discretion exercised in good faith.

                  (b) COMPENSATION. Prior to a Change in Control (as defined in
         Section 6(b)), any question regarding salary, bonus and other
         compensation payable to Executive pursuant to this Agreement shall be
         determined by the Compensation Committee in its discretion exercised in
         good faith.

         15. WITHHOLDINGS; RIGHT OF OFFSET. Company may withhold and deduct from
any benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other employee deductions made with
respect to Company's employees generally, and (c) any advances made to Executive
and owed to Company.

         16. NONALIENATION. The right to receive payments under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, his dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.

         17. INCOMPETENT OR MINOR PAYEES. Should the Board determine that any
person to whom any payment is payable under this Agreement has been determined
to be legally incompetent or is

                                                                Initials:_______

                                                                Initials:_______

                                       17
<PAGE>   18

a minor, any payment due hereunder may, notwithstanding any other provision of
this Agreement to the contrary, be made in any one or more of the following
ways: (a) directly to such minor or person; (b) to the legal guardian or other
duly appointed personal representative of the person or estate of such minor or
person; or (c) to such adult or adults as have, in the good faith knowledge of
the Board, assumed custody and support of such minor or person; and any payment
so made shall constitute full and complete discharge of any liability under this
Agreement in respect to the amount paid.

         18. SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to Section 21), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be reformed, it shall be deemed ineffective and deleted
herefrom without affecting any other provision of this Agreement.

         19. TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.

         20. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.

         21. ARBITRATION.

                                                                Initials:_______

                                                                Initials:_______

                                       18
<PAGE>   19

                  (a) ARBITRABLE MATTERS. If any dispute or controversy arises
         between Executive and the Company relating to (1) this Agreement in any
         way or arising out of the parties' respective rights or obligations
         under this Agreement or (2) the employment of Executive or the
         termination of such employment, then either party may submit the
         dispute or controversy to arbitration under the then-current Commercial
         Arbitration Rules of the American Arbitration Association (AAA) (the
         "RULES"); provided, however, the Company shall retain its rights to
         seek a restraining order or injunctive relief pursuant to Section 12.
         Any arbitration hereunder shall be conducted before a single arbitrator
         unless the parties mutually agree that the arbitration shall be
         conducted before a panel of three arbitrators. The arbitrator shall be
         selected through mutual agreement of the parties, if possible. If the
         parties fail to reach agreement upon appointment of the arbitrator
         within twenty (20) days following receipt by one party of the other
         party's notice of desire to arbitrate, then within five (5) days
         following the end of such 20-day period, each party shall select one
         arbitrator who, in turn, shall within five (5) days select a third
         arbitrator who shall be the single arbitrator hereunder. The site for
         any arbitration hereunder shall be in Harris County or Montgomery
         County, Texas, unless otherwise mutually agreed by the parties, and the
         parties hereby waive any objection that the forum is inconvenient.

                  (b) SUBMISSION TO ARBITRATION. The party submitting any matter
         to arbitration shall do so in accordance with the Rules. Notice to the
         other party shall state the question or questions to be submitted for
         decision or award by arbitration. Notwithstanding any provision of this
         Section 21, Executive shall be entitled to seek specific performance of
         the Executive's right to be paid during the pendency of any dispute or
         controversy arising under this Agreement. In order to prevent
         irreparable harm, the arbitrator may grant temporary or permanent
         injunctive or other equitable relief for the protection of property
         rights.

                  (c) ARBITRATION PROCEDURES. The arbitrator shall set the date,
         time and place for each hearing, and shall give the parties advance
         written notice in accordance with the Rules. Any party may be
         represented by counsel or other authorized representative at any
         hearing. The arbitration shall be governed by the Federal Arbitration
         Act, 9 U.S.C. Sections 1 et. seq. (or its successor). The arbitrator
         shall apply the substantive law (and the law of remedies, if
         applicable) of the State of Texas to the claims asserted to the extent
         that the arbitrator determines that federal law is not controlling.

                  (d) COMPLIANCE WITH AWARD.

                           (1) Any award of an arbitrator shall be final and
                  binding upon the parties to such arbitration, and each party
                  shall immediately make such changes in its conduct or provide
                  such monetary payment or other relief as such award requires.
                  The parties agree that the award of the arbitrator shall be
                  final and binding and shall be subject only to the judicial
                  review permitted by the Federal Arbitration Act.

                                                                Initials:_______

                                                                Initials:_______

                                       19
<PAGE>   20

                           (2) The parties hereto agree that the arbitration
                  award may be entered with any court having jurisdiction and
                  the award may then be enforced as between the parties, without
                  further evidentiary proceedings, the same as if entered by the
                  court at the conclusion of a judicial proceeding in which no
                  appeal was taken. The Company and the Executive hereby agree
                  that a judgment upon any award rendered by an arbitrator may
                  be enforced in other jurisdictions by suit on the judgment or
                  in any other manner provided by law.

                  (e) COSTS AND EXPENSES. Each party shall pay any monetary
         amount required by the arbitrator's award, and the fees, costs and
         expenses for its own counsel, witnesses and exhibits, unless otherwise
         determined by the arbitrator in the award. The compensation and costs
         and expenses assessed by the arbitrator and the AAA shall be split
         evenly between the parties unless otherwise determined by the
         arbitrator in the award. If court proceedings to stay litigation or
         compel arbitration are necessary, the party who opposes such
         proceedings to stay litigation or compel arbitration, if such party is
         unsuccessful, shall pay all associated costs, expenses, and attorney's
         fees which are reasonably incurred by the other party as determined by
         the arbitrator.

         22. BINDING EFFECT; THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors, personal representatives, successors and permitted
assigns hereunder, but otherwise this Agreement shall not be for the benefit of
any third parties.

         23. ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.

         24. SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the
intention of the parties hereto, the respective rights and obligations of said
parties, including, but not limited to, the rights and obligations set forth in
Sections 6 through 14 and 21 hereof, shall survive any termination or expiration
of this Agreement.

         25. WAIVER OF BREACH. No waiver by either party hereto of a breach of
any provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.

                                                                Initials:_______

                                                                Initials:_______

                                       20
<PAGE>   21

         26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Company and its Affiliates (as defined in Section 2),
and upon any successor to the Company following a Change in Control (as defined
in Section 6(b)); provided, however, any such assignment by the Company shall
not relieve Company of its obligations hereunder. Any reference herein to
"Company" shall mean the Company as first written above, as well as any
successor or successors thereto.

         This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board. Any attempt by the Executive to
assign, delegate or otherwise transfer this Agreement, any portion hereof, or
his rights, duties or obligations hereunder without the prior approval of the
Board shall be deemed void and of no force and effect.

         27. NOTICES. Notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly received (a) when delivered in person or
sent by facsimile transmission, (b) on the first business day after it is sent
by air express overnight courier service, or (c) on the third business day
following deposit in the United States mail, registered or certified mail,
return receipt requested, postage prepaid and addressed, to the following
address, as applicable:

                  (1) If to Company, addressed to:

                           Lexicon Genetics Incorporated
                           4000 Research Forest Drive
                           The Woodlands, Texas 77381
                           Attention:  Corporate Secretary

                  (2) If to Executive, addressed to the address set forth below
                      his name on the execution page hereof;

or to such other address as either party may have furnished to the other party
in writing in accordance with this Section 27.

         28. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party, but together signed by both parties hereto.

         29. EXECUTIVE ACKNOWLEDGMENT; NO STRICT CONSTRUCTION. The Executive
represents to Company that he is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that he has read the
Agreement and that he understands its terms and

                                                                Initials:_______

                                                                Initials:_______

                                       21
<PAGE>   22

     conditions. The parties hereto agree that the language used in this
     Agreement shall be deemed to be the language chosen by them to express
     their mutual intent, and no rule of strict construction shall be applied
     against either party hereto. Executive also represents that he is free to
     enter into this Agreement including, without limitation, that he is not
     subject to any other contract of employment or covenant not to compete that
     would conflict in any way with his duties under this Agreement. Executive
     acknowledges that he has had the opportunity to consult with counsel of his
     choice, independent of Employer's counsel, regarding the terms and
     conditions of this Agreement and has done so to the extent that he, in his
     unfettered discretion, deemed to be appropriate.

          30. SUPERSEDING AGREEMENT. This Employment Agreement shall supersede
     any prior employment agreement entered into between the Company and
     Executive.

              [Intentionally left blank -- signature page follows]

                                                                Initials:_______

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                                       22
<PAGE>   23

     IN WITNESS WHEREOF, the Executive has hereunto set his hand, and Company
has caused this Agreement to be executed in its name and on its behalf, to be
effective as of the Effective Date first above written.

WITNESS:                                           EXECUTIVE:

Signature:                          Signature:         /s/Randall Riggs
          -----------------------             ---------------------------------
Printed Name:                                             Randall Riggs
             --------------------
Date:                               Date:             December 22, 1998
     ----------------------------        --------------------------------------
                                    Address for Notices:

                                                   222 South Maple Glade Circle
                                                   The Woodlands, Texas  77382
                                                   ----------------------------
ATTEST:                                 LEXICON GENETICS INCORPORATED

By:    /s/ Jean Magdaleno           By:      /s/ Arthur T. Sands
   ----------------------------        -----------------------------------------
Name:  /s/ Jean Magdaleno           Name:    Arthur T. Sands
     --------------------------          ---------------------------------------
Title: Administrative Assistant     Title: President and Chief Executive Officer
      -------------------------           --------------------------------------
Date:  December 21, 1998            Date:  December 21, 1998
     --------------------------          ---------------------------------------<PAGE>   1

CONFIDENTIAL TREATMENT REQUESTED                                   EXHIBIT 10.10

                            DATABASE ACCESS AGREEMENT

         THIS DATABASE ACCESS AGREEMENT (the "Agreement") is entered into as of
the Effective Date, as defined below, by and between LEXICON GENETICS
INCORPORATED, a Delaware corporation ("Lexicon"), and MILLENNIUM
PHARMACEUTICALS, INC., a Delaware corporation ("MPI").

                                    RECITALS

         WHEREAS, Lexicon wishes to grant to MPI, and MPI wishes to obtain from
Lexicon, non-exclusive access to Lexicon's proprietary Human Gene Trap(TM) and
OmniBank(R) Databases for the discovery, development and commercialization of
(i) Small Molecule Drugs and Antibody Drugs addressing human Drug Targets, (ii)
Therapeutic Proteins, (iii) Antisense Drugs, (iv) Gene Therapy Drugs, and (v)
Diagnostic Products, on the terms and subject to the conditions set forth
herein; and

         WHEREAS, Lexicon wishes to grant to MPI, and MPI wishes to obtain from
Lexicon, the right to receive certain rights and licenses under the Lexicon
Technology, on the terms and subject to the conditions set forth herein.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

1.1      "ACADEMIC COLLABORATOR" means any Third Party which is a university,
         research institute or other non-profit organization which (a) has
         entered into an agreement with MPI or any of its Affiliates involving
         collaborative research with MPI and/or such Affiliate(s) in which MPI
         and/or such Affiliate(s) reasonably believes that Material Use of a
         specified Program Clone may have application, and (b) if MPI or an
         Affiliate has transferred any Program Clone to such Third Party, has
         entered into a material transfer agreement with MPI or such Affiliate
         with respect to such Program Clone or has otherwise entered into an
         agreement with MPI or such Affiliate limiting the Third Party's use of
         the Program Clone to the purposes permitted herein.

1.2      "ACCESS PERIOD" means the Initial Access Period and, if applicable, the
         Extended Access Period and any extensions thereto on terms mutually
         acceptable to the parties.

1.3      "AFFILIATE" means any corporation or other entity (e.g. a company,
         partnership or joint venture) which controls, is controlled by, or is
         under common control with Lexicon or

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

*****denotes confidential information with respect to which a separate
     confidential treatment request has been filed with the Securities and
     Exchange Commission.

<PAGE>   2

CONFIDENTIAL - 9/23/99

         MPI. A corporation or other entity will be regarded as in control of
         another corporation or entity if it owns or directly or indirectly
         controls more than 50% of the voting securities or other ownership
         interest of the other corporation or entity, or if it possesses,
         directly or indirectly, the power to direct or cause the direction of
         the management and policies of the corporation or other entity.

1.4      "ANTIBODY DRUG" means any Drug which contains an antibody, whether
         monoclonal or polyclonal, multiple or single chain, whole or fragment,
         including any molecule consisting of the Fc portion of an antibody
         fused with another polypeptide moiety(ies).

1.5      "ANTISENSE DRUG" means any Drug which contains nucleic acid or a
         functional analog, derivative or homolog thereof, which is
         complementary to a segment of DNA of a gene or such gene's cognate RNA,
         and which, upon delivery by any means, alters the transcription,
         processing, elaboration, RNA expression or protein production of or by
         such gene.

