Equity Incentive Awards

Equity Incentive Plans

2017 Equity Incentive Plan: In September 1995, Lexicon adopted the 1995 Stock Option Plan, which was subsequently amended and restated in February 2000, April 2009, April 2012, April 2015 and April 2017 and renamed the 2017 Equity Incentive Plan (the “Equity Incentive Plan”).

The Equity Incentive Plan provides for the grant of incentive stock options to employees and nonstatutory stock options to employees, directors and consultants of the Company. The plan also permits the grant of stock bonus awards, restricted stock awards, restricted stock unit awards, stock appreciation rights and performance stock awards. Incentive and nonstatutory stock options have an exercise price of 100% or more of the fair market value of the Company’s common stock on the date of grant. Most stock options granted under the Equity Incentive Plan become vested and exercisable over a period of four years; however some have been granted with different vesting schedules. Stock options granted under the Equity Incentive Plan have a term of ten years from the date of grant.

The total number of shares of common stock that may be issued pursuant to stock awards under the Equity Incentive Plan shall not exceed in the aggregate 15,000,000 shares. As of December 31, 2017, an aggregate of 15,000,000 shares of common stock had been reserved for issuance, options to purchase 4,773,915 shares and 945,723 restricted stock units were outstanding, 1,812,584 shares had been issued upon the exercise of stock options, 1,118,151 shares had been issued pursuant to restricted stock units and 113,940 shares had been issued pursuant to stock bonus awards or restricted stock awards granted under the Equity Incentive Plan.

2017 Non-Employee Directors’ Equity Incentive Plan: In February 2000, Lexicon adopted the 2000 Non-Employee Directors’ Stock Option Plan, which was subsequently amended and restated in April 2009, April 2012, April 2015 and April 2017 and renamed the 2017 Non-Employee Directors’ Equity Incentive Plan (the “Directors’ Plan”). Under the Directors’ Plan, non-employee directors may be granted awards under the plan with an aggregate grant date fair value of more than $500,000 during any calender year, taken together with any cash fees paid to such non-employee director in compensation for service on Lexicon’s board of directors during such calender year. Stock options granted under the Directors’ Plan have an exercise price equal to the fair market value of the Company’s common stock on the date of grant and a term of ten years from the date of grant.

The total number of shares of common stock that may be issued pursuant to stock awards under the Directors’ Plan shall not exceed in the aggregate 600,000 shares. As of December 31, 2017, an aggregate of 600,000 shares of common stock had been reserved for issuance, stock options to purchase 187,119 shares were outstanding, none had been issued upon the exercise of stock options and 82,696 shares had been issued pursuant to restricted stock awards granted under the Directors’ Plan.

Stock Option Activity: The following is a summary of stock option activity under Lexicon’s equity incentive plans:



	2017				2016				2015
(in thousands, except exercise price data)	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding at beginning of year	4,834		$	11.24	4,217		$	12.35	3,371		$	14.98
Granted	892		14.31		1,370		10.40		1,207		6.83
Exercised	(458	)	11.97		(495	)	12.17		(19	)	11.14
Expired	(157	)	26.42		(195	)	27.33		(187	)	27.29
Forfeited	(150	)	13.84		(63	)	10.45		(155	)	8.51
Outstanding at end of year	4,961		11.17		4,834		11.24		4,217		12.35
Exercisable at end of year	3,077		$	10.95	2,727		$	12.55	2,686		$	14.53

The weighted average estimated grant date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 were $8.59, $6.43 and $4.58, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 were $2.0 million, $1.7 million and $35,000, respectively. The weighted average remaining contractual term of stock options outstanding and exercisable was 6.4 and 5.2 years, respectively, as of December 31, 2017. At December 31, 2017, the aggregate intrinsic value of the outstanding stock options and the exercisable stock options was $4.6 million and $2.8 million, respectively.

Stock Bonus and Restricted Stock Unit Activity:

During the years ended December 31, 2017, 2016 and 2015, Lexicon granted its non-employee directors 10,248, 11,456 and 21,360 shares, respectively, of restricted stock awards. The restricted stock awards had weighted average grant date fair values of $15.61, $13.96 and $7.49 per share, respectively, and vested immediately.

During the years ended December 31, 2017, 2016 and 2015, Lexicon granted its employees restricted stock units in lieu of or in addition to annual stock option awards. These restricted stock units vest in four annual installments. The following is a summary of restricted stock units activity under Lexicon’s stock-based compensation plans for the year ended December 31, 2017:



	Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at December 31, 2016	875		$	8.13
Granted	418		14.44
Vested	(286	)	8.78
Forfeited	(61	)	11.57
Outstanding at December 31, 2017	946		$	10.50

Aggregate Shares Reserved for Issuance

As of December 31, 2017, an aggregate of 5,906,757 shares of common stock were reserved for issuance upon exercise of outstanding stock options and vesting of outstanding restricted stock units and 6,565,872 additional shares were available for future grants under Lexicon’s equity incentive plans. The Company has a policy of using either authorized and unissued shares or treasury shares, including shares acquired by purchase in the open market or in private transactions, to satisfy equity award exercises.