UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________

FORM 8-K
__________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported): July 7, 2014


Lexicon Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)


Delaware
000-30111
76-0474169
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer
Identification Number)


8800 Technology Forest Place
The Woodlands, Texas 77381
(Address of principal executive
offices and Zip Code)


(281) 863-3000
(Registrant’s telephone number,
including area code)


Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d‑2(b))
o
Pre-commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))

 
 
 
 
 





Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

(b)      On July 7, 2014, Arthur T. Sands, M.D., Ph.D. notified us of his decision to resign as our president and chief executive officer (in which capacity, Dr. Sands functioned as our principal executive officer) and as a member of our board of directors, effective July 7, 2014.
In connection with Dr. Sands’ resignation, we entered into a separation agreement with Dr. Sands providing that we will pay Dr. Sands salary continuation payments in an amount equal to his current base annual salary of $580,000 for a period of twelve months following the date of his termination of employment (the “ Separation Date ”). In the event we enter into a licensing transaction within 90 days following the Separation Date pursuant to which we grant a third party rights to commercialize LX4211, and which becomes effective, then the period during which Dr. Sands will receive such salary continuation payments will be extended by six additional months, for a total period of 18 months following the Separation Date. We will also pay Dr. Sands an additional, single sum payment of $290,000, or 50% of his current base annual salary, payable within 30 days of the Separation Date. In addition, we will make monthly payments of approximately $1,846 for a period of 18 months to provide for his cost of continued benefit coverage under COBRA during such period.
Also in connection with Dr. Sands’ resignation, we entered into a consulting agreement with Dr. Sands pursuant to which he will provide his consulting and advisory services for a period of five years following the Separation Date. We will pay Dr. Sands fees of $100,000 per year for the first two years of the consulting term and $50,000 per year for the following three years of the consulting term.
Copies of the separation agreement and consulting agreement are attached to this current report on Form 8-K as Exhibits 10.1 and 10.2, respectively, and the above summaries are qualified in their entirety by reference to the full text of such agreements.

(c) (d)      Effective as of July 7, 2014, Lonnel Coats was appointed as our president and chief executive officer (in which capacity he will function as our principal executive officer) and elected to serve as a member of our board of directors.
Mr. Coats, 49, served for eighteen years in a series of senior leadership positions at Eisai Inc., the United States subsidiary of Eisai Co., Ltd., most recently as president and chief executive officer from 2010 to June 2014. As president and chief executive officer, Mr. Coats oversaw the commercialization of Eisai products in the therapeutic areas of oncology, neurology, gastrointestinal disorders, epilepsy and metabolic disorders and the expansion of Eisai’s business across the Americas. Mr. Coats’ previous positions with Eisai included president and chief operating officer from 2004 to 2010, vice president of U.S. sales and marketing from 2003 to 2004 and vice president of human resources from 2001 to 2003. Prior to joining Eisai, Mr. Coats spent eight years with Janssen Pharmaceuticals, Inc., a division of Johnson & Johnson, where he held a variety of management and sales positions. Mr. Coats holds a B.S. in public administration from Oakland University. We believe that Mr. Coats’ extensive experience in a wide variety of disciplines within the pharmaceutical industry, including strategic and commercial planning and the identification, evaluation and negotiation of strategic acquisitions, licensing and partnerships, qualifies him to serve as a member of our board of directors.

In connection with his appointment, we entered into an offer letter with Mr. Coats dated July 1, 2014. Under the terms of the offer letter, Mr. Coats will receive an initial annual base salary of $550,020 and will be eligible to receive an annual cash bonus, with a bonus target of 60% of his base salary. The actual cash bonus, if any, will be determined in the discretion of the compensation committee of our board of directors based on the achievement of certain corporate and individual goals and in accordance with the process applicable to all named executive officers; provided , that we will pay Mr. Coats a prorated cash bonus for 2014 at no less than the bonus target level. If we terminate Mr. Coats’ employment without “cause,” as defined in the offer letter, we will pay Mr. Coats his then-current salary for twelve months following such termination. If such termination is in connection with a “change in control,”




