COLLABORATION AND LICENSE AGREEMENT

Collaboration Agreement

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LEXICON GENETICS INC/TX | BRISTOL-MYERS SQUIBB COMPANY

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Title: COLLABORATION AND LICENSE AGREEMENT
Governing Law: Delaware Date: 3/12/2004
Industry: Biotechnology and Drugs Sector: Healthcare

COLLABORATION AND LICENSE AGREEMENT, Parties: lexicon genetics inc/tx , bristol-myers squibb company

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EXHIBIT 10.15

Confidential materials omitted and filed separately with the Securities and

Exchange Commission. Asterisks denote omissions.

================================================================================

COLLABORATION AND LICENSE AGREEMENT

between

LEXICON GENETICS INCORPORATED

and

BRISTOL-MYERS SQUIBB COMPANY

================================================================================

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COLLABORATION AND LICENSE AGREEMENT

THIS COLLABORATION AND LICENSE AGREEMENT (this "Agreement") is dated as

of December 17, 2003 (the "Effective Date") and is made by and between LEXICON

GENETICS INCORPORATED, a Delaware corporation ("Lexicon"), and BRISTOL-MYERS

SQUIBB COMPANY, a Delaware corporation ("BMS"). Lexicon and BMS are sometimes

referred to herein individually as a "party" and collectively as the "parties."

R E C I T A L S

WHEREAS, Lexicon and BMS are each in the business of discovering,

developing and commercializing pharmaceutical products; and

WHEREAS, Lexicon is engaged in the identification and validation of

targets for use in the discovery of compounds potentially useful to prevent or

treat diseases and conditions of the central nervous system;

WHEREAS, Lexicon and BMS are interested in collaborating in the

discovery, development and commercialization of compounds for use in the

prevention or treatment of such diseases and conditions;

NOW, THEREFORE, in consideration of the premises and of the covenants

herein contained, the parties hereto mutually agree as follows:

ARTICLE 1. DEFINITIONS

The terms in this Agreement with initial letters capitalized, whether

used in the singular or the plural, shall have the meaning set forth below or,

if not listed below, the meaning designated in places throughout this Agreement.

1.1 "Affiliate" means any corporation, company, partnership, joint

venture and/or firm that controls, is controlled by or is under common control

with a party to this Agreement. For purposes hereof, "control" means (a) in the

case of corporate entities, direct or indirect ownership of more than fifty

percent (50%) of the stock or shares entitled to vote for the election of

directors; and (b) in the case of non-corporate entities, direct or indirect

ownership of more than fifty percent (50%) of the equity interest with the power

to direct the management and policies of such non-corporate entities.

1.2 "Agreement" means this Collaboration and License Agreement,

including all Exhibits hereto.

1.3 "Alliance Manager" has the meaning set forth in Section 3.12.

1.4 "Annual Research Plan" means the plan to be developed by the

Joint Scientific Committee and approved by the Joint Management Committee for

each Contract Year, to be updated as necessary during each Contract Year,

setting forth, among other things, a master plan for the Research Program during

the Research Program Term and the matters described in Section 2.7 hereof.

1.5 "Background Materials" means BMS Background Materials and

Lexicon Background Materials.

1.6 "Background Technology" means BMS Background Technology and

Lexicon Background Technology.

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1.7 "Back-up Compound" means a Program Compound acting through the

same Selected Target as a Development Candidate and designated by the Joint

Management Committee as a back-up for such Development Candidate, including,

without limitation, any Program Compound for which the Joint Management

Committee authorizes the conduct of preclinical work sufficient to support the

filing of an IND.

1.8 "Blended Rate" means (a) the total amount of royalties (stated

in U.S. dollars) that would be payable in a Contract Year with respect to a

Product under Section 5.5.1 or 5.5.2, as applicable, [**] divided by (b) the

total Net Sales (stated in U.S. dollars) of such Product in that Contract Year,

expressed as a percentage.

1.9 "BMS" means Bristol-Myers Squibb Company and its Affiliates.

1.10 "BMS Background Materials" means any compounds, assays or

other materials that are (a) necessary or useful for the conduct of the Research

Program, (b) Controlled by BMS, (c) utilized in the Research Program (but only

to the extent so utilized) and (d) either in BMS's or any of its Affiliates'

possession as of the Effective Date or are discovered or acquired by BMS or any

of its Affiliates during the Research Program Term but outside of the conduct of

the Research Program. BMS Background Materials excludes Selected Targets and

Program Compounds.

1.11 "BMS Background Technology" means any inventions, information,

methods, know-how, trade secrets or data that (a) are necessary or useful for

the performance of the Research Program, (b) are Controlled by BMS, (c) are

utilized in the Research Program (but only to the extent so utilized) and (d)

either are in BMS's or any of its Affiliates' possession as of the Effective

Date or are discovered or acquired by BMS or any of its Affiliates during the

Research Program Term but outside of the conduct of the Research Program.

1.12 "BMS Development Compound" means any and all of the following:

(a) a Development Candidate for a BMS Target that is so

designated under Section 2.5 hereof; and

(b) any Back-up Compound(s) designated for such

Development Candidate; and

the same BMS Target:

(i) that is made in the course of performing

medicinal chemistry on or optimizing such Development

Candidate and Back-up Compound(s), or performing structure

activity relationship activities using such Development

Candidate, Back-up Compound(s) or other Program Compounds

active against such BMS Target; provided that such Small

Molecule Compound [**]; or

(ii) that is [**]; and

(d) any salts of any of the foregoing.

1.13 "BMS Inactive Selected Target" has the meaning set forth in

Section 2.3.4.4.

1.14 "BMS Product" means a pharmaceutical product containing a BMS

Development Compound as an active ingredient.

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1.15 "BMS Target" means a Selected Target that is so designated

under Section 2.5 hereof.

1.16 "CNS Field" means the prevention, palliation, control or

treatment in humans of (a) depression, schizophrenia, [**], (b) Alzheimer's

disease and other cognitive disorders, (c) [**] neurodegenerative disorders,

[**].

1.17 "Compound Library Screening" means screening of compound

libraries to identify Small Molecule Compounds that are active against a

Selected Target using an assay that meets requirements (for example, with

respect to throughput) established by, or the use of which is otherwise approved

by, the Joint Scientific Committee. For purposes of this Agreement,

"commencement of Compound Library Screening" for a Selected Target means the

initiation of Compound Library Screening for such Selected Target, following

Joint Management Committee authorization, by either BMS or Lexicon.

1.18 "Confidential Information" means any information and data

received by a party (the "Receiving Party") from the other party or its

Affiliates (the "Disclosing Party") in connection with this Agreement

(including, without limitation, all information disclosed by the parties under

Article 2 hereof and any research, testing, clinical, regulatory, marketing or

other scientific or business information, plans, or data pertaining to any

Product of the Disclosing Party). Notwithstanding the foregoing, Confidential

Information shall not include any part of such information or data that:

(a) is or becomes part of the public domain other than by

unauthorized acts of the Receiving Party or its Affiliates;

(b) can be shown by written documents to have been

already in the possession of the Receiving Party or its Affiliates

prior to disclosure under this Agreement, provided such information or

data was not obtained directly or indirectly from the Disclosing Party

under an obligation of confidentiality;

disclosed to the Receiving Party or its Affiliates by a Third Party,

provided such information or data was not obtained directly or

indirectly from the Disclosing Party under an obligation of

confidentiality; or

(d) can be shown by written documents to have been

independently developed by the Receiving Party or its Affiliates

without use, aid or application of Confidential Information of the

Disclosing Party.

