July 1, 2014
Mr. Lonnel Coats
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:
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 15th and last day of each month.
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.
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 (1/48th) of the total after each month of employment thereafter up to the end of your 48th 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.
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.
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.
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.
We expect that you will begin work on or about July 7, 2014.
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.
/s/ Raymond Debbane
Chairman of the Board of Lexicon Pharmaceuticals
Accepted and agreed:
/s/ Lonnel Coats
Date: July 1, 2014