exv10w4



 





Exhibit 10.4




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




RESEARCH COST SHARING, PAYMENT AND EXTENSION AGREEMENT




     This RESEARCH COST SHARING, PAYMENT AND EXTENSION AGREEMENT (this “Agreement”) is
entered into as of June 15, 2007, by and among LEXICON PHARMACEUTICALS, INC., a Delaware
corporation (“Lexicon”), SYMPHONY ICON HOLDINGS LLC, a Delaware limited liability company
(“Holdings”), and SYMPHONY ICON, INC., a Delaware corporation (“Symphony Icon”).



PRELIMINARY STATEMENT




     WHEREAS, Lexicon and Holdings have entered into a Technology License Agreement dated June 15,
2007, pursuant to which Lexicon has granted Holdings an exclusive license to the use of certain
intellectual property related to the Programs owned or controlled by Lexicon;



     WHEREAS, contemporaneously with the execution of this Agreement, Lexicon, Holdings and
Symphony Icon are entering into a Novated and Restated Technology License Agreement, pursuant to
which, among other things, Holdings will assign by way of novation such license to Symphony Icon;



     WHEREAS, Lexicon and Holdings have entered into a Research and Development Agreement dated
June 15, 2007, pursuant to which Holdings and Lexicon have agreed to develop the Products and to
establish a Development Committee to oversee such development;



     WHEREAS, contemporaneously with the execution of this Agreement, Lexicon, Holdings and
Symphony Icon are entering into an Amended and Restated Research and Development Agreement,
pursuant to which, among other things, Holdings will assign its rights and obligations under the
Research and Development Agreement to Symphony Icon;



     WHEREAS, contemporaneously with the execution of this Agreement, Holdings, Lexicon, and
Symphony Icon are entering into a Purchase Option Agreement (the “Purchase Option
Agreement”) pursuant to which, among other things, Holdings is granting to Lexicon an option to
purchase all of the equity securities of Symphony Icon
owned, or hereafter acquired, by Holdings on the terms set forth in the Purchase Option
Agreement;



     WHEREAS, Lexicon agrees that, upon the occurrence of certain events as described herein, it
will pay an aggregate amount of up to $15,000,000 to Symphony Icon pursuant to the terms hereof in
consideration of the foregoing and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by Lexicon; and



 









 





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




     WHEREAS, Lexicon, Symphony Icon and Holdings have determined that it is in each of its best
interest to perform and comply with certain agreements relating to each of its ongoing operations
contained in this Agreement;



     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
(the “Parties”) agree as follows:



          1. Defined Terms. Terms not otherwise defined herein are used as defined in the
Purchase Option Agreement.




          2. Lexicon Payment Obligation.




               (a) Lexicon agrees that, upon the occurrence of certain events and on the terms and conditions
set forth herein, it will pay to Symphony Icon an aggregate amount of up to $15,000,000 (less the
aggregate amount of all dividends and distributions, if any, under Section 8.1 of the
Amended and Restated Research and Development Agreement) (the “Payment Cap”), for the sole
purpose of Symphony Icon’s use in the development of the Programs in accordance with the
Development Budget and Development Plan.



               (b) Pursuant to Paragraph 14 of the Development Committee Charter, the Development Committee
may recommend that the Symphony Icon Board submit to Lexicon a written notice and, if such
recommendation is approved, the Symphony Icon Board shall submit to Lexicon a written notice which
notice shall (a) inform Lexicon that, pursuant to the Development Budget, additional funds will be
required to complete the development of the Programs, (b) specify the Lexicon Payment Amount (as
defined in the Development Committee Charter), and (c) provide wire transfer and other relevant
instructions for funding (such notice, the “Lexicon Funding Notice”), and following
Lexicon’s receipt of the Lexicon Funding Notice, Lexicon shall, within [**] pay such Lexicon
Payment Amount to Symphony Icon or, if the Purchase Option Period has not expired, exercise the
Purchase Option.



               (c) Notwithstanding the Development Committee’s rights under Section 2 of this
Agreement, (A) any decision by the Development Committee to recommend to the Symphony Icon Board to
submit a Lexicon Funding Notice shall be made in accordance with the Development Committee Charter,
the Development Budget and Development Plan (for purposes of which, in the case of a Lexicon
Payment Amount determined after the expiration of the Purchase Option or the termination of the
Purchase Option Agreement, shall be the Development Plan in effect immediately prior to such
expiration or termination, as applicable) and (B) in no event shall the aggregate total of all
Lexicon Payment Amounts exceed the Payment Cap.