Specific Confidential Information of a Disclosing Party shall not be deemed to

come under the foregoing exceptions merely because it is embraced by more

general information that is or becomes part of the public domain, or is known

by, disclosed to or independently developed by the Receiving Party.

1.19 "Contract Year" means (a) with respect to the first Contract

Year, the period beginning on the Effective Date and ending on December 31, 2004

(the "First Contract Year"), and (b) with respect to each subsequent Contract

Year, the twelve (12) month period beginning on the day following the end of the

First Contract Year and each succeeding twelve (12) month period thereafter

during the term of the Agreement (except that the last Contract Year shall end

on the effective date of any termination or expiration of this Agreement). Each

Contract Year (other than the First and last Contract Year) shall be divided

into four (4) "Contract Quarters" comprised of successive three (3) month

periods. In the First Contract Year, the first Contract Quarter shall begin on

the Effective Date and end on March 31, 2004, and in the last Contract Year, the

last Contract Quarter shall end on the effective date of any termination or

expiration of this Agreement.

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1.20 "Control" or "Controlled" means, with respect to any (a)

material, document, item of information, method, data or other know-how or (b)

Patent Right or other intellectual property right, the possession (whether by

ownership or license, other than by a license granted pursuant to this

Agreement) by a party or its Affiliates of the ability to grant to the other

party access, ownership, a license and/or a sublicense as provided herein under

such item or right without violating the terms of any agreement or other

arrangement with any Third Party as of the time such party would first be

required hereunder to grant the other party such access, ownership, license or

sublicense.

1.21 "Cover," "Covered" or "Covering" means, with respect to a

Patent Right, that, but for rights granted to a person or entity under such

Patent Right, the practice by such person or entity of an invention claimed in

such Patent Right would infringe a Valid Claim included in such Patent Right, or

in the case of a Patent Right that is a patent application, would infringe a

Valid Claim in such patent application if it were to issue as a patent.

1.22 "Development Candidate" means a Program Compound that has been

selected by the Joint Management Committee for full preclinical development in

preparation for the commencement of a Phase 1 Trial and that has been designated

by the Joint Management Committee as a "Development Candidate" in accordance

with Section 3.4, including, without limitation, any Program Compound for which

the Joint Management Committee authorizes the commencement of a Phase 1 Trial.

1.23 "Development Compound" means a BMS Development Compound or a

Lexicon Development Compound.

1.24 "Diligent Efforts" means the carrying out of obligations or

tasks by a party in a sustained manner using good faith commercially reasonable

and diligent efforts, which efforts shall be consistent with the exercise of

prudent scientific and business judgment in accordance with the efforts such

party devotes to products or research, development or marketing projects of

similar scientific and commercial potential. Diligent Efforts requires that

[**].

1.25 "Disclosing Party" has the meaning specified in Section 1.18

hereof.

1.26 "Effective Date" means the date specified in the initial

paragraph of this Agreement.

1.27 "Escrow Agent" means an independent Third Party consultant to

the parties with whom BMS shall deposit a list of Excluded Targets and who shall

notify Lexicon which, if any, Targets submitted in accordance with Section 2.2.4

are Excluded Targets.

1.28 "Excluded Target" means a Target that [**]. A list of such

Excluded Targets shall be provided to the Escrow Agent who shall notify Lexicon

which, if any, Targets submitted in accordance with Section 2.2.4 are Excluded

Targets. [**].

1.29 "First Commercial Sale" means the first sale for use or

consumption by the general public of a Product in a country after Regulatory

Approval has been obtained in such country. For clarity, First Commercial Sale

shall not include the sale of any Product for use in clinical trials or for

compassionate use prior to the approval of an NDA.

1.30 "FDA" means the United States Food and Drug Administration, or

the successor thereto.

1.31 "Full Phase Program" means a full medicinal chemistry and

supporting biology program involving the commitment of resources of the scope

and nature described in Exhibit A. For purposes of this Agreement, "commencement

of a Full Phase Program" means the authorization by the Joint

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Management Committee of the commencement of activities for the first Full Phase

Program for a given Selected Target.

1.32 "FTE" means the equivalent of one employee working on a

dedicated full time basis for one year (consisting of [**] hours per year of

dedicated effort) performing scientific, technical or managerial work on or

directly related to the Target Discovery Program or the Research Program, as

applicable. [**].

1.33 "Inactive Selected Target" has the meaning specified in

Section 2.3.4 hereof. Any BMS Inactive Selected Target or Lexicon Inactive

Selected Target shall remain an Inactive Selected Target unless and until it

becomes a BMS Target or Lexicon Target.

1.34 "Indemnitee" has the meaning specified in Section 10.4 hereof.

1.35 "Indemnitor" has the meaning specified in Section 10.4 hereof.

1.36 "IND" means an Investigational New Drug application filed with

the U.S. Food and Drug Administration or a similar application for the clinical

testing of a Product in human subjects filed with a foreign regulatory

authority.

1.37 "Joint Management Committee" has the meaning specified in

Section 3.1.1 hereof.

1.38 "Joint Program Inventions" has the meaning specified in

Section 7.1.3.3 hereof.

1.39 "Joint Research Project Team" has the meaning specified in

Section 3.1.2 hereof.

1.40 "Joint Scientific Committee" has the meaning specified in

Section 3.1.2 hereof.

1.41 "Laws" means all laws, statutes, rules, regulations,

ordinances and other pronouncements having the effect of law of any federal,

national, multinational, state, provincial, county, city or other political

subdivision, domestic or foreign.

1.42 "Level 1 Phenotypic Analysis" means the analyses of the

phenotypes of Mutant Mice described in Exhibit B.

1.43 "Level 2 Phenotypic Analysis" means any one or more of the

analyses of the phenotypes of Mutant Mice described in Exhibit C. The Level 2

Phenotypic Analysis for a given Target shall be as determined by the Joint

Scientific Committee as set forth in Section 3.5.

1.44 "Lexicon" means Lexicon Genetics Incorporated and its

Affiliates.

1.45 "Lexicon Background Materials" means any compounds, assays or

other materials that are (a) necessary or useful for the conduct of the Research

Program, (b) Controlled by Lexicon, (c) utilized in the Research Program (but

only to the extent so utilized) and (d) either in Lexicon's or any of its

Affiliates' possession as of the Effective Date or are discovered or acquired by

Lexicon or any of its Affiliates during the Research Program Term but outside of

the conduct of the Research Program. Lexicon Background Materials excludes

Selected Targets and Program Compounds.

1.46 "Lexicon Background Technology" means any inventions,

information, methods, know-how, trade secrets or data that (a) are necessary or

useful for the performance of the Research Program, (b) are Controlled by

Lexicon, (c) are utilized in the Research Program (but only to the extent so

utilized)

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and (d) either are in Lexicon's or any of its Affiliates' possession as of the

Effective Date or are discovered or acquired by Lexicon or any of its Affiliates

during the Research Program Term but outside of the conduct of the Research

Program.

1.47 "Lexicon Development Compound" means any and all of the

following:

(a) a Development Candidate for a Lexicon Target that is

so designated under Section 2.5 hereof; and

(b) any Back-up Compound(s) designated for such

Development Candidate; and

the same Lexicon Target:

(i) that is made in the course of performing

medicinal chemistry on or optimizing such Development

Candidate and Back-up Compound(s), or performing structure

activity relationship activities using such Development

Candidate, Back-up Compound(s) or other Program Compounds

active against such Lexicon Target; provided that such Small

Molecule Compound [**]; or

(ii) that is [**]; and

(d) any salts of any of the foregoing.