as defined in the offer letter, we will pay Mr. Coats an additional one-time payment equal to his bonus target for the year of termination.
In addition, we have granted Mr. Coats an option under our Equity Incentive Plan (the “ Plan ”) to purchase 853,500 shares of our common stock at an exercise price equal to $1.68 per share, the fair market value of our common stock on the grant date, as determined in accordance with the terms of the Plan. The option expires on the tenth anniversary of the grant date and vests with respect to 25% of the shares underlying the option on the first anniversary of the grant date and 1/48 th per month for each month of service thereafter. The option becomes fully vested with respect to all remaining unvested shares upon a change in control of our company.
Mr. Coats will be eligible to receive additional long-term stock-based incentive awards under the Plan, with an initial potential target of aggregate grant amount value of 200% of his annual base salary. Actual long-term stock-based incentive awards, if any, will be determined in the discretion of the compensation committee of our board of directors in accordance with the process applicable to all named executive officers.
Neither the election of Mr. Coats as a director nor his appointment as president and chief executive officer were made pursuant to any other arrangement or understanding between Mr. Coats and any other person. Mr. Coats will not initially serve on any committees of the board of directors, and we do not expect that Mr. Coats will ultimately be appointed to any such committees. Mr. Coats will not receive any additional compensation for his service as a director.
There are no family relationships involving Mr. Coats which would require disclosure under Item 401(d) of Regulation S-K. There are no current or proposed transactions in which Mr. Coats or any member of his immediate family has, or will have, a direct or indirect material interest which would require disclosure under Item 404(a) of Regulation S-K.
A copy of the offer letter with Mr. Coats is attached to this current report on Form 8-K as Exhibit 10.3 and the above summary is qualified in its entirety by reference to the full text of such offer letter.

(e)      The information set forth in the second and third paragraphs of Item 5.02(b) and in the third, fourth and fifth paragraphs of Item 5.02(c) and (d) is incorporated herein by reference.


Item 9.01
Financial Statements and Exhibits

(d)      Exhibits

Exhibit No.
 
Description
10.1
—
Separation Agreement, dated July 7, 2014, with Arthur T. Sands, M.D., Ph.D.

10.2
—
Consulting Agreement, dated July 7, 2014, with Arthur T. Sands, M.D., Ph.D.

10.3
—
Offer Letter, dated July 1, 2014, with Lonnel Coats









Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
Lexicon Pharmaceuticals, Inc.
 
 
 
 
 
 
 
 
Date: July 7, 2014
By:
/s/ Brian T. Crum
 
 
Brian T. Crum
 
 
Vice   President and General Counsel
 
 
 





Index to Exhibits


Exhibit No.
 
Description
10.1
—
Separation Agreement, dated July 7, 2014, with Arthur T. Sands, M.D., Ph.D.

10.2
—
Consulting Agreement, dated July 7, 2014, with Arthur T. Sands, M.D., Ph.D.

10.3
—
Offer Letter, dated July 1, 2014, with Lonnel Coats







Exhibit 10.1




July 7, 2014


Arthur T. Sands, M.D., Ph.D.
[Address]

Dear Arthur:

The purpose of this letter is to confirm our agreement concerning your resignation as president and chief executive officer and as a member of the board of directors of Lexicon Pharmaceuticals, Inc. (the “ Company ”).

As of the date hereof (the “ Separation Date ”), you hereby resign as president and chief executive officer and as a member of the board of directors of the Company. In connection with such resignation, you also hereby resign from any positions you currently hold as an officer or member of the boards of directors of any affiliates of the Company. This letter constitutes notice of termination pursuant to Section 7 of the Employment Agreement between you and the Company, dated October 15, 1999, as subsequently amended (the “ Employment Agreement ”), and no additional notice of termination will be required under the Employment Agreement. Your resignation pursuant to this letter will be treated for all purposes as a voluntary termination of your employment by you and the parties agree that no payments will be due pursuant to Section 6(b) of the Employment Agreement as a result of such resignation.

Notwithstanding the voluntary character of your termination, and subject to the following paragraph, the Company hereby agrees to pay salary continuation payments (pursuant to the Company’s normal payroll procedures) in an amount equal to your current base annual salary of $580,000, less applicable tax withholding, for a period of twelve (12) months following the Separation Date. In the event the Company enters into any licensing transaction within ninety (90) days following the Separation Date pursuant to which the Company grants a third party rights to commercialize LX4211, and which becomes effective, then the period during which you will be entitled to receive such salary continuation payments will be extended by six (6) additional months, for a total period of eighteen (18) months following the Separation Date. In addition, the Company hereby agrees to pay an additional single sum payment equal to 50% of your current base salary ($290,000), less applicable tax withholding, payable within 30 days following the Separation Date. The Company also agrees to pay you monthly payments equal to $1,846.20 on regular pay dates of the Company, less applicable tax withholding, for a period of 18 months following your Separation Date to provide for the cost of continued benefit coverage under COBRA in accordance with your benefit coverage elections in effect immediately prior to the Separation Date.

