Exhibit 10.1
 
 

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AMENDED AND RESTATED
PURCHASE OPTION AGREEMENT
 
by and among
 
 
LEXICON PHARMACEUTICALS, INC.
 
 
SYMPHONY ICON HOLDINGS LLC
 

and

 
SYMPHONY ICON, INC.
 

 

 

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Dated as of July 30, 2010

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Table of Contents

 

TABLE OF CONTENTS
 

   
Page
Section 1.
Grant of Purchase Option
1
Section 2.
Exercise of Purchase Option
2
Section 3.
Lexicon Representations, Warranties and Covenants
9
Section 4.
Holdings Representations and Warranties
12
Section 5.
Symphony Icon Representations, Warranties and Covenants
14
Section 6.
Notice of Material Event
22
Section 7.
Assignment; Transfers; Legend
22
Section 8.
Costs and Expenses; Payments
23
Section 9.
Expiration; Termination of Agreement
23
Section 10.
Survival; Indemnification
24
Section 11.
No Petition
27
Section 12.
Third-Party Beneficiary
27
Section 13.
Notices
27
Section 14.
Governing Law; Consent to Jurisdiction and Service of Process
29
Section 15.
Waiver of Jury Trial
29
Section 16.
Entire Agreement
29
Section 17.
Amendment; Successors; Counterparts
30
Section 18.
Specific Performance
30
Section 19.
Severability
30
Section 20.
Tax Reporting
30
Section 21.
Original Agreement
31
Section 22.
Amendment to Annex A
31

 
 
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Annex A                     Certain Definitions
 
Exhibit 1                      Purchase Exercise Notice
 

 
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AMENDED AND RESTATED
PURCHASE OPTION AGREEMENT
 
This AMENDED AND RESTATED PURCHASE OPTION AGREEMENT (this “Agreement”) is
entered into as of July 30, 2010 (the “Closing Date”), 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”).  Capitalized terms used
herein and not defined herein shall have the meanings assigned to such terms in
Annex A attached hereto.
 
PRELIMINARY STATEMENT
 
WHEREAS, Lexicon, Holdings and Symphony Icon, entered into that certain Purchase
Option Agreement, dated as of June 15, 2007 (the “Original Agreement”), pursuant
to which Holdings granted Lexicon an option to purchase all of the Common Stock
of Symphony Icon and any other Equity Securities issued by Symphony Icon
(together, the “Symphony Icon Equity Securities”) owned, or thereafter acquired,
by Holdings on the terms described therein;
 
WHEREAS, the Parties to the Original Agreement wish to amend and restate the
Original Agreement and accept the rights and covenants hereof in lieu of their
rights and covenants under the Original Agreement; and
 
WHEREAS, Symphony Icon and Holdings have determined that it is in each of its
best interest to perform and comply with certain agreements and covenants
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:
 
Section 1.                      Grant of Purchase Option.
 
(a)           Holdings hereby grants to Lexicon an exclusive option (the
“Purchase Option”) to purchase all, but not less than all, of the outstanding
Symphony Icon Equity Securities owned or hereinafter acquired by Holdings, in
accordance with the terms of this Agreement.
 
(b)           Lexicon’s right to purchase the Symphony Icon Equity Securities is
subject to the following conditions:
 
(i)           The Purchase Option may only be exercised for the purchase of all,
and not less than all, of the Symphony Icon Equity Securities;
 
(ii)           The Purchase Option may only be exercised a single time; and
 
 
 

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(iii)           The Purchase Option may be exercised only on the Closing Date.
 
Section 2.              Exercise of Purchase Option.
 
(a)           Exercise Notice.  Lexicon may exercise the Purchase Option only by
delivery of a notice in the form attached hereto as Exhibit 1 (the “Purchase
Option Exercise Notice”) on the Closing Date.  The Purchase Option Exercise
Notice shall be delivered to Holdings and Symphony Icon and shall be irrevocable
once delivered.
 
(b)           Purchase Price.
 
(i)           As complete and full consideration for the sale to Lexicon by
Holdings of its Symphony Icon Equity Securities (and for the Symphony Icon
Equity Securities of any other Person), Lexicon shall deliver the following to
Holdings:
 
(A)           Ten Million Dollars ($10,000,000) in cash on the Closing Date (the
“Closing Date Payment”);
 
(B)           Fifty Million Dollars ($50,000,000) (subject to adjustment as set
forth in Section 2(b)(ii), (iii) and (v), the “Base Payment Balance”) payable at
any time, or from time to time, in whole or in increments, in each case at
Lexicon’s sole discretion, but in any event payable prior to July 30, 2013; and
 
(C)           Up to Thirty Million Dollars ($30,000,000) of contingent payments
(subject to adjustment as set forth in Section 2(b)(ii), (iii) and (v), the
“Contingent Payments”), in the amount of fifty percent (50%) of any upfront,
milestone or royalty payments or any other consideration of any kind received at
any time by Lexicon ( “Partnership Payments”) pursuant to any transaction or
transactions under which Lexicon grants an unaffiliated third party rights to
commercialize an LG103 Product (a “Licensing Transaction”), provided that
Partnership Payments (and, therefore, the calculation of Contingent Payments for
purposes of this Section 2(b)(i)(C)) shall specifically exclude payments from a
third party to Lexicon pursuant to any Licensing Transaction (x) for securities
of Lexicon up to (but not exceeding) the fair market value of such securities,
determined, in the case of Lexicon Common Stock, in a manner consistent with the
provisions of Section 2(f), with any excess over such fair market value, for
clarity, being deemed Partnership Payments as contemplated by Section 2(b)(v),
or (y) that constitute an advancement or reimbursement of expenses incurred by
Lexicon for the research or development of any LG103 Product after entering into
such Licensing Transaction (whether such payments are in the form of or
characterized as an advance of such expenses, reimbursement of such expenses, or
a payment upon the achievement of a specified milestone for which such expenses
were incurred), up to (but not exceeding) the amount of LG103 Product
Development Expenses (as defined in Section 22 hereof) incurred by Lexicon for
the research or development of such LG103 Product after entering into such
Licensing Transaction (“Allowed Reimbursed Expenses”), with any excess over such
Allowed Reimbursed Expenses, for clarity, being deemed Partnership Payments.
 
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(ii)           The Base Payment Balance will be reduced by fifty percent (50%)
of all LG103 Product Development Expenses, which reduction shall in any event be
no greater in the aggregate than Fifteen Million Dollars ($15,000,000) (any such
reduction, the “Base Payment Reduction”).  In the event of a Base Payment
Reduction, the Maximum Contingent Payments Amount (as defined in Section 22
hereof) payable will be increased by the same amount of the Base Payment
Reduction, with such increase being referred to as the “Recapture-Eligible
Amount.”  For clarity, until the Base Payment Balance is reduced to zero (or, if
earlier, July 30, 2013), the amount of the Base Payment Balance (and, in the
case of the following clause (A), the corresponding Base Payment Reduction,
Recapture-Eligible Amount and Maximum Contingent Payments Amount) will be
determined on a continuing net basis after taking account (A) reductions in the
Base Payment Balance for expenses in accordance with the foregoing provisions
after taking into account any Allowed Reimbursed Expenses offsetting any such
expenses and (B) any payments by Lexicon credited against the Base Payment
Balance.  To the extent Lexicon receives Partnership Payments that would result
in Holdings receiving Contingent Payments in excess of the Maximum Contingent
Payments Amount, then Holdings shall receive such additional Contingent Payments
and the Base Payment Balance shall be reduced dollar for dollar by the amount in
excess above the Maximum Contingent Payment Amount.  Notwithstanding the
foregoing, in no event, other than as set forth in Section 3(b)(viii), shall the
sum of the Base Payment Balance and all Contingent Payments (including for the
avoidance of doubt any payments made pursuant to Section 2(b)(iii) below) exceed
Eighty Million Dollars ($80,000,000), and in no event shall Holdings be required
to repay to Lexicon any amounts received for the Base Payment Balance or the
Contingent Payments.
 
(iii)           In the event that Lexicon receives regulatory approval in the
United States (consisting of approval by the U.S. Food and Drug Administration
of a New Drug Application) for the marketing and sale of any LG103 Product
(“U.S. Regulatory Approval”) prior to entering into any Licensing Transaction
under which Lexicon grants a third party rights to commercialize such LG103
Product in the United States, Lexicon shall pay Holdings, upon U.S. Regulatory
Approval and in lieu of any Contingent Payments from entering into any Licensing
Transaction in the United States with respect to such LG103 Product, an amount
equal to the lesser of (x) the sum of (A) any Recapture-Eligible Amount
attributable to the development of such LG103 Product plus (B) Fifteen Million
Dollars ($15,000,000), with such sum being reduced by fifty percent (50%) of any
Contingent Payments paid prior to U.S. Regulatory Approval attributable to any
Licensing Transaction outside of the United States with respect to such LG103
Product (a “Foreign Partnership”), provided that the maximum amount of any such
reduction shall in no event exceed fifty percent (50%) of the sum of (A) and (B)
above, and (y) the balance of the Maximum Contingent Payment Amount.  In the
event that Lexicon makes such payment upon U.S. Regulatory Approval, Lexicon
will have no obligation to make subsequent Contingent Payments attributable to
any Foreign Partnerships with respect to such LG103 Product until the proceeds
of such Foreign Partnerships exceed fifty percent (50%) of the payment made as a
result of U.S. Regulatory Approval (for illustration purposes, if the U.S.
Regulatory Approval payment with respect to such LG103 Product were $20,000,000,
then Contingent Payments would resume when the subsequently-received proceeds of
the Foreign Partnership with respect to such LG103 Product exceeded
$10,000,000).
 