1.48 "Lexicon Inactive Selected Target" has the meaning set forth

in Section 2.3.4.4.

1.49 "Lexicon Product" means a pharmaceutical product containing a

Lexicon Development Compound as an active ingredient.

1.50 "Lexicon Target" means a Selected Target that is so designated

under Section 2.5 hereof.

1.51 "LexVision Agreement" means the LexVision Database and

Collaboration Agreement dated September 26, 2000 between Lexicon and BMS, as

amended.

1.52 "LG617 Compound" means a Small Molecule Compound acting

through the LG617 Target.

1.53 "LG617 License" has the meaning specified in Section 4.4

hereof.

1.54 "LG617 Negotiation Period" has the meaning specified in

Section 4.4 hereof.

1.55 "LG617 Option Period" has the meaning specified in Section 4.4

hereof.

1.56 "LG617 Target" means the Target designated by Lexicon as

LG617.

1.57 "Listed Target" means [**].

1.58 "MAA Approval" means the final marketing authorization

approval, including full marketing, pricing and reimbursement approval, for the

applicable Product, in [**].

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1.59 "MAA Filing" means the filing of a marketing authorization

application or other application for marketing approval for the applicable

Product filed (a) in [**] or (b) in the European Medicines Evaluation Agency

under the centralized European procedure.

1.60 "Mid-Phase Program" means a mid-phase medicinal chemistry and

supporting biology program involving the commitment of resources of the scope

and nature described in Exhibit D.

1.61 "Mutant Mouse" means mouse cell or mouse containing a selected

mutation in the murine ortholog of a Target that is made or produced by Lexicon.

A "line of Mutant Mice" means Mutant Mice having the same selected mutation.

1.62 "NDA" means a New Drug Application filed with the FDA required

for marketing approval for the applicable Product in the U.S.

1.63 "NDA Approval" means the final approval of an NDA by the FDA

for the applicable Product in the U.S.

1.64 "NDA Filing" means the acceptance by the FDA of the filing of

an NDA for the applicable Product.

1.65 "Net Sales" means, with respect to a Product, the gross amount

invoiced by BMS, Lexicon, Sublicensees of BMS or Lexicon, and their respective

Affiliates for sales of such Product to customers which are not Affiliates (or

which are Affiliates but are end users of such Product), less:

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

(b) discounts, refunds, rebates, chargebacks, retroactive price

adjustments, billing errors and any other allowances (including,

without limitation, government-mandated and managed health

care-negotiated rebates) actually granted which effectively reduce the

net selling price;

(d) any tax imposed on the production, sale, delivery or use of

the product (excluding federal, state or local taxes based on income);

(e) freight, postage, shipping, customs duties, excises, tariffs,

surcharges, other governmental charges (excluding federal, state or

local taxes based on income) and insurance charges actually allowed or

paid for delivery of Products;

(f) payments or rebates paid with respect to such Product in

connection with state or federal Medicare, Medicaid or similar programs

in the United States or in connection with similar programs in other

countries in which there are sales; and

(g) amounts repaid, credited or written off by reason of

uncollectible debt, and amounts written off on account of factoring of

receivables to the extent consistent with the selling party's normal

business practices.

Such amounts shall be determined from the books and records of BMS, Lexicon,

Sublicensees of BMS or Lexicon, and their respective Affiliates, as the case may

be, maintained in accordance with U.S. generally accepted accounting principles,

consistently applied.

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In the event the 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 actual Net

Sales of the Combination Product by the fraction A/(A+B) where A is the average

sale price of the Product when sold separately in finished form and B is the

total average sale price of the other active ingredient or ingredients in the

Combination Product sold separately in finished form.

In the event that the average sales price of both the Product and the

other active compounds or ingredients in the Combination Product cannot be

determined, the adjusted Net Sales of the Combination Product for the purpose of

determining royalties shall be negotiated by the parties in good faith and in an

equitable manner consistent with the intent of this Agreement.

The Net Sales price for a Combination Product in a given country will

be calculated once each Contract Year and such price will be used during all

applicable royalty reporting periods for the entire Contract Year for such

country, absent extraordinary conditions or events. When determining the average

sale price of a Product or the other active compounds or ingredients in the

Combination Product, the average sale price will be calculated using data

arising from the twelve (12) months preceding the calculation of the Net Sales

price for the Combination Product. As used above, the term "Combination Product"

means any Product sold in conjunction with any other active component(s)

(whether packaged together or in the same therapeutic formulation).

If BMS, Lexicon, Sublicensees of BMS or Lexicon, or any of their

respective Affiliates sells any Product to a customer which also purchases other

products or services from such seller or any of its Affiliates in a bundled,

combination or capitated transaction (a "Bundled Transaction"), and such seller

discounts the sales price of the Product to a greater degree than such seller or

its Affiliates generally discount the price of its other products to such

customer, then the aggregate amount received with respect to such Bundled

Transaction shall be allocated to Net Sales pursuant to the formula set forth in

Exhibit E hereto. For purposes of the foregoing, "discounting" includes

establishing the list price at lower than the seller's normal pricing level.

Free samples of Product and/or the disposition of Product for, or the

use of Product in, pre-clinical or clinical (Phase 1 - 3) trials or other

market-focused (Phase 4) trials in which Product is provided to patients without

any payment shall not result in any Net Sales.

1.66 "Patent Prosecution" has the meaning specified in Section

7.2.1 hereof.

1.67 "Patent Rights" means all existing patents and patent

applications and all patent applications hereafter filed and patents hereafter

issued, including, without limitation, any continuations, continuations-in-part,

divisions, provisionals or any substitute applications, any patent issued with

respect to any such patent applications, any reissue, reexamination, renewal or

extension (including any supplemental protection certificate) of any such

patent, and any confirmation patent or registration patent or patent of addition

based on any such patent, and all foreign counterparts of any of the foregoing.

1.68 "Phase 1 Trial" shall mean a human clinical trial [**] that is

intended to initially evaluate the safety, pharmacokinetic and/or

pharmacological effect of a Product in subjects in accordance with or otherwise

in satisfaction of the requirements of 21 CFR 312.21(a). For purposes of this

Agreement, "commencement of a Phase 1 Trial" for a Product shall mean the first

dosing of such Product into a human patient in a Phase 1 Trial.

1.69 "Phase 2 Trial" means a human clinical trial [**] that is

intended to initially evaluate the dosing and effectiveness of a Product for a

particular indication or indications in patients with the disease

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or indication under study in accordance with or otherwise in satisfaction of the

requirements of 21 CFR 312.21(b). For purposes of this Agreement, "commencement

of a Phase 2 Trial" for a Product shall mean the first dosing of such Product

into a human patient in a Phase 2 Trial.

1.70 "Phase 3 Trial" means a pivotal human clinical trial [**] the

results of which could be used to establish safety and efficacy of a Product as

a basis for an NDA in accordance with or otherwise in satisfaction of the

requirements of 21 CFR 312.21(c). For purposes of this Agreement, "commencement

of a Phase 3 Trial" for a Product shall mean the first dosing of such Product

into a human patient in a Phase 3 Trial.

1.71 "Post Opt-out Product" has the meaning set forth in Section

2.5.3.3.

1.72 "Pre-existing Obligations" means:

(a) [**]; and

(b) [**].

1.73 "Product" means a BMS Product or a Lexicon Product.