               (d) The Development Committee’s right to recommend that the Symphony Icon Board submit a
Lexicon Funding Notice shall terminate, (A) in the event


Research Cost Sharing, Payment and Extension Agreement

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



of the expiration of the Purchase Option Period pursuant to the terms of the Purchase Option Agreement, on the first (1st)
anniversary of such expiration, (B) in the event that the Purchase Option Agreement terminates
pursuant to Section 9(a)(ii) thereof, on the fourth anniversary of the Closing Date, or (C)
in the event Holdings or Symphony Icon is in material default or breach of any Operative Document
that has resulted in, or would reasonably be expected to result in, a material adverse effect on
the Programs or Lexicon’s rights under the Operative Documents, and such material default or breach
continues unremedied for a period of [**] after written notice thereof is delivered to Symphony
Icon or Holdings, as applicable, on the last day of such [**] period. For the avoidance of doubt
and subject to the foregoing conditions and restrictions, the Development Committee’s right to
recommend that the Symphony Icon Board submit a Lexicon Funding Notice, and Lexicon’s obligation to
pay the Lexicon Payment Amounts, shall survive the expiration of the Purchase Option Period and the
termination of the Purchase Option Agreement pursuant to its terms.




               (e) In the event that a Bankruptcy Event occurs during the Term with respect to Lexicon,
Lexicon agrees to pay to Symphony Icon an amount equal to the difference, if any, between
$15,000,000 and the aggregate amount of all Lexicon Payment Amounts actually paid by Lexicon
pursuant to clause (b) above, and such amount shall be immediately due and payable upon the
occurrence of such Bankruptcy Event.



               (f) Lexicon hereby waives all right to set off amounts owing under this Section 2 against any
amounts owing by Holdings or Symphony Icon to Lexicon under the Operative Documents.



               (g) Holdings and Symphony Icon shall be entitled to exercise any and all remedies at law or in
equity to enforce Lexicon’s obligations hereunder.



    
      3. Costs of Additional Research In the event that a Balance Sheet Deficiency has
occurred with respect to Symphony Icon, and Lexicon wishes to fund additional development of
the Programs to be conducted by Symphony Icon, beyond the Funds Termination Date, Lexicon
shall, within [**] of the Balance Sheet Deficiency Date, (a) notify the other Parties of its intent
to cover the cost of further development of the Products, and (b) transfer to Symphony Icon funds
sufficient to both (x) pay all of Symphony Icon’s estimated ongoing costs and expenses for work to
be performed by or billed to Symphony Icon by Lexicon during the following [**] (the calculation of
such amount to be based on historical expenditures and the Development Budget and the Development
Plan), and (y) leave Symphony Icon with working capital on its balance sheet of not less than the
Balance Sheet Deficiency Threshold (such funding an “Extension Funding”). Any Extension Funding
shall comply with the requirements of this Section 3.




               (b) [**].


Research Cost Sharing, Payment and Extension Agreement

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




          4. Determination of the Purchase Option Period. Following a transfer of funds
pursuant to Section 3 hereof, the Purchase Option Period shall continue until the earlier
of (x) the Final Termination Date, or (y) the occurrence of another Balance Sheet Deficiency;
provided however, that, if another Balance Sheet Deficiency shall occur, Lexicon
may make further Extension Fundings in accordance with Section 3 above; provided
further, that, unless otherwise agreed by the Parties, in no event shall the Purchase
Option Period be extended beyond the Final Termination Date.




          5. Notice. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted to be given to any Party shall be in writing addressed
to the Party at its address set forth below and shall be deemed given (i) when delivered to the
Party personally, (ii) if sent to the Party by facsimile transmission (promptly followed by a
hard-copy delivered in accordance with this Section 4), when the transmitting Party obtains
written proof of transmission and receipt; provided, however, that notwithstanding the foregoing,
any communication sent by facsimile transmission after 5:00 PM (receiving Party’s time) or not on a
Business Day shall not be deemed received until the next Business Day, (iii) when delivered by next
Business Day delivery by a nationally recognized courier service, or (iv) if sent by registered or
certified mail, when received, provided postage and registration or certification fees are prepaid
and delivery is confirmed by a return receipt:



Lexicon:



Lexicon Pharmaceuticals, Inc.

