Exhibit
10.16




STOCK
OPTION AGREEMENT
 
 (Officer
Incentive Stock Option)
 
 This Stock Option
Agreement (this “Agreement”), effective as of «GrantDate» (the “Grant
Date”), is by and between Lexicon Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), and «Name»
(“Optionee”).
 
 To carry
out the purposes of the Lexicon Pharmaceuticals, Inc. Equity Incentive Plan (the
“Plan”), by providing Optionee the opportunity to purchase shares of Common
Stock, par value $0.001 per share, of the Company (“Stock”), and in
consideration of the mutual agreements and other matters set forth herein and in
the Plan, the Company and Optionee hereby agree as follows:
 
 1.           Grant of
Option.  The Company hereby grants to Optionee the right and
option (the “Option”) to purchase all or any part of an aggregate of «Shares»
shares of Stock, on the terms and conditions set forth in this Agreement and in
the Plan.  The Option shall be treated as an “incentive stock option”
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the “Code”), to the maximum extent permitted under the Code, and as a
non-statutory stock option to the extent it exceeds the limitations imposed by
the Code for incentive stock options.
 
 2.           Exercise
Price.  The price at which Optionee may purchase Stock upon
exercise of the Option (the “Exercise Price”) shall be $«Price» per share, which
has been determined to be the Fair Market Value (as defined in the Plan) of the
Stock on the Grant Date.  The Exercise Price is subject to adjustment
under certain circumstances as provided in the Plan.
 
 3.           Term.  The
Option shall expire on the 10th anniversary of the Grant Date, subject to
earlier termination under the circumstances specified in Section 8 of this
Agreement.
 
 4.           Exercisability and
Vesting.  (a) Subject to the terms and conditions set forth in
this Agreement and the Plan, the Option may be exercised, in whole or in part,
at any time and from time to time during the term of the Option, to purchase the
number of shares of Stock that have vested and become exercisable in accordance
with this Agreement.  The Option shall vest and become exercisable
with respect to (i) 25% of the total number of shares of Stock subject to the
Option on «VestingDate» and (ii) an additional 1/48 of the total number of
shares subject to the Option each month thereafter; provided that such options
shall become vested with respect to all remaining unvested shares in the event
of a Change in Control (as defined below); and provided further, that, upon
the termination of Optionee’s Continuous Service (as defined in the Plan), the
Option shall cease to vest and shall terminate with respect to all shares of
Stock that have not vested and become exercisable prior to such
time.
 
 (b)           A
“Change in Control” shall be deemed to have occurred if any of the following
shall have taken place: (i) any “person” (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) other
than Invus, L.P. and its affiliates (collectively, “Invus”) is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, or any
successor provisions thereto), directly or indirectly, of securities of the
Company representing 35% or more of the combined voting power of the Company’s
then-outstanding voting securities; (ii) Invus becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act, or any successor provisions
thereto), directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company’s then-outstanding voting
securities; (iii) the approval by the stockholders of the Company of a
reorganization, merger, or consolidation, in each case with respect to which
persons who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own or
control more than 50% of the combined voting power of the reorganized, merged or
consolidated Company’s then-outstanding securities entitled to vote generally in
the election of directors in substantially the same proportions as their
ownership of the Company’s outstanding voting securities prior to such
reorganization, merger or consolidation; (iv) a liquidation or dissolution of
the Company or the sale of all or substantially all of the Company’s assets; (v)
in the event any person is elected by the stockholders of the Company to the
Company’s board of directors (the “Board”) who has not been nominated for
election by a majority of the Board or any duly appointed committee thereof; or
(vi) following the election or removal of directors, a majority of the Board
consists of individuals who were not members of the Board two years before such
election or removal, unless the election of each director who is not a director
at the beginning of such two-year period has been approved in advance by
directors representing at least a majority of the directors then in office who
were directors at the beginning of the two-year period.  The
Compensation Committee of the Board, in its discretion, may deem any other
corporate event affecting the Company to be a “Change in Control”
hereunder.
 
 
 5.           Procedures for
Exercise.  Subject to the terms and conditions set forth in
this Agreement and the Plan, the Option may be exercised by delivery to the
Company at its principal executive office of (i) written notice addressed to the
Secretary of the Company specifying the number of shares of Stock as to which
the Option is being exercised and (ii) payment in full of the Exercise Price for
such shares.  The Exercise Price shall be paid in cash or in such
other manner as may be authorized by the administrator of the Plan in accordance
with the terms of the Plan.  If the offering, sale and delivery of the
shares of Stock issuable upon exercise of the Option have not been registered
under the Securities Act of 1933 (the “Securities Act”), the Company may require
Optionee, as a condition to Optionee’s exercise of the Option, to enter into a
stock purchase agreement containing such representations and warranties as the
Company may deem necessary to permit the issuance of the Stock purchased upon
exercise of the Option in compliance with the Securities Act and applicable
state securities laws.
 
 6.           No Rights of Ownership in
Stock Before Issuance.  No person shall be entitled to the
rights and privileges of stock ownership with respect to any shares of Stock
issuable upon exercise of the Option until such shares have been issued in
accordance with the terms of this Agreement and the Plan.
 