The terms hereof are subject to your execution and return to the Company within 60 days of the Separation Date of a customary release relating to your employment with the Company which becomes effective and non-revocable within such period. Payments pursuant to the preceding paragraph which would otherwise become due prior to such a release becoming effective and non-revocable will be delayed and paid in a lump sum promptly following the release becoming effective and non-revocable within such 60-day period.

Each installment payment payable pursuant to this agreement shall be treated as a separate payment for purposes of section 409A of the Internal Revenue Code of 1986, as amended.





The parties agree that, notwithstanding any provisions of Section 10(e) of the Employment Agreement to the contrary, you may retain any Confidential Information (as defined in the Employment Agreement) in your possession, custody or control to the extent and for long as such retention may be necessary or required for you to fulfill your obligations under the consulting agreement between you and the Company dated July 7, 2014.

The parties agree that the definition of “Competing Business” in Section 11(a) of the Employment Agreement is hereby amended to mean any other person or entity engaging in the clinical development of a drug (i) in direct conflict or competition with a Phase 3 drug development program being conducted by the Company or (ii) which inhibits or otherwise modulates a drug target that is the subject of any drug development program which has been or is being conducted by the Company or any drug discovery program to which the Company is devoting or has devoted material resources.

It is agreed that, except as expressly provided herein, this letter shall not affect the rights and obligations of the parties under the Employment Agreement (including, without limitations, Sections 6(a), 10 and 11 thereof) or any other agreements between the parties.

If the foregoing correctly sets forth our mutual understanding, please so indicate by signing this letter in the space provided below and return it to the Company at the above address, whereupon this letter shall become effective.
        

Very truly yours,
 
Lexicon Pharmaceuticals, Inc.
 
 
 
 
 
 
 
 
 
By:
/s/ Raymond Debbane
 
 
Raymond Debbane
 
 
Chairman of the Board of Directors
 
 
 

Accepted and agreed to:

 
 
 
 
 
 
By:
/s/ Arthur T. Sands
 
 
Arthur T. Sands, M.D., Ph.D.
 
 
 
 
Date:
July 7, 2014
 
 
 
 






Exhibit 10.2



July 7, 2014

Arthur T. Sands, M.D., Ph.D.
[Address]

Dear Arthur:

We are pleased to invite you to become a consultant to Lexicon Pharmaceuticals, Inc. (which, together with its subsidiaries and affiliates, is referred to as the “ Company ” or “ Lexicon ”). The purpose of this letter agreement (this “ Agreement ”) is to set forth our mutual understanding of the terms and conditions under which you will provide consulting services to the Company, as set forth below.

1. Consulting Services . As a consultant to Lexicon, you will provide such consulting and advisory services as may be requested by the Company’s chief executive officer, or his or her designee (Lexicon’s “ Designated Representative ”) relating to (i) matters previously within the scope of your employment with the Company, including, without limitation, the Company’s clinical development of LX4211 for type 1 and type 2 diabetes, and (ii) such other consulting and advisory services as you and the Company may agree. You will devote up to 24 days annually during the first two years of the term hereof and up to 12 days annually during the following three years of the term hereof to providing such services to the Company under this Agreement, on a schedule and at times reasonably agreed upon by you and the Designated Representative. You agree to provide the Company with written quarterly reports detailing the number of days (reported in half-day increments) devoted to providing services under this Agreement during the prior quarter.

2. Compensation . As full consideration for your services as a consultant to the Company and your obligations under this Agreement, you will receive fees of $100,000 per year for the first two years of the term hereof and fees of $50,000 per year for the following three years of the term hereof, in each case payable in 12 monthly installments. In addition, you will be reimbursed for your reasonable, ordinary and necessary out-of-pocket expenses for attendance at in-person meetings or otherwise incurred at the Company’s request in connection with your performance of consulting or advisory services under this Agreement. To the extent applicable, each installment payment payable pursuant to this Agreement shall be treated as a separate payment for purposes of section 409A of the Internal Revenue Code of 1986, as amended.