1.6      "CONFIDENTIAL INFORMATION" means any confidential or proprietary
         information of a party, including, without limitation, information
         relating to the Lexicon Technology, the Human Gene Trap(TM) and
         OmniBank(R) Databases or any Program Clone, and any information
         relating to any compound, research project, work in process, future
         development, scientific, engineering, manufacturing, marketing,
         business plan, financial or personnel matter relating to such party,
         its present or future products, sales, suppliers, customers, employees,
         investors or business, whether in oral, written, graphic or electronic
         form. Notwithstanding the foregoing, Confidential Information will not
         include any information which:

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

                  (b)      is known by the receiving party at the time of
                           receiving such information, as demonstrated by
                           competent written or electronic evidence;

                  (c)      is hereafter furnished to the receiving party by a
                           Third Party, as a matter of right and without
                           restriction on disclosure;

                  (d)      is independently developed by the receiving party
                           without the use of the Confidential Information of
                           the disclosing party as demonstrated by competent
                           written or electronic records; or

                  (e)      is the subject of a written or electronic permission
                           to disclose provided by the disclosing party.

         Notwithstanding the above, coding sequence from a gene shall not be
deemed to come under the foregoing exceptions unless it is Established Exon
Sequence.

                                       2

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1.7      "CORPORATE PARTNER" means any Third Party which (a) has entered into an
         agreement with MPI or any of its Affiliates involving the grant to such
         Third Party of rights for the development or commercialization of
         products for which MPI or such Affiliate reasonably believes that
         Material Use of a specified Program Clone may have application, and (b)
         if MPI or an Affiliate has transferred any Program Clone to such Third
         Party, has entered into a material transfer agreement with MPI or such
         Affiliate with respect to such Program Clone or has otherwise entered
         into an agreement with MPI or such Affiliate limiting the Third Party's
         use of the Program Clone to the purposes permitted herein.

1.8      "DIAGNOSTIC VALIDATION STUDIES" means for the development of a
         Diagnostic Product, human clinical validation studies the purpose of
         which is to establish a significant correlation between the presence or
         abundance of one or more genes, RNA transcripts, proteins, or any part
         thereof, and either (a) the cause, history, stage, progression or
         prognosis of a disease or (b) an actual or likely response to a drug.

1.9      "DIAGNOSTIC PRODUCT" means any product or service which (a) uses, is
         based on or incorporates a Lexicon Sequence (for purposes of which, a
         product or service shall be deemed to be based on a Lexicon Sequence if
         it measures the presence or activity of any gene represented by such
         Lexicon Sequences, any mutant or polymorphic form of such gene, any
         transcription product of such gene, or modified form thereof resulting
         from post-transcriptional processing, and/or any translation product of
         such gene, or modified form thereof resulting from post-translational
         processing) and (b) has utility in either (i) the diagnosis, prognosis,
         monitoring, prediction or disease management of a human disease or
         condition or (ii) the selection of a method of treatment of any human
         disease or condition including without limitation the assessment or
         prediction of responses in humans to a drug or other method of treating
         a disease, including without limitation the determination of efficacy
         and the side effects or toxicity of drug(s).

1.10     "DIAGNOSTIC PROGRAM" means any program directed to the discovery and
         development of Diagnostic Products.

1.11     "DRUG" means any therapeutic or prophylactic drug or drug candidate
         which is discovered, identified, developed, made, selected,
         characterized or determined to have utility using a Lexicon Sequence
         corresponding to a given gene or which is based on or incorporates a
         Lexicon Sequence corresponding to a given gene.

1.12     "DRUG TARGET" means a protein, which is derived from a Lexicon Sequence
         corresponding to a given gene, whose modulation may elicit a
         physiological response of interest.

1.13     "EFFECTIVE DATE" means the date set forth in a written notice from MPI
         to Lexicon as the date upon which this Agreement shall take effect,
         provided that such date shall not be later than 15 days from the date
         this Agreement is fully executed unless MPI has paid the Initial
         Database Access Fee set forth in Section 5.1 on October 1, 1999, in
         which case such date shall be no later than November 1, 1999.

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1.14     "ESCROWED SEQUENCE" means any Lexicon Sequence present within a Program
         Clone the name of which is deposited in escrow by MPI during the Access
         Period pursuant to Sections 2.1, 2.2 or 2.19.

1.15     "ESTABLISHED EXON SEQUENCE" means *****.

1.16     "EXTENDED ACCESS PERIOD" has the meaning set forth in Section 2.19.

1.17     "FIELD" means the treatment, diagnosis, or prevention of any human
         disease or condition.

1.18     "FIRST COMMERCIAL SALE" means the first sale for use or consumption by
         the general public of a Licensed Product in a country after any
         required marketing and pricing or pricing reimbursement approval
         granted by the governing health authority of such country has been
         obtained.

1.19     "GENE THERAPY DRUG" means any Drug, excluding an Antisense Drug, which
         contains nucleic acid or a functional analog, derivative or homologue
         thereof, and which, upon delivery by any means, expresses a gene
         product encoded therein.

1.20     "HUMAN GENE TRAP(TM) DATABASE" means Lexicon's proprietary database
         made available to MPI, its Affiliates and other subscribers on a
         non-exclusive basis that is comprised of nucleotide sequences of human
         origin derived from cDNA produced by gene trapping which has been
         cloned into a phage vector and having an average length of
         approximately ***** base pairs or more ("H-TSTs"), and all associated
         information, as supplemented from time to time by Lexicon. For
         avoidance of doubt, the Human Gene Trap(TM) Database shall not include
         access to the LexGene(TM) Database but shall include any full-length
         gene sequence that is included in, or may be deduced directly from, the
         Human Gene Trap(TM) Database as the contiguous sequence obtained by
         clustering and aligning sequences in the Human Gene Trap(TM) Database
         that have overlapping regions of sequence information from the same
         gene.

1.21     "HUMANIZED MOUSE PROGRAM" means Lexicon's proprietary program to
         replace a mouse gene with a human gene to assess the physiological
         effects on a Drug Target following the introduction of a Small Molecule
         Drug or a Therapeutic Protein.

1.22     "INITIAL ACCESS PERIOD" means the period commencing on the date MPI
         receives the Human Gene Trap(TM) Database and the OmniBank(R) Database
         on CD ROM and ending ***** thereafter. MPI shall provide Lexicon prompt
         written notice of its receipt of the date it receives the Human Gene
         Trap(TM) and OmniBank(R) Database on CD ROM, which notice shall specify
         the date of such receipt.

1.23     "LEXGENE(TM) DATABASE" means Lexicon's proprietary database comprised
         of full-length gene sequences generated by Lexicon outside the scope of
         the gene-trapping program established by Lexicon for the purpose of
         creating the Human Gene Trap(TM) Database.

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CONFIDENTIAL - 9/23/99

1.24     "LEXICON KNOW-HOW" means all information, data and biological materials
         consisting of, or directly and solely relating to, the Human Gene
         Trap(TM) and/or OmniBank(R) Databases, including without limitation any
         DNA sequence data contained therein, and such other know-how of Lexicon
         expressly provided by Lexicon to MPI, but excluding MPI Sequence and
         MPI Know-How, all to the extent and only to the extent Lexicon has the
         right to grant a license or sublicense to MPI as provided for herein
         without violating the terms of any agreement or other rights of any
         Third Party.

1.25     "LEXICON PATENT RIGHTS" means all rights under patents of Lexicon (i)
         which claim, as a composition of matter, polynucleotide sequence
         information present in, or polypeptide sequence encoded by, any Program
         Clone(s), or any full-length gene sequences disclosed by Lexicon to MPI
         pursuant to Section 2.20(b) or Section 4.4, and/or any contiguous DNA
         sequence deduced by clustering and aligning sequences in the Human Gene
         Trap(TM) Database with sequence information in the public domain, or
         (ii) which arise solely from the generation of the Human Gene Trap(TM)
         and/or OmniBank(R) Databases, and in either case which claim the use of
         Program Clone(s) in the discovery or development of human therapeutic
         or prophylactic drugs or human diagnostic products, excluding patent
         claims of Lexicon covering the use of a Program Clone in the discovery
         or development of human therapeutic or prophylactic drugs or human
         diagnostic products based on an actual reduction to practice of a
         specified function of the gene encoded by a Program Clone (e.g. through
         observation of a phenotype in a mouse relating to an ortholog to such
         gene), and all pending patent applications related thereto throughout
         the world, together with all substitutions, extensions, supplemental
         protection certificates, reissues, renewals, reexaminations,
         divisionals, provisionals, continuations or continuations-in-part
         thereof, in each case to the extent and only to the extent Lexicon has
         the right to grant a license or sublicense to MPI as provided for
         herein without violating the terms of any agreement or other rights of
         any Third Party.

1.26     "LEXICON SEQUENCE" means *****.

1.27     "LEXICON TECHNOLOGY" means the Lexicon Know-How and the Lexicon Patent
         Rights.

1.28     "LICENSED ANTIBODY DRUG" means any Antibody Drug (or any analog or
         derivative thereof), which interacts with a Drug Target and as to which
         MPI and/or its Affiliates has obtained a commercial product license
         from Lexicon hereunder.

1.29     "LICENSED ANTISENSE DRUG" means any Antisense Drug (or any analog or
         derivative thereof) as to which MPI and/or its Affiliates has obtained
         a commercial product license from Lexicon hereunder.

1.30     "LICENSED DIAGNOSTIC PRODUCT" means any Diagnostic Product as to which
         MPI and/or its Affiliates has obtained a commercial product license
         from Lexicon hereunder.

1.31     "LICENSED GENE THERAPY DRUG" means any Gene Therapy Drug (or any analog
         or derivative thereof) as to which MPI and/or its Affiliates has
         obtained a commercial product license from Lexicon hereunder.

                                       5
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CONFIDENTIAL - 9/23/99

1.32     "LICENSED PRODUCT" means any Licensed Small Molecule Drug, Licensed
         Antibody Drug, Licensed Therapeutic Protein, Licensed Antisense Drug,
         Licensed Gene Therapy Drug or Licensed Diagnostic Product.

1.33     "LICENSED SMALL MOLECULE DRUG" means any Small Molecule Drug (or any
         analog or derivative thereof) which interacts with a Drug Target, and
         as to which MPI and/or its Affiliates has obtained a commercial product
         license from Lexicon hereunder.

1.34     "LICENSED THERAPEUTIC PROTEIN" means any Therapeutic Protein (or any
         analog or derivative thereof) as to which MPI and/or its Affiliates has
         obtained a commercial product license from Lexicon hereunder.

1.35     "MAJOR MARKET COUNTRY" shall mean Canada, Japan, France, Germany,
         Italy, Spain, the United Kingdom, and the United States.

1.36     "MATERIAL ACTIVITY" means any of the following: ******

1.37     "MPI KNOW-HOW" means any information, data and materials, other than
         DNA sequence information, that is owned, developed, controlled and/or
         obtained by MPI and/or its Affiliates that is not Confidential
         Information of Lexicon.

1.38     "MATERIAL USE" means any use of a Lexicon Sequence in a Material
         Activity by or on behalf of MPI and/or its Affiliates.

1.39     "MPI SEQUENCE" means *****.

1.40     "MUTANT MOUSE PROGRAM" means the program set forth on Exhibit A to this
         Agreement.

1.41     "NET SALES" means with respect to a Licensed Product, the gross amount
         invoiced by MPI, its Affiliates or sublicensees for sales of the
         Licensed Product to a Third Party, less:

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

         (b)      discounts, refunds, rebates, chargebacks, retroactive price
                  adjustments, and any other allowances actually granted which
                  effectively reduce the net selling price;

         (c)      product returns 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); and

         (e)      freight, postage, shipping, customs duties, excises and
                  insurance charges actually allowed or paid for delivery of
                  Licensed Products, to the extent billed.

         In the event the Licensed Product 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

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<PAGE>   7

CONFIDENTIAL - 9/23/99

fraction, A/A+B where A is the average sale price of the Licensed 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 Licensed Product 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 Licensed Product and D is the difference between the average selling
price of the Combination Product and the average selling price of the Licensed
Product. If the average sale price of the other active compounds or ingredients
can be determined but the average price of the Licensed Product 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 the applicable agreement between MPI and
a sublicensee contains the same methodology for determining the average sale
price of the active compounds or ingredients when the average sale price of the
other active compounds or ingredients cannot be determined as set forth above,
and if such sublicense agreement also contains a provision stating that the Net
Sales of the Licensed Product shall not be less than 50% of the Net Sales of the
Combination Product, then the same 50% limitation shall, as to that sublicensee
only, also apply to this Agreement.