 
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(iv)           Lexicon shall promptly, and in no event later than thirty (30)
days, pay Holdings any Contingent Payment upon its receipt of any Partnership
Payment (or, as applicable, of U.S. Regulatory Approval) giving rise to such
Contingent Payment.
 
(v)           If Lexicon enters into a Licensing Transaction that includes, as
part of its terms, the purchase of Lexicon Common Stock or other Lexicon
securities at a premium to the then fair market value of such securities (in the
case of Lexicon Common Stock, using the valuation methodology set forth in
Section 2(f)), then the aggregate premium paid will be treated as a Partnership
Payment for purposes of determining Contingent Payments.
 
(c)           Form of Payment.  The Base Payment Balance and the Contingent
Payments may be paid in cash, Lexicon Common Stock or in a combination of cash
and Lexicon Common Stock, at the sole discretion of Lexicon; provided that any
payment made on or prior to July 30, 2012 shall contain a minimum value of fifty
percent (50%) of Lexicon Common Stock and any payment made after July 30, 2012
shall contain a maximum value of fifty percent (50%) of Lexicon Common Stock, in
each case, determined in accordance with Section 2(f) hereof.
 
(d)           Purchase Price.  The aggregate payments to be made to Holdings set
forth in Section 2(b) shall constitute the “Purchase Price”.   For clarity, in
no event other than as set forth in Section 3(b)(viii) shall the Purchase Price
exceed Ninety Million Dollars ($90,000,000) in the aggregate.
 
(e)           Surrender of Symphony Icon Equity Securities; Symphony Icon Board;
Insurance Policies.  Subject to the terms and conditions of this Agreement, on
the Closing Date, Holdings shall surrender to Lexicon its certificates
representing its Symphony Icon Equity Securities, and shall convey good title to
such Symphony Icon Equity Securities, free from any Encumbrances and from any
and all restrictions that any sale, assignment or other transfer of such
Symphony Icon Equity Securities be consented to or approved by any Person.  On
or prior to the Closing Date, Holdings shall remove all directors serving on the
Symphony Icon Board, other than the Lexicon Director, as of the Closing
Date.  On or prior to the Closing Date, Holdings shall cause Symphony Icon to
deliver the Insurance Policies to Lexicon and itself in accordance with Section
5(b)(xiii) hereof.
 
(f)           Valuation of Lexicon Stock.  In the event that Lexicon elects to
pay part of the Purchase Price through the delivery to Holdings of Lexicon
Common Stock, the value per share thereof (the “Lexicon Common Stock Valuation”)
shall equal the average closing price of Lexicon Common Stock, as reported by
the NASDAQ Global Market, or other national exchange that is the primary
exchange on which Lexicon Common Stock is listed, for the twenty (20) trading
days immediately preceding (but not including) the second trading day prior to
the applicable Payment Date.  If Lexicon Common Stock is not traded on a
national exchange or the NASDAQ Global Market, then Lexicon shall be obligated
to pay the Purchase Price solely in cash.  Lexicon shall calculate the Lexicon
Common Stock Valuation in accordance with this Section 2(f), subject to review
and confirmation by Holdings.
 
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(g)           Share Certificates. Any stock certificate(s) issued by Lexicon for
Lexicon Common Stock pursuant to this Section 2 may contain a legend (the “33
Act Legend”) substantially as follows:
 
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE,
AND THE SAME HAVE BEEN ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED
UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

This legend shall be removed by Lexicon, subject to, and in accordance with, the
terms of Section 3(b)(iii) hereof.
 
(h)           Conditions Precedent to Lexicon Stock Issuances.  Prior to
issuing, and as a condition precedent to Lexicon’s ability to issue, any Lexicon
Common Stock to Holdings as payment of the Purchase Price, Lexicon shall:
 
(i)           in the event that Lexicon is eligible to include all of the
Lexicon Common Stock to be issued to Holdings in full or partial payment of any
installment of the Purchase Price in a Registration Statement that is effective
under the Securities Act or that may become effective under the Securities Act
upon filing with the SEC, Lexicon shall include such Lexicon Common Stock or
file such Registration Statement prior to the Payment Date; or if Lexicon is not
so eligible, it shall (A) be eligible to file a short form Registration
Statement on Form S-3 under the Securities Act (or any successor form providing
for forward incorporation by reference) permitting the immediate resale without
restriction of all Lexicon Common Stock to be issued to Holdings in full or
partial payment of any installment of the Purchase Price; (B) not have any
unresolved staff comments from the SEC staff regarding any filing with the SEC;
(C) not be the subject of any stop order with respect to any registration under
the Securities Act; (D) be current in its reporting obligations under the
Exchange Act; (E) file the Registration Statement referred to in clause (A)
prior to the Payment Date immediately upon determination of the number of shares
of Lexicon Common Stock to be issued to Holdings on the relevant Payment Date;
and (F) use its best efforts to have such Registration Statement declared
effective prior to the Payment Date or as soon thereafter as possible;
 
 
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(ii)           provide evidence reasonably acceptable to Holdings that such
Lexicon Common Stock has been approved for listing on the NASDAQ Global Market
or such other national market on which the Lexicon Common Stock is then listed;
 
(iii)           cooperate with any necessary HSR Filings by Holdings and shall
pay the HSR Filing fee on behalf of Holdings and promptly reimburse Holdings for
any fees, costs and expenses (including the reasonable fees of counsel) in
connection with such filings;
 
(iv)           not make any Partial Stock Payment to Holdings or an Affiliate of
Holdings to which Holdings has assigned its payment rights under the Agreement
in accordance with Section 7(a) (each, a “Symphony Payment Recipient”) to the
extent that, immediately prior to the time of such payment, such Symphony
Payment Recipient (whether on its own account or as part of a “group” for
purposes of Section 16 of the Exchange Act, such Persons, the “Symphony
Reporting Persons”) is subject to the reporting and short-swing liability
provisions of Section 16 of the Exchange Act (the “Section 16 Threshold”) solely
as a result of the Lexicon Common Stock acquired from Lexicon under this
Agreement and the transactions contemplated hereby; provided that
 
(A)           if, prior to the second anniversary of the Closing Date, payment
by Lexicon to a Symphony Payment Recipient of any Contingent Payment (or portion
thereof) in Lexicon Common Stock would result in any Symphony Reporting Person
meeting or exceeding the Section 16 Threshold, Lexicon may, at its sole option,
reduce the portion of such Contingent Payment otherwise payable in Lexicon
Common Stock pursuant to Section 2(c) to the extent necessary for such Symphony
Reporting Person to avoid meeting or exceeding the Section 16 Threshold;
 
(B)           on the Closing Date, Holdings shall certify to Lexicon the number
of shares of Lexicon Common Stock owned by the Symphony Reporting Persons; and
 
(C)           within ten (10) Business Days of any change in the number of
shares of Lexicon Common Stock owned by the Symphony Reporting Persons, Holdings
shall certify to Lexicon the number of shares of Lexicon Common Stock owned by
the Symphony Reporting Persons;
 
(v)           certify that Holdings has not been provided with any material
non-public information that remains such at the time Lexicon issues any Lexicon
Common Stock to Holdings in full or partial payment of an installment of the
Purchase Price; and
 
(vi)           if applicable, prior to each Partial Stock Payment, the Lexicon
Board shall have adopted resolutions, reasonably satisfactory to Holdings,
approving the issuance of the Lexicon Common Stock to Holdings for purposes of
Section 203(a)(1) of the Delaware General Corporation Law (the “DGCL”), such
that the restrictions on “business combinations” set forth in Section 203 of the
DGCL shall not apply to Lexicon and Holdings as a result of such issuances.
 
 
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It is hereby expressly agreed and understood that the conditions set forth in
this clause (h) are for the exclusive benefit of, and may be waived only in
writing by, Holdings.  If any such condition is not satisfied or waived at the
time of any payment, Lexicon shall be obligated to pay the entire amount of the
applicable portion of the Purchase Price in cash in lieu of Lexicon Common
Stock.