3. Confidential Information .

(a) In the course of your service as a consultant to the Company, you may learn or be exposed, orally, visually, electronically or in writing, to inventions, discoveries, improvements, materials, data, technology, processes, formulas, know-how, trade secrets, ideas and other information which we consider proprietary or confidential (“ Confidential Information ”). You agree to hold any Confidential Information disclosed to you by the Company or learned by you from the Company in conjunction with your services under this Agreement in strict confidence and to take all reasonable precautions to protect such Confidential Information, not to disclose any such Confidential Information to any third party, and to use such Confidential Information only in furtherance of your services under this Agreement; provided that your nondisclosure obligation shall not apply to the extent such Confidential Information (i) is already in the public domain or hereafter enters the public domain other than through your acts or omissions in violation of this Agreement; (ii) is already known to you, as may be shown by competent written records; (iii) is hereafter received by you without restriction as to confidentiality or use from a third party lawfully entitled so to disclose same in such manner; or (iv) is hereafter generated by you, other than in performance of your services under this Agreement, without the use of any Confidential Information, facilities or personnel of the Company. Information shall not be deemed to be within the foregoing exceptions merely because such information is embraced by more




general information in the public domain or in your possession. All Confidential Information (and any copies and notes thereof) shall remain the sole property of the Company.

(b) You agree not to disclose or otherwise make available to the Company any information that you possess under an obligation of confidentiality to a third party. You may disclose to the Company any information made available generally to the scientific community at large through published reports or public presentations prior to disclosure to the Company.

4. Inventions and Discoveries .

(a) You hereby assign and transfer to the Company all of your right, title and interest throughout the world in all inventions, discoveries, improvements, materials, data, works of authorship and other intellectual property, whether or not patentable or subject to copyright, which may be made, written or conceived by you in the course of, or arising as a result of, your performance of your services as a consultant to the Company, in whole or in part and whether alone or in conjunction with others (collectively, “ Intellectual Property ”). All such Intellectual Property shall be the sole property of the Company or its nominee.

(b) You shall promptly disclose any Intellectual Property in writing to the Company in order to permit the Company to claim rights to which it may be entitled under this Agreement. The Company shall have full power and authority to file and prosecute patent applications and copyright registrations throughout the world with respect to all Intellectual Property, and to procure and maintain patents and copyrights with respect thereto. You agree, at the Company’s reasonable request and expense, to sign, execute and acknowledge, or cause to be signed, executed and acknowledged, any applications, assignments, instruments and other documents, and to perform such other acts, as the Company may deem necessary, useful or convenient to confirm and vest in the Company or its nominee all right, title and interest throughout the world in and to any Intellectual Property and all patent, copyright and other intellectual property rights and protections therein, and to assist the Company in procuring, maintaining, enforcing and defending such patent, copyright and other intellectual property rights and protections throughout the world. You agree to treat all such Intellectual Property as Confidential Information under this Agreement.

5. Conflicting Engagements .

(a) During your service as a consultant to the Company, you agree that you will not, without previously notifying the Company in writing, directly or indirectly, become associated with, render advisory, consulting or other services to, or become employed by any other person or entity engaging in the clinical development of a drug (i) in direct conflict or competition with a Phase 3 drug development program being conducted by the Company or (ii) which inhibits or otherwise modulates a drug target that is the subject of any drug development program which has been or is being conducted by the Company or any drug discovery program to which the Company is devoting or has devoted material resources (collectively referred to as “ Third Party Competitors ”). You agree to disclose to the Company any proposed relationship with a Third Party Competitor (a “ Proposed Relationship ”) at least 30 days prior to the establishment of a confidential relationship between you and such Third Party Competitor. Upon such disclosure, the Company may consent to the Proposed Relationship in writing, may proffer written consent subject to condition precedent regarding certain restrictions on the scope and/or field of the Proposed Relationship, or may terminate this Agreement.

(b) Subject to your obligations with respect to Confidentiality and Intellectual Property under Sections 3 and 4 of this Agreement, nothing in this Agreement shall prohibit you from continuing your duties under any consulting or advisory agreement that predates this Agreement, and which has been disclosed to the Company in writing prior to the effective date of this Agreement.

6. Term and Termination . You will render your advisory and consulting services to the Company for an initial period of five years commencing on July 7, 2014, at which time this Agreement will terminate unless renewed by mutual written consent. This Agreement may be terminated (i) at any time by you, with or without cause, upon 30 days’ advance written notice to the Company and (ii) by either party for breach of this Agreement by the other party




that, where curable, is not cured within 10 business days after written notice of such breach is delivered to the breaching party.

7. Independent Contractor . For purposes of this Agreement, you will be deemed an independent contractor and not an employee or agent of Lexicon. In this connection, you will not be eligible for, nor entitled to, any employee benefits that we normally extend to our employees, and we will not withhold any taxes from the compensation paid to you, all of which shall be your responsibility. The manner in which you render your services under this Agreement will be within your reasonable control and discretion. You have no express or implied authority to incur any liability, or to make any decision or to create any binding obligation, on our behalf.

