Exhibit 10.4
Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
RESEARCH COST SHARING, PAYMENT AND EXTENSION AGREEMENT
     This RESEARCH COST SHARING, PAYMENT AND EXTENSION AGREEMENT (this
“Agreement”) is entered into as of June 15, 2007, by and among LEXICON
PHARMACEUTICALS, INC., a Delaware corporation (“Lexicon”), SYMPHONY ICON
HOLDINGS LLC, a Delaware limited liability company (“Holdings”), and SYMPHONY
ICON, INC., a Delaware corporation (“Symphony Icon”).
PRELIMINARY STATEMENT
     WHEREAS, Lexicon and Holdings have entered into a Technology License
Agreement dated June 15, 2007, pursuant to which Lexicon has granted Holdings an
exclusive license to the use of certain intellectual property related to the
Programs owned or controlled by Lexicon;
     WHEREAS, contemporaneously with the execution of this Agreement, Lexicon,
Holdings and Symphony Icon are entering into a Novated and Restated Technology
License Agreement, pursuant to which, among other things, Holdings will assign
by way of novation such license to Symphony Icon;
     WHEREAS, Lexicon and Holdings have entered into a Research and Development
Agreement dated June 15, 2007, pursuant to which Holdings and Lexicon have
agreed to develop the Products and to establish a Development Committee to
oversee such development;
     WHEREAS, contemporaneously with the execution of this Agreement, Lexicon,
Holdings and Symphony Icon are entering into an Amended and Restated Research
and Development Agreement, pursuant to which, among other things, Holdings will
assign its rights and obligations under the Research and Development Agreement
to Symphony Icon;
     WHEREAS, contemporaneously with the execution of this Agreement, Holdings,
Lexicon, and Symphony Icon are entering into a Purchase Option Agreement (the
“Purchase Option Agreement”) pursuant to which, among other things, Holdings is
granting to Lexicon an option to purchase all of the equity securities of
Symphony Icon owned, or hereafter acquired, by Holdings on the terms set forth
in the Purchase Option Agreement;
     WHEREAS, Lexicon agrees that, upon the occurrence of certain events as
described herein, it will pay an aggregate amount of up to $15,000,000 to
Symphony Icon pursuant to the terms hereof in consideration of the foregoing and
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Lexicon; and

 