1.74 "Product Licensee" means (a) with respect to a BMS Product,

BMS, and (b) with respect to a Lexicon Product, Lexicon.

1.75 "Product Licensor" means (a) with respect to a BMS Product,

Lexicon, and (b) with respect to a Lexicon Product, BMS.

1.76 "Program Committee" means the Joint Management Committee or

the Joint Scientific Committee.

1.77 "Program Compound" means a Small Molecule Compound that:

(a) (i) is selected by the Joint Scientific Committee for

optimization, characterization and/or preclinical evaluation

in the conduct of the Research Program,

(ii) is Controlled by a party,

(iii) either is in a party's or any of its

Affiliates' possession as of the Effective Date or is

discovered or acquired by either or both parties or any of

their respective Affiliates during the Research Program Term

but outside the conduct of the Research Program, and

(iv) inhibits, agonizes or otherwise modulates

(i.e., acts through) a Selected Target; or

(b) is first [**] in the conduct of the Research Program;

(d) is otherwise designated a Program Compound by the

Joint Management Committee;

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provided, however, that in no event shall [**] become a Program Compound unless

such designation is affirmatively agreed to by the Joint Management Committee.

1.78 "Program Director" has the meaning specified in Section 3.2

hereof.

1.79 "Program Intellectual Property" means Program Patent Rights

and any other proprietary rights in Program Material and Program Technology.

1.80 "Program Invention" has the meaning specified in Section

7.1.3.3 hereof.

1.81 "Program Material" means (a) any Program Compounds and (b) any

material first identified or discovered in the conduct of the Research Program.

1.82 "Program Patent Rights" means any Patent Rights that are

Controlled by one or both parties and that Cover any Program Technology or

Program Materials. For clarification, such Program Patent Rights include the

entire scope of all of the claims contained in such Patent Rights.

1.83 "Program Technology" means any invention, information,

methods, know-how, trade secrets or data that (a) is Controlled by a party or

jointly by the parties and (b) either (i) relates to the use in the CNS Field of

Small Molecule Compounds acting through a Selected Target, or the use in the CNS

Field of a Selected Target to identify Small Molecule Compounds acting through

such Selected Target, or (ii) is first identified or discovered in the conduct

of the Research Program. [**]. Program Technology excludes any invention,

information, methods, know-how, trade secrets or data with respect to [**], or

the [**] acting through such Selected Target, in each case that is first

identified or discovered by a party outside of the conduct of the Research

Program; provided, however, that, [**]. In addition, Program Technology excludes

Program Materials.

1.84 "Proposed Target" means a Target proposed for designation as a

Selected Target in accordance with Section 2.3.1 hereof

1.85 "Receiving Party" has the meaning specified in Section 1.18

hereof.

1.86 "Regulatory Approval" means any and all approvals (including

any applicable governmental price and reimbursement approvals), licenses,

registrations, or authorizations of any federal, national, multinational, state,

provincial or local regulatory agency, department bureau or other governmental

entity that are necessary for the manufacture, use, storage, import, transport,

promotion, marketing and sale of a Product in a country or group of countries.

1.87 "Released Target" means [**] or a Target designated as a

Released Target in accordance with Section 2.3.2 hereof.

1.88 "Research Program" has the meaning specified in Section 2.1.1

hereof.

1.89 "Research Program Activities" has the meaning specified in

Section 2.1.1 hereof.

1.90 "Research Program Term" has the meaning specified in Section

2.1.2 hereof.

1.91 "Research Program Costs" means the FTE costs and out-of-pocket

expenditures that are incurred after the Effective Date by a party in performing

activities approved by the Joint Management Committee in support of the Research

Program, for purposes of which the cost of an FTE shall be [**] per

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FTE per year. Research Program Costs shall not include [**]. In addition,

Research Program Costs shall not include [**].

1.92 [**]

1.93 "Reviewing Party" has the meaning specified in Section 8.4

hereof.

1.94 "Selected Target" means any Target that is selected for

research by the Joint Management Committee in accordance with Section 2.3.2

hereof.

1.95 "Selected Target Inventions" has the meaning specified in

Section 7.1.3.2 hereof.

1.96 "Small Molecule Compound" means a chemical compound [**]. For

clarity, Small Molecule Compound specifically excludes any compound that

consists of or incorporates as an active ingredient [**] (a) a protein, (b) an

antibody or any fragment thereof, (c) an antisense product or (d) an

oligonucleotide.

1.97 "Sole Program Inventions" has the meaning specified in Section

7.1.3.3 hereof.

1.98 "Sublicensee" means (a) in the case of a BMS Product, any

Third Party which is licensed by BMS to market and sell such BMS Product, and

(b) in the case of a Lexicon Product, any Third Party which is licensed by

Lexicon to market and sell such Lexicon Product.

1.99 "Submitting Party" has the meaning specified in Section 8.4

hereof.

1.100 "Target" means [**]. Each Target shall be identified by [**].

1.101 "Target Discovery Program" has the meaning specified in

Section 2.1.1 hereof.

1.102 "Target Discovery Program Term" has the meaning specified in

Section 2.2.2 hereof.

1.103 "Territory" means all countries and jurisdictions throughout

the world.

1.104 "Third Party" means any person or entity other than Lexicon,

BMS and their respective Affiliates.

1.105 "Third Party Opportunity" has the meaning specified in Section

2.11 hereof.

1.106 "Valid Claim" means either (a) a claim of an issued and

unexpired patent which has not been held permanently revoked, unenforceable or

invalid by a decision of a court or other governmental agency of competent

jurisdiction, unappealable or unappealed within the time allowed for appeal and

that is not admitted to be invalid or unenforceable through reissue, disclaimer

or otherwise, or (b) a claim of a [**], provided, however, that (x) [**] and (y)

[**].

ARTICLE 2. RESEARCH PROGRAM

2.1 General.

2.1.1 Objectives. The parties intend to carry out a research program

(the "Research Program") in which Lexicon and BMS will collaborate to identify,

characterize and carry out the preclinical development of Small Molecule

Compounds that act through Selected Targets for use in the CNS Field, consistent

with the objectives set forth in and the resources allocated to such

<PAGE>

activities in the then-current Annual Research Plan ("Research Program

Activities"). It is intended that the Research Program will be conducted as a

unified collaborative effort with activities by the parties carried out

primarily at each party's respective facilities, and this intent shall be

reflected in the Annual Research Plans. It is further intended that each party

shall contribute to fifty (50%) of the Research Program Costs, and the Annual

Research Plans will be consistent with and provide for such equal contribution.

In support of the Research Program, Lexicon will continue its efforts, using its

technology for the generation and analysis of the phenotypes of Mutant Mice, to

identify and validate Targets with potential utility in the CNS Field (the

"Target Discovery Program").

2.1.2 Research Program Term. The Research Program shall commence on

the Effective Date and continue during the Target Discovery Program Term and

thereafter until all Selected Targets have become BMS Targets, Lexicon Targets

or Inactive Selected Targets and thereafter for so long as the parties continue

to conduct Research Program Activities with respect to any BMS Targets or

Lexicon Targets (the "Research Program Term").

2.2 Target Discovery Program.

2.2.1 Generation and Analysis of Mutant Mice. In the Target

Discovery Program, Lexicon shall complete (a) the development and Level 1

Phenotypic Analysis of [**] lines of Mutant Mice and (b) Level 2 Phenotypic

Analysis of such lines of Mutant Mice, from the first [**] lines of Mutant Mice

for which Level 1 Phenotypic Analysis was completed, that displayed a phenotype

suggestive, as determined by [**], of the potential utility of the corresponding

Target in the CNS Field. [**]. Lexicon shall use Diligent Efforts to complete

such work by the end of the third Contract Year of the Research Term and, if

necessary, shall continue to use Diligent Efforts thereafter until such work is

complete, [**]. The Target Discovery Program Term shall continue until such work

is complete.