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

         The Net Sales price for a Combination Product will be calculated once
each calendar year and such price will be used during all applicable royalty
reporting periods for the entire calendar year. When determining the average
sale price of a Licensed Product or the other active compounds or ingredients in
the Combination Product, the average sale price will be calculated using data
arising from the 12 months preceding the calculation of the Net Sales price for
the Combination Product. As used above, the term "Combination Product" means any
pharmaceutical or diagnostic product comprised of the Licensed Product and other
active compounds and/or ingredients.

1.42     "NOVEL GENE" means a gene, part of whose coding sequence is present in
         the Human Gene Trap(TM) Database and in one or more Program Clones, and
         *****.

1.43     "OMNIBANK(R) DATABASE" means Lexicon's proprietary database comprised
         of OmniBank(R) Sequence Tags and all associated information, together
         with bioinformatics software to the extent additional access to the
         OmniBank (R) Database is provided, at Lexicon's sole discretion, via
         the Internet (and enhancements and updates related to such
         bioinformatics software scanning tools), all as supplemented from time
         to time by Lexicon.

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1.44     "OMNIBANK(R) LIBRARY" means Lexicon's library of mouse embryonic stem
         cells, each of which contains a gene trap event in a particular mouse
         gene, which gene is identified by an OmniBank(R) Sequence Tag.

1.45     "OMNIBANK(R) MICE" means mouse embryonic stem cells contained in the
         OmniBank(R) Library, mice made or developed using such mouse embryonic
         stem cells and any successive generations thereof, and any progeny,
         part, derivative or expression product of any such mouse embryonic stem
         cells or mice.

1.46     "OMNIBANK(R) SEQUENCE TAGS" or "OSTS" means murine DNA sequences and
         mouse embryonic stem cells which contain mutations in one or more genes
         made using gene trap insertion techniques, which genes are identified
         by a DNA sequence derived from the mutated gene.

1.47     "PHASE I" means that portion of the clinical development program which
         generally provides for the first introduction into humans of a Licensed
         Product with the primary purpose of determining safety, metabolism and
         pharmacokinetic properties and clinical pharmacology of the Licensed
         Product, as more specifically defined by the rules and regulations of
         the FDA and corresponding rules and regulations in other countries or
         jurisdictions.

1.48     "PHASE II" means that portion of the clinical development program after
         the initial introduction of the Licensed Product into human subjects to
         test for safety (adverse effects), dosage tolerance, metabolism,
         distribution, excretion and pharmacodynamics, and, if applicable, after
         receipt of authorization from the competent regulatory authorities to
         proceed with further clinical development, and before final pivotal
         trials of the drug for safety and efficacy, as more specifically
         defined by the rules and regulations of the FDA and corresponding rules
         and regulations in other countries or jurisdictions. Phase II studies
         generally involve a limited patient population with the disease or
         condition to be treated and are intended to (a) determine the efficacy
         of the drug for specific, targeted indications, (b) determine dosage
         tolerance and optimal dosage (dose ranging), (c) identify possible
         adverse effects and safety risks, and (d) identify patient populations
         and clinical endpoints for Phase III trials.

1.49     "PHASE III" means that portion of the clinical development program
         which provides for the continued trials of a Licensed Product on
         sufficient numbers of patients to establish the safety and efficacy of
         a Licensed Product for the desired claims and indications, as more
         specifically defined by the rules and regulations of the FDA and
         corresponding rules and regulations in other countries or
         jurisdictions.

1.50     "PRE-IND STUDIES" means formal preclinical studies under controlled
         conditions, such as Good Laboratory Practice conditions, intended to
         provide evidence of safety of an Antibody Drug, Antisense Drug, Gene
         Therapy Drug, Small Molecule Drug or Therapeutic Protein in
         applications to regulatory agencies.

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CONFIDENTIAL - 9/23/99

1.51     "PROGRAM CLONE" means a clone (including DNA sequence information,
         whether partial or full-length, pertaining to the clone) contained in,
         identified using or derived from the Human Gene Trap(TM) and/or
         OmniBank(R) Databases.

1.52     "PROTEIN" means a high molecular weight (i.e. with a mass greater than
         1,000 daltons) polymer compound composed of a variety of amino acids
         joined by peptide linkages, including allelic variants thereof,
         post-translationally modified variants thereof (i.e. glycosylated
         proteins) and derivatives thereof.

1.53     "SMALL MOLECULE DRUG" means any Drug, the active ingredient of which is
         a synthetic small molecule, a natural product or a macromolecule, that
         (a) is identified in a screening assay on the basis ***** through use
         of a Lexicon Sequence, or (b) is designed or developed using medicinal
         chemistry, structural activity relationship ("SAR") or combinatorial
         chemistry techniques to interact ***** through the use of a Lexicon
         Sequence; provided, however, that a Small Molecule Drug will not
         include any Protein or any Drug in which the active ingredient is an
         Antibody Drug, an Antisense Drug or a Gene Therapy Drug.

1.54     "S-T-V(TM)PROGRAM" means the program set forth on Exhibit B to this
         Agreement.

1.55     "THERAPEUTIC PROGRAM" means any program directed to the discovery and
         development of Drugs.

1.56     "THERAPEUTIC PROTEIN" means any Drug which contains a Protein and that
         is not an Antibody Drug.

1.57     "THIRD PARTY" means any corporation, company, partnership, joint
         venture or other entity other than Lexicon and its Affiliates and MPI
         and its Affiliates.

1.58     "VALID CLAIM" means a claim of an issued or granted and unexpired
         patent included within the Lexicon Patent Rights, which claim (a) has
         not been held unenforceable, unpatentable or invalid by a decision of a
         court or governmental body of competent jurisdiction, (b) is
         unappealable or unappealed within the time allowed for appeal, (c) has
         not been rendered unenforceable through disclaimer or otherwise, and
         (d) has not been lost through an interference proceeding.

1.59     *****

As used herein, the phrases "using a Lexicon Sequence" and "use of a Lexicon
Sequence," and words of similar import, shall be deemed to encompass (i) the use
in a Diagnostic Program of any gene that contains a Lexicon Sequence, on which
Lexicon Sequence MPI or an Affiliate has performed a Material Activity in a
Diagnostic Program, or (ii) the use in a Therapeutic Program of any gene that
contains a Lexicon Sequence, on which Lexicon Sequence MPI or an Affiliate has
performed a Material Activity in a Therapeutic Program. For the purpose of the
foregoing sentence, the word "gene" is understood to mean the gene itself, any
mutant or polymorphic form of such gene, any transcription product of such gene
or modified form thereof resulting from

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CONFIDENTIAL - 9/23/99

post-transcriptional processing, and/or any translation product of such gene or
modified form thereof resulting from post-translational processing.

                                    ARTICLE 2

                          GRANT OF RIGHTS AND LICENSES

2.1      NON-EXCLUSIVE ACCESS TO HUMAN GENE TRAP(TM) DATABASE. Subject to the
         terms and conditions of this Agreement and during the Access Period,
         Lexicon hereby grants to MPI and its Affiliates non-exclusive access to
         Lexicon's Human Gene Trap(TM) Database. MPI will deposit information in
         escrow pursuant to Section 2.20 identifying each Program Clone of which
         it elects to make Material Use in research and development activities
         within ***** after MPI or any of its Affiliates initiates such
         activities. Notwithstanding the foregoing, MPI shall not be required to
         deposit in escrow *****. At its election, MPI and/or its Affiliates
         ***** whose representation in the Human Gene Trap(TM) Database at the
         time of such deposit ***** for purposes of this Agreement. MPI and/or
         its Affiliates may (either directly or via consultants), manipulate the
         data in any FASTA files delivered to MPI by Lexicon.

2.2      NON-EXCLUSIVE ACCESS TO OMNIBANK(R) DATABASE. Subject to the terms and
         conditions of this Agreement and during the Access Period, Lexicon
         hereby grants to MPI and its Affiliates non-exclusive access to
         Lexicon's OmniBank(R) Database. MPI will deposit in escrow information
         pursuant to Section 2.20 identifying each Program Clone which it elects
         to make Material Use in research and development activities within
         ***** after MPI or any of its Affiliates initiates such activities.
         Notwithstanding the foregoing, MPI shall not be required to deposit in
         escrow *****. At its election, MPI and/or its Affiliates ***** whose
         representation in the OmniBank(R) Database at the time of such deposit
         ***** for purposes of this Agreement. MPI and/or its Affiliates may
         (either directly or via consultants), manipulate the data in the FASTA
         files Lexicon is delivering to MPI. To the extent Lexicon provides the
         OmniBank(R) Database via the Internet (in addition to the CD-ROM), such
         access shall be via a commercially available third party Web Browser.

2.3      RESEARCH LICENSE FOR FIELD. Subject to the terms and conditions of this
         Agreement and during the Access Period and any extensions thereto,
         Lexicon hereby grants to MPI and its Affiliates a non-exclusive license
         under the Lexicon Technology to use Program Clones to conduct research
         directed towards the discovery of potential Drugs and Diagnostic
         Products in the Field. Lexicon hereby grants to MPI and its Affiliates
         the limited right to grant sublicenses to Corporate Partners and
         Academic Collaborators, on a Program Clone-by-Program Clone basis,
         solely to accomplish the purposes of such Corporate Partner's or
         Academic Collaborator's collaboration with MPI or its Affiliates.

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2.4      DEVELOPMENT LICENSE FOR DRUG TARGETS. Subject to the terms and
         conditions of this Agreement and during the Access Period, Lexicon
         hereby grants to MPI and its Affiliates a non-exclusive license under
         the Lexicon Technology to research, develop, make and use any escrowed
         Program Clone, any Drug Target encoded by an escrowed Program Clone and
         any assays which are based on or incorporate such Drug Target solely to
         develop Small Molecule Drugs and/or Antibody Drugs in the Field.
         Lexicon hereby grants MPI and its Affiliates the limited right to grant
         sublicenses to Corporate Partners and Academic Collaborators, on a
         Program Clone-by-Program Clone basis, solely to accomplish the purposes
         of such Corporate Partner's or Academic Collaborator's collaboration
         with MPI or its Affiliates.

2.5      DEVELOPMENT LICENSE FOR THERAPEUTIC PROTEINS. Subject to the terms and
         conditions of this Agreement and during the Access Period, Lexicon
         hereby grants to MPI and its Affiliates a non-exclusive license under
         the Lexicon Technology to research, develop, make and use any escrowed
         Program Clone and any Protein encoded by an escrowed Program Clone
         solely to develop Therapeutic Proteins in the Field. Lexicon hereby
         grants MPI and its Affiliates the limited right to grant sublicenses to
         Corporate Partners and Academic Collaborators, on a Program
         Clone-by-Program Clone basis, solely to accomplish the purposes of such
         Corporate Partner's or Academic Collaborator's collaboration with MPI
         or its Affiliates.

2.6      DEVELOPMENT LICENSE FOR ANTISENSE DRUGS. Subject to the terms and
         conditions of this Agreement and during the Access Period, Lexicon
         hereby grants to MPI and its Affiliates a non-exclusive license under
         the Lexicon Technology to research, develop, make and use any escrowed
         Program Clone and any RNA encoded by an escrowed Program Clone solely
         to develop Antisense Drugs in the Field. Lexicon hereby grants MPI and
         its Affiliates the limited right to grant sublicenses to Corporate
         Partners and Academic Collaborators, on a Program Clone-by-Program
         Clone basis, solely to accomplish the purposes of such Corporate
         Partner's or Academic Collaborator's collaboration with MPI or its
         Affiliates.

2.7      DEVELOPMENT LICENSE FOR GENE THERAPY DRUGS. Subject to the terms and
         conditions of this Agreement and during the Access Period, Lexicon
         hereby grants to MPI and its Affiliates a non-exclusive license under
         the Lexicon Technology to research, develop, make and use any escrowed
         Program Clone solely to develop Gene Therapy Drugs in the Field. MPI
         and its Affiliates will have the right to grant limited sublicenses to
         Corporate Partners and Academic Collaborators, on a Program
         Clone-by-Program Clone basis, solely to accomplish the purposes of such
         Corporate Partner's or Academic Collaborator's collaboration with MPI
         or its Affiliates.

2.8      DEVELOPMENT LICENSE FOR DIAGNOSTIC PRODUCTS. Subject to the terms and
         conditions of this Agreement and during the Access Period, Lexicon
         hereby grants to MPI and its Affiliates a non-exclusive license under
         the Lexicon Technology to research, develop, make and use any escrowed
         Program Clone and any RNA or Protein encoded by an escrowed Program
         Clone solely to develop Diagnostic Products in the Field. Lexicon

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CONFIDENTIAL - 9/23/99

         hereby grants MPI and its Affiliates the limited right to grant
         sublicenses to Corporate Partners and Academic Collaborators, on a
         Program Clone-by-Program Clone basis, solely to accomplish the purposes
         of such Corporate Partner's or Academic Collaborator's collaboration
         with MPI or its Affiliates.