8. Compliance with Laws and Procedures . To the extent you provide services under this Agreement on our premises, you agree to observe our business hours, as well as our rules, policies and security procedures concerning conduct and the health, safety and protection of persons and property. You will comply with all applicable governmental laws, ordinances, rules and regulations applicable to the performance of your services under this Agreement.

9. Governing Law . This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas as they apply to contracts entered into and wholly to be performed in Texas.

10. Enforcement . You agree that a breach of any of the restrictions set forth in the provisions of this Agreement would cause the Company irreparable injury and damage, and that, in the event of any breach or threatened breach, the Company, in addition to all other rights and remedies at law or in equity, shall have the right to enforce the specific performance of such restrictions and to apply for injunctive relief against their violation.

11. Survival of Terms . The provisions of Sections 3, 4 and 9 through 17 hereof shall survive termination of this Agreement.

12. Successors and Assigns . You may not assign this Agreement without the written consent of the Company. This Agreement shall be binding on your heirs, executors, administrators and legal representatives and the Company’s successors and assigns.

13. Severability . The invalidity or unenforceability of any provision of this Agreement (or portion thereof) shall not affect the validity or enforceability of any other provision of this Agreement, and if such provision (or portion thereof) is so broad as to be unenforceable, it shall be interpreted to be only as broad as is enforceable.

14. Entire Agreement . This Agreement (together with the Employment Agreement between you and the Company, dated October 15, 1999, as amended) constitutes the sole and complete agreement of the parties with respect to the matters included herein, and supersedes any previous oral or written agreement, if any, relating to the subject matters included herein.

15. Amendment and Waiver . This Agreement may not be amended or supplemented in any way, nor may the benefit of any provision hereof be waived, except by a written agreement duly executed by both you and the Company.

16. No Conflict . You represent that the performance of your obligations and duties under this Agreement does not conflict with any obligations or duties, express or implied, that you may have to third parties.

17. Construction . Each party to this Agreement has had the opportunity to review this Agreement with legal counsel. This Agreement shall not be construed or interpreted against any party on the basis that such party drafted or authored a particular provision, parts of or the entirety of this Agreement.





If the foregoing correctly sets forth our mutual understanding, please so indicate by signing this letter in the space provided below and return it to the Company at the above address, whereupon this Agreement shall constitute a binding contract between us and our legal representatives, successors, and assigns.

 
Very truly yours,
 
 
 
Lexicon Pharmaceuticals, Inc.
 
 
 
 
 
 
 
 
 
By:
/s/ Raymond Debbane
 
 
Raymond Debbane
 
 
Chairman of the Board of Directors
 
 
 

Accepted and agreed to on the date set forth below:

 
 
 
 
 
 
By:
/s/ Arthur T. Sands
 
 
Arthur T. Sands, M.D., Ph.D.
 
 
 
 
Date:
July 7, 2014
 
 
 
 






Exhibit 10.3
        


July 1, 2014

Mr. Lonnel Coats
[Address]

Dear Lonnel:

All the directors of Lexicon Pharmaceuticals share my enthusiasm as I extend this offer for you to join us as the Company’s President and Chief Executive Officer. We believe you have the leadership, personal and professional qualities that will allow you to make a significant contribution to the future of medicine as you lead Lexicon in its mission to discover, develop and commercialize breakthrough treatments for human disease. As we have discussed, Lexicon is at an exciting stage in its journey and we welcome you as the leader that will spearhead its transformation from clinical development to a patient-centric successful pharma company.

In this position, you will be responsible for directing the activities of the Company and you will report directly to the board of directors. Additionally, we will nominate you as a director of the Company, a position you will retain as long as you are the Company’s CEO.

The terms under which we are offering you this position are outlined below:

Base Salary
You will receive a monthly salary of $45,835 ($550,020.00 per year), paid in accordance with our standard payroll policies. We currently pay employees on the 15 th and last day of each month.

Bonus Arrangements
You will be eligible for an annual bonus with a bonus target (i.e. the amount payable if all objectives are achieved) of 60% of your annual base salary, with an opportunity to earn a greater bonus for over-achievement. The actual amount of your bonus will be determined by the compensation committee of the board of directors, based upon achievement of corporate objectives established at the beginning of each year. As is the case with all Lexicon officers, decisions regarding the payment of bonuses are subject to the discretion of the compensation committee of the board of directors.