2.2.2 Target Discovery Program Term. The Target Discovery Program

shall continue until the end of the third Contract Year of the Research Program

Term (and thereafter until the work set forth in Section 2.2.1 is completed)

(the "Target Discovery Program Term"); provided that BMS shall have the option

to extend the Target Discovery Program Term for an additional two Contract Years

(which two-year period may be further extended as set forth below) on the terms

set forth below:

(a) BMS may extend the Target Discovery Program to

include the completion by Lexicon in the Target Discovery Program of

(i) the development and Level 1 Phenotypic Analysis of [**] lines of

Mutant Mice (to the extent not already completed by the end of the

third Contract Year of the Research Program Term) and (ii) Level 2

Phenotypic Analysis of such lines of Mutant Mice, from such [**] lines

of Mutant Mice, that displayed a phenotype suggestive, as determined by

[**], of the potential utility of the corresponding Target in the CNS

Field. Lexicon shall use Diligent Efforts to complete such work by the

end of the fifth Contract Year of the Research Term and, if necessary,

shall continue to use Diligent Efforts thereafter until such work is

complete, [**]. The Target Discovery Program Term shall continue until

such work is complete.

(b) BMS may extend the Target Discovery Program to

include the completion by Lexicon in the Target Discovery Program of

(i) the development and Level 1 Phenotypic Analysis of [**] lines of

Mutant Mice and (ii) Level 2 Phenotypic Analysis of such lines of

Mutant Mice, from such [**] lines of Mutant Mice, that

<PAGE>

displayed a phenotype suggestive, as determined by [**], of the

potential utility of the corresponding Target in the CNS Field. Lexicon

shall use Diligent Efforts to complete such work by the end of the

fifth Contract Year of the Research Term and, if necessary, shall

continue to use Diligent Efforts thereafter until such work is

complete, [**]. The Target Discovery Program Term shall continue until

such work is complete.

BMS may exercise the foregoing option by delivery to Lexicon of written notice

of such exercise (specifying the subsection above under which such option is

being exercised) no fewer than [**] days before the end of the third Contract

Year of the Research Program Term.

2.2.3 Reporting and Oversight of Target Discovery Program Progress.

Lexicon shall keep the Joint Scientific Committee fully informed of the progress

of its activities under this Section 2.2. At a minimum, within [**] days

following [**] during the Target Discovery Program Term, Lexicon shall prepare,

and provide to the Joint Scientific Committee, a reasonably detailed written

summary report which shall describe (a) the work performed by Lexicon during the

preceding [**], including, without limitation, the status of Lexicon's

development of Mutant Mice and the conduct of Level 1 Phenotypic Analysis and

Level 2 Phenotypic Analysis (or only Level 1 Phenotypic Analysis if Level 2

Phenotypic Analysis has not been performed) of such Mutant Mice, and (b)

identify phenotypes identified through such Level 1 Phenotypic Analysis and

Level 2 Phenotypic Analysis that are suggestive, in Lexicon's good faith

scientific judgment, of the potential utility of the corresponding Targets in

the CNS Field. [**].

2.2.4 Disclosure of Target Identity. Prior to first disclosing to

BMS the identity of any Target (by sequence or otherwise in a manner that would

reveal the identity of the Target), Lexicon shall submit the identity of the

Target to the Escrow Agent, who will notify Lexicon whether such Target matches

any Excluded Target. [**]. In the event a Target matches an Excluded Target, as

determined by the Escrow Agent, Lexicon shall promptly notify BMS of such fact

and, if requested by BMS within [**] days thereafter, shall provide BMS with the

phenotypic data relating to the corresponding line of Mutant Mice and such

additional information with respect to any Target (without disclosing the

identity of such Target) that is [**]. In such event, BMS shall have the right,

within [**] days after receiving such information, to submit to the Escrow Agent

a second list of Excluded Targets, in which case the Escrow Agent shall

determine whether the Target in question matches any Target on the second list

of Excluded Targets. If the Target in question does not match any Target on the

second list of Excluded Targets, the Escrow Agent shall so notify Lexicon and

BMS, and such Target shall not be considered an Excluded Target and may be

considered for proposal as a Proposed Target. BMS shall not be entitled to

designate a Target as an Excluded Target following Lexicon's disclosure to BMS

of the identity of such Target in accordance with this Section 2.2.4. The

parties may mutually agree in writing to redesignate any Excluded Target as a

non-Excluded Target that may be considered for proposal as a Proposed Target.

2.2.5 [**].

2.3 Target Selection.

2.3.1 Proposal of Targets. Following Lexicon's completion of Level 2

Phenotypic Analysis of a line of Mutant Mice corresponding to a Target [**], BMS

and Lexicon shall each have the right to propose such Target for inclusion in

the Research Program as a Selected Target. Within [**] following the proposal by

either party that such Proposed Target be considered for designation as a

Selected Target [**], BMS and Lexicon shall provide the Joint Scientific

Committee with the following information:

<PAGE>

(a) all relevant scientific data in BMS's possession (and

which BMS has the right to disclose to Lexicon) and all relevant

scientific data in Lexicon's possession (and which Lexicon has the

right to disclose to BMS) relating specifically to such Proposed

Target, including, without limitation, any bioinformatics and

expression analyses conducted by BMS or Lexicon with respect to such

Proposed Target, and any phenotypic data with respect to mice

(including, without limitation, Mutant Mice) with a mutation in the

murine ortholog of such Proposed Target;

(b) the results of genomic analysis and druggability

assessment with respect to such Proposed Target by BMS and/or Lexicon;

(d) [**].

2.3.2 Designation of Proposed Targets as Selected Targets or

Released Targets. Within [**] following receipt by the Joint Scientific

Committee of a complete package of all of the information set forth in Section

2.3.1 for a Proposed Target, the Joint Scientific Committee shall make a

recommendation to the Joint Management Committee as to whether to designate such

Proposed Target as a Selected Target or a Released Target. [**] In the event the

members of the Joint Management Committee are unable to reach agreement by

consensus regarding such designation within [**] following its receipt of the

Joint Scientific Committee recommendation, [**].

2.3.3 [**].

2.3.4 Inactive Selected Targets.

2.3.4.1 A Selected Target shall become an "Inactive Selected

Target" upon the occurrence of any of the following: (a) at such time

that there has been no material activity by either party with respect

to studies to further evaluate the utility of such Selected Target or

the development of assays or the discovery or development of Program

Compounds acting through such Selected Target for a period of [**], and

[**]; (b) upon the election of a party that does not wish to proceed

with the discovery or development of Program Compounds acting through a

Selected Target, when the other party does wish to proceed, such that

such other party could proceed with the discovery or development of

Program Compounds acting through such Inactive Selected Target, without

the participation of the party making such election [**]; or (c) upon

the election of the Joint Management Committee, in order to equalize

each party's participation in the Research Program (measured by

Research Program Costs), such that one party could proceed with the

discovery or development of Program Compounds acting through such

Inactive Selected Target, without the participation of the other party.