2.9      EXCLUSIVE OPTIONS FOR THERAPEUTIC PROTEINS. With respect to any gene
         which encode(s) a Therapeutic Protein, is partially represented by an
         Escrowed Sequence or set of Escrowed Sequences, and for which MPI
         and/or its Affiliates has obtained a full-length coding sequence from
         any source, MPI and/or its Affiliates will have the right to obtain
         from Lexicon an exclusive option (a "Therapeutic Option") to obtain an
         exclusive commercial product license to such Therapeutic Protein in
         accordance with Section 2.10; provided, however, that neither MPI nor
         any of its Affiliates will have the right to obtain a Therapeutic
         Option in the event that (a) a Third Party holds an exclusive option or
         has obtained an exclusive commercial product license to such
         Therapeutic Protein prior to MPI's and/or its Affiliates' request for
         such Therapeutic Option, or (b) ***** prior to MPI's and/or its
         Affiliates' request for a Therapeutic Option, as demonstrated by
         competent written records. MPI's and/or its Affiliates' right to obtain
         Therapeutic Options shall continue during the Access Period and for six
         months thereafter, provided that (i) in the event that ***** (ii) MPI
         and its Affiliates may have no more than ***** Therapeutic Proteins
         under one or more Therapeutic Options at any time during the Access
         Period (for purposes of which the termination by MPI and/or its
         Affiliates of any Therapeutic Option prior to its expiration date will
         be disregarded), and be granted no more than ***** Therapeutic Options
         in any twelve-month period, and (iii) MPI's and/or its Affiliates'
         right to obtain Therapeutic Options after the Access Period shall be
         limited to ***** such Therapeutic Options. Any request for a
         Therapeutic Option will be submitted to Lexicon by MPI in writing,
         identifying the specific Program Clone or Program Clones that contain
         the Escrowed Sequence(s) encoding the Therapeutic Protein for which the
         Therapeutic Option is requested and the date of the request. Within
         ***** after the date Lexicon receives such request, Lexicon will
         provide written notice to MPI (i) granting a Therapeutic Option, or
         (ii) specifying the reason why a Therapeutic Option is not available
         (limited to the reasons outlined in subsections (a) and (b) above.) In
         the event that Lexicon grants such Therapeutic Option requested by MPI
         and/or its Affiliates, MPI and/or its Affiliates shall ***** MPI and/or
         its Affiliates may exercise a Therapeutic Option, in its discretion, at
         any time during the period commencing on the date such Therapeutic
         Option was granted and ending ***** thereafter. MPI and/or its
         Affiliates may extend a Therapeutic Option for an additional *****
         period by delivering written notice of such extension to Lexicon and
         paying to Lexicon the option extension fee set forth in Section 5.6 on
         or before the expiration of the initial ***** period. If MPI and/or its
         Affiliates fails to obtain an exclusive commercial product license for
         a Therapeutic Protein within ***** after the grant of the Therapeutic
         Option (***** if the Therapeutic Option has been extended), then the
         Therapeutic Option will terminate and all right, title and interest
         under the Lexicon Technology granted pursuant to the Therapeutic Option
         to Escrowed Sequence(s) which encodes such Therapeutic Protein will
         revert exclusively to Lexicon.

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2.10     PRODUCT LICENSE FOR THERAPEUTIC PROTEINS.

                  (a) Upon payment of the applicable product license fee *****
                  and subject to Section 2.17 and the other terms and conditions
                  of this Agreement, Lexicon will grant to MPI and/or its
                  Affiliates an exclusive, worldwide license under the Lexicon
                  Technology, with the right to grant sublicenses, to make, have
                  made, import, use, have used, offer for sale, sell and have
                  sold such Therapeutic Protein in the Field; provided, however,
                  that MPI and/or its Affiliates will not obtain a commercial
                  product license in the event that (i) a Third Party holds an
                  exclusive option or has obtained an exclusive commercial
                  product license to such Therapeutic Protein prior to MPI's
                  and/or its Affiliates' request for such exclusive commercial
                  product license (or prior to MPI's and/or its Affiliates'
                  request for a Therapeutic Option in the case where MPI and/or
                  its Affiliates holds a Therapeutic Option), or (ii) *****
                  prior to MPI's and/or its Affiliates' request for such
                  exclusive commercial product license (or prior to MPI's and/or
                  its Affiliates' request for a Therapeutic Option in the case
                  where MPI's and/or its Affiliates holds a Therapeutic Option),
                  as demonstrated by competent written records. MPI and/or its
                  Affiliates may collectively obtain exclusive commercial
                  product licenses to no more than ***** Therapeutic Proteins
                  during any ***** period during the Access Period, and to no
                  more than ***** Therapeutic Proteins after the Access Period.

                  (b) Lexicon will promptly annotate all Program Clones
                  representing the full-length gene corresponding to a
                  Therapeutic Protein licensed by MPI's and/or its Affiliates'
                  that are contained in the Human Gene Trap(TM) Database,
                  provided that Lexicon shall not effect such annotation in a
                  manner that indicates that all such Program Clones are part of
                  the same full-length gene sequence. ***** and shall use such
                  Confidential Information for the sole purpose of annotating
                  the Human Gene Trap(TM) Database as contemplated hereby. If an
                  exclusive commercial product license is available for such
                  Therapeutic Protein, such license will include Lexicon
                  Technology related to the use of all Lexicon Sequences that
                  represent the gene which encodes such Therapeutic Protein.
                  Lexicon will not reveal the identity of MPI and/or its
                  Affiliates as the company obtaining such exclusive commercial
                  product license.

2.11     EXCLUSIVE OPTIONS FOR ANTISENSE DRUGS. With respect to any gene
         corresponding to an Escrowed Sequence or set of Escrowed Sequences that
         is complementary to an Antisense Drug, and for which MPI and/or its
         Affiliates has obtained a full-length coding sequence from any source,
         MPI and/or its Affiliates will have the right to obtain from Lexicon an
         exclusive option (an "Antisense Option") to obtain an exclusive
         commercial product license to such Antisense Drug in accordance with
         Section 2.12; provided, however, that neither MPI nor any of its
         Affiliates will have the right to obtain an Antisense Option in the
         event that (a) a Third Party holds an exclusive option or has obtained
         an exclusive commercial product license to such Antisense Drug prior to
         MPI's and/or its Affiliates' request for such Antisense Option, or (b)
         ***** prior to MPI's and/or its Affiliates'

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         request for an Antisense Option, as demonstrated by competent written
         records. MPI's and/or its Affiliates' right to obtain Antisense Options
         shall continue during the Access Period and for ***** thereafter,
         provided that (i) in the event that ***** (ii) MPI and its Affiliates
         may have no more than ***** Antisense Drugs under one or more Antisense
         Options at any time during the Access Period (for purposes of which the
         termination by MPI and/or its Affiliates of any Antisense Option prior
         to its expiration date will be disregarded), and be granted no more
         than ***** Antisense Options in any twelve-month period, and (iii)
         MPI's and/or its Affiliates' right to obtain Antisense Options after
         the Access Period shall be limited to ***** such Antisense Options. Any
         request for an Antisense Option will be submitted to Lexicon by MPI in
         writing, identifying the specific Program Clone or Program Clones that
         contain the Escrowed Sequence(s) complementary to the Antisense Drug
         for which the Antisense Option is requested and the date of the
         request. Within ***** after the date Lexicon receives such request,
         Lexicon will provide written notice to MPI (i) granting an Antisense
         Option, or (ii) specifying the reason why an Antisense Option is not
         available (limited to the reasons outlined in subsections (a) and (b)
         above). In the event that Lexicon grants such Antisense Option
         requested by MPI and/or its Affiliates, MPI and/or its Affiliates shall
         ***** MPI and/or its Affiliates may exercise an Antisense Option, in
         its discretion at any time during the period commencing on the date
         such Antisence Option was granted and ending ***** thereafter. MPI
         and/or its Affiliates may extend an Antisense Option for an additional
         ***** period by delivering written notice of such extension to Lexicon
         and paying to Lexicon the option extension fee set forth in Section 5.9
         on or before the expiration of the initial ***** period. If MPI and/or
         its Affiliates fails to obtain an exclusive commercial product license
         for an Antisense Drug within ***** after the grant of the Antisense
         Option (***** if the Antisense Option has been extended), then the
         Antisense Option will terminate and all right, title and interest under
         the Lexicon Technology granted pursuant to the Antisense Option to the
         Escrowed Sequence(s) which is complementary to such Antisense Drug will
         revert exclusively to Lexicon.

2.12     PRODUCT LICENSE FOR ANTISENSE DRUGS.

         (a) Upon payment of the applicable product license fee ***** and
         subject to Section 2.17 and the other terms and conditions of this
         Agreement, Lexicon will grant to MPI and/or its Affiliates an
         exclusive, worldwide license under the Lexicon Technology, with the
         right to grant sublicenses, to make, have made, import, use, have used,
         offer for sale, sell and have sold such Antisense Drug in the Field;
         provided, however, that MPI and/or its Affiliates will not obtain a
         commercial product license in the event that (i) a Third Party holds an
         exclusive option or has obtained an exclusive commercial product
         license to such Antisense Drug prior to MPI's and/or its Affiliates'
         request for such exclusive commercial product license (or prior to
         MPI's and/or its Affiliates' request for an Antisense Option in the
         case where MPI and/or its Affiliates holds an Antisense Option), or
         (ii) ***** prior to MPI's and/or its Affiliates' request for such
         exclusive commercial product license (or prior to MPI's and/or its
         Affiliates' request for an Antisense Option in the case where MPI's
         and/or its Affiliates holds an Antisense Option), as demonstrated by
         competent written records. MPI and/or its Affiliates may collectively
         obtain exclusive

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         commercial product licenses to no more than ***** Antisense Drugs
         during any ***** period during the Access Period, and to no more than
         ***** Antisense Drugs after the Access Period.

         (b) Lexicon will promptly annotate all Program Clones representing the
         full-length gene corresponding to an Antisense Drug licensed by MPI's
         and/or its Affiliates' that are contained in the Human Gene Trap(TM)
         Database, provided that Lexicon shall not effect such annotation in a
         manner that indicates that all such Program Clones are part of the same
         full-length gene sequence. ***** and shall use such Confidential
         Information for the sole purpose of annotating the Human Gene Trap(TM)
         Database as contemplated hereby. If an exclusive commercial product
         license is available for such Antisense Drug, such license will include
         Lexicon Technology related to the use of all Lexicon Sequences that
         represent the gene which is complementary to such Antisense Drug.
         Lexicon will not reveal the identity of MPI and/or its Affiliates as
         the company obtaining such exclusive commercial product license.

2.13     PRODUCT LICENSE FOR SMALL MOLECULE DRUGS AND ANTIBODY DRUGS. Upon
         receipt of written notice from MPI and/or its Affiliates that it has
         initiated Pre-IND Studies with respect to a Small Molecule Drug or
         Antibody Drug and subject to the terms and conditions of this
         Agreement, Lexicon hereby grants to MPI and/or its Affiliates a
         non-exclusive, worldwide license under the Lexicon Technology, with the
         right to grant sublicenses, to make, have made, import, use, have used,
         offer for sale, sell and have sold such Small Molecule Drug or Antibody
         Drug in the Field.

2.14     PRODUCT LICENSE FOR GENE THERAPY DRUGS. Upon receipt of written notice
         from MPI and/or its Affiliates that it has initiated Pre-IND Studies
         related to a Gene Therapy Drug and subject to the terms and conditions
         of this Agreement, Lexicon hereby grants to MPI and/or its Affiliates a
         non-exclusive, worldwide license under the Lexicon Technology, with the
         right to grant sublicenses, to make, have made, import, use, have used,
         offer for sale, sell and have sold such Gene Therapy Drug in the Field.

2.15     PRODUCT LICENSE FOR DIAGNOSTIC PRODUCTS. Upon receipt of written notice
         from MPI and/or its Affiliates that it has initiated Diagnostic
         Validation Studies related to a Diagnostic Product and subject to the
         terms and conditions of this Agreement, Lexicon hereby grants to MPI
         and/or its Affiliates a non-exclusive, worldwide license under the
         Lexicon Technology, with the right to grant sublicenses, to make, have
         made, import, use, have used, offer for sale, sell and have sold such
         Diagnostic Product in the Field.

2.16     SUBLICENSES. Any sublicense granted by MPI or its Affiliates will be
         consistent with the terms and conditions of this Agreement. MPI or its
         Affiliates will notify any sublicensee of all rights and obligations of
         MPI under this Agreement which are sublicensed to such sublicensee and
         will notify Lexicon within ***** of the grant of any sublicense
         hereunder. MPI will remain primarily liable under this Agreement
         irrespective of any sublicense granted hereunder.