(i)           Government Approvals.  On or prior to the Closing Date, each of
Lexicon, Symphony Icon and Holdings shall have taken all necessary action to
cause all Governmental Approvals with respect to such Party (including, without
limitation, the preparing and filing of any pre-merger notification and report
forms required under the HSR Filings required to be in effect in connection with
the transactions contemplated by this Agreement) to be in effect; provided,
however, that with respect to Government Approvals required by a Governmental
Authority other than the United States federal government and its various
branches and agencies, the Parties’ obligations under this Section 2(i) shall be
limited to causing to be in effect only those Government Approvals, the failure
of which to be in effect would, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on any of the
Parties.  Each of Symphony Icon and Lexicon shall pay its own costs associated
with taking such action.  Symphony Icon shall pay any costs of Holdings
associated with obtaining Government Approvals required in connection with the
exercise of the Purchase Option.  All other costs and expenses of Holdings shall
be paid by Holdings pursuant to Section 8(b) hereof, including any costs arising
from any error in Holdings’ initial valuation of its investment in Symphony
Icon.
 
(j)           Transfer of Title.  Transfer of title to Lexicon of all of the
Symphony Icon Equity Securities shall be deemed to occur automatically on the
Closing Date, subject to the payment by Lexicon of the Closing Date Payment, the
commitment by Lexicon to pay the balance of the Purchase Price and its
performance of its other obligations herein required to be performed, and under
the Registration Rights Agreement, as applicable, to the reasonable satisfaction
of Holdings, and thereafter Symphony Icon shall treat Lexicon as the sole holder
of all Symphony Icon Equity Securities, notwithstanding any failure of Holdings
to tender certificates representing such shares to Lexicon in accordance with
Section 2(c) hereof.  After the Closing Date, Holdings shall have no rights in
connection with such Symphony Icon Equity Securities other than the right to
receive the Purchase Price; provided, however, that nothing in this Section 2(j)
shall affect the survivability of any indemnification provision in this
Agreement upon termination of this Agreement.
 
(k)           Consents and Authorizations.  Lexicon has obtained all consents
and authorizations necessary from stockholders and/or its board of directors for
the consummation of the exercise and closing of the Purchase Option, as may be
required under the organizational documents of Lexicon, any prior stockholders
or board resolution, any stock exchange or similar rules or any applicable law;
provided, however, that with respect to consents or authorizations required by a
Governmental Authority other than the United States federal government and its
various branches and agencies, the Parties’ obligations under this Section 2(k)
shall be limited to obtaining only those consents and authorizations, the
failure of which to be obtained would, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on any of the Parties.
 
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Section 2A.                      Change of Control.  Within thirty (30) days
following a Change of Control with a third party that is principally engaged in
the business of developing and/or commercializing pharmaceutical products,
Lexicon shall promptly (a) pay Holdings the amount of the unpaid Base Payment
Balance; provided that if such Change of Control results in all outstanding
shares of Lexicon Common Stock being converted into the right to receive other
consideration or otherwise being cancelled and ceasing to exist, the portion of
such unpaid Base Payment Balance that may otherwise be payable in Lexicon Common
Stock pursuant to Section 2(c) may be paid in a manner consistent with the form
and type of the consideration received by the holders of Lexicon Common Stock in
such Change of Control, and (b) notify Holdings of its good faith intention, in
light of such Change of Control, to enter into Licensing Transactions for the
commercialization of the LG103 Products or to commercialize the LG103 Products
on its own (together with its Affiliates, including the ultimate parent of
Lexicon in such Change of Control), in each case in major markets including the
United States, Europe and Japan.  In the event that Lexicon fails to deliver
such notice, or if it notifies Holdings of its good faith intention to
commercialize the LG103 Products on its own (together with its Affiliates,
including the ultimate parent of Lexicon in such Change of Control) in the
United States and either or both of Europe or Japan, then Lexicon shall pay
Holdings, within thirty (30) days of such notice, the amount of the sum of the
Base Payment Balance plus the Maximum Contingent Payment Amount, in each case,
reduced by any amounts already paid (the “Acceleration Payment”); provided that
if such Change of Control results in all outstanding shares of Lexicon Common
Stock being converted into the right to receive other consideration or otherwise
being cancelled and ceasing to exist, the portion of such Base Payment Balance
and Maximum Contingent Payment Amount that may otherwise be payable in Lexicon
Common Stock pursuant to Section 2(c) may be paid in a manner consistent with
the form and type of the consideration received by the holders of Lexicon Common
Stock in such Change of Control; and provided further that, in the event Lexicon
shall have elected to abandon the development of any LG103 Product, the amount
of such Acceleration Payment shall be reduced by the Recapture-Eligible Amount
associated with such abandoned LG103 Product.
 
Section 3.              Lexicon Representations, Warranties and Covenants.
 
(a)           As of the date hereof, Lexicon hereby represents and warrants,
and, except to the extent that any of the following representations and
warranties are limited to the date of this Agreement or otherwise limited, on
and each Payment Date, shall be deemed to have represented and warranted, to
Holdings and Symphony Icon that:
 
 
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(i)           Organization.  Lexicon is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware.
 
(ii)           Authority and Validity.  Lexicon has all requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.  The
execution, delivery and performance by Lexicon of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action required on the part of Lexicon, and no other
proceedings on the part of Lexicon are necessary to authorize this Agreement or
for Lexicon to perform its obligations under this Agreement.  This Agreement
constitutes the lawful, valid and legally binding obligation of Lexicon,
enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
 
(iii)           No Violation or Conflict.  The execution, delivery and
performance of this Agreement and the transactions contemplated hereby do not
(A) violate, conflict with or result in the breach of any provision of the
Organizational Documents of Lexicon, (B) as of the date of this Agreement and
each Payment Date if Lexicon elects to pay part of the Purchase Price through
the delivery of Lexicon Common Stock (a “Partial Stock Payment”), conflict with
or violate any law or Governmental Order applicable to Lexicon or any of its
assets, properties or businesses, or (C) conflict with, result in any breach of,
constitute a default (or event that with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of Lexicon, pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which Lexicon is a party except,
in the case of clauses (B) and (C), to the extent that such conflicts, breaches,
defaults or other matters would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Lexicon.
 
(iv)           Governmental Consents and Approvals.  Other than any HSR Filings
which, if such HSR Filings are required pursuant to Section 2(i) hereof, will be
obtained on or prior to the Closing Date, the execution, delivery and
performance of this Agreement by Lexicon do not, and the consummation of the
transactions contemplated hereby do not and will not, require any Governmental
Approval which has not already been obtained, effected or provided, except with
respect to which the failure to so obtain, effect or provide would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Lexicon.
 
 
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(v)           Litigation.  As of (A) the date of this Agreement, except as
disclosed in any Lexicon Public Filings available as of the date hereof, and
(B)  each Payment Date if Lexicon elects to make a Partial Stock Payment, there
are no actions by or against Lexicon pending before any Governmental Authority
or, to the knowledge of Lexicon, threatened to be brought by or before any
Governmental Authority, that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Lexicon.  There are no pending
or, to the knowledge of Lexicon, threatened actions, to which Lexicon is a party
(or is threatened to be named as a party) to set aside, restrain, enjoin or
prevent the execution, delivery or performance of this Agreement or the
Operative Documents or the consummation of the transactions contemplated hereby
or thereby by any party hereto or thereto.  As of the date of this Agreement,
and as of each Payment Date if Lexicon elects to make a Partial Stock Payment,
Lexicon is not subject to any Governmental Order (nor, to the knowledge of
Lexicon, is there any such Governmental Order threatened to be imposed by any
Governmental Authority) that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Lexicon.
 
(b)           Lexicon hereby covenants and agrees with Holdings as follows:
 
(i)           Immediately prior to any Payment Date, Lexicon shall have
sufficient amounts of cash and, if applicable, sufficient authorized but
unissued and nonassessable shares of Lexicon Common Stock available to satisfy
the portion of the Purchase Price to be paid in cash or Lexicon Common Stock on
such Payment Date.  Lexicon shall have, on each Payment Date, complied with the
requirements of Section 2(h)(i) above for the resale of any such shares of
Lexicon Common Stock to be delivered in partial satisfaction of the Purchase
Price on such Payment Date, accompanied by evidence reasonably acceptable to
Holdings that such Lexicon Common Stock has been approved for listing on the
NASDAQ Global Market or such other national market on which the Lexicon Common
Stock is then listed.  Lexicon shall deliver to Holdings on or prior to any
Partial Stock Payment a legal opinion from Lexicon’s general counsel, or such
other counsel as Lexicon and Holdings shall mutually agree, which opinion shall
be, in form and substance, reasonably acceptable to Holdings.
 
(ii)           If Lexicon elects to satisfy any portion of the Purchase Price in
Lexicon Common Stock, Lexicon, on each Payment Date, shall convey good and
marketable title to such Lexicon Common Stock, free from any Encumbrances and
any and all other restrictions that any issuance, sale, assignment or other
transfer of such Lexicon Common Stock be consented to or approved by any Person.
 
(iii)           If the share certificates representing such Lexicon Common Stock
include the 33 Act Legend (as set forth in Section 2(g) hereof), Lexicon shall,
within two (2) Business Days of receiving a request from Holdings or any
“Investor” (as defined in the Registration Rights Agreement), remove or cause to
be removed the 33 Act Legend from such share certificates as Holdings or such
Investor shall designate, so long as (x) the Lexicon Common Stock represented by
such share certificates has been transferred to a third party in compliance with
the registration requirements of the Securities Act or an available exemption
therefrom, and (y) Lexicon receives a certification from Holdings, such Investor
or a securities broker designated by Holdings or such Investor to the effect
that the sale of such Lexicon Common Stock was made under a Registration
Statement and accompanied by the delivery of a current prospectus.
 