2.3.4.2 The Joint Management Committee shall determine how

the parties shall proceed with respect to the Inactive Selected Target;

provided that, in the event that one party desires to proceed with the

discovery or development of Program Compounds acting through such

Inactive Selected Target, and the other party does not wish to proceed

with such discovery and development efforts in the Research Program (or

if one party has been given the opportunity to pursue the discovery or

development of Program Compounds acting through such Inactive Selected

Target under Section 2.3.4.1(b) or (c) above), such party may elect to

proceed with such discovery or development for its own

<PAGE>

account (using Diligent Efforts), without participation of the other

party. In such case, (a) the other party shall reasonably cooperate

with the party electing to proceed with the discovery and development

of Program Compounds acting through such Inactive Selected Target, at

the developing party's expense, in transitioning such activities to

such developing party (including, without limitation, the transfer of

relevant Program Material) and (b) upon the commencement of a Phase 1

Trial for a Program Compound acting through such Inactive Selected

Target (and notwithstanding anything to the contrary in Section 2.5),

such Inactive Selected Target shall then be designated as and treated

as a BMS Target or Lexicon Target (depending on the party that proceeds

with such discovery and development) for all purposes, except that the

milestone payments and royalties payable with respect to BMS Products

(under Sections 5.4.1 and 5.5.1) or Lexicon Products (under Sections

5.4.2 and 5.5.2), as the case may be, shall be [**] of those otherwise

payable. Prior to the commencement of a Phase 1 Trial for a Product

acting through an Inactive Selected Target, such Inactive Selected

Target shall remain designated as an Inactive Selected Target.

2.3.4.3 If neither party elects to proceed with such

discovery and development of Program Compounds acting through such

Inactive Selected Target for its own account, [**].

2.3.4.4 An Inactive Selected Target for which BMS proceeds

with the discovery and development of Program Compounds acting through

such Inactive Selected Target, without the participation of Lexicon, as

set forth above, shall be designated as a "BMS Inactive Selected

Target." An Inactive Selected Target for which Lexicon proceeds with

the discovery and development of Program Compounds acting through such

Inactive Selected Target, without the participation of BMS, as set

forth above, shall be designated as a "Lexicon Inactive Selected

Target."

2.4 Conduct of Research Program.

2.4.1 Scope. Following the designation of a Selected Target, the

parties will use Diligent Efforts, under the direction of the Joint Management

Committee and Joint Scientific Committee, to carry out the following principal

activities with respect to the Selected Target: (a) to carry out studies to

further evaluate the biology and the utility of the Selected Target ([**]), (b)

to develop assays for such Selected Target amenable to Compound Library

Screening, (c) to conduct Compound Library Screening against such Selected

Target, (d) to carry out a Mid-Phase Program to develop lead compounds suitable

to chemically recapitulate the phenotype seen in the Mutant Mice for the

Selected Target, (e) to carry out a follow-up Full Phase Program with the

objective of identifying Program Compounds meeting the criteria required for

designation as Development Candidates that are suitable for further development,

and (f) to carry out preclinical work on selected Development Candidates and

Back-up Compounds in preparation for Phase 1 Trials. The parties will carry out

other specific activities in support of these principal activities.

2.4.2 Efforts. The Joint Management Committee shall adopt project

progression guidelines, including criteria for the selection of Program

Compounds, Development Candidates and Back-up Compounds for the Research

Program. [**]. The parties shall conduct the Research Program in good scientific

manner in accordance with such project progression guidelines and in compliance

with applicable Laws. Each party shall use Diligent Efforts to conduct the

activities of the Research Program that are assigned to it in the

then-applicable Annual Research Plan, and each shall devote sufficient resources

to timely perform such respective activities. While the parties acknowledge and

agree that neither party guarantees the success of the Research Program

<PAGE>

or any individual task undertaken thereunder, each party agrees that it will

perform the activities assigned to it under the Research Program in a

professional manner in accordance with the highest industry standards.

2.4.3 Resources. Over the course of the Research Program, tasks

under the Research Program will be allocated between the parties with the goal

that each party's participation in the Research Program (based on FTE

utilization and out-of-pocket expenditures) and Research Program Costs will be

substantially equal. Particular tasks and responsibilities shall be assigned in

a manner consistent with each party's respective capabilities, capacity and

expertise. For purposes of this Agreement, "out-of-pocket expenditures"

includes, but is not limited to, the cost of subcontractors related to the

Research Program, but specifically excludes the cost of laboratory supplies,

laboratory space and capital equipment. Either party may at its sole discretion

reduce its required contribution to the Research Program Costs by designating

one or more Selected Targets as Inactive Selected Targets that may be pursued by

the other party as contemplated in Section 2.3.4.

2.4.4 FTE Levels. The parties anticipate that the combined total

personnel the parties will commit to the Research Program will start at an

average of [**] FTEs for the First Contract Year and will escalate to an average

of [**] FTEs for the Second Contract Year, [**] FTEs in the Third Contract Year

and [**] FTEs for the Fourth Contract Year (i.e., these are the expected number

of FTEs to be included in the Research Program Costs). For clarification, the

number of FTEs referenced in the previous sentence shall not include Lexicon

FTEs working on the Target Discovery Program, except as set forth in Section

2.2.5. Each party agrees in good faith to expedite the hiring and utility of

such FTEs as early in the applicable Contract Year as possible. In the event

that the Research Program generates more projects that qualify for lead

optimization than are contemplated by the foregoing resource commitment, the

parties agree to discuss in good faith a possible increase in the number of FTEs

devoted to the Research Program, and may discuss changes in the allocation of

Research Program Costs; provided that any such increase in the number of FTEs or

change in the allocation of Research Program Costs shall be subject to the

mutual agreement of the parties. The Annual Research Plans shall set forth

specific FTE levels for each Contract Year to be assigned to specific

activities.

2.4.5 Subcontractors. In accordance with Section 2.4.3, the parties

will endeavor to optimize the allocation of their resources for the conduct of

the Research Program. As necessary and in furtherance of the Research Program,

however, either party may enter into research-related agreements or subcontracts

in accordance with this Section 2.4.5; provided that (a) none of the rights of

the other party hereunder are diminished or otherwise adversely affected as a

result of such subcontracting, (b) such party obtains the written approval of

the other party prior to engaging any subcontractor, which approval shall not be

unreasonably withheld or delayed, (c) the subcontractor undertakes in writing

obligations of confidentiality and non-use regarding the other party's

Confidential Information that are substantially the same as those undertaken by

BMS and Lexicon pursuant to Article 8 hereof, and (d) where possible, the

subcontractor agrees in writing to assign to the party inventions made by such

subcontractor in performing services for the party. In the event a party

performs one or more of its obligations under the Research Program through a

subcontractor, then such Party shall at all times be responsible for the

performance of such subcontractor. The Joint Management Committee shall decide

whether the cost of such agreement shall be shared equally between the parties

or if the cost is to be borne by one party and whether it can be allocated to

offset obligations with respect to FTE levels as set forth in Section 2.4.4 of

this Agreement.

<PAGE>

2.4.6 Reports. Each party shall submit [**] reports to the Joint

Management Committee, and additional reports as may be required by the

then-current Annual Research Plans, detailing its activities under the Research

Program. The Joint Management Committee shall use such [**] reports to monitor

the parties' respective contributions to the Research Program. The Joint

Management Committee may amend the Annual Research Plan as necessary to maintain

substantial equality in resources devoted and participation by the parties over

the course of the Research Program, as measured by Research Program Costs.