2.17     RESERVATION OF RIGHTS. Subject to the non-exclusive rights and licenses
         granted to MPI

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         and its Affiliates hereunder, Lexicon reserves all rights (a) to
         provide Third Parties access to the Human Gene Trap(TM) and OmniBank(R)
         Databases on terms and conditions consistent with the terms and
         conditions of this Agreement, (b) to research, develop and
         commercialize (internally or by granting non-exclusive licenses to
         Third Parties or otherwise) Drug Targets, Small Molecule Drugs,
         Antibody Drugs, Gene Therapy Drugs and Diagnostic Products derived from
         the Human Gene Trap(TM) and/or OmniBank(R) Databases, and (c) to
         research, develop and commercialize (internally or by granting
         exclusive licenses to Third Parties or otherwise) Therapeutic Proteins
         encoded by Program Clones and Antisense Drugs complementary to Program
         Clones or the RNA encoded by Program Clones as to which MPI (i) does
         not hold an unexpired Therapeutic Option or Antisense Option, or (ii)
         has not obtained an exclusive commercial product license. Lexicon
         reserves rights under the Lexicon Technology, for itself and its
         collaborators, to make, have made and use Program Clones and
         Therapeutic Proteins as to which MPI has rights of exclusivity
         (including Licensed Therapeutic Proteins) to research, develop and
         commercialize (internally or by granting non-exclusive licenses to
         Third Parties or otherwise) Small Molecule Drugs, Antibody Drugs, Gene
         Therapy Drugs, and Diagnostic Products, subject to MPI's non-exclusive
         right under the Lexicon Technology to use such Program Clones and
         Licensed Therapeutic Proteins for the same purposes. It is further
         understood that no license under any intellectual property of MPI is
         granted to Lexicon hereby. UNDER NO CIRCUMSTANCES WILL MPI HAVE ANY
         RIGHT OR LICENSE TO PRACTICE LEXICON'S PROPRIETARY GENE TRAPPING
         METHODS OR USE LEXICON'S PROPRIETARY GENE TRAP VECTORS.

2.18     REQUIREMENT OF PRODUCT LICENSES. The research and development licenses
         granted under this Article 2 will specifically exclude any right or
         license to market, sell, license or commercialize any Small Molecule
         Drugs, Antibody Drugs, Therapeutic Proteins, Gene Therapy Drugs,
         Antisense Drugs or Diagnostic Products discovered or developed using a
         Lexicon Sequence absent a commercial product license.

2.19     EXTENSION OF RESEARCH AND DEVELOPMENT LICENSES FOLLOWING EXPIRATION OF
         THE INITIAL ACCESS PERIOD. Unless MPI terminates this Agreement
         pursuant to Section 9.2 or Section 9.3, the Access Period will extend
         for an additional ***** following the end of the Initial Access Period
         (the "Extended Access Period"). Following the expiration of the
         Extended Access Period, MPI and MPI's Affiliates shall have continued
         rights under the research and development licenses granted hereunder
         and to obtain additional commercial product licenses under Sections
         2.13 through 2.15 to no more than ***** Program Clones such number to
         be subject to revision based on mutual agreement of the parties. MPI
         shall deposit in escrow under the Escrow Agreement, within ***** after
         the end of the Extended Access Period, the name of each Program Clone
         for which it elects continued rights under this Section 2.19. MPI and
         its Affiliates will be entitled to such rights only for Program Clones
         that contain Lexicon Sequence of which it has made Material Use during
         the Access Period. All other Lexicon Sequences, except for Lexicon
         Sequences that are the subject of unexpired options or commercial
         product licenses under Sections 2.9 through 2.12, will be permanently
         removed from MPI's and its Affiliates records, computers, internal
         databases, facilities, or any other repository system used by MPI and
         its Affiliates for Program Clones during the Access Period, and, except
         as provided in Sections 2.9 through 2.12, MPI and its Affiliates shall
         have no further rights to obtain Therapeutic or

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         Antisense Options or commercial product licenses with respect to such
         other Lexicon Sequences following the expiration of the Access Period.

2.20     ESCROW AGREEMENT.

         (a) Lexicon shall have entered into an escrow agreement (the "Escrow
         Agreement") with SourceFile Inc. or such other escrow agent mutually
         acceptable to MPI, under which MPI shall be a beneficiary, on mutually
         acceptable terms and conditions prior to or simultaneous with the
         execution of this Agreement. During the Access Period, Lexicon will
         deposit into escrow the names of all Program Clones in the Human Gene
         Trap(TM) Database that have a corresponding full-length gene sequence
         generated for purposes of Lexicon's LexGene(TM) Database or other
         purposes in accordance with Lexicon's current labeling method for
         Program Clones (e.g. H-TST1, H-TST2, H-TST3). Upon Material Use of a
         Program Clone, MPI will promptly deposit the name of such Program Clone
         in the escrow account in accordance with Lexicon's current labeling
         method. The identity of such Program Clones will be held in escrow by a
         third party escrow agent mutually acceptable to the parties. The Escrow
         Agreement will contain other customary terms and conditions mutually
         acceptable to Lexicon and MPI. Any third party escrow fees will be
         shared equally by Lexicon and MPI.

         (b) In the event MPI and/or Lexicon deposits the names of one or more
         Program Clones into escrow, the escrow agent will compare, on a monthly
         basis, such names to the names of Program Clones deposited in escrow by
         Lexicon to search for any matches. If a match exists, then the escrow
         agent will inform Lexicon and MPI of such match and MPI may request,
         and upon such request Lexicon will provide to MPI, the full-length gene
         sequence that matches the escrowed Program Clone, provided that Lexicon
         shall have no obligation to provide MPI such full-length gene sequence
         if such full-length gene sequence *****. In the event that Lexicon is
         issued a Valid Claim within the Lexicon Patent Rights covering the
         composition of matter of a full-length gene sequence disclosed to MPI
         pursuant to this Section 2.20(b), then any milestone and royalty
         payments payable to Lexicon under Article 5 with respect to a Licensed
         Product derived from Program Clone(s) representing such gene *****.

2.21     NOTICE OF INFRINGEMENT. Upon Lexicon's receipt of a notice from MPI
         and/or MPI's Affiliate's requesting an exclusive option and/or
         exclusive commercial product license, and in the event Lexicon grants
         such option or license to MPI and/or MPI's Affiliate, at any time
         thereafter, Lexicon shall promptly notify MPI of any notice of
         infringement, claims, judgments or settlements against or owed by
         Lexicon with respect to such Therapeutic Proteins, Antisense Drugs
         and/or any Program Clones encoding or corresponding to such Therapeutic
         Proteins or Antisense Drugs or any part(s) thereof. In the event of
         such notification, MPI and/or its Affiliates shall have the right, in
         its sole discretion, to rescind its request.

2.22     INSPECTION RIGHT. During the Access Period MPI and/or MPI's Affiliates
         shall have the right to inspect Lexicon Patent Rights, including
         without limitation any Patent Office communications related thereto,
         with respect to a given Program Clone, from time to time on

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         reasonable notice, for the purpose of evaluating MPI's and/or such
         Affiliates' interest in obtaining an exclusive license under such
         Lexicon Patent Rights pursuant to Sections 2.9 through 2.12. Subject to
         Article 7, Lexicon shall provide a copy of such Lexicon Patent Rights
         to MPI and/or MPI's Affiliates' to facilitate such inspection.

                                    ARTICLE 3

                   DEVELOPMENT AND COMMERCIALIZATION DILIGENCE

3.1      CLINICAL DILIGENCE REQUIREMENTS.

         (a) MPI will use commercially reasonable efforts to develop and
         commercialize Licensed Products similar to the efforts it applies to
         its own internal products at a similar stage in development with a
         comparable market potential. MPI's diligence obligations may be
         fulfilled partially and/or wholly by the efforts of MPI's Affiliates
         and/or sublicensees. Without limiting the foregoing, MPI's diligence
         obligations with respect to Licensed Therapeutic Proteins and Licensed
         Antisense Drugs will include the following specific requirements with
         respect to clinical development:

                  (i) MPI will ***** Licensed Therapeutic Protein or Licensed
                  Antisense Drug within ***** after obtaining an exclusive
                  license to such Licensed Therapeutic Protein or Licensed
                  Antisense Drug; and

                  (ii) MPI will ***** Licensed Therapeutic Protein or Licensed
                  Antisense Drug ***** Licensed Therapeutic Protein or Licensed
                  Antisense Drug.

         (b) If MPI is unable, using commercially reasonable efforts, to satisfy
         the foregoing diligence obligations with respect to a Licensed
         Therapeutic Protein or Licensed Antisense Drug as a result of
         preclinical obstacles or regulatory requirements (e.g. a Licensed
         Therapeutic Protein or Licensed Antisense Drug requires extensive
         pre-clinical efforts or a Licensed Therapeutic Protein or Licensed
         Antisense Drug requires particularly large clinical trials or
         repetition or refinement of previous clinical trials or MPI has unusual
         difficulty in recruiting subjects for clinical trials), then the
         applicable time period will be extended for a period of time reasonably
         sufficient for MPI to complete such requirements.

3.2      LICENSED PRODUCT REVERSION RIGHTS. Subject to Section 3.1(b), MPI's
         license with respect to a Licensed Therapeutic Protein or Licensed
         Antisense Drug will terminate in the event MPI ***** or abandons the
         development of, such Licensed Therapeutic Proteins or Licensed
         Antisense Drug. If Lexicon believes that MPI has so ***** or abandoned
         development with respect to a Licensed Therapeutic Protein or Licensed
         Antisense Drug, Lexicon shall provide written notice to MPI specifying
         such ***** or abandonment. MPI shall within ***** after receipt of such
         notice, either (a) respond in writing to Lexicon indicating that it
         does not concur that such ***** or abandonment has occurred, (b)
         provide written notice to Lexicon of its intent to cure and then take
         steps to cure such ***** or abandonment within ***** after receipt of
         such

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         notice, and provide Lexicon with information concerning such ***** or
         (c) respond in writing to Lexicon that it concurs with Lexicon's notice
         (failure to respond within such ***** period shall be deemed to be
         response under this subsection (c)). If MPI responds pursuant to
         subsection (a), the parties shall use reasonable efforts to reach
         mutual agreement as to whether such ***** or abandonment has occurred.
         If MPI responds pursuant to subsection (c) or responds pursuant to
         subsection (b) but fails to effect ***** within the ***** period, then
         upon the resulting termination of MPI's license with respect to any
         Licensed Therapeutic Protein or Licensed Antisense Drug, MPI will, to
         the extent that MPI and its Affiliates are not then precluded under
         their arrangements with Corporate Partners or other Third Parties,
         grant to Lexicon an exclusive option to obtain an exclusive,
         royalty-bearing, worldwide license, with the right to grant
         sublicenses, under such intellectual property rights of MPI related to
         such Licensed Therapeutic Protein or Licensed Antisense Drug as are
         reasonably necessary to commercialize such Licensed Therapeutic Protein
         or Licensed Antisense Drug, to make, have made, use, sell, offer for
         sale and import such Licensed Therapeutic Protein or Antisense Drug. In
         no event shall such intellectual property include any generic process
         development or manufacturing technologies of MPI and/or MPI Affiliates.
         Lexicon may exercise the option within ***** after the termination of
         MPI's license. In the event that Lexicon exercises the option during
         such ***** period, MPI and Lexicon will enter into good faith
         negotiations to execute a definitive license agreement within *****
         thereafter (the "Negotiation Period"). If Lexicon and MPI are not able
         to reach mutually acceptable terms with respect to such Licensed
         Therapeutic Protein or Antisense Drug, then MPI will not offer more
         favorable terms to a Third Party than the last terms MPI offered to
         Lexicon for ***** after the expiration of the Negotiation Period.

                                    ARTICLE 4

                           DELIVERY AND ACCESS RIGHTS

4.1      DELIVERY OF HUMAN GENE TRAP(TM) DATABASE. Within five business days
         after the Effective Date, Lexicon shall deliver to MPI a copy of the
         Human Gene Trap(TM) Database in machine-readable form, in its most
         current version as of the delivery date. MPI shall install the Human
         Gene Trap(TM) Database on a maximum of two servers in secure locations
         at its principal offices. MPI may install the Human Gene Trap(TM)
         Database on an additional back-up server in the event either of the
         other two servers becomes inoperable. MPI shall take reasonable
         precautions to restrict access to the Human Gene Trap(TM) Database to
         the scientists, other employees of MPI and its Affiliates, and third
         party consultants and on-site collaborators who are working on MPI
         and/or its Affiliates' behalf, who have access to MPI's own proprietary
         gene databases, including without limitation all precautions MPI
         employs with respect to its own proprietary gene databases. Lexicon
         will update the Human Gene Trap(TM) Database from time to time during
         the Access Period as additional Program Clones, annotations and other
         related information become available. Lexicon will use commercially
         reasonable efforts to update the Human Gene Trap(TM) Database and
         provide such updates to MPI at least ***** but in no event less
         frequently and promptly than Lexicon provides to other subscribers to
         the Human Gene Trap(TM) Database. Lexicon shall not initiate a
         full-length sequencing program based on the analysis of any Program
         Clones or H-TSTs in the Human Gene Trap(TM) Database until after such

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         Program Clones or H-TSTs sequences are released to MPI and its other
         subscribers of the Human Gene Trap(TM) Database.