 
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(iv)           Upon the termination of this Agreement pursuant to Section 9
hereof, or as soon thereafter as is practical, Lexicon shall (A) in accordance
with and pursuant to Sections 2.7 and 2.8 of the Novated and Restated Technology
License Agreement, deliver to Symphony Icon all Regulatory Files and Tangible
Materials, and (B) in accordance with and pursuant to Section 2.11 of the
Novated and Restated Technology License Agreement, provide and supply, or cause
to be provided and supplied, finished dosage form of the Products.
 
(v)           Lexicon shall maintain the separate corporate existence of
Symphony Icon for a minimum of one (1) year following the Closing Date, unless
such maintenance would have a Material Adverse Effect on Lexicon or any of its
Affiliates.
 
(vi)           Lexicon shall use commercially reasonable efforts to maintain the
effectiveness of the Registration Statement filed in accordance with Section
2(h)(i) until the expiration of two years after the final Payment Date in which
shares of Lexicon Common Stock are issued in a Partial Stock Payment, or such
earlier time as all shares held by Holdings are eligible for resale under Rule
144 of the Securities Act.
 
(vii)           Lexicon shall use commercially reasonable efforts, as
conclusively determined by Lexicon’s Board of Directors in its good faith
discretion (taking into account scientific, medical, market and competitive
factors, Lexicon’s financial condition, portfolio management considerations, and
such other factors as it deems relevant), to develop and, following requisite
regulatory approvals, commercialize one or more LG103 Products.
 
(viii)           In the event Lexicon’s Board of Directors shall determine, in
its sole discretion, to abandon all further efforts relating to the development
and/or commercialization of all LG103 Products (the “Abandoned Products”),
Lexicon shall provide Holdings with written notice of such determination within
ten (10) Business Days.  For a period of up to eighteen months following
delivery of such notice, to the extent requested by Holdings, Lexicon shall
reasonably cooperate with Holdings, at Holdings’ expense, in identifying and
concluding one or more Licensing Transactions; provided, for clarity, that
Lexicon shall not be obligated to enter into any Licensing Transaction that
imposes any obligation on Lexicon other than the grant of a license and the
customary related obligations (excluding, without limitation, indemnification,
financial or monetary obligations of any kind) in connection with granting such
license under the relevant Licensed Intellectual Property relating to such LG103
Products.  The consideration received for any Licensing Transaction(s) for an
Abandoned Product(s) (an “Abandoned Product Partnership Payment”) shall be
divided equally between Lexicon and Holdings and shall not be subject to the
Purchase Price limitation set forth in Section 2(d).
 
 
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(ix)           Lexicon shall permit the representatives of Holdings (including
Holdings’ members and their respective representatives) and each Symphony Fund,
at each of their own expense and upon reasonable prior notice to Lexicon, to
visit the principal executive office of Lexicon, to discuss the LG103 Financial
Information (as defined in Section 3(b)(x)) with Lexicon’s officers and (with
the consent of Lexicon, which consent will not be unreasonably withheld) its
Auditors, all at such reasonable times and as often as may be reasonably
requested in writing.
 
(x)           Lexicon will keep complete, proper and separate books of record
and account for the LG103 Products, including a record of all costs and expenses
incurred (recorded using a method consistent with past practices under this
Agreement), all charges made, all credits made and received, the Base Payment
Balance, the Recapture Eligible Amount, the calculation of any Contingent
Payments, and all income derived in connection with LG103 Products, all in
accordance with GAAP, in each case to the extent necessary to enable Lexicon to
comply with the periodic reporting requirements of this Agreement, and will
promptly notify Holdings if it adopts or changes any accounting principle
pursuant to a change in GAAP or applicable Law (such information, the “LG103
Financial Information”).  Within ten (10) Business Days following each quarter,
Lexicon shall provide Holdings a report setting forth in reasonable detail the
financial performance for the LG103 Products, including without limitation the
LG103 Product Development Expenses incurred during the prior quarter (on a
product by product basis), a calculation of the Base Payment Balance, the
Recapture Eligible Amount and the calculation of any Contingent Payments.
 
Section 4.               Holdings Representations and Warranties.
 
(a)           As of the date hereof, Holdings hereby represents and warrants
that:
 
(i)           Organization.  Holdings is a limited liability company, duly
formed, validly existing and in good standing under the laws of the State of
Delaware.
 
(ii)           Authority and Validity.  Holdings has all requisite limited
liability company power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.  The execution, delivery and performance by Holdings of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action required on the part of Holdings, and
no other proceedings on the part of Holdings are necessary to authorize this
Agreement or for Holdings to perform its obligations under this Agreement.  This
Agreement constitutes the lawful, valid and legally binding obligation of
Holdings, enforceable in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
 
 
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(iii)           No Violation or Conflict.  The execution, delivery and
performance of this Agreement and the transactions contemplated hereby do not
(A) violate, conflict with or result in the breach of any provision of the
Organizational Documents of Holdings, (B) as of the date of this Agreement,
conflict with or violate any law or Governmental Order applicable to Holdings or
any of its assets, properties or businesses, or (C) as of the date of this
Agreement, conflict with, result in any breach of, constitute a default (or
event that with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
or result in the creation of any Encumbrance on any of the assets or properties
of Holdings, pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which Holdings is a party except, in the case of clauses (B) and
(C), to the extent that such conflicts, breaches, defaults or other matters
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Holdings.
 
(iv)           Governmental Consents and Approvals.  The execution, delivery and
performance of this Agreement by Holdings do not, and the consummation of the
transactions contemplated hereby do not and will not, require any Governmental
Approval which has not already been obtained, effected or provided, except with
respect to which the failure to so obtain, effect or provide would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Holdings.
 
(v)           Litigation.  As of the date of this Agreement, there are no
actions by or against Holdings pending before any Governmental Authority or, to
the knowledge of Holdings, threatened to be brought by or before any
Governmental Authority, that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Holdings.  There are no pending
or, to the knowledge of Holdings, threatened actions to which Holdings is a
party (or is threatened to be named as a party) to set aside, restrain, enjoin
or prevent the execution, delivery or performance of this Agreement or the
Operative Documents or the consummation of the transactions contemplated hereby
or thereby by any party hereto or thereto.  As of the date of this Agreement,
Holdings is not subject to any Governmental Order (nor, to the knowledge of
Holdings, is there any such Governmental Order threatened to be imposed by any
Governmental Authority) that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Holdings.
 
(vi)           Stock Ownership.  All of Symphony Icon’s issued and outstanding
Symphony Icon Equity Securities are owned beneficially and of record by
Holdings, free and clear of any and all encumbrances.
 
 
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(vii)           Accredited Investor.
 
(A)           Holdings is and will remain at all relevant times an Accredited
Investor.
 
(B)           Holdings has relied completely on the advice of, or has consulted
with or has had the opportunity to consult with, its own personal tax,
investment, legal or other advisors and has not relied on Lexicon or any of its
Affiliates for advice related to any offer and sale of Lexicon Common Stock in
connection with the Purchase Option.  Holdings has reviewed the Investment
Overview and is aware of the risks disclosed therein.  Holdings acknowledges
that it has had a reasonable opportunity to conduct its own due diligence with
respect to the Products, the Programs, Symphony Icon, Lexicon and the
transactions contemplated by the Operative Documents.
 
(C)           Holdings is able to bear the economic risk of such investment for
an indefinite period and to afford a complete loss thereof.
 
(D)           Holdings agrees that the Lexicon Common Stock may not be resold
(A) without registration thereof under the Securities Act (unless an exemption
from such registration is available), or (B) in violation of any law.
 
(E)           No person or entity acting on behalf of, or under the authority
of, Holdings is or will be entitled to any broker’s, finder’s, or similar fees
or commission payable by Lexicon or any of its Affiliates.
 
Section 5.               Symphony Icon Representations, Warranties and
Covenants.
 
(a)           As of the date hereof, Symphony Icon hereby represents and
warrants that:
 
(i)           Organization.  Symphony Icon is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware.
 
(ii)           Authority and Validity.  Symphony Icon has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby.  The execution, delivery and performance by Symphony Icon of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action required on the part of
Symphony Icon, and no other proceedings on the part of Symphony Icon are
necessary to authorize this Agreement or for Symphony Icon to perform its
obligations under this Agreement.  This Agreement constitutes the lawful, valid
and legally binding obligation of Symphony Icon, enforceable in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors’ rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
 
 
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(iii)           No Violation or Conflict.  The execution, delivery and
performance of this Agreement and the transactions contemplated hereby do not
(A) violate, conflict with or result in the breach of any provision of the
Organizational Documents of Symphony Icon, (B) conflict with or violate any law
or Governmental Order applicable to Symphony Icon or any of its assets,
properties or businesses, or (C) conflict with, result in any breach of,
constitute a default (or event that with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of Symphony Icon, pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which Symphony Icon is a party
except, in the case of clauses (B) and (C), to the extent that such conflicts,
breaches, defaults or other matters would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Symphony Icon.
 