2.4.7 Adjustments. If either party believes that the parties are not

devoting substantially equal resources and participation to the Research

Program, measured by the aggregated Research Program Costs incurred by each

party, such party may submit the matter to the Joint Management Committee in

writing, providing a reasonably detailed description of its reasons for such

belief. Taking into account historical and prospective participation and

resource devotion of the parties during the current Contract Quarter and the

immediately following Contract Quarter, the Joint Management Committee shall

take such steps as may be reasonably necessary to ensure substantial equality in

resources devoted to and participation by the parties in the Research Program

including, with respect to any out-of-pocket expenditures, a reimbursement by

one party to the other party. In addition or as an alternative to taking steps

to reallocate resources and participation in the Research Program, the Joint

Management Committee may, by agreement, take one or more of the following

actions in order to equalize each party's participation in the Research Program

(measured by the aggregated Research Program Costs): (a) designate a Selected

Target as an Inactive Selected Target, such that one party could proceed with

the discovery or development of Program Compounds acting through such Inactive

Selected Target, without the participation of the other party (and such that the

developing party's activities with respect to such Inactive Selected Target

would no longer be included in the Research Program Costs) or (b) provide for

the payment by one party to the other party of one-half of the Research Program

Costs attributable to unmatched FTEs provided by such other party in support of

Research Program Activities. In addition, a party may elect to designate a

Selected Target as an Inactive Selected Target to be pursued by the other party

as set forth in Section 2.3.4.1(b), and upon such election, the party making

such election shall notify the Joint Management Committee if it wishes to

maintain the level of its FTE contribution to the Research Program Costs by

allocating FTEs to another Selected Target or to reduce the total number of FTEs

the party contributes to the Research Program Costs. At the request of a party,

the other party shall permit an independent, certified accountant appointed by

the requesting party and reasonably acceptable to the other party, at reasonable

times and upon reasonable notice but no more than [**], to examine, at the sole

cost of the requesting party, the records of the other party to verify the

accuracy of any reports submitted by the other party to the Joint Management

Committee regarding the Research Program Costs devoted to the Research Program

by such party.

2.5 Development and Commercialization of Products.

2.5.1 Designation of BMS Targets and Lexicon Targets. Upon the

commencement of a Phase 1 Trial for the first pharmaceutical product acting

through a given Selected Target that contains a Development Candidate as an

active ingredient, BMS will have the first option, exercisable by written notice

to Lexicon, to obtain exclusive rights under Section 4.1.1.3 and Section 4.2.1

with respect to such Selected Target, upon the exercise of which option (a) such

Selected Target shall be designated as a "BMS Target," (b) BMS shall then be the

Product Licensee with respect to such BMS Target and (c) the exclusive licenses

granted to BMS under Section 4.1.1.3 and Section 4.2.1 shall apply to such BMS

Target. BMS shall deliver written notice to Lexicon within [**] days of the

commencement of such Phase 1 Trial of its election whether or not to be the

Product Licensee for such Selected Target. If BMS fails, within such

<PAGE>

[**] period, to deliver written notice to Lexicon of its election whether or not

to be the Product Licensee for such Selected Target, Lexicon shall provide

notice to BMS advising BMS that such notice by BMS is required. If BMS does not

remedy such failure within [**] days following Lexicon's notice, then Lexicon

shall have the option to obtain exclusive rights under Section 4.1.2.3 and

Section 4.2.2 with respect to such Selected Target, upon the exercise of which

option (a) such Selected Target shall be designated as a "Lexicon Target," (b)

Lexicon shall then be the Product Licensee with respect to such Lexicon Target

and (c) the exclusive licenses granted to Lexicon under Section 4.1.2.3 and

Section 4.2.2 shall apply to such Lexicon Target.

2.5.2 Responsibility for Development and Commercialization

Activities. From and after the time that a party is designated as the Product

Licensee with respect to a Selected Target, such party shall then have full

responsibility (including responsibility for funding, resourcing and

decision-making) for all research, development and commercialization activities

relating to Development Compounds and Products that act through such Selected

Target, subject to the provisions of Section 2.5.3 and Article 6 hereof.

2.5.3 Continuation of Research Program Activities.

2.5.3.1 The party that is designated as the Product Licensee

with respect to a Selected Target may, at its option, request that

Research Program Activities (including but not limited to work on

Back-up Compounds) continue following the designation of such Selected

Target as a BMS Target or Lexicon Target, as applicable. In such event,

the parties shall continue to carry out such Research Program

Activities with respect to such Selected Target as may be reasonably

requested by the Product Licensee (with the allocation of

responsibilities determined by the Joint Management Committee and

reflected in the Annual Research Plans) until the earlier of (a) the

first NDA Approval or MAA Approval of a Product acting through such

Selected Target or (b) the Product Licensor notifies the Product

Licensee of its election to discontinue further Research Program

Activities with respect to such Selected Target.

2.5.3.2 In the event the Product Licensor notifies the

Product Licensee of its election to discontinue further Research

Program Activities with respect to such Selected Target, (a) the

Product Licensor shall have no further obligation with respect to

further Research Program Activities related to such Selected Target

other than to reasonably cooperate with the Product Licensee, at the

Product Licensee's expense, in transitioning such activities to the

Product Licensee (including, without limitation, the transfer of

relevant Program Material), (b) no further activities of the Product

Licensee related to such Selected Target shall be considered Research

Program Activities for purposes of the parties' participation in the

Research Program or Research Program Costs and (c) the milestone

payments and royalties with respect to BMS Products (under Sections

5.4.1 and 5.5.1) or Lexicon Products (under Sections 5.4.2 and 5.5.2),

as the case may be, that are Post Opt-out Products (as defined below)

shall be [**].

2.5.3.3 As used in this Agreement, a "Post Opt-out Product"

shall mean a Product acting through a Selected Target for which the

Product Licensor has elected to discontinue further Research Program

Activities under this Section 2.5.3, which Product does not contain as

an active ingredient a Development Candidate or Back-up Compound for

which [**].

2.5.3.4 The milestone payments and royalties with respect to

BMS Products (under Sections 5.4.1 and 5.5.1) or Lexicon Products

(under Sections 5.4.2 and 5.5.2) (a)

<PAGE>

that are Post Opt-out Products and that contain [**] as an active

ingredient shall be [**] and (b) that are Post Opt-out Products and

that do not contain [**] as an active ingredient shall be [**].

2.6 Exclusivity.

2.6.1 During the Research Program Term, each party shall work

exclusively with the other party under the terms of the Agreement with respect

to discovery and development activities directed to identifying and developing

Small Molecule Compounds that act through Selected Targets, on a Selected

Target-by-Selected Target basis, until the later to occur of:

(a) such time as the applicable Selected Target either:

(i) becomes an Inactive Selected Target, or

(ii) is designated as a BMS Target or a Lexicon

Target and either (A) the Product Licensee has obtained an NDA

Approval or MAA Approval of a Product acting through such

Selected Target or (B) the Product Licensor has notified the

Product Licensee of its election to discontinue further

Research Program Activities with respect to such Selected

Target; or

(b) such time as the specific and substantial medical

utility of such Selected Target in the CNS Field is or becomes

[**].

The expiration or termination of the parties' exclusivity obligations with

respect to a Selected Target under this Section 2.6.1 shall not be construed as

granting any right or license under any Background Materials, Background

Technology or Program Intellectual Property related thereto.