4.2      ACCESS TO THE OMNIBANK(R) DATABASE. Within five business days after the
         Effective Date, Lexicon shall deliver to MPI a copy of the OmniBank(R)
         Database in machine-readable form, in its most current version as of
         the delivery date. MPI shall install the OmniBank(R) Database on a
         maximum of two servers in secure locations at its principal offices.
         MPI may install the OmniBank(R) Database on an additional back-up
         server in the event either of the other two servers become inoperable.
         In addition to the foregoing, Lexicon may provide MPI with secure
         Internet access during the Access Period, using a minimum of 128-bit
         encryption, to the OmniBank(R) Database together with any necessary
         bioinformatic software. MPI shall take reasonable precautions to
         restrict access to the OmniBank(R) Database to the scientists and other
         employees of MPI and its Affiliates, and third party consultants and
         on-site collaborators who are working on MPI and/or its Affiliates'
         behalf, who have access to MPI's own proprietary gene databases,
         including without limitation all precautions MPI employs with respect
         to its own proprietary gene databases. Lexicon will update the
         OmniBank(R) Database from time to time during the Access Period as
         additional Program Clones, annotations and other related information
         becomes available. Lexicon will use commercially reasonable efforts to
         update the OmniBank(R) Database and provide such updates to MPI at
         least ***** but in no event less frequently and promptly than Lexicon
         provides to other subscribers to the OmniBank(R) Database. Lexicon
         shall not initiate a full-length sequencing program based on the
         analysis of any Program Clones in the OmniBank(R) Database until after
         such Program Clones are released to MPI and its other subscribers of
         the OmniBank(R) Database. Lexicon represents and warrants that any
         queries or records thereof resulting from MPI and/or its Affiliates'
         use of Lexicon's secure Internet access shall be immediately purged
         from Lexicon's records and Lexicon acknowledges that such queries shall
         constitute Confidential Information of MPI and/or its Affiliates.

4.3      RIGHT TO OBTAIN PCR CLONES. During the Access Period, subject to the
         terms and conditions of this Agreement, MPI shall have the right, upon
         request and payment to Lexicon pursuant to Section 5.11, to obtain a
         PCR clone of any escrowed Program Clone. Any request for a PCR clone
         will be submitted in writing to Lexicon, identifying the specific
         Program Clone for which a PCR clone is requested. Lexicon will use
         commercially reasonable efforts to deliver requested PCR clones
         promptly following its receipt of any such request, and will verify
         that each PCR clone provided to MPI corresponds to the Program Clone
         specified in such request.

4.4      ACCESS TO FULL-LENGTH CLONES. During the Access Period, subject to the
         terms and conditions of this Agreement, MPI may request that Lexicon
         extend to full-length any escrowed Program Clone. Any request for a
         full-length clone will be submitted in writing to Lexicon, identifying
         the specific Program Clone for which MPI desires a full-length clone.
         Lexicon may, but shall have no obligation to, accept any such request.
         Any such acceptance will be made by delivering written notice of such
         acceptance to MPI within the time frame specified in MPI's request. In
         the event Lexicon accepts any such request, Lexicon will use
         commercially reasonable efforts to deliver the full-length clone
         promptly following such acceptance and MPI will pay Lexicon the amount
         set forth in Section 5.12. Prior to and for ***** after Lexicon's
         delivery of such full-length clone to MPI, Lexicon shall not (i)
         provide any DNA sequence

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CONFIDENTIAL - 9/23/99

         information from such clone that is not already in the Human Gene
         Trap(TM) Database to any Third Party, (ii) place such full-length
         sequence in the LexGene(TM) Database or (iii) *****. Subject to the
         licenses granted under this Agreement, ownership of all intellectual
         property rights shall be governed by the principles of inventorship
         under U.S. patent law.

4.5      MUTANT MOUSE AND S-T-V(TM) PROGRAMS. During the Access Period and upon
         mutually agreeable terms by the parties, MPI and its Affiliates may
         participate in Lexicon's S-T-V(TM) Program to determine the biological
         function of those Program Clones selected by MPI for further research
         and development, it being understood that Lexicon and MPI are parties
         to a Corporate Research and Development Agreement dated June 24, 1999
         (the "Knock-Out Agreement") and that, pursuant to the Knock-Out
         Agreement, MPI and its Affiliates are entitled under this Agreement to
         access Lexicon's Mutant Mouse Program, on the terms and conditions of
         that Knock-Out Agreement in lieu of the terms and conditions of Exhibit
         A to this Agreement. Any requests by MPI and/or its Affiliates to
         institute a knock-out mouse project pursuant to this Agreement shall be
         credited towards MPI's obligation under Section 2.1 of the Knock Out
         Agreement *****

4.6      ACCESS TO HUMANIZED MOUSE PROGRAM. During the Access Period and upon
         mutually agreeable terms by the parties, MPI and its Affiliates will
         have the right to access Lexicon's Humanized Mouse Program with respect
         to the Program Clones selected by MPI for further research and
         development. The parties agree to negotiate in good faith the business
         terms for the Humanized Mouse Program on a project-by-project basis.

                                    ARTICLE 5

                               PAYMENT OBLIGATIONS

5.1      INITIAL DATABASE ACCESS FEE. In consideration for access to the Human
         Gene Trap(TM) and OmniBank(R) Databases during the Initial Access
         Period, such access to be accomplished via the delivery of and
         successful installation at MPI of such Human Gene Trap(TM) and
         OmniBank(R) Databases, MPI will pay to Lexicon a non-refundable
         database access fee of ***** payable (i) within 15 business days after
         MPI's receipt of the Human Gene Trap(TM) and OmniBank(R) Databases on
         CD-ROM pursuant to Section 4.1 and Section 4.2 or (ii) at MPI's sole
         election pursuant to Section 1.13, on October 1, 1999.

5.2      EXTENDED DATABASE ACCESS FEE. In consideration for access to the Human
         Gene Trap(TM) and OmniBank(R) Databases during the Extended Access
         Period, MPI will pay to Lexicon a non-refundable extended database
         access fee of (a) ***** payable within 15 business days after the
         expiration of the Initial Access Period, and (b) ***** payable within
         15 business days after the first anniversary of the Effective Date.

5.3      S-T-V(TM) PROGRAM. In the event MPI wishes to participate in Lexicon's
         S-T-V(TM) Program, the parties will negotiate in good faith the fees
         payable to Lexicon on a project by project basis.

5.4      HUMANIZED MOUSE PROGRAM. In the event MPI wishes to participate in
         Lexicon's

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         Humanized Mouse Program, the parties will negotiate in good faith the
         fees payable to Lexicon on a project by project basis.

5.5      OPTION FEE FOR A THERAPEUTIC PROTEIN. MPI will pay to Lexicon a
         non-refundable option fee of ***** for each Therapeutic Protein subject
         to a Therapeutic Option, payable within 10 business days after Lexicon
         grants such Therapeutic Option to MPI.

5.6      OPTION EXTENSION FEE FOR A THERAPEUTIC PROTEIN. MPI will pay to Lexicon
         a non-refundable option extension fee of ***** for each Therapeutic
         Protein subject to a Therapeutic Option for which MPI elects to extend
         the Therapeutic Option for an additional ***** period, payable upon the
         expiration of the initial Therapeutic Option period.

5.7      PRODUCT LICENSE FEE FOR A LICENSED THERAPEUTIC PROTEIN. MPI will pay to
         Lexicon a non-refundable product license fee of ***** for each Licensed
         Therapeutic Protein, payable at the time MPI obtains an exclusive
         commercial product license to such Licensed Therapeutic Protein.

5.8      OPTION FEE FOR AN ANTISENSE DRUG. MPI will pay to Lexicon a
         non-refundable option fee of ***** for each Antisense Drug subject to
         an Antisense Option, payable within 10 business days after Lexicon
         grants such Antisense Option to MPI.

5.9      OPTION EXTENSION FEE FOR AN ANTISENSE DRUG. MPI will pay to Lexicon a
         non-refundable option extension fee of ***** for each Antisense Drug
         subject to an Antisense Option for which MPI elects to extend the
         Antisense Option for an additional ***** period, payable upon the
         expiration of the initial Antisense Option period.

5.10     PRODUCT LICENSE FEE FOR A LICENSED ANTISENSE DRUG. MPI will pay to
         Lexicon a non-refundable product license fee of ***** for each Licensed
         Antisense Drug, payable at the time MPI obtains an exclusive commercial
         product license to such Licensed Antisense Drug.

5.11     PCR CLONE. MPI will pay to Lexicon ***** for each PCR clone provided to
         MPI by Lexicon pursuant to Section 4.3.

5.12     FULL-LENGTH CLONE. MPI will pay to Lexicon ***** for each full-length
         clone provided to MPI by Lexicon pursuant to Section 4.4.

5.13     MILESTONE PAYMENTS FOR EACH LICENSED SMALL MOLECULE DRUG OR LICENSED
         ANTIBODY DRUG. Within 30 days after achievement of each of the
         milestones set forth below for a Licensed Small Molecule Drug or
         Licensed Antibody Drug, MPI will pay to Lexicon the non-refundable
         milestone payment set forth below:

         *****

         *****

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5.14     ROYALTY FOR EACH LICENSED SMALL MOLECULE OR LICENSED ANTIBODY DRUG. MPI
         will pay to Lexicon ***** of Net Sales of each Licensed Small Molecule
         Drug or Licensed Antibody Drug.

5.15     MILESTONE PAYMENTS FOR EACH LICENSED THERAPEUTIC PROTEIN. Within 30
         days after achievement of each of the milestones set forth below for a
         Licensed Therapeutic Protein, MPI will pay to Lexicon the
         non-refundable milestone payment set forth below:

         *****

         *****

5.16     ROYALTY FOR EACH LICENSED THERAPEUTIC PROTEIN.

         (a)      MPI will pay to Lexicon on a country-by-country basis, (i)
                  ***** and (ii) *****.

         (b)      *****

5.17     ROYALTY OFFSETTING PROVISION. In the event that MPI and/or any of its
         Affiliates are required to obtain a license for ***** regarding a
         Licensed Therapeutic Protein and MPI's total royalty obligations to
         third parties, including royalties owed to Lexicon, exceeds ****
         related to ***** then MPI may, on a country-by-country basis, credit
         ***** of the royalty rate that exceeds ***** against Lexicon's royalty
         rate; provided, however, that in no event will Lexicon's royalty rate
         be reduced below ***** of its initial royalty rate. *****

5.18     SPECIAL PROVISION FOR ROYALTY PAYMENTS. *****

5.19     MILESTONE PAYMENTS FOR EACH LICENSED ANTISENSE OR GENE THERAPY DRUG.
         Within 30 days after achievement of each of the milestones set forth
         below for a Licensed Antisense Drug or Gene Therapy Drug, MPI will pay
         to Lexicon the non-refundable milestone payment set forth below:

         *****

         *****

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CONFIDENTIAL - 9/23/99

5.20     ROYALTY FOR EACH LICENSED ANTISENSE DRUG OR LICENSED GENE THERAPY DRUG.

         (a)      MPI will pay to Lexicon on a country-by-country basis, (i)
                  ***** and (ii) *****

         (b)      *****

5.21     MILESTONE PAYMENTS FOR EACH LICENSED DIAGNOSTIC PRODUCT. Within 30 days
         after the first regulatory marketing approval for a Licensed Diagnostic
         Product in a Major Market Country, MPI will pay to Lexicon *****.

5.22     ROYALTY FOR EACH LICENSED DIAGNOSTIC PRODUCT. MPI will pay to Lexicon
         on a country-by-country basis (a) ***** (b) *****.

5.23     *****

5.24     ADDITIONAL MILESTONE PAYMENTS FOR EACH NOVEL GENE.

         (a) Within 30 days after the initiation of Pre-IND Studies for each
         Therapeutic Protein or Antisense Drug relating to a Lexicon Sequence
         corresponding to a given Novel Gene, MPI will pay to Lexicon ***** in
         addition to the milestone payments under Section 5.15 or 5.19 and
         royalty payments under Sections 5.16 or 5.20 payable to Lexicon; and

         (b) Within 30 days after the initiation of Pre-IND Studies for each
         Antibody Drug, Small Molecule Drug or Gene Therapy Drug relating to a
         Lexicon Sequence corresponding to a given Novel Gene, MPI will pay to
         Lexicon **** in addition to the milestone payments under Sections 5.13
         or 5.19 and royalty payments under Sections 5.14 or 5.20 payable to
         Lexicon.