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Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
     WHEREAS, Lexicon, Symphony Icon and Holdings have determined that it is in
each of its best interest to perform and comply with certain agreements relating
to each of its ongoing operations contained in this Agreement;
     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto (the “Parties”) agree as follows:
          1. Defined Terms. Terms not otherwise defined herein are used as
defined in the Purchase Option Agreement.
          2. Lexicon Payment Obligation.
               (a) Lexicon agrees that, upon the occurrence of certain events
and on the terms and conditions set forth herein, it will pay to Symphony Icon
an aggregate amount of up to $15,000,000 (less the aggregate amount of all
dividends and distributions, if any, under Section 8.1 of the Amended and
Restated Research and Development Agreement) (the “Payment Cap”), for the sole
purpose of Symphony Icon’s use in the development of the Programs in accordance
with the Development Budget and Development Plan.
               (b) Pursuant to Paragraph 14 of the Development Committee
Charter, the Development Committee may recommend that the Symphony Icon Board
submit to Lexicon a written notice and, if such recommendation is approved, the
Symphony Icon Board shall submit to Lexicon a written notice which notice shall
(a) inform Lexicon that, pursuant to the Development Budget, additional funds
will be required to complete the development of the Programs, (b) specify the
Lexicon Payment Amount (as defined in the Development Committee Charter), and
(c) provide wire transfer and other relevant instructions for funding (such
notice, the “Lexicon Funding Notice”), and following Lexicon’s receipt of the
Lexicon Funding Notice, Lexicon shall, within [**] pay such Lexicon Payment
Amount to Symphony Icon or, if the Purchase Option Period has not expired,
exercise the Purchase Option.
               (c) Notwithstanding the Development Committee’s rights under
Section 2 of this Agreement, (A) any decision by the Development Committee to
recommend to the Symphony Icon Board to submit a Lexicon Funding Notice shall be
made in accordance with the Development Committee Charter, the Development
Budget and Development Plan (for purposes of which, in the case of a Lexicon
Payment Amount determined after the expiration of the Purchase Option or the
termination of the Purchase Option Agreement, shall be the Development Plan in
effect immediately prior to such expiration or termination, as applicable) and
(B) in no event shall the aggregate total of all Lexicon Payment Amounts exceed
the Payment Cap.
               (d) The Development Committee’s right to recommend that the
Symphony Icon Board submit a Lexicon Funding Notice shall terminate, (A) in the
event
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Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
of the expiration of the Purchase Option Period pursuant to the terms of the
Purchase Option Agreement, on the first (1st) anniversary of such expiration,
(B) in the event that the Purchase Option Agreement terminates pursuant to
Section 9(a)(ii) thereof, on the fourth anniversary of the Closing Date, or (C)
in the event Holdings or Symphony Icon is in material default or breach of any
Operative Document that has resulted in, or would reasonably be expected to
result in, a material adverse effect on the Programs or Lexicon’s rights under
the Operative Documents, and such material default or breach continues
unremedied for a period of [**] after written notice thereof is delivered to
Symphony Icon or Holdings, as applicable, on the last day of such [**] period.
For the avoidance of doubt and subject to the foregoing conditions and
restrictions, the Development Committee’s right to recommend that the Symphony
Icon Board submit a Lexicon Funding Notice, and Lexicon’s obligation to pay the
Lexicon Payment Amounts, shall survive the expiration of the Purchase Option
Period and the termination of the Purchase Option Agreement pursuant to its
terms.
               (e) In the event that a Bankruptcy Event occurs during the Term
with respect to Lexicon, Lexicon agrees to pay to Symphony Icon an amount equal
to the difference, if any, between $15,000,000 and the aggregate amount of all
Lexicon Payment Amounts actually paid by Lexicon pursuant to clause (b) above,
and such amount shall be immediately due and payable upon the occurrence of such
Bankruptcy Event.
               (f) Lexicon hereby waives all right to set off amounts owing
under this Section 2 against any amounts owing by Holdings or Symphony Icon to
Lexicon under the Operative Documents.
               (g) Holdings and Symphony Icon shall be entitled to exercise any
and all remedies at law or in equity to enforce Lexicon’s obligations hereunder.
           3. Costs of Additional Research In the event that a Balance Sheet
Deficiency has occurred with respect to Symphony Icon, and Lexicon wishes to
fund additional development of the Programs to be conducted by Symphony Icon,
beyond the Funds Termination Date, Lexicon shall, within [**] of the Balance
Sheet Deficiency Date, (a) notify the other Parties of its intent to cover the
cost of further development of the Products, and (b) transfer to Symphony Icon
funds sufficient to both (x) pay all of Symphony Icon’s estimated ongoing costs
and expenses for work to be performed by or billed to Symphony Icon by Lexicon
during the following [**] (the calculation of such amount to be based on
historical expenditures and the Development Budget and the Development Plan),
and (y) leave Symphony Icon with working capital on its balance sheet of not
less than the Balance Sheet Deficiency Threshold (such funding an “Extension
Funding”). Any Extension Funding shall comply with the requirements of this
Section 3.
               (b) [**].
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Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
          4. Determination of the Purchase Option Period. Following a transfer
of funds pursuant to Section 3 hereof, the Purchase Option Period shall continue
until the earlier of (x) the Final Termination Date, or (y) the occurrence of
another Balance Sheet Deficiency; provided however, that, if another Balance
Sheet Deficiency shall occur, Lexicon may make further Extension Fundings in