(iv)           Governmental Consents and Approvals.  The execution, delivery and
performance of this Agreement by Symphony Icon do not, and the consummation of
the transactions contemplated hereby do not and will not, require any
Governmental Approval which has not already been obtained, effected or provided,
except with respect to which the failure to so obtain, effect or provide would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Symphony Icon.
 
(v)           Litigation.  There are no actions by or against Symphony Icon
pending before any Governmental Authority or, to the knowledge of Symphony Icon,
threatened to be brought by or before any Governmental Authority that would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Symphony Icon.  There are no pending or, to the knowledge of
Symphony Icon, threatened actions to which Symphony Icon is a party (or is
threatened to be named as a party) to set aside, restrain, enjoin or prevent the
execution, delivery or performance of this Agreement or the Operative Documents
or the consummation of the transactions contemplated hereby or thereby by any
party hereto or thereto.  Symphony Icon is not subject to any Governmental Order
(nor, to the knowledge of Symphony Icon, is there any such Governmental Order
threatened to be imposed by any Governmental Authority) that would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Symphony Icon.
 
(vi)           Capitalization.  Holdings is the beneficial and record owner of
all issued and outstanding Symphony Icon Equity Securities.  No shares of
Symphony Icon capital stock are held in treasury by Symphony Icon or any
Symphony Icon Subsidiary.  All of the issued and outstanding Symphony Icon
Equity Securities (A) have been duly authorized and validly issued and are fully
paid and nonassessable, (B) were issued in compliance with all applicable state
and federal securities laws, and (C) were not issued in violation of any
preemptive rights or rights of first refusal.  No preemptive rights or rights of
first refusal exist with respect to any Symphony Icon Equity Securities and no
such rights will arise by virtue of or in connection with the transactions
contemplated hereby (other than for the Purchase Option).  Other than the
Purchase Option, there are no outstanding options, warrants, call rights,
commitments or agreements of any character to acquire any Symphony Icon Equity
Securities.  There are no outstanding stock appreciation, phantom stock, profit
participation or other similar rights with respect to Symphony Icon.  Symphony
Icon is not obligated to redeem or otherwise acquire any of its outstanding
Symphony Icon Equity Securities.
 
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(b)           Symphony Icon covenants and agrees that:
 
(i)           Symphony Icon will comply with all laws, ordinances or
governmental rules or regulations to which it is subject and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
Governmental Approvals necessary to the ownership of its properties or to the
conduct of its business, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other Governmental Approvals would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Symphony Icon.
 
(ii)           Symphony Icon will file (or cause to be filed) all material tax
returns required to be filed by it and pay all taxes shown to be due and payable
on such returns and all other taxes imposed on it or its assets to the extent
such taxes have become due and payable and before they have become delinquent
and shall pay all claims for which sums have become due and payable that have or
might become attached to the assets of Symphony Icon; provided, that Symphony
Icon need not file any such tax returns or pay any such tax or claims if (A) the
amount, applicability or validity thereof is contested by Symphony Icon on a
timely basis in good faith and in appropriate proceedings, and Symphony Icon has
established adequate reserves therefor in accordance with GAAP on the books of
Symphony Icon or (B) the failure to file such tax returns or the nonpayment of
such taxes and assessments, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Symphony Icon.
 
(iii)           Symphony Icon will at all times preserve and keep in full force
and effect its corporate existence.
 
(iv)           Symphony Icon will keep complete, proper and separate books of
record and account, including a record of all costs and expenses incurred, all
charges made, all credits made and received, and all income derived in
connection with the operation of the business of Symphony Icon, all in
accordance with GAAP (which GAAP shall be conformed to those used by Lexicon to
the extent practicable), in each case to the extent necessary to enable Symphony
Icon to comply with the periodic reporting requirements of this Agreement, and
will promptly notify Lexicon if it adopts or changes any accounting principle
pursuant to a change in GAAP or applicable Law.
 
 
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(v)           Symphony Icon will perform and observe in all material respects
all of the terms and provisions of each Operative Document to be performed or
observed by it, maintain each such Operative Document to which it is a party,
promptly enforce in all material respects each such Operative Document in
accordance with its terms, take all such action to such end as may be from time
to time reasonably requested by Holdings or Lexicon and make to each other party
to each such Operative Document such demands and requests for information and
reports or for action as Symphony Icon is entitled to make under such Operative
Document.
 
(vi)           Symphony Icon shall permit the representatives of Holdings
(including Holdings’ members and their respective representatives), each
Symphony Fund and Lexicon, at each of their own expense and upon reasonable
prior notice to Symphony Icon, to visit the principal executive office of
Symphony Icon, to discuss the affairs, finances and accounts of Symphony Icon
with Symphony Icon’s officers and (with the consent of Symphony Icon, which
consent will not be unreasonably withheld) its Auditors, all at such reasonable
times and as often as may be reasonably requested in writing.
 
(vii)           Symphony Icon shall permit each Symphony Fund, at its own
expense and upon reasonable prior notice to Symphony Icon, to inspect and copy
Symphony Icon’s books and records and inspect Symphony Icon’s properties at
reasonable times.
 
(viii)           Symphony Icon shall allow Lexicon or its designated
representatives to have reasonable visitation and inspection rights with regard
to the Programs and materials, documents and other information relating thereto.
 
(ix)           Symphony Icon shall permit each Symphony Fund to consult with and
advise the management of Symphony Icon on matters relating to the research and
development of the Programs in order to develop the Product in accordance with
the terms or provisions of the Amended and Restated Research and Development
Agreement.
 
(x)           On the Closing Date, or as soon thereafter as is practical,
Symphony Icon shall deliver to Lexicon all materials, documents, files and other
information relating to the Programs (or, where necessary, copies thereof).
 
(xi)           Symphony Icon shall indemnify the directors and officers of
Symphony Icon against liability incurred by reason of the fact that such Person
is or was a director or officer of Symphony Icon, as permitted by Article VII of
the Symphony Icon Charter and Section 9.01 of the Symphony Icon By-laws, as set
forth in, and on the terms of, the Indemnification Agreement and the RRD
Services Agreement, respectively.
 
 
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(xii)           Symphony Icon shall comply with, and cause any Persons acting
for it to comply with, the terms of the Investment Policy with respect to the
investment of any funds held by it.
 
(xiii)           On or prior to the Closing Date, Symphony Icon shall pay for a
non-cancelable clinical trial insurance policy and a non-cancelable directors
and officers liability insurance policy, in each case in form and substance
reasonably satisfactory to Holdings (such policies, the “Insurance Policies”),
covering claims made or reported for a period of six (6) years after the Closing
Date to provide insurance coverage for events, acts or omissions occurring on or
prior to the Closing Date for all persons who were directors or officers of
Symphony Icon on or prior to the Closing Date.
 
(c)           Symphony Icon covenants and agrees that it shall not, and shall
cause its Subsidiaries (if any) not to, without Lexicon’s prior written consent
(such consent, in the case of clause (x) below, not to be unreasonably
withheld):
 
(i)           issue any Symphony Icon Equity Securities or any Equity Securities
of any Subsidiary thereof; provided, however, that in any event any such
Symphony Icon Equity Securities shall be issued subject to the Purchase Option;
 
(ii)           redeem, repurchase or otherwise acquire, directly or indirectly,
any Symphony Icon Equity Securities or the Equity Securities of any Subsidiary
of Symphony Icon;
 
(iii)           create, incur, assume or permit to exist (A) any Encumbrance
over or on any of its assets, other than (x) statutory liens or (y) liens
created in the ordinary course of Symphony Icon’s business securing obligations
valued at less than $250,000 in the aggregate principal amount at any one time
outstanding (unless the Development Committee shall authorize the existence of
ordinary course liens securing obligations valued at greater than $250,000), or
(B) Debt other than any Debt owing to parties not affiliated with Symphony Icon
incurred pursuant to the Operative Documents and the Development Budget
(including payables incurred in the ordinary course of business) (“Excepted
Debt”); provided, however, that the aggregate outstanding principal amount of
all Excepted Debt for borrowed money (including the amount of Debt secured by
any Encumbrances permitted pursuant to clause (A)) shall not exceed $500,000 at
any time;
 
(iv)           declare or pay dividends or other distributions on any Symphony
Icon Equity Securities other than any dividend declared out of funds released by
the Development Committee pursuant to Section 8.1 of the Amended and Restated
Research and Development Agreement, from the proceeds of (x) the exercise of a
Discontinuation Option, or (y) a sale or license of a discontinued Program to a
third party, in each case in respect of which Symphony Icon shall be entitled to
pay (subject to the existence of lawfully available funds) a dividend equal to
the net amount (such net amount calculated as the gross proceeds received less
amounts required to be paid in respect of any and all corporate taxes owed by
Symphony Icon as a result of the receipt of such gross amounts) of such
Discontinuation Price or the amounts received from such third party, as the case
may be;
 