*****

5.25     TERM OF ROYALTY OBLIGATIONS. MPI's obligation to make royalty payments
         with respect to a Licensed Product will commence on the First
         Commercial Sale of such Licensed Product in a given country and will
         continue until the later of (a) the expiration of the last to expire
         patent covering such Licensed Product in such country, or (b) *****
         years after the First Commercial Sale of such Licensed Product in such
         country. *****

5.26     *****

5.27     CORPORATE PARTNERS AS SUBSCRIBERS TO THE HUMAN GENE TRAP(TM) DATABASE.
         In the event a Corporate Partner who is also a subscriber to the Human
         Gene Trap(TM) Database, elects, primarily as a result of work conducted
         by MPI and/or MPI's Affiliates, to pursue the discovery, development
         and commercialization of an Antibody Drug, Antisense Drug, Diagnostic
         Product, Gene Therapy Drug, Small Molecule Drug or Therapeutic Protein
         for which it would need to practice rights to a particular Program
         Clone and/or Lexicon Sequence granted by Lexicon under such Corporate
         Partner's own agreement with Lexicon, MPI and such Corporate Partner
         shall

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CONFIDENTIAL - 9/23/99

         agree upon and advise Lexicon in writing as to which of the two parties
         shall be responsible for the payments due to Lexicon and Lexicon shall
         waive the payments otherwise due Lexicon from the other party in
         connection with any such Antibody Drug, Antisense Drug, Diagnostic
         Product, Gene Therapy Drug, Small Molecule Drug or Therapeutic Protein
         developed by such Corporate Partner.

                                    ARTICLE 6

                            PAYMENTS; RECORDS; AUDITS

6.1      PAYMENT; REPORTS. Royalty payments will be calculated and reported for
         each calendar quarter. All royalty payments due to Lexicon under this
         Agreement will be paid within ***** of the end of each calendar
         quarter, unless otherwise specifically provided herein. Each payment of
         royalties will be accompanied by a report in sufficient detail to
         permit confirmation of the accuracy of the royalty payment made,
         including, without limitation, Net Sales, the royalties payable in
         United States dollars, the method used to calculate the royalty and any
         exchange rates used.

6.2      EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments hereunder will
         be payable in United States dollars. With respect to each quarter, for
         countries other than the United States, whenever conversion of payments
         from any foreign currency will be required, such conversion will be
         made at the rate of exchange reported in the East Coast edition of The
         Wall Street Journal on the last business day of the applicable
         reporting period. All payments owed under this Agreement will be made
         by wire transfer to a bank account designated by Lexicon, unless
         otherwise specified in writing by Lexicon.

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

6.4      RECORDS AND AUDITS. During the term of this Agreement and for a period
         of ***** thereafter, MPI will keep complete and accurate records in
         sufficient detail to permit Lexicon to confirm the accuracy of all
         payments due hereunder. Lexicon will have the right to cause an
         independent, certified public accountant reasonably acceptable to MPI,
         who has executed MPI's then-current standard confidentiality agreement
         to audit such records to confirm payments due hereunder. Such audits
         may be exercised during normal business hours, subject to MPI's
         security regulations, no more than once in any 12-month period upon
         reasonable prior written notice to MPI. Lexicon will bear the full cost
         of such audit, unless such audit discloses an underpayment of more than
         ***** of the amount due under this Agreement. In such case, MPI will
         bear the full cost of such audit. In all events, MPI will pay any
         underpayment with interest in accordance with Section 6.3.

6.5      TAXES. All taxes levied on account of the royalties and other payments
         accruing to

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CONFIDENTIAL - 9/23/99

         Lexicon under this Agreement will be paid by Lexicon for its own
         account, including taxes levied thereon as income to Lexicon. If
         provision is made in law or regulation for withholding, such tax will
         be deducted from the royalty or other payment made by MPI to the proper
         taxing authority and a receipt of payment of the tax secured and
         promptly delivered to Lexicon. Each party agrees to assist the other
         party in claiming exemption from such deductions or withholdings under
         any double taxation or similar agreement or treaty from time to time in
         force.

                                    ARTICLE 7

                                 CONFIDENTIALITY

During the term of this Agreement and for a period of ***** thereafter, each
party will maintain all Confidential Information of the other party as
confidential and will not disclose any Confidential Information of the other
party to any Third Party or use any Confidential Information of the other party
for any purpose, except (a) as expressly authorized by this Agreement, (b) as
required by law, rule, regulation or court order (provided that the disclosing
party will use commercially reasonable efforts to obtain confidential treatment
of any such information required to be disclosed), (c) to its Affiliates,
Corporate Partners, Academic Collaborators, sublicensees, employees, agents,
consultants, and other representatives to accomplish the purposes of this
Agreement so long as such persons are under an obligation of confidentiality no
less stringent than as set forth herein or (d) as is reasonably necessary to
file or prosecute patent applications or to conduct preclinical or clinical
trials. Each party may use such Confidential Information only to the extent
required to accomplish the purposes of this Agreement. Each party will use at
least the same standard of care as it uses to protect its own Confidential
Information to ensure that its Affiliates, sublicensees, employees, agents,
consultants, and other representatives do not disclose or make any unauthorized
use of Confidential Information of the other party. Each party will promptly
notify the other party upon discovery of any unauthorized use or disclosure of
Confidential Information of the other party.

                                    ARTICLE 8

                  REPRESENTATIONS; WARRANTIES; INDEMNIFICATION

8.1      CORPORATE POWER. Each party hereby represents and warrants that it is
         duly organized, validly existing and in good standing under the laws of
         the state of its incorporation and has full corporate power and
         authority to enter into this Agreement and to carry out the provisions
         hereof.

8.2      DUE AUTHORIZATION. Each party hereby represents and warrants that such
         party is duly authorized to execute and deliver this Agreement and to
         perform its obligations hereunder.

8.3      BINDING AGREEMENT. Each party hereby represents and warrants that this
         Agreement is a legal and valid obligation binding upon it and is
         enforceable in accordance with its terms. The execution, delivery and
         performance of this Agreement by such party does not conflict with any
         agreement, instrument or understanding, oral or written, to which it is
         a party or by which it may be bound, nor violate any law or regulation
         of any court, governmental body or administrative or other agency
         having authority over it.

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8.4      PATENTS. Lexicon hereby represents and warrants that: (i) prior to
         releasing any DNA sequence from a Program Clone present in the Human
         Gene Trap(TM) Database that it believes to be novel to any party
         outside of Lexicon and/or prior to the disclosure to any party outside
         of Lexicon of any full-length gene sequence that it believes to contain
         novel DNA sequence information, it will file such patent applications
         as are necessary to obtain Lexicon Patent Rights with respect to, or
         representative of, such Program Clone(s) and/or such full-length
         sequence as the case may be, ***** (ii) during the Access Period, it
         will, consistent with reasonable commercial and patent practices,
         prosecute such patent applications and maintain such patents as may
         issue thereon and (iii) subsequent to the grant to MPI of any type of
         commercialization option or license hereunder with respect to a Program
         Clone or set of Program Clones corresponding to a given gene,
         consistent with reasonable commercial and patent practices, continue to
         prosecute the patent applications pertaining to such Program Clone or
         set of Program Clones and to maintain such patents as may issue
         thereon. In the event that MPI shall be granted an exclusive commercial
         product license for a Licensed Therapeutic Protein or a Licensed
         Antisense Drug and Lexicon shall desire to cease to prosecute or
         maintain a patent application or patent pertaining to the related
         Program Clone or set of Program Clones, Lexicon shall provide MPI with
         prompt notice (but in no event less than ***** notice prior to any
         required action necessary to prosecute or maintain such patent
         application or patent) and, thereupon, MPI shall have the right to
         assume such prosecution or maintenance, in the name and on behalf of
         Lexicon, and to offset all of its reasonable and documented costs that
         are directly associated with such prosecution and maintenance against
         any payments due to Lexicon in relation to such Licensed Therapeutic
         Protein or Licensed Antisense Drug.

8.5      DATABASE WARRANTIES. Lexicon hereby represents, warrants and covenants
         to MPI as follows:

                  (a)      Lexicon has the right to grant access to the Human
                           Gene Trap(TM)and OmniBank(R)

                  (b)      Databases and licenses contemplated in this
                           Agreement, subject to the intellectual property
                           rights of others in gene sequence information
                           independently generated by parties other than
                           Lexicon;

                  (c)      as of the date of delivery to MPI, the Human Gene
                           Trap(TM) Database contains at least ***** H-TSTs of
                           tag length greater than ***** nucleotides and with an
                           average length of approximately ***** base pairs or
                           more, and the OmniBank(R) Database contains at least
                           ***** OSTs of tag length greater than *****
                           nucleotides;

                  (d)      the Human Gene Trap(TM) Database and the OmniBank(R)
                           Database in the form delivered to MPI does not
                           contain any disabling device, code, computer virus or
                           defect that will with the passage of time or
                           otherwise, impair the functionality or use of the
                           Human Gene Trap(TM) Database and/or OmniBank(R)
                           Database;

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CONFIDENTIAL - 9/23/99

                  (e)      the Human Gene Trap(TM) Database and the OmniBank(R)
                           Database in the form delivered to MPI shall not in
                           any way malfunction, cease to function, or produce
                           incorrect data or results as a result of the Year
                           2000, and

                  (f)      the Human Gene Trap(TM) Database and OmniBank(R)
                           Databases were prepared with and will be maintained
                           and updated with professional skill and care.

8.6      DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
         AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE
         OTHER PARTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
         LIMITATION, ANY WARRANTY OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY OR
         FITNESS FOR A PARTICULAR PURPOSE.

8.7      LIMITATION OF LIABILITY. NEITHER PARTY WILL BE ENTITLED TO RECOVER FROM
         THE OTHER PARTY ANY SPECIAL, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR
         PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT.

8.8      INDEMNIFICATION. MPI hereby agrees to save, defend, indemnify and hold
         harmless Lexicon and its officers, directors, employees, consultants,
         agents and other representatives from and against all losses, damages,
         liabilities, expenses and costs, including reasonable legal expense and
         attorneys' fees ("Losses"), to which Lexicon may become subject as a
         result of any claim, demand, action or proceeding by any Third Party to
         the extent such Losses arise out of or result from (a) the practice by
         MPI of the licenses granted hereunder, or (b) the development,
         manufacture, use, handling, storage, sale or other disposition of any
         Licensed Product by MPI, its Affiliates or sublicensees. In the event
         Lexicon seeks indemnification under this Section 8.8, it will promptly
         inform MPI of a claim in writing, will permit MPI to assume direction
         and control of the defense of the claim including the right to settle
         the claim, and will cooperate as requested at the expense of MPI, in
         the defense of the claim. The foregoing MPI indemnification obligations
         shall not apply if such claim, demand, action or proceeding arises as a
         result of Lexicon's breach of the warranties set forth in Section 8.5.

                                    ARTICLE 9

                                TERM; TERMINATION

9.1      TERM. This Agreement will commence as of the Effective Date and will
         continue until the expiration of all of MPI's obligations to pay
         royalties hereunder with respect to Licensed Products, unless
         terminated earlier as provided herein.

9.2      TERMINATION. Either party may terminate this Agreement prior to the
         expiration of the term of this Agreement upon or after the breach of
         any material provision of this Agreement by the other party if the
         breaching party has not cured such breach within ***** after written
         notice thereof by the non-breaching party.

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CONFIDENTIAL - 9/23/99

9.3      TERMINATION BY MPI. MPI may terminate this Agreement by providing
         written notice of termination to Lexicon at least ***** prior to the
         expiration of the Initial Access Period. In the event MPI terminates
         this Agreement prior to the expiration of the Initial Access Period,
         MPI will provide to Lexicon a written report citing its reasons for
         termination, including general statistical data MPI discovered
         regarding the novelty of the Human Gene Trap(TM) and OmniBank(R)
         Databases compared to MPI's internal proprietary databases.

9.4      EFFECT OF TERMINATION.

                  (a)      *****Upon termination of this Agreement subsequent to
                           the Initial Access Period, (i) MPI's access to the
                           Human Gene Trap(TM) Database and OmniBank(R) Database
                           and research and development licenses shall
                           terminate, (ii) any commercial product licenses shall
                           continue in full force and effect, subject to the
                           terms and conditions of this Agreement, and (iii) MPI
                           will promptly delete from its databases all other
                           data provided by Lexicon to MPI during the Access
                           Period related to the Human Gene Trap(TM) and
                           OmniBank(R) Databases and all other Lexicon Sequences
                           which are not related to such commercial product
                           licenses. Notwithstanding the foregoing, in the event
                           MPI fails to pay any fees or royalties for an
                           individual commercial product license, Lexicon shall
                           have the right to terminate the commercial product
                           license for which payment was not made.