2.6.2 During the Target Discovery Program Term, Lexicon shall work

exclusively with BMS and shall not enter into discussions with any Third Party

with respect to activities directed to the identification of novel Targets for

the identification and development of Small Molecule Compounds for use in the

CNS Field, provided that Lexicon may pursue discussions with third parties with

respect to Released Targets and Inactive Selected Targets that the parties have

agreed to out-license. During the Target Discovery Program Term, Lexicon shall

work exclusively with BMS under the terms of the Agreement with respect to all

Targets identified by Lexicon as of the Effective Date and thereafter as having

potential utility in the CNS Field, with the exception of Lexicon's LG617 Target

(which is subject to Section 4.4) and Released Targets.

2.6.3 Except as otherwise provided for in this Agreement, and

without granting any right or license under any Lexicon Background Materials or

Lexicon Background Technology with respect thereto, for a period of [**] years

following the proposal that a Proposed Target be considered for designation as a

Selected Target under Section 2.3.2, BMS shall not, unless such Proposed Target

was so designated, research, develop or commercialize any pharmaceutical product

for any indication within the CNS Field that specifically targets such Proposed

Target. For the avoidance of doubt, the parties agree that this covenant not to

compete is not meant to restrict BMS from researching, developing and/or

commercializing pharmaceutical products that do not specifically target a

Proposed Target but that nevertheless bind to such Proposed Target; provided

that such pharmaceutical products specifically target, and achieve their

intended physiological effects by binding to, a Target other than the Proposed

Target. Without granting any right or license, BMS's obligations under this

Section 2.6.3 with respect to a Proposed Target shall terminate on the earlier

of:

<PAGE>

(a) the medical utility in the disclosed indication of

the Proposed Target is or becomes [**]; or

(b) [**].

2.7 Annual Research Plan.

2.7.1 The Joint Scientific Committee shall prepare and the Joint

Management Committee shall approve the Annual Research Plan for every Contract

Year (other than the First Contract Year) at least [**] prior to the

commencement of such Contract Year. The Annual Research Plan for the First

Contract Year shall be prepared by the Joint Scientific Committee and approved

by the Joint Management Committee within [**] after the Effective Date.

2.7.2 The Joint Management Committee shall update and amend, as

appropriate, the then-current Annual Research Plan from time to time.

2.7.3 Each Annual Research Plan shall contain the specific research

objectives to be achieved during the relevant Contract Year, the specific

activities to be performed under the Research Program during such year and the

timeline for performing such activities, and shall designate which party shall

be responsible for performing each of such activities.

2.7.4 Each Annual Research Plan shall be consistent with the other

terms and conditions of this Agreement, including without limitation the

objectives set forth in Section 2.1.1 and the terms and conditions set forth in

Section 2.4, and each Annual Research Plan for Contract Years after the First

Contract Year shall be substantially the same in form, including the items

itemized in, the Annual Research Plan for the First Contract Year.

2.8 Research Program Records.

2.8.1 All work conducted by each party in the course of the Research

Program shall be completely and accurately recorded, in reasonable detail and in

good scientific manner, in separate laboratory notebooks. On reasonable notice,

and at reasonable intervals, each party shall have the right to inspect and copy

all such records of the other party reflecting Program Technology or work done

under the Research Program, to the extent reasonably required to carry out its

respective obligations and to exercise its respective rights hereunder. The

parties acknowledge and agree that neither party guarantees the success of the

Research Program tasks undertaken hereunder.

2.8.2 In order to protect the parties' Patent Rights under U.S. law

in any inventions conceived or reduced to practice during or as a result of the

Research Program, each party agrees to maintain a policy that requires its

employees to record and maintain all data and information developed during the

Research Program in such a manner as to enable the parties to use such records

to establish the earliest date of invention and/or diligence to reduction to

practice. At a minimum, the policy shall require such individuals to record all

inventions generated by them in standard laboratory notebooks or other suitable

means that are dated and corroborated by non-inventors on a regular,

contemporaneous basis.

2.9 Disclosure of Research Program Results. Subject to restrictions imposed

by a party's confidentiality obligations to any Third Party with respect to

Background Materials or Background Technology, each party will disclose to the

Joint Scientific Committee all Program Technology that is discovered, invented

or made by such party during the course of the Research Program and that is

useful

<PAGE>

in or relates to the Research Program, including, without limitation,

information regarding Selected Targets, Small Molecule Compounds identified in

the Research Program through the use of Selected Targets, activities of such

Small Molecule Compounds, derivatives and results of in vitro and in vivo

studies, assay techniques and new assays. Such Program Technology will be

promptly disclosed to the Joint Scientific Committee, with meaningful

discoveries or advances being communicated as promptly as practicable after such

information is obtained or its significance is appreciated. Upon written request

by any member of the Joint Scientific Committee, each party will provide the

other with copies of the raw data generated in the course of the Research

Program, if reasonably necessary to the other party's work under the Research

Program. Any information disclosed pursuant to this Section 2.9 may be used by

the other party solely for the purposes of the Research Program or as otherwise

expressly permitted in this Agreement.

2.10 Material Transfer. In order to facilitate the Research

Program, either party may provide to the other party certain Program Materials

and Background Materials Controlled by the supplying Party for use by the other

party in furtherance of the Research Program. All such Program Materials shall

be considered the Confidential Information of both parties and shall be subject

to the restrictions in Article 8. All Background Materials shall be considered

the Confidential Information of the supplying Party and shall be subject to the

restrictions in Article 8. Except as otherwise provided under this Agreement,

all such Program Materials and Background Materials delivered to the other party

shall remain the sole property of the supplying party, shall be used only in

furtherance of the Research Program and solely under the control of the other

party and its Affiliates, shall not be used or delivered to or for the benefit

of any Third Party without the prior written consent of the supplying party and

shall not be used in research or testing involving human subjects. The Program

Materials and Background Materials supplied under this Section 2.10 must be used

with prudence and appropriate caution in any experimental work, since not all of

their characteristics may be known. THE PROGRAM MATERIALS AND BACKGROUND

MATERIALS ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY,

EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF

MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT

THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER

PROPRIETARY RIGHTS OF ANY THIRD PARTY.

2.11 Third Party Opportunities. In the event that a party is

presented with an opportunity to obtain a license from a Third Party for the

development and commercialization of a Small Molecule Compound acting through a

Selected Target (a "Third Party Opportunity"), then the party may pursue such

Third Party Opportunity, but only in the manner provided in this Section 2.11.

For purposes of Third Party Opportunities, Section 2.6.1.(a) shall not apply

[**]

2.11.1 Third Party Opportunities for Selected Targets. In

the event that a party is presented with a Third Party Opportunity for

the development and commercialization of a Small Molecule Compound

acting through a Selected Target that has not been previously

designated as an Inactive Selected Target, a BMS Target or a Lexicon

Target, then the party may pursue such Third Party Opportunity, but

only in the manner provided in this Section 2.11.1. The party shall

present the Third Party Opportunity, including all relevant terms and

conditions relating thereto (subject to any confidentiality obligations

to the Third Party), to the Joint Management Committee. In the event

that the Joint Management Committee elects to pursue such Third Party

Opportunity, then the parties shall negotiate (with one another and

with the Third Party, as appropriate) in a good faith effort to reach

an agreement whereby the Third Party Opportunity can be included as a

Product under the Agreement. In the event that the parties and the

Third Party reach an agreement to include such Third Party Opportunity

as a Product under the Agreement, then (a) [**], and (b) [**]. In the

event that the Joint Management Committee does not elect to pursue such

Third Party Opportunity, then, subject to the parties' obligations

under Section

<PAGE>

2.6.1(b) and Article 8, either party shall have the right to pursue

such Third Party Opportunity and, upon completion of an agreement with

such Third Party for such Third Party Opportunity

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