8800 Technology Forest Place

The Woodlands, TX 77381-1160

Attn: Arthur T. Sands, M.D., Ph.D.

Facsimile: (281) 863-8095



with copies to:



Lexicon Pharmaceuticals, Inc.

8800 Technology Forest Place

The Woodlands, TX 77381-1160

Attn: Jeffrey L. Wade

Facsimile: (281) 863-8010



and



Research Cost Sharing, Payment and Extension Agreement

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



Lexicon Pharmaceuticals, Inc.

8800 Technology Forest Place

The Woodlands, TX 77381-1160

Attn: Julia P. Gregory

Facsimile: (281) 863-8095



Symphony Icon:



Symphony Icon, Inc.

7361 Calhoun Place, Suite 325

Rockville, MD 20855

Attn: Charles W. Finn, Ph.D.

Facsimile: (301) 762-6154



Holdings:



Symphony Icon Holdings LLC

7361 Calhoun Place, Suite 325

Rockville, MD 20855

Attn: Robert L. Smith, Jr.

Facsimile: (301) 762-6154



with copies to:



Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

Attn: Mark Kessel

Facsimile: (212) 632-5401



and



Symphony Strategic Partners, LLC

875 Third Avenue, 18th Floor

New York, NY 10022

Attn: Mark Kessel

Facsimile: (212) 632-5401



or to such other address as such Party may from time to time specify by notice given in the manner
provided herein to each other Party entitled to receive notice hereunder.




          6. Governing Law; Consent to Jurisdiction and Service of Process.




               (a) This Agreement shall be governed by, and construed in accordance with, the laws of the
State of New York; except to the extent that this


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



Agreement pertains to the internal governance of
Symphony Icon or Holdings, and to such extent this Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.




               (b) Each of the Parties hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court, any Delaware State court or
federal court of the United States of America sitting in the City of New York, Borough of Manhattan
or Wilmington, Delaware, and any appellate court from any jurisdiction thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each of the Parties hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such New York State
court or any such Delaware state court or, to the fullest extent permitted by law, in such federal
court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that any Party may
otherwise have to bring any action or proceeding relating to this Agreement.



               (c) Each of the Parties irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement in any New
York State or federal court, or any Delaware State or federal court. Each of the Parties hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court. Each of the Parties hereby
consents to service of process by mail.



          7. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT.




          8. Entire Agreement. This Agreement (including any Annexes, Schedules, Exhibits or
other attachments hereto) constitutes the entire agreement between the Parties with respect to the
matters covered hereby and supersedes all prior and contemporaneous agreements, correspondence,
discussion, and understanding with respect to such matters between the Parties, excluding the
Operative Documents.




          9. Amendment; Successors; Counterparts.




               (a) The terms of this Agreement shall not be altered, modified, amended, waived or
supplemented in any manner whatsoever except by a written instrument signed by each of the Parties.


 Research Cost Sharing, Payment and Extension Agreement

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




               (b) Nothing expressed or implied herein is intended or shall be construed to confer upon or to
give to any Person, other than the Parties, any right, remedy or claim under or by reason of this
Agreement or of any term, covenant or condition hereof, and all the terms, covenants, conditions,
promises and agreements contained herein shall be for the sole and exclusive benefit of the Parties
and their successors and permitted assigns.



               (c) This Agreement may be executed in one or more counterparts, each of which, when executed,
shall be deemed an original but all of which, taken together, shall constitute one and the same
Agreement.



          10. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in a manner
materially adverse to either party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.




[SIGNATURES FOLLOW ON NEXT PAGE]



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     IN WITNESS WHEREOF, each of the undersigned has executed and delivered this Agreement, or has
caused this Agreement to be executed and delivered by a duly authorized officer, on the day and
year first above written.



	 	 	 	 	 
	 	LEXICON PHARMACEUTICALS, INC.

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



	 	 	 	 	 	 	 
	 	 	SYMPHONY ICON HOLDINGS LLC
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Symphony Capital Partners, L.P.,	 	 
	 

	 	 	 	its Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Symphony Capital GP, L.P.,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Symphony GP, LLC,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 





	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	Mark Kessel 	 
	 	 	Title:  	Managing Member 	 
	 



	 	 	 	 	 
	 	SYMPHONY ICON, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	Mark Kessel 	 
	 	 	Title:  	Chairman of the Board 	 
	 



Signature
Page to  Research Cost Sharing, Payment and Extension Agreement