 7.           Non-Transferability.  The
Option may not be transferred by Optionee otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order (as
defined in Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder).
 
 8.           Termination of
Option.   If Optionee’s Continuous Service is terminated
for any reason other than (i) the Disability (as defined in the Plan) or death
of Optionee or (ii) the Company’s termination of Optionee’s employment without
cause, the Option shall remain exercisable, with respect to the shares of Stock
that had vested under the terms of this Agreement before the date of such
termination, for a period of 90 days after the date of such termination (but in
no event later than the expiration date of the Option specified in Section 3 of
this Agreement), following which 90-day period this Agreement and Optionee’s
right to exercise the Option shall terminate.  If Optionee’s
Continuous Service is terminated because of (i) the Disability or death of
Optionee or (ii) the Company’s termination of Optionee’s employment without
cause, the Option shall remain exercisable, with respect to the shares of Stock
that had vested under the terms of this Agreement before the date of such
termination, for a period of one year after the date of such termination (but in
no event later than the expiration date of the Option specified in Section 3 of
this Agreement), following which one-year period this Agreement and Optionee’s
right to exercise the Option shall terminate; provided that the Option shall not
be treated as an “incentive stock option” within the meaning of the Code if the
Option is exercised more than 90 days following the termination of Optionee’s
Continuous Service as a result of the Company’s termination of Optionee’s
employment without cause.  Notwithstanding the foregoing, if the
employment of Optionee by the Company is terminated for cause, this Agreement
and Optionee’s right to exercise any portion of the Option, whether or not
vested, shall terminate at the commencement of business on the date of such
termination.  For purposes of this Agreement, “cause” shall mean (x)
the breach of a material obligation of Optionee under any agreement between
Optionee and the Company, (y) gross negligence or willful or intentional
wrongdoing or misconduct on the part of Optionee, or (z) Optionee’s conviction
of a felony offense or a crime involving moral turpitude.
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 9.           Withholding of
Tax.   To the extent that the Company is required under
applicable federal or state income tax laws to withhold any amount on account of
any present or future tax imposed as a result of the exercise of the Option,
Optionee shall pay the Company, at the time of such exercise, funds in an amount
sufficient to permit the Company to satisfy such withholding obligations in
full.  If Optionee fails to pay such amount, the Company shall be
authorized (i) to withhold from any cash remuneration then or thereafter payable
to Optionee any tax required to be withheld or (ii) to refuse to issue or
transfer any shares otherwise required to be issued pursuant to the terms of
this Agreement.
 
 10.           Status of
Stock.  (a)  Unless the offering, sale and delivery
of the shares of Stock issuable upon exercise of the Option have been registered
under the Securities Act, Optionee agrees that any shares of Stock purchased
upon exercise of the Option shall be acquired for investment without a view to
distribution, within the meaning of the Securities Act, and shall not be sold,
transferred, assigned, pledged or hypothecated in the absence of an effective
registration statement under the Securities Act and applicable state securities
laws or an applicable exemption from the registration requirements of the Act
and any applicable state securities laws.  Optionee further agrees
that the shares of Stock which Optionee may acquire by exercising the Option
will not be sold or disposed of in any manner which would constitute a violation
of any other applicable federal or state securities laws.  In
addition, Optionee agrees (i) that the certificates representing the shares of
Stock issued under this Agreement may bear such legend or legends as the
administrator of the Plan deems appropriate in order to assure compliance with
applicable securities laws, and (ii) that the Company may give instruction to
its transfer agent, if any, to stop transfer of the shares of Stock issued under
this Agreement on the stock transfer records of the Company, if such proposed
transfer would, in the opinion of counsel to the Company, constitute a violation
of any applicable securities law or any such agreements.
 
 (b)           Optionee
further agrees that the Option granted herein shall be subject to the
requirement that if at any time the administrator of the Plan shall determine,
in its discretion, that the listing, registration or qualification of the shares
of Stock subject to such Option upon any securities exchange or market or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the purchase or issuance of shares of Stock hereunder, such Option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not reasonably acceptable to the  administrator of the
Plan.
 
 11.           Stock Option
Plan.  The Plan, a copy of which is available for inspection by
Optionee or other persons entitled to exercise this Option at the Company’s
principal executive office during business hours, is incorporated by reference
in this Agreement.  The Option is subject to, and the Company and
Optionee agree to be bound by, all of the terms and conditions of the Plan. In
the event of a conflict between this Agreement and the Plan, the terms of the
Plan shall control.  Subject to the terms of the Plan, the
administrator of the Plan shall have authority to construe the terms of this
Agreement, and the determinations of the administrator of the Plan shall be
final and binding on Optionee and the Company.
 
 12.           Binding
Agreement.  This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Optionee.
 
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 13.           Governing
Law.  This Agreement and all actions taken hereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
 
 
 
 IN
WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and
Optionee has executed this Agreement as of the day and year first above
written.
 
 Lexicon
      Pharmaceuticals, Inc.By:Arthur
      T. Sands, M.D., Ph.D.President
      and Chief Executive OfficerOptionee[Name]