                  (b)      Within 30 days following the expiration or
                           termination of this Agreement, each party will return
                           to the other party, or destroy, upon the written
                           request of the other party, any and all Confidential
                           Information of the other party in its possession.

                  (c)      Expiration or termination of this Agreement will not
                           relieve the parties of any obligation accruing prior
                           to such expiration or termination. The provisions of
                           Sections 6.4, 8.4, 8.5, 8.6, 8.7, 8.8 and 9.4 and
                           Articles 1, 7 and 10 will survive termination or
                           expiration of this Agreement.

                                   ARTICLE 10

                                  MISCELLANEOUS

10.1     FORCE MAJEURE. Neither party will 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 term of
         this Agreement (other than non-payment) when such failure or delay is
         caused by or results from causes beyond the reasonable control of the
         affected party, including, without limitation, fire, floods,
         earthquakes, natural disasters, embargoes, war, acts of war (whether
         war be 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 or the
         other party.

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10.2     ASSIGNMENT. Except as expressly provided hereunder, neither this
         Agreement nor any rights or obligations hereunder may be assigned or
         otherwise transferred by either party without the prior written consent
         of the other party (which consent will not be unreasonably withheld);
         provided, however, that either party may assign this Agreement and its
         rights and obligations hereunder without the other party's consent (a)
         in connection with the transfer or sale of all or substantially all of
         the business of such party to which this Agreement relates to a Third
         Party, whether by merger, sale of stock, sale of assets or otherwise,
         or (b) to an Affiliate. Notwithstanding the foregoing, any such
         assignment to an Affiliate will not relieve the assigning party of its
         responsibilities for performance of its obligations under this
         Agreement. In the event of such transaction with an unrelated Third
         Party, notwithstanding the other provisions of this Agreement, the
         intellectual property rights of such Third Party shall not be subject
         to the licenses granted under this Agreement. The rights and
         obligations of the parties under this Agreement will be binding upon
         and inure to the benefit of the successors and permitted assigns of the
         parties. Any assignment not in accordance with this Agreement will be
         void.

10.3     GOVERNING LAW. This Agreement will be governed by, and construed and
         enforced in accordance with, the laws of the State of Delaware, without
         regard to any choice of law provisions which would result in the
         application of the law of another jurisdiction.

10.4     ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Knock-Out Agreement
         (including the Exhibits attached hereto) set forth all of the
         agreements and understandings between the parties hereto with respect
         to the subject matter hereof, and supersede and terminate all prior
         agreements and understandings between the parties with respect to the
         subject matter hereof. There are no agreements or understandings with
         respect to the subject matter hereof, either oral or written, between
         the parties other than as set forth herein. Except as expressly set
         forth in this Agreement, no subsequent amendment, modification or
         addition to this Agreement will be binding upon the parties hereto
         unless reduced to writing and signed by the respective authorized
         officers of the parties.

10.5     PUBLICITY. Except as provided in this Section 10.5, Lexicon and MPI
         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 the Effective Date
         of this Agreement, Lexicon and MPI 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 MPI may, on or after the Effective Date,
         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 ten (10) days prior to the anticipated use or disclosure of
         the revised material, such approval not to be unreasonably withheld or
         delayed. If either party desires to release a separate announcement
         relating to this Agreement, to the extent such separate announcement
         contains information concerning the other party that differs from the
         materials previously agreed upon for use as a routine reference, it
         shall first allow the other party to approve in writing such proposed
         announcement in redacted form, such approval not to be unreasonably
         withheld or delayed.

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         The terms of this Agreement shall be treated as the Confidential
         Information of Lexicon and MPI, and shall not be disclosed to anyone
         (except for the parties' respective employees, agents and attorneys
         with regard to this Agreement who have a need to know the terms of this
         Agreement) without the written permission of MPI or Lexicon; provided
         that MPI may disclose to its actual and potential sublicensees that it
         is a subscriber to the Human Gene Trap(TM) Database; and provided,
         further, that MPI may disclose the restrictions imposed on it as a
         subscriber to the Human Gene Trap(TM) Database to the employees,
         directors or officers of its actual and potential sublicensees, under a
         written confidentiality agreement, to the extent necessary to enable
         such sublicensees to fulfill their obligations to MPI and Lexicon under
         sponsored research and other similar agreements.

10.6     NOTICES. All notices and other communications provided for hereunder
         will be in writing and will be mailed by first-class or certified mail,
         postage paid, or delivered personally, by overnight delivery service or
         by facsimile, with confirmation of receipt, addressed as follows:

         IF TO LEXICON:                     LEXICON GENETICS INCORPORATED
                                            4000 Research Forest Drive
                                            The Woodlands, Texas  77381
                                            Attention:  President
                                            Telephone:  (281) 364-0100
                                            Facsimile:  (281) 364-0155

         IF TO MPI:                         MILLENNIUM PHARMACEUTICALS, INC.
                                            75 Sidney Street
                                            Cambridge, Massachusetts 02139
                                            Attention:  Chief Business Officer
                                            Telephone: 617/679-7000

         WITH A cc TO:                      General Counsel

                                            75 Sidney Street
                                            Cambridge, Massachusetts 02139

                                            Telephone: 617-679-7000
                                            Facsimile: 617-374-0074

         Either party may by like notice specify or change an address to which
notices and communications will thereafter be sent. Notices sent by facsimile
will be effective upon confirmation of receipt, notices sent by mail or
overnight delivery service will be effective upon receipt, and notices given
personally will be effective when delivered.

                                       31
<PAGE>   32

CONFIDENTIAL - 9/23/99

10.7     INDEPENDENT CONTRACTORS. It is expressly agreed that Lexicon and MPI
         will be independent contractors and that the relationship between the
         two parties will not constitute a partnership, joint venture or agency
         of any kind. Neither party will have the authority to make any
         statements, representations or commitments of any kind, or to take any
         action, which will be binding on the other party, without the prior
         written consent of the other party.

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

10.9     SEVERABILITY. In case any provision of this Agreement will be invalid,
         illegal or unenforceable, the validity, legality and enforceability of
         the remaining provisions will not in any way be affected or impaired
         thereby.

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

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

10.12    DISPUTES. Any controversy, claim or dispute arising out of or relating
         to this Agreement shall be settled, if possible, through good faith
         negotiations between the parties. If, however, the parties are unable
         to settle such dispute after good faith negotiations, the matter shall
         be referred to the executive officers of each company to be resolved by
         negotiation in good faith as soon as is practicable but in no event
         later than 30 days after referral. If the executive officers are unable
         to settle the dispute after good faith negotiation in the manner set
         forth above, then in addition to any other recourse in law or in equity
         available to either party, with respect to issues directly relating to
         (a) Lexicon's reasonable, good faith belief that MPI or its Affiliates
         are developing or have developed a product using a specific Program
         Clone that (i) requires a commercial product license under this
         Agreement and for which MPI and/or its Affiliates have not complied
         with the material terms and conditions of this Agreement necessary to
         obtain such commercial product license or (ii) for which Lexicon is
         entitled to milestone payments and/or royalties under this Agreement
         and for which undisputed amounts have not been paid by Millennium
         and/or its Affiliates or (b) MPI and/or its Affiliates reasonable, good
         faith belief that Lexicon has failed to comply with its obligations set
         forth in Section 2.20(a) of this Agreement, then upon written notice to
         the other party, either party may proceed with the procedures set forth
         in the Escrow Agreement.

                                       32
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CONFIDENTIAL - 9/23/99

IN WITNESS WHEREOF, the parties have executed this Agreement as of the latest
date set forth below.

LEXICON GENETICS INCORPORATED           MILLENNIUM PHARMACEUTICALS, INC.

By: /S/ Arthur T. Sands                 By: /s/ Steven H. Holtzman
   ------------------------------          ------------------------------

Name: Arthur T. Sands                   Name: Steven H. Holtzman
     ----------------------------            ----------------------------

Title: President and Chief              Title: Chief Business Officer
        Executive Officer                     ---------------------------
      ---------------------------

Date: 9/28/99                            Date: 9/27/99
     ----------------------------            ----------------------------

<PAGE>   34

CONFIDENTIAL - 9/23/99

                                    EXHIBIT A

                              MUTANT MOUSE PROGRAM

         During each year of the Access Period, MPI may submit one or more
written purchase orders to Lexicon to purchase up to **** custom mutant mice
under the financial terms described below. Lexicon will generate custom mutant
mice (e.g. conditionals, point mutations or standard deletions) for MPI and
provide updates every two months as to Lexicon's progress in generating such
custom mutant mice. The cost and time to generate a custom mutant mouse will
depend upon the type of mutant mouse requested as described below. The main
procedures Lexicon will perform to generate a custom mutant mouse are described
below. Mutant mice made by homologous recombination under this program will be
subject to the terms and conditions of the collaboration agreement between
Millennium Pharmaceuticals, Inc. and Lexicon Genetics Incorporated and any
successor to such Agreement, dated June 24, 1999, unless otherwise agreed to in
writing by the parties.

I. PRICING

         MUTANT MICE GENERATED BY HOMOLOGOUS RECOMBINATION:

         Non Cre-Lox                                               *****
         Cre-Lox                                                   *****

         MUTANT MICE GENERATED BY OMNIBANK(R) METHOD (E.G. USING EMBRYONIC STEM
         CELLS DERIVED FROM OMNIBANK(R) SEQUENCE TAGS):

         OmniBank(R)Mice                                           *****

The parties agree to negotiate in good faith the terms under which MPI will
receive non-exclusive rights to and delivery of mice generated under the
OmniBank(R) Method.

II. GENERAL CUSTOM MUTANT MOUSE SCIENTIFIC PROCEDURES

         *****

<PAGE>   35

CONFIDENTIAL - 9/23/99

                                    EXHIBIT B

                   SEEK TARGET VALIDATION (S-T-V(TM)) PROGRAM

         The S-T-V Program includes the generation of custom mutant mice and
primary phenotypic analysis of the mutant mouse to help discern the drug
target's biological function in vivo. The price for each S-T-V Program is based
on a project by project scenario for a specific gene of interest to the partner
and depends on the number and type of experiments performed as depicted below
through Levels I - III.

         Upon completion of the mutant mouse for a specific S-T-V Program,
Lexicon will work with its partner to identify a battery of biological
experiments to perform under this project. Although not inclusive, the following
list provides a sample representation of the breadth of biological experiments
Lexicon can perform to better understand the biological function of the Drug
Target.

         LEVEL I - PRIMARY BIOLOGICAL ANALYSIS

         Level I analysis is designed to identify primary pathophysiological
perturbations resulting from engineered mutations. Although not an exhaustive
list, primary phenotypic screens may include any or all of the following
scientific experiments.

         FULL ANATOMICAL AND HISTOLOGICAL ANALYSIS ON MUTANT ANIMALS:

         *****

         Additional cost for biological experiments under Level I: *****

         LEVEL II - ORGAN AND PHYSIOLOGIC SYSTEMS ANALYSIS

         Level II analysis is designed as a continuation of the Level I
preliminary analysis of the pathophysiological perturbations resulting from
engineered mutations. Level II analysis is focused on organ and system function
and represents an exhaustive analysis of organismal physiology. Phenotypic
screen analysis under Level II may include any or all of the following
scientific experiments. Additional screens and assays to be conducted shall be
determined by the parties in accordance to the specific requirements of such
project.

         FULL ORGAN AND PHYSIOLOGIC SYSTEMS FUNCTIONAL ANALYSIS:

         *****

         Additional cost for biological experiments under Level II: *****

<PAGE>   36

CONFIDENTIAL - 9/23/99

         LEVEL III - PATHWAY DISCOVERY AND ANALYSIS

         Level III analysis is designed as a continuation of the Level I and
Level II analysis of the pathophysiological perturbations resulting from
engineered mutations. Level III analysis is designed to define biochemical
pathways, identify new drug-targets and to define the biochemical mechanism of
the pathophysiology identified in the Level I and Level II analysis. Level III
analysis utilizes biochemistry, cell biology, enzymology, molecular biology and
other biological disciplines to define the molecular mechanism leading to the
identified dysfunction. Level III analysis further exploits gene expression
profiling with mutant, heterozygous and wild-type mouse strains that differ in
only one gene. These animals are the perfect substrate for gene expression
profiling analysis. This analysis will identify up-regulated and down-regulated
genes responsive to the initial genetic perturbation. This analysis is
substantially aided by Lexicon's proprietary gene-trap sequence tags, which
provide the advantage to analyze tens-of-thousands of novel genes. In addition
Lexicon will analyze the target protein for interacting proteins by two-hybrid
analysis.

         Additional cost for biological experiments under Level III: *****

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