For 2014, your bonus will be prorated based on your start date with the Company and we will guarantee a payout of this prorated amount at least at target level. Bonuses for 2014 are expected to be determined and paid in the first quarter of 2015.

Stock Options
You will receive an option under our equity incentive plan giving you the right to purchase shares of common stock at an exercise price equal to the fair market value of the common stock, as defined in our stock plan, on the date your employment with the company commences. The number of shares underlying this option will be calculated so that the aggregate dollar value of the option (using the Company’s usual method of option valuation) is equal to 200% of your salary or $1,100,040.00. The option will vest and become exercisable according to the following schedule: (1) twenty-five percent (25%) of the total after twelve months of continuous employment and (2) one forty-eight (1/48 th ) of the total after each month of employment thereafter up to the end of your 48 th month of employment. The options will have a ten-year term and will be subject to the terms and conditions of the plan and our standard form of stock option agreement for company officers (which includes acceleration of vesting in the event of a change in control, as defined in that agreement), which you will receive after the option is granted.

Long-Term Incentive
You will also be eligible to participate in the Company’s annual equity incentive (LTI), with an initial potential target (for an initial possible grant mid-2015) of aggregate grant amount value of 200% of salary. The terms and timing of




any such annual grant are subject to separate compensation committee decisions and resolutions at such time as annual incentive awards are generally considered for executives of the Company. Should the compensation committee continue with the structure of the annual LTI program the target level would be reviewed after three annual grants.

Benefits
You will be eligible to participate in the employee benefits plans we make available to our employees generally, which currently include health, dental, vision, life and disability insurance, as well as a 401(k) retirement plan. We currently make matching contributions under our 401(k) plan in an amount equal to 50% of an employee’s contributions up to five percent of salary. We will provide you with life insurance coverage under our group term policy that provides for a death benefit of two times your annual salary.

Paid Time Off
You will be entitled to four weeks paid time off under our employee paid time off policy.

Severance
In the event your employment is terminated without “cause” by the company, you will be entitled to receive, and the company shall be obligated to pay, salary continuation payments (pursuant to the company’s normal payroll procedures) in an amount equal to your then current base salary for a period of twelve months following such termination. In the event your employment is terminated without “cause” by the company in connection with a “change in control,” you will receive in addition a one-time payment equal to your bonus at target for the year of your termination. For purposes of the foregoing,
•
termination for “cause” shall mean termination of employment directly resulting from (1) intentional misconduct causing a material violation by the company of any state or federal laws, (2) a theft of corporate funds or corporate assets or in a material act of fraud upon the company, (3) an act of personal dishonesty that was intended to result in personal enrichment at the expense of the company or (4) conviction of a felony; and
•
a “change in control” of the company shall be deemed to have occurred if any of the following shall have taken place: (1) 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”)) 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 50% or more of the combined voting power of the company’s then-outstanding voting securities; (2) 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 entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding securities in substantially the same proportion as their ownership of the company’s outstanding voting securities prior to such reorganization, merger or consolidation; or (3) a liquidation or dissolution of the company or the sale of all or substantially all of the company’s assets. For the avoidance of doubt, Invus, LP being a majority owner or dropping below majority ownership does not by itself constitute a “change in control”.

Subject to the payment obligations of the company, if any, under the preceding paragraph of this letter, this letter does not create any term of employment, and both you and the company will be free to terminate your employment at any time for any reason.

Start Date
We expect that you will begin work on or about July 7, 2014.

Employment Location
Your primary place of employment will be our Princeton, New Jersey office. You will be expected to dedicate a meaningful portion of your time working at our Woodlands site.





Proprietary Information Agreement
We consider the protection of our confidential information and proprietary rights to be very important. As a result, our offer of employment is conditioned upon your signing our standard form of employee proprietary information agreement.

If you have any questions regarding this offer, please contact me, Philippe Amouyal or Jeff Wade.

Lonnel, I believe you will enjoy working with the entire Lexicon team and with the board and that you will both thrive at Lexicon and make Lexicon a great success story. If you find this offer to be acceptable, please indicate your acceptance by signing and returning one of the two copies of this letter on, or before, Thursday July 3, 2014.

Sincerely,

/s/ Raymond Debbane
                                
Raymond Debbane
Chairman of the Board of Lexicon Pharmaceuticals



Accepted and agreed:

/s/ Lonnel Coats
                    
Lonnel Coats

Date:      July 1, 2014