 
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(v)           enter into any transaction of merger or consolidation, or
liquidate, wind up or dissolve itself, or convey, transfer, license, lease or
otherwise dispose of all, or a material portion of, its properties, assets or
business;
 
(vi)           other than in respect of the Programs, engage in the development
of products for any other company or engage or participate in the development of
products or engage in any other material line of business;
 
(vii)           other than entering into, and performing its obligations under,
the Operative Documents and participating in the Programs, engage in any action
that negates or is inconsistent with any rights of Lexicon set forth herein;
 
(viii)           (A) other than as contemplated by the RRD Services Agreement
and Section 6.2 of the Amended and Restated Research and Development Agreement,
hire, retain or contract for the services of, any employees until the
termination of such agreements, or (B) appoint, dismiss or change any RRD
Investment Personnel;
 
(ix)           incur any financial commitments in respect of the development of
the Programs other than those set forth in the Development Plan and the
Development Budget, or those approved by the Development Committee and, if so
required by the terms of Paragraph 11 of the Development Committee Charter, the
Symphony Icon Board in accordance with the Operative Documents;
 
(x)           other than any transaction contemplated by the Operative
Documents, enter into or engage in any Conflict Transactions without (x) if the
Symphony Icon Board shall have less than five (5) members, the prior approval of
all the members of the Symphony Icon Board, or (y) if the Board shall have five
(5) members, the prior approval of a majority of the Disinterested Directors of
the Symphony Icon Board; or
 
(xi)           waive, alter, modify, amend or supplement in any manner
whatsoever any material terms and conditions of the RRD Services Agreement, the
Subscription Agreement, the Research Cost Sharing, Payment and Extension
Agreement, or Articles 4 and 6 of the Amended and Restated Research and
Development Agreement, except in compliance with the terms of the Operative
Documents.
 
(d)           Symphony Icon covenants and agrees to deliver, cause to be
delivered, and provide access thereto, to each other Party, each Symphony Fund,
and such Auditors as Lexicon may designate, so long as such Auditors shall
(x) be subject to confidentiality requirements at least as stringent as the
Confidentiality Agreement or (y) be the Lexicon Accounting Advisor retained
pursuant to an agreement which incorporates confidentiality provisions
substantially the same as the ones incorporated in the agreements in effect
between Lexicon and such Lexicon Accounting Advisor as of the Closing Date:
 
 
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(i)           upon request, copies of the then current Development Plan for each
quarter, on or before March 31, June 30, September 30, and December 31 of each
year;
 
(ii)           upon request, copies of the then current Development Budget for
each quarter, including a report setting forth in reasonable detail the
projected expenditures by Symphony Icon pursuant to the Development Budget, on
or before March 31, June 30, September 30, and December 31 of each year;
 
(iii)           prior to the close of each fiscal year, Symphony Icon shall
cause the Manager to seek to obtain from the Symphony Icon Auditors schedules of
certain financial information to be provided to Lexicon’s Auditors in connection
with the Symphony Icon Auditors’ audit of Symphony Icon.  Within fifteen (15)
Business Days after the close of each fiscal year, Symphony Icon (or the Manager
acting on its behalf) will provide Lexicon’s Auditors with the Client
Schedules.  If the Symphony Icon Auditors deliver the notice or listing of
required Client Schedules after the end of the fiscal year, Symphony Icon (or
the Manager acting on its behalf) will provide the completed Client Schedules to
Lexicon’s Auditors within fifteen (15) Business Days of such receipt.  Following
Lexicon’s Auditors’ review of the Client Schedules, Symphony Icon (or the
Manager acting on its behalf) will promptly provide Lexicon’s Auditors with any
reasonably requested back-up information related to the Client Schedules.
 
(iv)           prior to the close of each fiscal year, Lexicon’s Chief Financial
Officer, the Symphony Icon Auditors, Lexicon’s Auditors and Symphony Icon (or
the Manager acting on its behalf) shall agree to a completion schedule that will
include (A) the provision by Symphony Icon to Lexicon of the financial
information reasonably necessary for Lexicon to consolidate the financial
results of Symphony Icon and (B) the following financial statements, including
the related notes thereto, audited and certified by the Symphony Icon
Auditors:  (1) a balance sheet of Symphony Icon as of the close of such fiscal
year, (2) a statement of net income for such fiscal year, and (3) a statement of
cash flows for such fiscal year.  Such audited annual financial statements shall
set forth in comparative form the figures for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and Symphony Icon (or the
Manager acting on its behalf) shall, to the extent that Symphony Icon (or the
Manager acting on its behalf), using commercially reasonable means, can procure
such an opinion, be accompanied by an opinion thereon of the Symphony Icon
Auditors to the effect that such financial statements present fairly, in all
material respects, the financial position of Symphony Icon and its results of
operations and cash flows and have been prepared in conformity with GAAP, and
that the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards, and that such audit provides a reasonable basis for such opinion in
the circumstances;
 
 
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(v)           within five (5) Business Days following each calendar month and
receipt from Lexicon of its monthly invoice to Symphony Icon, current accrued
monthly vendor expenses and prepaid expenses, Symphony Icon (or the Manager
acting on its behalf) will provide to Lexicon:  (A) the unaudited balance sheet
of Symphony Icon for the previous calendar month; (B) the unaudited statement of
net income for such previous calendar month; (C)  the trial balance schedule for
such previous calendar month; and (D) related account reconciliations for such
previous calendar month (collectively, “Unaudited Financial Information”);
 
(vi)           within five (5) Business Days following its filing, a copy of
each income tax return so filed by Symphony Icon with any foreign, federal,
state or local taxing authority (including all supporting schedules thereto);
 
(vii)           any other documents, materials or other information pertaining
to the Programs or Symphony Icon as Lexicon may reasonably request, including
preliminary financial information and information and documentation of internal
controls and reporting;
 
(viii)           promptly, and in any event within ten (10) days of receipt
thereof, copies of any notice to Symphony Icon from any federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that would reasonably be expected to have a Material Adverse Effect
on Symphony Icon;
 
(ix)           promptly upon receipt thereof, notice of all actions, suits,
investigations, litigation and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting Symphony Icon;
 
(x)           promptly upon receipt thereof, copies of any other notices,
requests, reports, financial statements and other information and documents
received by Symphony Icon under or pursuant to any other Operative Document,
including, without limitation, any notices of breach or termination of any
subcontracts or licenses entered into or permitted pursuant to the Operative
Documents; and
 
(xi)           with reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of Symphony Icon or relating to the ability of Symphony Icon to
perform its obligations hereunder and under the Operative Documents as from time
to time may be reasonably requested by Lexicon and/or Holdings;
 
provided, that neither Symphony Icon, nor the Manager acting on behalf of
Symphony Icon, shall have any liability to Lexicon for the failure to deliver
financial documents or other materials hereunder, if such failure was caused by
a failure of Lexicon to provide, in a timely manner, data required to prepare
such financial documents or other materials to Symphony Lexicon in a timely
manner.
 
Section 6.                Notice of Material Event.  Each Party covenants and
agrees that, upon its acquiring Knowledge of (a) any breach by it of any
representation, warranty, covenant or any other term or condition of this
Agreement or (b) any other event or development that it expects, as conclusively
determined by such Party in its good faith judgment, to be materially adverse to
the other Party with respect to any Program or the transactions contemplated
hereby (including, without limitation, Lexicon’s efforts to develop,
commercialize and/or partner the LG103 Products), such Party shall promptly
notify the other Party in writing within three (3) Business Days of acquiring
such Knowledge in the case of Section 6(a) and within twenty (20) Business Days
of acquiring such Knowledge in the case of Section 6(b); provided, that the
failure to provide such notice shall not impair or otherwise be deemed a waiver
of any rights any Party may have arising from such breach, event or development
and that notice under this Section 6 shall not be deemed an admission by the
Party providing such notice of any breach of any of the Operative Documents; and
provided further that the failure to provide such notice pursuant to Section
6(b) shall not constitute a material default or breach of this Agreement for
purposes of Section 9.
 
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Section 7.                Assignment; Transfers; Legend.
 
(a)           Assignment and Transfers.  No Party may assign, delegate,
transfer, sell or otherwise dispose of (collectively, “Transfer”), in whole or
in part, any or all of its rights or obligations hereunder to any Person (a
“Transferee”) without the prior written approval of the other Parties; provided
that neither Lexicon nor Symphony Icon shall unreasonably withhold consent to
any Transfer to an unrelated third party by Holdings of its rights to receive
payment(s) of the Purchase Price hereunder; provided, further, that Holdings may
Transfer without consent any or all of its rights hereunder to one or more of
its Affiliates provided that such Affiliate exists and has the status of an
Affiliate of Holdings as of the Closing Date.  For the avoidance of doubt,
entering into a Licensing Transaction shall not be deemed a Transfer.
 