accordance with Section 3 above; provided further, that, unless otherwise agreed
by the Parties, in no event shall the Purchase Option Period be extended beyond
the Final Termination Date.
          5. Notice. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any Party
shall be in writing addressed to the Party at its address set forth below and
shall be deemed given (i) when delivered to the Party personally, (ii) if sent
to the Party by facsimile transmission (promptly followed by a hard-copy
delivered in accordance with this Section 4), when the transmitting Party
obtains written proof of transmission and receipt; provided, however, that
notwithstanding the foregoing, any communication sent by facsimile transmission
after 5:00 PM (receiving Party’s time) or not on a Business Day shall not be
deemed received until the next Business Day, (iii) when delivered by next
Business Day delivery by a nationally recognized courier service, or (iv) if
sent by registered or certified mail, when received, provided postage and
registration or certification fees are prepaid and delivery is confirmed by a
return receipt:
Lexicon:
Lexicon Pharmaceuticals, Inc.
8800 Technology Forest Place
The Woodlands, TX 77381-1160
Attn: Arthur T. Sands, M.D., Ph.D.
Facsimile: (281) 863-8095
with copies to:
Lexicon Pharmaceuticals, Inc.
8800 Technology Forest Place
The Woodlands, TX 77381-1160
Attn: Jeffrey L. Wade
Facsimile: (281) 863-8010
and
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Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Lexicon Pharmaceuticals, Inc.
8800 Technology Forest Place
The Woodlands, TX 77381-1160
Attn: Julia P. Gregory
Facsimile: (281) 863-8095
Symphony Icon:
Symphony Icon, Inc.
7361 Calhoun Place, Suite 325
Rockville, MD 20855
Attn: Charles W. Finn, Ph.D.
Facsimile: (301) 762-6154
Holdings:
Symphony Icon Holdings LLC
7361 Calhoun Place, Suite 325
Rockville, MD 20855
Attn: Robert L. Smith, Jr.
Facsimile: (301) 762-6154
with copies to:
Symphony Capital Partners, L.P.
875 Third Avenue, 18th Floor
New York, NY 10022
Attn: Mark Kessel
Facsimile: (212) 632-5401
and
Symphony Strategic Partners, LLC
875 Third Avenue, 18th Floor
New York, NY 10022
Attn: Mark Kessel
Facsimile: (212) 632-5401
or to such other address as such Party may from time to time specify by notice
given in the manner provided herein to each other Party entitled to receive
notice hereunder.
          6. Governing Law; Consent to Jurisdiction and Service of Process.
               (a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York; except to the extent that
this
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Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Agreement pertains to the internal governance of Symphony Icon or Holdings, and
to such extent this Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
               (b) Each of the Parties hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court, any Delaware State court or federal court of the United
States of America sitting in the City of New York, Borough of Manhattan or
Wilmington, Delaware, and any appellate court from any jurisdiction thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the Parties hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New York State
court or any such Delaware state court or, to the fullest extent permitted by
law, in such federal court. Each of the Parties agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Party may otherwise
have to bring any action or proceeding relating to this Agreement.
               (c) Each of the Parties irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York State or
federal court, or any Delaware State or federal court. Each of the Parties
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court. Each of the Parties hereby consents to service of process by mail.
          7. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
          8. Entire Agreement. This Agreement (including any Annexes, Schedules,
Exhibits or other attachments hereto) constitutes the entire agreement between
the Parties with respect to the matters covered hereby and supersedes all prior
and contemporaneous agreements, correspondence, discussion, and understanding
with respect to such matters between the Parties, excluding the Operative
Documents.
          9. Amendment; Successors; Counterparts.
               (a) The terms of this Agreement shall not be altered, modified,
amended, waived or supplemented in any manner whatsoever except by a written
instrument signed by each of the Parties.
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Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
               (b) Nothing expressed or implied herein is intended or shall be
construed to confer upon or to give to any Person, other than the Parties, any
right, remedy or claim under or by reason of this Agreement or of any term,
covenant or condition hereof, and all the terms, covenants, conditions, promises
and agreements contained herein shall be for the sole and exclusive benefit of
the Parties and their successors and permitted assigns.
               (c) This Agreement may be executed in one or more counterparts,
each of which, when executed, shall be deemed an original but all of which,
taken together, shall constitute one and the same Agreement.
          10. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in a manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
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     IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Agreement, or has caused this Agreement to be executed and delivered by a duly
authorized officer, on the day and year first above written.

            LEXICON PHARMACEUTICALS, INC.
      By:           Name:   Arthur T. Sands, M.D., Ph.D.        Title:  
President and Chief Executive Officer     

                  SYMPHONY ICON HOLDINGS LLC
 
           
 
  By:   Symphony Capital Partners, L.P.,    
 
      its Manager    
 
           
 
  By:   Symphony Capital GP, L.P.,    
 
      its general partner    
 
           
 
  By:   Symphony GP, LLC,    
 
      its general partner    
 
           

                  By:           Name:   Mark Kessel        Title:   Managing
Member     

            SYMPHONY ICON, INC.
      By:           Name:   Mark Kessel        Title:   Chairman of the Board   
 

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