(b)           Legend.  Any certificates evidencing Symphony Icon Equity
Securities shall bear a legend in substantially the following form:
 
THE SECURITIES OF SYMPHONY ICON, INC., EVIDENCED HEREBY ARE SUBJECT TO AN
OPTION, HELD BY LEXICON PHARMACEUTICALS, INC., AS DESCRIBED IN AN AMENDED AND
RESTATED PURCHASE OPTION AGREEMENT (THE “PURCHASE OPTION AGREEMENT”) DATED AS OF
JULY 30, 2010, BY AND AMONG LEXICON PHARMACEUTICALS, INC. AND THE OTHER PARTIES
THERETO, TO PURCHASE SUCH SECURITIES AT A PURCHASE PRICE DETERMINED PURSUANT TO
SECTION 2 OF THE PURCHASE OPTION AGREEMENT, EXERCISABLE BY WRITTEN NOTICE AT ANY
TIME DURING THE PERIOD SET FORTH THEREIN.  COPIES OF THE PURCHASE OPTION
AGREEMENT ARE AVAILABLE AT THE PRINCIPAL PLACE OF BUSINESS OF SYMPHONY ICON,
INC. AT 7361 CALHOUN PLACE, SUITE 325, ROCKVILLE, MARYLAND 20855, AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST WITHOUT COST.
 
 
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Section 8.                      Costs and Expenses; Payments.
 
(a)           Symphony Icon Costs and Expenses.  Symphony Icon shall pay any of
its ongoing legal expenses with respect to the transactions described in the
Operative Documents from the funds allocated for such purpose in the Development
Budget.
 
(b)           Costs and Expenses of the Purchase Option.  Except as otherwise
specified in Section 2(i) hereof, each Party shall pay its own costs and
expenses incurred in connection with the exercise of the Purchase Option.
 
(c)           Payments to Holdings.  Payment of the Purchase Price shall (i) in
the case of payments of Lexicon Common Stock, Lexicon shall provide prior
written notice to Holdings of such payment (pursuant to Section 13 hereof) two
(2) Business Days in advance of such payment and Holdings shall provide written
instructions to Lexicon regarding where Lexicon should send the Lexicon Common
Stock and (ii) in the case of cash payments, be made by wire transfer of
immediately available funds to an account specified in writing by Holdings and
delivered to Lexicon (pursuant to Section 13 hereof).
 
Section 9.              Expiration; Termination of Agreement.
 
(a)           Termination.  This Agreement shall terminate
 
(i)           Upon the mutual written consent of Lexicon and Holdings; or
 
(ii)           upon written notice to Lexicon if Lexicon is in material default
or breach of this Agreement that has resulted in, or would reasonably be
expected to result in, a material adverse effect on Holdings’ rights under this
Agreement, and such material default or breach continues unremedied for a period
of thirty (30) days after written notice thereof is delivered to Lexicon.
 
Section 10.            Survival; Indemnification.
 
(a)           Survival of Representations and Warranties; Expiration of Certain
Covenants.
 
(i)           The representations and warranties of the Parties contained in
this Agreement shall survive for a period of one year from the making of such
representations, except for representations and warranties contained in
Sections 3(a)(i) and (ii), 4(a)(i) and (ii) and 5(a)(i) and (ii) hereof which
shall survive indefinitely.  The liability of the Parties related to their
respective representations and warranties hereunder shall not be reduced by any
investigation made at any time by or on behalf of Holdings, Symphony Icon or
Lexicon, as applicable.
 
 
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(ii)           All of the covenants and agreements set forth in this Agreement
shall survive indefinitely; provided that, following the Closing, the covenants
and agreements of Symphony Icon set forth in Sections 5(b) and 5(d) may be
waived or terminated by Lexicon, in its sole discretion, except for the
covenants set forth in Sections 5(b)(xi).
 
(iii)           For the avoidance of doubt, Lexicon shall pay to Holdings the
Contingent Payments set forth in Section 2(b) and the Abandoned Product
Partnership Payments set forth in Section 3(b)(viii) when and as received, and
such obligations shall survive indefinitely (including following any termination
of this Agreement).
 
(b)           Indemnification.  To the greatest extent permitted by applicable
law, Lexicon and Symphony Icon shall indemnify and hold harmless Holdings and
Holdings shall indemnify and hold harmless Lexicon, and each of their respective
Affiliates, officers, directors, employees, agents, partners, members,
successors, assigns, representatives of, and each Person, if any (including any
officers, directors, employees, agents, partners, members of such Person) who
controls Holdings, Symphony Icon and Lexicon, as applicable, within the meaning
of the Securities Act or the Exchange Act, (each, an “Indemnified Party”), from
and against any and all actions, causes of action, suits, claims, losses, costs,
interest, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (hereinafter, a “Loss”), incurred by any Indemnified
Party to the extent resulting from, arising out of, or relating to:  (i) in the
case of Lexicon being the Indemnifying Party, (A) any breach of any
representation or warranty made by Lexicon herein or in Section 5.1 of the
Novated and Restated Technology License Agreement, or (B) any breach of any
covenant, agreement or obligation of Lexicon contained herein, and (ii) in the
case of Holdings being the Indemnifying Party, (A) any breach of any
representation or warranty made by Holdings or Symphony Icon herein, or (B) any
breach of any covenant, agreement or obligation of Holdings or Symphony Icon
contained herein.  To the extent that the foregoing undertaking by Lexicon or
Holdings may be unenforceable for any reason, such Party shall make the maximum
contribution to the payment and satisfaction of any Loss that is permissible
under applicable law.
 
(c)           Notice of Claims.  Any Indemnified Party that proposes to assert a
right to be indemnified under this Section 10 shall notify Lexicon or Holdings,
as applicable (the “Indemnifying Party”), promptly after receipt of notice of
commencement of any action, suit or proceeding against such Indemnified Party
(an “Indemnified Proceeding”) in respect of which a claim is to be made under
this Section 10, or the incurrence or realization of any Loss in respect of
which a claim is to be made under this Section 10, of the commencement of such
Indemnified Proceeding or of such incurrence or realization, enclosing a copy of
all relevant documents, including all papers served and claims made, but the
omission to so notify the applicable Indemnifying Party promptly of any such
Indemnified Proceeding or incurrence or realization shall not relieve (x) such
Indemnifying Party from any liability that it may have to such Indemnified Party
under this Section 10 or otherwise, except, as to such Indemnifying Party’s
liability under this Section 10, to the extent, but only to the extent, that
such Indemnifying Party shall have been prejudiced by such omission, or (y) any
other indemnitor from liability that it may have to any Indemnified Party under
the Operative Documents.
 
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(d)           Defense of Proceedings.  In case any Indemnified Proceeding shall
be brought against any Indemnified Party, it shall notify the applicable
Indemnifying Party of the commencement thereof as provided in Section 10(c), and
such Indemnifying Party shall be entitled to participate in, and provided such
Indemnified Proceeding involves a claim solely for money damages and does not
seek an injunction or other equitable relief against the Indemnified Party and
is not a criminal or regulatory action, to assume the defense of, such
Indemnified Proceeding with counsel reasonably satisfactory to such Indemnified
Party.  After notice from such Indemnifying Party to such Indemnified Party of
such Indemnifying Party’s election so to assume the defense thereof and the
failure by such Indemnified Party to object to such counsel within ten (10)
Business Days following its receipt of such notice, such Indemnifying Party
shall not be liable to such Indemnified Party for legal or other expenses
related to such Indemnified Proceedings incurred after such notice of election
to assume such defense except as provided below and except for the reasonable
costs of investigating, monitoring or cooperating in such defense subsequently
incurred by such Indemnified Party reasonably necessary in connection with the
defense thereof.  Such Indemnified Party shall have the right to employ its
counsel in any such Indemnified Proceeding, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless:
 
(i)           the employment of counsel by such Indemnified Party at the expense
of the applicable Indemnifying Party has been authorized in writing by such
Indemnifying Party;
 
(ii)           such Indemnified Party shall have reasonably concluded in its
good faith (which conclusion shall be determinative unless a court determines
that such conclusion was not reached reasonably and in good faith) that there is
or may be a conflict of interest between the applicable Indemnifying Party and
such Indemnified Party in the conduct of the defense of such Indemnified
Proceeding or that there are or may be one or more different or additional
defenses, claims, counterclaims, or causes of action available to such
Indemnified Party (it being agreed that in any case referred to in this clause
(ii) such Indemnifying Party shall not have the right to direct the defense of
such Indemnified Proceeding on behalf of the Indemnified Party);
 
(iii)           the applicable Indemnifying Party shall not have employed
counsel reasonably acceptable to the Indemnified Party, to assume the defense of
such Indemnified Proceeding within a reasonable time after notice of the
commencement thereof; provided, however, that (A) this clause (iii) shall not be
deemed to constitute a waiver of any conflict of interest that may arise with
respect to any such counsel, and (B) an Indemnified Party may not invoke this
clause (iii) if such Indemnified Party failed to timely object to such counsel
pursuant to the first paragraph of this Section 10(d) above (it being agreed
that in any case referred to in this clause (iii) such Indemnifying Party shall
not have the right to direct the defense of such Indemnified Proceeding on
behalf of the Indemnified Party); or
 
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(iv)           any counsel employed by the applicable Indemnifying Party shall
fail to timely commence or reasonably conduct the defense of such Indemnified
Proceeding and such failure has prejudiced (or is in immediate danger of
prejudicing) the outcome of such Indemnified Proceeding (it being agreed that in
any case referred to in this clause (iv) such Indemnifying Party shall not have
the right to direct the defense of such Indemnified Proceeding on behalf of the
Indemnified Party);
 
in each of which cases the fees and expenses of counsel for such Indemnified
Party shall be at the expense of such Indemnifying Party.  Only one counsel
shall be retained by all Indemnified Parties with respect to any Indemnified
Proceeding, unless counsel for any Indemnified Party reasonably concludes in
good faith (which conclusion shall be determinative unless a court determines
that such conclusion was not reached reasonably and in good faith) that there is
or may be a conflict of interest between such Indemnified Party and one or more
other Indemnified Parties in the conduct of the defense of such Indemnified
Proceeding or that there are or may be one or more different or additional
defenses, claims, counterclaims, or causes or action available to such
Indemnified Party.
 
(e)           Settlement.  Without the prior written consent of such Indemnified
Party, such Indemnifying Party shall not settle or compromise, or consent to the
entry of any judgment in, any pending or threatened Indemnified Proceeding,
unless such settlement, compromise, consent or related judgment (i) includes an
unconditional release of such Indemnified Party from all liability for Losses
arising out of such claim, action, investigation, suit or other legal
proceeding, (ii) provides for the payment of money damages as the sole relief
for the claimant (whether at law or in equity), (iii) involves no admission of
fact adverse to the Indemnified Party or finding or admission of any violation
of law or the rights of any Person by the Indemnified Party, and (iv) is not in
the nature of a criminal or regulatory action.  No Indemnified Party shall
settle or compromise, or consent to the entry of any judgment in, any pending or
threatened Indemnified Proceeding (A) in respect of which any payment would
result hereunder or under any other Operative Document, (B) which includes an
injunction that will adversely affect any Indemnifying Party, (C) which involves
an admission of fact adverse to the Indemnifying Party or a finding or admission
of any violation of law or the rights of any Person by the Indemnifying Party,
or (D) which is in the nature of a criminal or regulatory action, without the
prior written consent of the Indemnifying Party, such consent not to be
unreasonably conditioned, withheld or delayed.
 
 
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Section 11.              No Petition.  Each of Lexicon and Holdings covenants
and agrees that, prior to the date which is one year and one day after the
Closing Date, it will not institute or join in the institution of any
bankruptcy, insolvency, reorganization or similar proceeding against Symphony
Icon.  The provisions of this Section 11 shall survive the termination of this
Agreement.
 
Section 12.             Third-Party Beneficiary.  Each of the Parties agrees
that each Symphony Fund shall be a third-party beneficiary of this Agreement.
 
Section 13.              Notices.  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 13), 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
     
Lexicon Pharmaceuticals, Inc.
8800 Technology Forest Place
The Woodlands, TX 77381-1160
Attn:  Brian T. Crum
Facsimile:  (281) 863-8010
 

 
 
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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, 3rd Floor
New York, NY  10022
Attn:  Mark Kessel
Facsimile:  (212) 632-5401
     
and
     
Symphony Strategic Partners, LLC
875 Third Avenue, 3rd 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.
 
Section 14.            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
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 and 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, 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.
 
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(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.
 
Section 15.             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.
 
Section 16.             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.
 
Section 17.             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.
 
(b)           Except as set forth in Section 12, 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.
 
 
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(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.
 
Section 18.              Specific Performance.  The Parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore agree that the rights and obligations of the
Parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction.  Such a remedy shall, however, not
be exclusive, and shall be in addition to any other remedies which any Party may
have under this Agreement or otherwise.  The Parties further acknowledge and
agree that a decree of specific performance may not be an available remedy in
all circumstances.
 
Section 19.              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.
 
Section 20.             Tax Reporting.  The Parties acknowledge and agree that,
for all federal and state income tax purposes for the period prior to the
Closing Date:
 
(a)           (i) Holdings shall be treated as the owner of all the Equity
Securities of Symphony Icon prior to the consummation of the Purchase Option;
(ii) the Purchase Option shall be treated as an option to acquire all the Equity
Securities of Symphony Icon; (iii) the Option Premium Shares shall be treated as
an option premium payable in respect of the grant of the Purchase Option; and
(iv) Symphony Icon shall be treated as the owner of all the Licensed
Intellectual Property and shall be entitled to all deductions claimed under
Section 174 of the Code in respect of the Licensed Intellectual Property to the
extent of the amounts funded by Symphony Icon (which, for the avoidance of
doubt, shall not preclude Lexicon from claiming deductions under Section 174 of
the Code to which Lexicon is otherwise entitled); and
 
(b)           No Party shall take any tax position inconsistent with any
position described in Section 20(a) above, except (i) in the event of a
“determination” (as defined in Section 1313 of the Code) to the contrary, or
(ii) in the event either of the Parties receives an opinion of counsel to the
effect that there is no reasonable basis in law for such a position or that a
tax return cannot be prepared based on such a position without being subject to
substantial understatement penalties; provided, however, that in the case of
Lexicon, such counsel shall be reasonably satisfactory to Holdings.
 
 
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Section 21.             Original Agreement.
 
(a)           The Original Agreement is hereby amended and superseded in its
entirety and restated herein.  Such amendment and restatement is effective upon
execution of this Agreement by the Parties.  Upon such execution, all provisions
of, rights granted and covenants made in the Original Agreement are hereby
superseded in their entirety by the provisions hereof and shall have no further
force or effect.
 
(b)           Defined terms in the Operative Documents (other than this
Agreement) that refer to definitions in this Agreement shall be deemed to refer
to the definitions in the Original Agreement, except where the context requires
otherwise.
 
Section 22.             Amendment to Annex A.
 
(a)           The definition of “LG103 Product Development Expenses” shall be
added to Annex A and shall read, “means the amount of the expenses for which
Lexicon would have been entitled to reimbursement under the Amended and Restated
Research and Development Agreement if such expenses had been incurred pursuant
to the Development Plan and Development Budget for the research or development
of any LG103 Product (except for expenses incurred by Lexicon prior to the
Closing Date and expenses incurred by Lexicon after the Closing Date that relate
to the Phase 2a studies of LX1032 and IND-enabling studies of LX1033 that are
currently in progress) and that have not been reimbursed or otherwise paid by a
third party as Allowed Reimbursed Expenses.  For clarity, the reference to the
Development Plan and Development Budget is intended only to reference the
standards and practices historically applied by the Parties in accounting for
and reimbursing expenses associated with the Programs (e.g., FTE rates and
matters relating to when expenses incurred by Lexicon become reimbursable), and
shall not in any way be deemed to restrict expenses to those that are included
in the Development Plan and Development Budget as of the Closing Date.
 
(b)           The definition of “Maximum Contingent Payment Amount” shall be
added to Annex A and shall read, “means Thirty Million Dollars (as increased by
any Recapture Eligible Amount).”
 
(c)           The definition of “Payment Date” shall be added to Annex A and
shall read, “means each date on which an installment of the Base Payment Balance
or a Contingent Payment is paid to Holdings.”
 
(d)           The definition of “Purchase Option Agreement” in Annex A is hereby
amended to read, “means the Purchase Option Agreement dated as of the Closing
Date, among Lexicon, Holdings and Symphony Icon, as the same may be amended,
amended and restated, supplemented or otherwise modified from time to time.”
 
 
[SIGNATURES FOLLOW ON NEXT PAGE]
 
 
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and year first above written.
 
LEXICON PHARMACEUTICALS, INC.
   
By:
/s/ Arthur T. Sands
 
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:
/s/ Mark Kessel
 
Name:  Mark Kessel
Title:  Managing Member
       
SYMPHONY ICON, INC.
       
By:
/s/ Mark Kessel
 
Name:  Mark Kessel
Title:  Chairman of the Board
   

 

 
 

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EXHIBIT 1
 
PURCHASE OPTION EXERCISE NOTICE
 
July 30, 2010
 
 
Attention:  Symphony Icon Holdings, LLC and Symphony Icon, Inc.
 
Ladies and Gentlemen:
 
Reference is hereby made to that certain Amended and Restated Purchase Option
Agreement dated as of July 30, 2010 (the “Purchase Option Agreement”), by and
among Lexicon Pharmaceuticals, Inc., a Delaware corporation (“Lexicon”),
Symphony Icon Holdings LLC, a Delaware limited liability company, and Symphony
Icon, Inc., a Delaware corporation.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned thereto in the
Purchase Option Agreement.
 
Pursuant to Section 2(a) of the Purchase Option Agreement, Lexicon hereby
irrevocably notifies you that it hereby exercises the Purchase Option.
 
Subject to the terms set forth therein, Lexicon hereby affirms the
representations and warranties set forth in Section 3(a) of the Purchase Option
Agreement, as of the date hereof.
 

Very truly yours,  
LEXICON PHARMACEUTICALS, INC.
   
By:
   
Name:
Title: