Exhibit 10.2

RHYTHM PHARMACEUTICALS, Inc.

2017 EQUITY INCENTIVE PLAN

 

 

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Table Of Contents

 

 

 

1.

Purpose

2

 

 

 

2.

Definitions

2

 

 

 

3.

Term of the Plan

5

 

 

 

4.

Stock Subject to the Plan

5

 

 

 

5.

Administration

6

 

 

 

6.

Authorization of Grants

7

 

 

 

7.

Specific Terms of Awards

8

 

 

 

8.

Adjustment Provisions

14

 

 

 

9.

Change of Control

17

 

 

 

10.

Settlement of Awards

17

 

 

 

11.

Reservation of Stock

20

 

 

 

12.

Limitation of Rights in Stock; No Special Service Rights

20

 

 

 

13.

Unfunded Status of Plan

20

 

 

 

14.

Nonexclusivity of the Plan

20

 

 

 

15.

No Guarantee of Tax Consequences

21

 

 

 

16.

Termination and Amendment of the Plan

21

 

 

 

17.

Recoupment

22

 

 

 

18.

Notices and Other Communications

22

 

 

 

19.

Governing Law

22

 

 

 

 

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Rhythm Pharmaceuticals, Inc.

2017 Equity Incentive Plan

1. Purpose

This Plan is intended to provide incentives that will attract, retain and
motivate highly competent officers, directors, employees, consultants and
advisors to promote the success of the Company’s business and align employees’
interests with stockholders’ interests. The Plan is intended to be an incentive
stock option plan within the meaning of Section 422 of the Code, but not all
Awards are required to be Incentive Options.

This Plan serves as the successor to the Company’s 2015 Equity Incentive Plan
(the “Predecessor Plan”), and no further awards shall be made under the
Predecessor Plan on or after the Effective Date. All awards outstanding under
the Predecessor Plan on the Effective Date shall be transferred to this Plan and
shall be treated as outstanding under this Plan. However, each outstanding award
so transferred shall continue to be governed solely by the terms of the
documents evidence such award, and no provision of the Plan shall be deemed to
affect or modified the rights or obligations of the holders of such transferred
awards. This Plan and all definitions hereunder shall be interpreted consistent
with the foregoing.

2. Definitions

As used in this Plan, the following terms shall have the respective meanings set
out below, unless the context clearly requires otherwise:

2.1. Accelerate,  Accelerated, and Acceleration, means: (a) when used with
respect to an Option or Stock Appreciation Right, that as of the time of
reference such Option or Stock Appreciation Right will become exercisable with
respect to some or all of the shares of Stock for which it was not then
otherwise exercisable by its terms; (b) when used with respect to Restricted
Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise
applicable to such Restricted Stock or Restricted Stock Units shall expire with
respect to some or all of such shares of Restricted Stock or such Restricted
Stock Units then still otherwise subject to the Risk of Forfeiture; and (c) when
used with respect to Performance Units, that the applicable Performance Goals or
other business objectives shall be deemed to have been met as to some or all of
such Performance Units.

2.2. Affiliate means any parent or subsidiary corporation of the Company (within
the meaning of Sections 424(e) and 424(f) of the Code, respectively).

2.3. Award means any grant or sale pursuant to the Plan or award outstanding
under the Predecessor Plan as of the Effective Date of Options, Stock
Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock
Units, Stock Grants or any of the foregoing intended to constitute Qualified
Performance-Based Awards.

2.4. Award Agreement means an agreement between the Company and the recipient of
an Award, or other notice of grant of an Award, setting forth the terms and
conditions of the Award.

2.5. Board means the Company’s Board of Directors.

 

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2.6. Change of Control means the occurrence of any of the following after the
date of the approval of the Plan by the Board:

(a) a Transaction (as defined in Section 8.4), unless securities possessing more
than 50% of the total combined voting power of the survivor’s or acquiror’s
outstanding securities (or the securities of any parent thereof) are held by a
person or persons who held securities possessing more than 50% of the total
combined voting power of the Company’s outstanding securities immediately prior
to that Transaction; or

(b) any person or group of persons (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended and in effect from time to time)
that, directly or indirectly, acquires, including but not limited to by means of
a merger or consolidation, beneficial ownership (determined pursuant to
Securities and Exchange Commission Rule 13d-3 promulgated under the said
Exchange Act) of securities possessing more than 50% of the total combined
voting power of the Company’s outstanding securities unless pursuant to a tender
or exchange offer made directly to the Company’s stockholders that the Board
recommends such stockholders accept, other than (i) the Company or any of its
Affiliates, (ii) an employee benefit plan of the Company or any of its
Affiliates, (iii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, or (iv) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or

(c) over a period of thirty-six (36) consecutive months or less, there is a
change in the composition of the Board such that a majority of the Board members
(rounded up to the next whole number, if a fraction) ceases, by reason of one or
more proxy contests for the election of Board members, to be composed of
individuals who either (i) have been Board members continuously since the
beginning of that period, or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in the preceding clause (i) who were still in office at the time that
election or nomination was approved by the Board; or

(d) a majority of the Board votes in favor of a decision that a Change of
Control has occurred, which vote may adopted by the Board with the intention
that such vote become effective subject to and contingent upon the occurrence of
certain events, in which case such Change of Control shall not be deemed to have
occurred unless and until such vote becomes effective in accordance with its
terms.

2.7. Code means the Internal Revenue Code of 1986, as amended from time to time,
or any successor statute thereto, and any regulations issued from time to time
thereunder.

2.8. Committee means the Compensation Committee of the Board, which in general
is responsible for the administration of the Plan, as provided in Section 5 of
this Plan. For any period during which no such committee is in existence
“Committee” shall mean the Board and all authority and responsibility assigned
to the Committee under the Plan shall be exercised, if at all, by the Board.

2.9. Company means Rhythm Pharmaceuticals, Inc., a corporation organized under
the laws of the State of Delaware.

2.10. “Forfeiture,” “forfeit,” and derivations thereof, when used in respect of
Restricted Stock purchased by a Participant, includes the Company’s repurchase
of such Restricted Stock at less than its then Market Value as a means intended
to effect a forfeiture of value.

2.11. Grant Date means the date as of which an Option is granted, as determined
under Section 7.1(a).

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2.12. Incentive Option means an Option which by its terms is to be treated as an
“incentive stock option” within the meaning of Section 422 of the Code.

2.13. Market Value means the value of a share of Stock on a particular date
determined by such methods or procedures as may be established by the Committee.
Unless otherwise determined by the Committee, the Market Value of Stock as of
any date is the closing price for the Stock as reported on the Nasdaq Stock
Market (or on any other national securities exchange on which the Stock is then
listed) for that date or, if no closing price is reported for that date, the
closing price on the first following date for which a closing price is reported.
For purposes of Awards effective as of the effective date of the Company’s
initial public offering, Market Value of Stock shall be the price at which the
Company’s Stock is offered to the public in its initial public offering.

2.14. Nonstatutory Option means any Option that is not an Incentive Option.

2.15. Option means an option to purchase shares of Stock.

2.16. Optionee means an eligible individual to whom an Option shall have been
granted under the Plan.

2.17. Participant means any holder of an outstanding Award under the Plan or the
Predecessor Plan.

2.18. Performance Criteria and Performance Goals have the meanings given such
terms in Section 7.7(f).

2.19. Performance Period means one or more periods of time, which may be of
varying and overlapping durations, selected by the Committee, over which the
attainment of one or more Performance Goals or other business objectives will be
measured for purposes of determining a Participant’s right to, and the payment
of, an Award.

2.20. Performance Unit means a right granted to a Participant under Section 7.5,
to receive cash, Stock or other Awards, the payment of which is contingent on
achieving Performance Goals or other business objectives established by the
Committee.

2.21. Plan means this 2017 Equity Incentive Plan of the Company, as amended from
time to time, and including any attachments or addenda hereto.

2.22. Qualified Performance-Based Awards means Awards intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.

2.23. Restricted Stock means a grant or sale of shares of Stock to a Participant
subject to a Risk of Forfeiture.

2.24. Restricted Stock Units means rights to receive shares of Stock, cash or
other Awards at the close of a Restriction Period, subject to a Risk of
Forfeiture.

2.25. Restriction Period means the period of time, established by the Committee
in connection with an Award of Restricted Stock or Restricted Stock Units,
during which the shares of Restricted Stock or Restricted Stock Units are
subject to a Risk of Forfeiture described in the applicable Award Agreement.

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2.26. Risk of Forfeiture means a limitation on the right of the Participant to
retain Restricted Stock or Restricted Stock Units, including a right of the
Company to reacquire shares of Restricted Stock at less than their then Market
Value, arising because of the occurrence or non-occurrence of specified events
or conditions.

2.27. Stock means common stock, par value $0.001 per share, of the Company, and
such other securities as may be substituted for such common stock pursuant to
Section 8.

2.28. Stock Appreciation Right means a right to receive any excess in the Market
Value of shares of Stock (except as otherwise provided in Section 7.2(c)) over a
specified exercise price.

2.29. Stock Grant means the grant of shares of Stock not subject to restrictions
or other forfeiture conditions.

2.30. Stockholders’ Agreement means any agreement by and among the holders of at
least a majority of the outstanding voting securities of the Company and setting
forth, among other provisions, restrictions upon the transfer of shares of Stock
or on the exercise of rights appurtenant thereto (including but not limited to
voting rights).

2.31. Ten Percent Owner means a person who owns, or is deemed within the meaning
of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or any
parent or subsidiary corporations of the Company, as defined in Sections 424(e)
and (f), respectively, of the Code). Whether a person is a Ten Percent Owner
shall be determined with respect to an Option based on the facts existing
immediately prior to the Grant Date of the Option.

3. Term of the Plan

The Plan became effective on October 10, 2017 upon consummation of the Company’s
initial public offering (the “Effective Date”) and, unless earlier terminated by
the Committee, shall terminate on October 10, 2027. Awards granted pursuant to
the Predecessor Plan or to the Plan within that period shall not expire solely
by reason of the termination of the Plan.

4. Stock Subject to the Plan

4.1. Plan Share Limitations.

(a) Limitation. The maximum number of shares of Stock that may be issued
pursuant to or subject to outstanding Awards granted under the Plan shall not
exceed 4,018,538 shares of Stock. Such share reserve includes 1,821,580 shares
of Stock available for issuance under the Predecessor Plan as of the Effective
Date, including the portion of those shares subject to Options outstanding under
the Predecessor Plan as of the Effective Date, plus an additional
2,196,958 shares. Notwithstanding the foregoing, however, beginning on the first
January 1 following consummation of the Company’s initial public offering, the
number of shares of Stock authorized under the first sentence of this
Section 4.1(a) of the Plan will be increased each January 1 by an amount equal
to four percent (4%) of outstanding shares of Stock as of the end of the
immediately preceding fiscal year. Notwithstanding the foregoing, the Board may
act prior to January 1 of a given year to provide that there will be no such
January 1 increase in the number of shares of Stock authorized under this
Section 4.1(a) of the Plan for such year or that the increase in the number of
shares of Stock authorized under this Section 4.1(a) of the Plan for such year
will be a lesser number than would otherwise occur pursuant to the preceding
sentence. Notwithstanding the preceding sentences, in no

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event shall the number of shares available for issuance pursuant to Incentive
Options over the term of the Plan exceed 4,018,538 shares of Stock.

(b) Application. For purposes of applying the foregoing limitation of
Section 4.1(a), (i) if any Option or Stock Appreciation Right expires,
terminates, or is cancelled for any reason without having been exercised in
full, or if any other Award is forfeited, the shares of Stock not purchased by
the holder or subject to Awards which are forfeited, as the case may be, shall
again be available for Awards to be granted under the Plan, (ii) if any Option
is exercised by delivering previously owned shares of Stock or the withholding
of a portion of the otherwise issuable shares of Stock subject to the Option in
payment of the exercise price therefor, only the net number of shares, that is,
the number of shares of Stock issued minus the number received by the Company in
payment of the exercise price, shall be considered to have been issued pursuant
to an Award granted under the Plan, and (iii) any shares of Stock either
delivered to or withheld by the Company in satisfaction of tax withholding
obligations of the Company or an Affiliate with respect to an Award shall again
be available for Awards to be granted under the Plan. In addition, settlement of
any Award shall not count against the foregoing limitations except to the extent
settled in the form of Stock. For the avoidance of doubt, Awards outstanding
under the Predecessor Plan shall be treated consistent with Awards granted under
this Plan for all purposes, including for purposes of this Section 4.1(b).
Shares of Stock issued pursuant to the Plan may be either authorized but
unissued shares or shares held by the Company in its treasury.

4.2. Per Person Limitations. The maximum number of shares of Stock that may be
subject to Options or Stock Appreciation Rights or any combination thereof
granted to any one Participant during any single calendar year shall be
1,200,000. The maximum number of shares of Stock that may be subject to all
other Awards or any combination thereof granted to any one Participant during
any single calendar year that are intended to be Qualified Performance-Based
Awards shall be 1,200,000. The maximum value of awards denominated in cash
granted to any one person, other than a non-employee member of the Board, during
any single calendar year and that are intended to be Qualified Performance-Based
Awards shall be $30,000,000. Each of the foregoing limitations shall be doubled
with respect to awards granted to an individual during the first calendar year
in which he or she commences employment. The per Participant limits described in
this Section 4.2 shall be construed and applied consistent with Section 162(m)
of the Code.

4.3. Limitations on Grants to Non-Employee Board Members. The maximum value of
awards denominated in cash granted to any non-employee member of the Board,
during any single calendar year shall be $1,000,000. For purposes of this
limitation, the value of an award shall be the grant date fair value of the
award (as determined for the Company’s financial statements).

4.4. Adjustment of Limitations. Each of the share limitations of this Section 4
shall be subject to adjustment pursuant to Section 8 of the Plan, but in the
case of the limitations of Section 4.2, only if and to the extent consistent
with Section 162(m) of the Code.

5. Administration

The Plan shall be administered by the Committee; provided, however, that at any
time and on any one or more occasions the Board may itself exercise any of the
powers and responsibilities assigned the Committee under the Plan and when so
acting shall have the benefit of all of the provisions of the Plan pertaining to
the Committee’s exercise of its authorities hereunder; and provided further,
however, that the Committee may delegate to an executive officer or officers the
authority to grant Awards hereunder to employees who are not executive officers,
and to consultants, up to such maximum number and in accordance with such other
guidelines as the Committee shall specify by resolution at any time or from time
to time. To the extent required by applicable law, any such delegation may not
include the authority

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to grant Restricted Stock, unless the delegate is a committee of the Board,
including a committee consisting solely of an executive officer who is a Board
member. Subject to the provisions of the Plan, the Committee shall have complete
authority, in its discretion, to make or to select the manner of making all
determinations with respect to each Award to be granted by the Company under the
Plan including the officer, employee, consultant, advisor or director to receive
the Award and the form of Award. In making such determinations, the Committee
may take into account the nature of the services rendered by the respective
officers, employees, consultants, advisors and directors, their present and
potential contributions to the success of the Company and its Affiliates, and
such other factors as the Committee in its discretion shall deem relevant.
Subject to the provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective Award Agreements (which need not be identical), and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee’s determinations made in good faith on matters referred to in the Plan
shall be final, binding and conclusive on all participants, beneficiaries,
heirs, assigns or other persons having or claiming any interest under the Plan
or an Award made pursuant hereto.

6. Authorization of Grants

6.1. Eligibility. The Committee may grant from time to time and at any time
prior to the termination of the Plan one or more Awards, either alone or in
combination with any other Awards, to any officer or employee of or consultant
or advisor to one or more of the Company and its Affiliates or to any
non-employee member of the Board or of any board of directors (or similar
governing authority) of any Affiliate. However, only employees of the Company
and its Affiliates shall be eligible for the grant of an Incentive Option.

6.2. General Terms of Awards. Each grant of an Award shall be subject to all
applicable terms and conditions of the Plan (including but not limited to any
specific terms and conditions applicable to that type of Award set out in the
following Section), and such other terms and conditions, not inconsistent with
the terms of the Plan, as the Committee may prescribe. No prospective
Participant shall have any rights with respect to an Award, unless and until
such Participant shall have complied with the applicable terms and conditions of
such Award (including if applicable delivering a fully executed copy of any
agreement evidencing an Award to the Company).

6.3. Effect of Termination of Employment, Etc. Unless the Committee shall
provide otherwise with respect to any Award (including, but not limited to, in a
Participant’s Award Agreement), if the Participant’s employment or other
association with the Company and its Affiliates ends for any reason, including
because of the Participant’s employer ceasing to be an Affiliate, (a) any
outstanding Option or Stock Appreciation Right of the Participant shall cease to
be exercisable in any respect not later than ninety (90) days following that
event and, for the period it remains exercisable following that event, shall be
exercisable only to the extent exercisable at the date of that event, and
(b) any other outstanding Award of the Participant to the extent that it is then
still subject to Risk of Forfeiture shall be forfeited or otherwise subject to
return to or repurchase by the Company on the terms specified in the applicable
Award Agreement. Cessation of the performance of services in one capacity, for
example, as an employee, shall not result in termination of an Award while the
Participant continues to perform services in another capacity, for example as a
director. Military or sick leave or other bona fide leave approved by the
Company shall not be deemed a termination of employment or other association;
provided, however, that should such leave exceed three (3) months, then for
purposes of determining the period within which an Incentive Option may be
exercised as such under the federal tax laws, the Participant’s service shall be
deemed to cease on the first day immediately following the expiration of such
three (3)-month period, unless the Participant is provided with the right to
return to employment following such leave either by statute or by written
contract.. To the extent consistent with applicable law, the Committee may
provide that Awards

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continue to vest for some or all of the period of any such leave, or that their
vesting shall be tolled during any such leave and only recommence upon the
Participant’s return from leave, if ever.

6.4. Non-Transferability of Awards. Except as otherwise provided in this
Section 6.4, Awards shall not be transferable, and no Award or interest therein
may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution. The
provisions of the immediately preceding sentence shall not be applicable to
Stock Grants which shall not be subject to any transfer restrictions under this
Section 6.4. All of a Participant’s rights in any Award may be exercised during
the life of the Participant only by the Participant or the Participant’s legal
representative. However, the Committee may, at or after the grant of an Award of
a Nonstatutory Option, or shares of Restricted Stock, provide that such Award
may be transferred by the recipient to a family member; provided, however, that
any such transfer is without payment of any consideration whatsoever and that no
transfer shall be valid unless first approved by the Committee, acting in its
sole discretion. For this purpose, “family member” means any child, stepchild,
grandchild, parent, grandparent, stepparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the employee’s household (other than a tenant or employee), a trust in
which the foregoing persons have more than fifty (50) percent of the beneficial
interests, a foundation in which the foregoing persons (or the Participant)
control the management of assets, and any other entity in which these persons
(or the Participant) own more than fifty (50) percent of the voting interests.

7. Specific Terms of Awards

7.1. Options.

(a) Date of Grant. The granting of an Option shall take place at the time
specified in the Award Agreement.

(b) Exercise Price. The price at which shares of Stock may be acquired under
each Option shall be not less than 100% of the Market Value of Stock on the
Grant Date, or for an Incentive Option not less than 110% of the Market Value of
Stock on the Grant Date if the Optionee is a Ten Percent Owner.

(c) Option Period. No Incentive Option may be exercised on or after the tenth
(10th) anniversary of the Grant Date, or on or after the fifth (5th) anniversary
of the Grant Date if the Optionee is a Ten Percent Owner. The Option period
under each Nonstatutory Option shall not be so limited solely by reason of this
Section.

(d) Exercisability. An Option may be immediately exercisable or become
exercisable in such installments, cumulative or non-cumulative, as the Committee
may determine. In the case of an Option not otherwise immediately exercisable in
full, the Committee may Accelerate such Option in whole or in part at any time;
provided, however, that in the case of an Incentive Option, any such
Acceleration of the Option would not cause the Option to fail to comply with the
provisions of Section 422 of the Code or the Optionee consents to the
Acceleration.

(e) Method of Exercise. An Option may be exercised by the Optionee giving
written notice, in the manner provided in Section 17, specifying the number of
shares of Stock with respect to which the Option is then being exercised. The
notice shall be accompanied by payment in the form of cash or check payable to
the order of the Company in an amount equal to the exercise price of the shares
of Stock to be purchased or, subject in each instance to the Committee’s
approval, acting in its sole discretion, and

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to such conditions, if any, as the Committee may deem necessary to avoid adverse
accounting effects to the Company,

(i) by delivery to the Company of shares of Stock having a Market Value equal to
the exercise price of the shares to be purchased, or

(ii) by the Company withholding shares of Stock otherwise issuable under the
Option with such withheld shares having an aggregate Market Value equal to the
aggregate exercise price of the shares to be purchased, or

(iii) unless prohibited by applicable law, by delivery to the Company of the
Optionee’s executed promissory note in the principal amount equal to the
exercise price of the shares of Stock to be purchased and otherwise in such form
as the Committee shall have approved.

If the Stock is traded on an established market, payment of any exercise price
may also be made through and under the terms and conditions of any formal
cashless exercise program authorized by the Company entailing the sale of the
Stock subject to an Option in a brokered transaction (other than to the
Company). Receipt by the Company of such notice and payment in any authorized or
combination of authorized means shall constitute the exercise of the Option.
Within thirty (30) days thereafter but subject to the remaining provisions of
the Plan, the Company shall deliver or cause to be delivered to the Optionee or
his agent a certificate or certificates or shall cause the Stock to be held in
book-entry position through the direct registration system of the Company’s
transfer agent for the number of shares then being purchased. Such shares of
Stock shall be fully paid and nonassessable.

(f) Limit on Incentive Option Characterization. An Incentive Option shall be
considered to be an Incentive Option only to the extent that the number of
shares of Stock for which the Option first becomes exercisable in a calendar
year do not have an aggregate Market Value (as of the date of the grant of the
Option) in excess of the “current limit”. Except to the extent otherwise
provided under applicable law or regulation, the current limit for any Optionee
for any calendar year shall be $100,000 minus the aggregate Market Value at the
date of grant of the number of shares of Stock available for purchase for the
first time in the same year under each other Incentive Option previously granted
to the Optionee under the Plan, and under each other incentive stock option
previously granted to the Optionee under any other incentive stock option plan
of the Company and its parent and subsidiary corporations (as defined in
Sections 424(e) and (f) of the Code). Any shares of Stock which would cause the
foregoing limit to be violated shall be deemed to have been granted under a
separate Nonstatutory Option, otherwise identical in its terms to those of the
Incentive Option.

(g) Notification of Disposition. Each person exercising any Incentive Option
granted under the Plan shall be deemed to have covenanted with the Company to
report to the Company any disposition of the shares of Stock issued upon such
exercise prior to the expiration of the holding periods specified by
Section 422(a)(1) of the Code and, if and to the extent that the realization of
income in such a disposition imposes upon the Company federal, state, local or
other withholding tax requirements, or any such withholding is required to
secure for the Company an otherwise available tax deduction, to remit to the
Company an amount in cash sufficient to satisfy those requirements.

7.2. Stock Appreciation Rights.

(a) Tandem or Stand-Alone. Stock Appreciation Rights may be granted in tandem
with an Option (at or, in the case of a Nonstatutory Option, after, the award of
the Option), or alone and unrelated to an Option. Stock Appreciation Rights in
tandem with an Option shall terminate to the extent

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that the related Option is exercised, and the related Option shall terminate to
the extent that the tandem Stock Appreciation Rights are exercised.

(b) Exercise Price. Stock Appreciation Rights shall have an exercise price of
not less than one hundred percent (100%) of the Market Value of the Stock on the
date of award, or in the case of Stock Appreciation Rights in tandem with
Options, the exercise price of the related Option.

(c) Other Terms. Except as the Committee may deem inappropriate or inapplicable
in the circumstances, Stock Appreciation Rights shall be subject to terms and
conditions substantially similar to those applicable to a Nonstatutory Option.
In addition, a Stock Appreciation Right related to an Option which can only be
exercised during limited periods following a Change of Control may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Stock in any transaction relating to the Change of Control or paid during
the thirty (30) day period immediately preceding the occurrence of the Change of
Control in any transaction reported in the stock market in which the Stock is
normally traded.

7.3. Restricted Stock.

(a) Purchase Price. Shares of Restricted Stock shall be issued under the Plan
for such consideration, if any, in cash, other property or services, or any
combination thereof, as is determined by the Committee.

(b) Issuance of Stock. Each Participant receiving a Restricted Stock Award,
subject to subsection (c) below, shall be issued a stock certificate in respect
of such shares of Restricted Stock or the shares shall be held in book-entry
position through the direct registration system of the Company’s transfer agent.
If a certificate is issued, such certificate shall be registered in the name of
such Participant, and, if applicable, shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Award
substantially in the following form:

“The shares evidenced by this certificate are subject to the terms and
conditions of Rhythm Pharmaceuticals, Inc.’s 2017 Equity Incentive Plan and an
Award Agreement entered into by the registered owner and Rhythm Pharmaceuticals,
Inc., copies of which will be furnished by the Company to the holder of the
shares evidenced by this certificate upon written request and without charge.”

If the Stock is in book-entry position through the direct registration system of
the Company’s transfer agent, the restrictions will be appropriately noted.

(c) Escrow of Shares. The Committee may require that any stock certificates
evidencing shares of Restricted Stock be held in custody by a designated escrow
agent (which may but need not be the Company) until the restrictions thereon
shall have lapsed, and that the Participant deliver a stock power, endorsed in
blank, relating to the Stock covered by such Award.

(d) Restrictions and Restriction Period. During the Restriction Period
applicable to shares of Restricted Stock, such shares shall be subject to
limitations on transferability and a Risk of Forfeiture arising on the basis of
such conditions related to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee on
such basis as it deems appropriate.

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(e) Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award. Except as
otherwise provided in the Plan or the applicable Award Agreement, the
Participant shall have all of the rights of a stockholder of the Company with
respect to any outstanding shares of Restricted Stock, including the right to
vote, and the right to receive any dividends with respect to, the shares of
Restricted Stock (but any dividends or other distributions payable in shares of
Stock or other securities of the Company shall constitute additional Restricted
Stock, subject to the same Risk of Forfeiture as the shares of Restricted Stock
in respect of which such shares of Stock or other securities are paid). The
Committee, as determined at the time of Award, may permit or require the payment
of cash dividends to be deferred and, if the Committee so determines, reinvested
in additional Restricted Stock to the extent shares of Stock are available under
Section 4.

(f)Lapse of Restrictions.  If and when the Restriction Period expires without a
prior forfeiture, any certificates for such shares shall be delivered to the
Participant promptly if not theretofore so delivered.

7.4. Restricted Stock Units.

(a) Character. Subject to Section 10, each Restricted Stock Unit shall entitle
the recipient to a share of Stock at a close of such Restriction Period as the
Committee may establish and subject to a Risk of Forfeiture arising on the basis
of such conditions relating to the performance of services, Company or Affiliate
performance or otherwise as the Committee may determine and provide for in the
applicable Award Agreement. Any such Risk of Forfeiture may be waived or
terminated, or the Restriction Period shortened, at any time by the Committee on
such basis as it deems appropriate.

(b) Form and Timing of Payment. Payment of earned Restricted Stock Units shall
be made promptly following the close of the applicable Restriction Period. At
the discretion of the Committee, Participants may be entitled to receive
payments equivalent to any dividends declared with respect to Stock referenced
in grants of Restricted Stock Units but only following the close of the
applicable Restriction Period and then only if the underlying Stock shall have
been earned. Unless the Committee shall provide otherwise, any such dividend
equivalents shall be paid, if at all, without interest or other earnings. The
Committee may permit or, if it so provides at grant require, a Participant to
defer such Participant’s receipt of the payment that would otherwise be due to
such Participant with respect to Restricted Stock Units. If any such deferral
election is required or permitted, the Committee shall establish rules and
procedures for such payment deferrals.

7.5. Performance Units.

(a) Character.  Each Performance Unit shall entitle the recipient to the value
of a specified number of shares of Stock, over the initial value for such number
of shares, if any, established by the Committee at the time of grant, at the
close of a specified Performance Period to the extent specified business
objectives, including but not limited to Performance Goals, shall have been
achieved.

(b) Earning of Performance Units. The Committee shall set Performance Goals or
other business objectives in its discretion which, depending on the extent to
which they are met within the applicable Performance Period, will determine the
number and value of Performance Units that will be paid out to the Participant.
After the applicable Performance Period has ended, the holder of Performance
Units shall be entitled to receive payout on the number and value of Performance
Units earned by the Participant over the Performance Period, to be determined as
a function of the extent to which the corresponding Performance Goals or other
business objectives have been achieved.

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(c) Form and Timing of Payment. Unless otherwise provided in the applicable
Award Agreement, payment of earned Performance Units shall be made in a single
lump sum following the close of the applicable Performance Period. At the
discretion of the Committee, Participants may be entitled to receive any
dividends declared with respect to Stock which have been earned in connection
with grants of Performance Units which have been earned, but not yet distributed
to Participants. The Committee may permit or, if it so provides at grant
require, a Participant to defer such Participant’s receipt of the payment of
cash or the delivery of Stock that would otherwise be due to such Participant by
virtue of the satisfaction of any requirements or goals with respect to
Performance Units. If any such deferral election is required or permitted, the
Committee shall establish rules and procedures for such payment deferrals.

7.6. Stock Grants. Stock Grants shall be awarded solely in recognition of
significant prior or expected contributions to the success of the Company or its
Affiliates, as an inducement to employment, in lieu of compensation otherwise
already due and in such other limited circumstances as the Committee deems
appropriate. Stock Grants shall be made without forfeiture conditions of any
kind.

7.7. Qualified Performance-Based Awards.

(a) Purpose. The purpose of this Section 7.7 is to provide the Committee the
ability to qualify Awards as “performance-based compensation” under
Section 162(m) of the Code. If the Committee, in its discretion, decides to
grant an Award as a Qualified Performance-Based Award, the provisions of this
Section 7.7 will control over any contrary provision contained in the Plan. In
the course of granting any Award, the Committee may specifically designate the
Award as intended to qualify as a Qualified Performance-Based Award. However, no
Award shall be considered to have failed to qualify as a Qualified
Performance-Based Award solely because the Award is not expressly designated as
a Qualified Performance-Based Award, if the Award otherwise satisfies the
provisions of this Section 7.7 and the requirements of Section 162(m) of the
Code applicable to “performance-based compensation.”

(b) Authority. All grants of Awards intended to qualify as Qualified
Performance-Based Awards and the determination of the terms applicable thereto
shall be made by the Committee. If not all of the members thereof qualify as
“outside directors” within the meaning of Section 162 of the Code, however, all
grants of Awards intended to qualify as Qualified Performance-Based Awards and
the determination of the terms applicable thereto shall be made by a
subcommittee of the Committee consisting of such of the members of the Committee
as do so qualify. Any reference in this Section 7.7 to the Committee shall mean
any such subcommittee if required under the preceding sentence, and any action
by such a subcommittee shall be considered the action of the Committee for
purposes of the Plan.

(c) Discretion of Committee with Respect to Qualified Performance-Based Awards.
Any form of Award permitted under the Plan, other than a Stock Grant, may be
granted as a Qualified Performance-Based Award. Options and Stock Appreciation
Rights may be granted as Qualified Performance-Based Awards in accordance with
Section 7.1 and Section 7.2, respectively, except that the Option or Stock
Appreciation Right may become exercisable based on continued service, on
satisfaction of Performance Goals or other business objectives, or on a
combination thereof. Each other Award intended to qualify as a Qualified
Performance-Based Award, such as Restricted Stock, Restricted Stock Units, or
Performance Units, shall be subject to satisfaction of one or more Performance
Goals except as otherwise provided in this Section 7.7. The Committee will have
full discretion to select the length of any applicable Restriction Period or
Performance Period, the kind and/or level of the applicable Performance Goal,
and whether the Performance Goal is to apply to the Company, a subsidiary of the
Company or any division or business unit or to the individual. Any Performance
Goal or Goals applicable to Qualified Performance-Based Awards shall be
objective, shall be established not later than ninety (90) days after the
beginning of any applicable Performance Period (or at such other date as may be
required or permitted for “performance-based compensation” under Section 162(m)
of the Code) and shall otherwise meet the requirements of

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Section 162(m) of the Code, including the requirement that the outcome of the
Performance Goal or Goals be substantially uncertain (as defined for purposes of
Section 162(m) of the Code) at the time established.

(d) Payment of Qualified Performance-Based Awards. A Participant will be
eligible to receive payment under a Qualified Performance-Based Award which is
subject to achievement of a Performance Goal or Goals only if the applicable
Performance Goal or Goals are achieved within the applicable Performance Period,
as determined by the Committee, provided, that a Qualified Performance-Based
Award may be deemed earned as a result of death, becoming disabled, or in
connection with a change of control (within the meaning of Section 162(m) of the
Code) if otherwise provided in the Plan or the applicable Award Agreement even
if the Award would not constitute “performance-based compensation” under
Section 162(m) of the Code following the occurrence of such an event. In
determining the actual size of an individual Qualified Performance-Based Award,
the Committee may reduce or eliminate the amount of the Qualified
Performance-Based Award earned for the Performance Period, if in its sole and
absolute discretion, such reduction or elimination is appropriate.

(e) Limitation on Adjustments for Certain Events. No adjustment of any Qualified
Performance-Based Award pursuant to Section 8 shall be made except on such
basis, if any, as will not cause such Award to provide other than
“performance-based compensation” within the meaning of Section 162(m) of the
Code.

(f) Definitions. For purposes of the Plan

(i) Performance Criteria means the criteria that the Committee selects for
purposes of establishing the Performance Goal or Performance Goals for a
Participant for a Performance Period. The Performance Criteria used to establish
Performance Goals are limited to: (i) net earnings (either before or after one
or more of (A) interest, (B) taxes, (C) depreciation and (D) amortization),
(ii) gross or net sales or revenue, (iii) net income (either before or after
taxes), (iv) adjusted net income, (v) operating earnings or profit, (vi) cash
flow (including, but not limited to, operating cash flow and free cash flow,
(vii) return on assets, (viii) return on capital, (ix) return on stockholders’
equity, (x) total stockholder return, (xi) return on sales, (xii) gross or net
profit or operating margin, (xiii) costs, (xiv) expenses, (xv) working capital,
(xvi) earnings per share, (xvii) adjusted earnings per share, (xviii) price per
share, (xix) regulatory body approval for commercialization of a product,
(xx) implementation, completion or attainment of objectives relating to
research, development, regulatory, commercial, or strategic milestones or
developments; (xxi) market share, (xxii) economic value, (xxiii) revenue,
(xxiv) revenue growth and (xxv) operational and organizational metrics.

(ii) Performance Goals means, for a Performance Period, the written goal or
goals established by the Committee for the Performance Period based upon one or
more of the Performance Criteria. The Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, subsidiary, or an individual, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
Affiliate, either individually, alternatively or in any combination, and
measured either quarterly, annually or cumulatively over a period of years, on
an absolute basis or relative to a pre-established target, to previous years’
results or to a designated comparison group, in each case as specified by the
Committee. The Committee will objectively define the manner of calculating the
Performance Goal or Goals it selects to use for such Performance Period for such
Participant, including whether or to what extent there shall not be taken into
account any of the following events that occurs during a Performance Period:
(i) asset write-downs,

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(ii) litigation, claims, judgments or settlements, (iii) the effect of changes
in tax law, accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and restructuring programs
and (v) any extraordinary, unusual, non-recurring or non-comparable items (A) as
described in Accounting Standard Codification Section 225-20, (B) as described
in management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s Annual Report to stockholders for the
applicable year, or (C) publicly announced by the Company in a press release or
conference call relating to the Company’s results of operations or financial
condition for a completed quarterly or annual fiscal period.

7.8. Awards to Participants Outside the United States. The Committee may modify
the terms of any Award under the Plan granted to a Participant who is, at the
time of grant or during the term of the Award, resident or primarily employed
outside of the United States in any manner deemed by the Committee to be
necessary or appropriate in order that the Award shall conform to laws,
regulations, procedures, and customs of the country in which the Participant is
then resident or primarily employed, or so that the value and other benefits of
the Award to the Participant, as affected by foreign tax laws and other
restrictions applicable as a result of the Participant’s residence or employment
abroad, shall be as comparable as practicable to the value of such an Award to a
Participant who is resident or primarily employed in the United States. The
Committee may establish supplements or sub-plans to, or amendments,
restatements, or alternative versions of, the Plan for the purpose of granting
and administrating any such modified Award. No such modification, supplement,
sub-plan, amendment, restatement or alternative version may increase the share
limit of Section 4.

8. Adjustment Provisions

8.1. Adjustment for Corporate Actions. All of the share numbers set forth in the
Plan reflect the capital structure of the Company as of the Effective Date. If
subsequent to that date the outstanding shares of Stock (or any other securities
covered by the Plan by reason of the prior application of this Section) are
increased, decreased, or exchanged for a different number or kind of shares or
other securities, or if additional shares or new or different shares or other
securities are distributed with respect to shares of Stock, as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other similar distribution with respect to such shares
of Stock, an equitable adjustment will be made in (i) the maximum numbers and
kinds of shares provided in Section 4, (ii) the numbers and kinds of shares or
other securities subject to the then outstanding Awards, (iii) the exercise
price for each share or other unit of any other securities subject to then
outstanding Options and Stock Appreciation Rights (without change in the
aggregate purchase price as to which such Options or Rights remain exercisable),
and (iv) the repurchase price of each share of Restricted Stock then subject to
a Risk of Forfeiture in the form of a Company repurchase right.

8.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. In the event of any corporate action not specifically covered by the
preceding Section, including but not limited to an extraordinary cash
distribution on Stock, a corporate separation or other reorganization or
liquidation, the Committee shall make such adjustment of outstanding Awards and
their terms, if any, as it, in its sole discretion, may deem equitable in the
circumstances. The Committee may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in this
Section) affecting the Company or the financial statements of the Company or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.

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8.3. Related Matters. Any adjustment in Awards made pursuant to Section 8.1 or
Section 8.2 shall be determined and made, if at all, by the Committee, acting in
its sole discretion, and shall include any correlative modification of terms,
including of Option exercise prices, rates of vesting or exercisability, Risks
of Forfeiture, applicable repurchase prices for Restricted Stock, and
Performance Goals and other business objectives which the Committee may deem
necessary or appropriate so as to ensure the rights of the Participants in their
respective Awards are not substantially diminished nor enlarged as a result of
the adjustment and corporate action other than as expressly contemplated in this
Section 8. The Committee, in its discretion, may determine that no fraction of a
share of Stock shall be purchasable or deliverable upon exercise, and in that
event if any adjustment hereunder of the number of shares of Stock covered by an
Award would cause such number to include a fraction of a share of Stock, such
number of shares of Stock shall be adjusted to the nearest smaller whole number
of shares. No adjustment of an Option exercise price per share pursuant to
Section 8.1 or Section 8.2 shall result in an exercise price which is less than
the par value of the Stock.

8.4. Transactions.

(a) Definition of Transaction. In this Section 8.4, “Transaction” means (1) any
merger or consolidation of the Company with or into another entity as a result
of which the Stock of the Company is converted into or exchanged for the right
to receive cash, securities or other property or is cancelled, (2) any sale or
exchange of all or substantially all of the outstanding Stock of the Company for
cash, securities or other property, (3) any sale, transfer, or other disposition
of all or substantially all of the Company’s assets to one or more other persons
in a single transaction or series of related transactions or (4) any liquidation
or dissolution of the Company.

(b) Treatment of Awards. In a Transaction, the Committee may take any one or
more of the following actions as to all or any (or any portion of) outstanding
Awards, subject to the provisions of Section 9 of this Plan.

(1) Provide that any Awards shall be assumed, or substantially equivalent rights
shall be provided in substitution therefor, by the acquiring or succeeding
entity (or an affiliate thereof).

(2) Upon written notice to the holders, provide that all or any of the holders’
unexercised outstanding Options and Stock Appreciation Rights (collectively,
“Rights”) will terminate immediately prior to the consummation of such
Transaction unless exercised within a specified period following the date of
such notice.

(3) Provide that all or any Awards that are subject to Risk of Forfeiture will
terminate immediately prior to the consummation of such Transaction.

(4) Provide that all or any outstanding Rights shall Accelerate so as to become
exercisable prior to or upon such Transaction with respect to some or all of the
shares of Stock for which any such Rights would not then otherwise be
exercisable by their terms.

(5) Provide that all or any outstanding Awards that are subject to Risk of
Forfeiture shall Accelerate so that the Risk of Forfeiture otherwise applicable
to such Awards shall expire prior to or upon such Transaction with respect to
any such Awards that would then still otherwise be subject to the Risk of
Forfeiture.

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(6) Provide for cash payments, net of applicable tax withholdings, to be made to
holders equal to the excess, if any, of (A) the acquisition price times the
number of shares of Stock subject to an Option and Stock Appreciation Right (in
each case, to the extent the exercise price does not exceed the acquisition
price) over (B) the aggregate exercise price for all such shares of Stock
subject to the Option or Stock Appreciation Right as applicable, in exchange for
the termination of such Option and Stock Appreciation Right; provided, that if
the acquisition price does not exceed the exercise price of any such Option or
Stock Appreciation Right, the Committee may cancel that Option and Stock
Appreciation Right without the payment of any consideration therefore prior to
or upon the Transaction. For purposes of this paragraph 6 and paragraph 7 below,
“acquisition price” means the amount of cash, and market value of any other
consideration, received in payment for a share of Stock surrendered in a
Transaction but need not take into account any deferred consideration unless and
until received.

(7) Provide for cash payments, net of applicable tax withholdings, to be made to
holder or holders of all or any Awards (other than Options and Stock
Appreciation Rights) equal to the acquisition price times the number of shares
of Stock subject to any such Awards, in exchange for the termination of any such
Awards; provided, that the Committee may cancel, pursuant to paragraph 3 above,
any such Award that is subject to a Risk of Forfeiture at the time of the
consummation of such Transaction without the payment of any consideration
therefor prior to or upon the Transaction.

(8) Provide that, in connection with a liquidation or dissolution of the
Company, all or any Awards (other than Restricted Stock or Stock Grants) shall
convert into the right to receive liquidation proceeds net of the exercise price
thereof and any applicable tax withholdings.

(9) Any combination of the foregoing.

In the event that the Committee determines in its discretion to take the actions
contemplated under paragraph (1) above of this Section 8.4(b) with respect to
all or any Awards, the Committee shall ensure that, upon consummation of the
Transaction, any such Awards are assumed and/or exchanged or replaced with
another similar award issued by the acquiring or succeeding entity (or an
affiliate thereof) and that, as a result of such assumption and/or exchange or
replacement, the holder of such assumed Award and/or such exchanged or replaced
similar award has the right to purchase or receive the value of, for each share
of Stock subject to such Award immediately prior to the consummation of the
Transaction, the consideration (whether cash, securities or other property)
received as a result of the Transaction by holders of Stock for each share of
Stock held immediately prior to the consummation of the Transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Stock); provided,
however, that if such consideration received as a result of the Transaction is
not solely common stock (or its equivalent) of the acquiring or succeeding
entity (or an affiliate thereof), the Committee may, with the consent of the
acquiring or succeeding entity (or an affiliate thereof), provide for the
consideration to be received with respect to such assumed Award and/or such
exchanged or replaced similar award to consist of or be based solely on common
stock (or its equivalent) of the acquiring or succeeding entity (or an affiliate
thereof) equivalent in value to the per share consideration received by holders
of outstanding shares of Stock as a result of the Transaction; and provided,
 further, that if such Award is an Option, the holder of such Option must
exercise the Option and make payment of the applicable exercise price in
connection therewith in order to receive such consideration.

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(c) Treatment of Other Awards. Upon the occurrence of a Transaction other than a
liquidation or dissolution of the Company which is not part of another form of
Transaction, then, subject to the provisions of Section 9 below, with respect to
all outstanding Awards (other than Options and Stock Appreciation Rights) that
are not terminated prior to or upon such Transaction, the repurchase and other
rights of the Company under each such Award shall inure to the benefit of the
Company’s successor and any forfeiture restrictions shall continue to apply and
shall, unless the Committee determines otherwise, apply to the cash, securities
or other property which the Stock was converted into or exchanged for pursuant
to such Transaction in the same manner and to the same extent as they applied to
the Award.

(d) Related Matters. In taking any of the actions permitted under this
Section 8.4, the Committee shall not be obligated to treat all Awards, all
Awards held by a Participant, or all Awards of the same type, identically. Any
determinations required to carry out the foregoing provisions of this
Section 8.4, including but not limited to the market value of other
consideration received by holders of Stock in a Transaction and whether
substantially equivalent Rights have been substituted, shall be made by the
Committee acting in its sole discretion. In connection with any action or
actions taken by the Committee in respect of Awards and in connection with a
Transaction, the Committee may require such acknowledgements of satisfaction and
releases from Participants as it may determine.

9. Change of Control

Except as otherwise provided below, upon the occurrence of a Change of Control,
to the extent that the surviving entity declines to continue, convert, assume or
replace outstanding Awards, then, notwithstanding anything express or implied to
the contrary in Section 8.4 above:

(a) any and all Options and Stock Appreciation Rights not already exercisable in
full shall Accelerate with respect to 100% of the shares for which such Options
or Stock Appreciation Rights are not then exercisable;

(b) any Risk of Forfeiture applicable to Restricted Stock and Restricted Stock
Units which is not based on achievement of Performance Goals or other business
objectives shall lapse with respect to 100% of the Restricted Stock and
Restricted Stock Units still subject to such Risk of Forfeiture immediately
prior to the Change of Control; and

(c) all outstanding Awards of Restricted Stock and Restricted Stock Units
conditioned on the achievement of Performance Goals or other business objectives
and the payouts attainable under outstanding Performance Units shall be deemed
to have been satisfied at target as of the effective date of the Change of
Control, except if and to the extent otherwise determined by the Committee in
its sole discretion at any time prior to, or upon, such Change of Control.

All such Awards of Performance Units and Restricted Stock Units shall be paid to
the extent earned to Participants in accordance with their terms within thirty
(30) days following the effective date of the Change of Control. None of the
foregoing shall apply, however, (i) in the case of any Award pursuant to an
Award Agreement requiring other or additional terms upon a Change of Control (or
similar event), (ii) if specifically prohibited under applicable laws, or by the
rules and regulations of any governing governmental agencies or national
securities exchanges, or (iii) as otherwise provided in Section 7.7, concerning
Qualified Performance-Based Awards.

10. Settlement of Awards

10.1. In General. Options and Restricted Stock shall be settled in accordance
with their terms. All other Awards may be settled in cash, Stock, or other
Awards, or a combination thereof, as determined

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by the Committee at or after grant and subject to any contrary Award Agreement.
The Committee may not require settlement of any Award in Stock pursuant to the
immediately preceding sentence to the extent issuance of such Stock would be
prohibited or unreasonably delayed by reason of any other provision of the Plan.

10.2. Violation of Law. Notwithstanding any other provision of the Plan or the
relevant Award Agreement, if, at any time, in the reasonable opinion of the
Company, the issuance of shares of Stock covered by an Award may constitute a
violation of law, then the Company may delay such issuance until (i) approval
shall have been obtained from such governmental agencies, other than the
Securities and Exchange Commission, as may be required under any applicable law,
rule, or regulation and (ii) in the case where such issuance would constitute a
violation of a law administered by or a regulation of the Securities and
Exchange Commission, one of the following conditions shall have been satisfied:

(a) the shares of Stock are at the time of the issue of such shares effectively
registered under the Securities Act of 1933, as amended; or

(b) the Company shall have determined, on such basis as it deems appropriate
(including an opinion of counsel in form and substance satisfactory to the
Company) that the sale, transfer, assignment, pledge, encumbrance or other
disposition of such shares does not require registration under the Securities
Act of 1933, as amended or any applicable State securities laws.

Furthermore, the inability of the Company to obtain or maintain, or the
impracticability of it obtaining or maintaining, authority from any governmental
agency having jurisdiction, which authority is deemed by the Company’s counsel
to be necessary to the lawful issuance of any Stock hereunder, shall relieve the
Company of any liability in respect of the failure to issue such Stock as to
which such requisite authority shall not have been obtained, and shall
constitute circumstances in which the Committee may determine to amend or cancel
Awards pertaining to such Stock, with or without consideration to the affected
Participants.

10.3. Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant
to Awards granted under the Plan shall be subject to all restrictions upon the
transfer thereof which may be now or hereafter imposed by the certificate of
incorporation, and bylaws.

10.4. Investment Representations. The Company shall be under no obligation to
issue any shares of Stock covered by any Award unless the shares to be issued
pursuant to Awards granted under the Plan have been effectively registered under
the Securities Act of 1933, as amended, or the Participant shall have made such
written representations to the Company (upon which the Company believes it may
reasonably rely) as the Company may deem necessary or appropriate for purposes
of confirming that the issuance of such shares will be exempt from the
registration requirements of that Act and any applicable state securities laws
and otherwise in compliance with all applicable laws, rules and regulations of
any jurisdiction in which Participants may reside or primarily work, including
but not limited to that the Participant is acquiring the shares for his or her
own account for the purpose of investment and not with a view to, or for sale in
connection with, the distribution of any such shares.

10.5. Registration. If the Company shall deem it necessary or desirable to
register under the Securities Act of 1933, as amended, or other applicable
statutes any shares of Stock issued or to be issued pursuant to Awards granted
under the Plan, or to qualify any such shares of Stock for exemption from the
Securities Act of 1933, as amended or other applicable statutes, then the
Company shall take such action at its own expense. The Company may require from
each recipient of an Award, or each holder of shares of Stock acquired pursuant
to the Plan, such information in writing for use in any registration statement,
prospectus, preliminary prospectus or offering circular as is reasonably
necessary for that purpose and may require reasonable indemnity to the Company
and its officers and directors from that holder against all

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losses, claims, damage and liabilities arising from use of the information so
furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made. In addition, the Company may require
of any such person that he or she agree that, without the prior written consent
of the Company or the managing underwriter in any public offering of shares of
Stock, he or she will not sell, make any short sale of, loan, grant any option
for the purchase of, pledge or otherwise encumber, or otherwise dispose of, any
shares of Stock during the 180 day period commencing on the effective date of
the registration statement relating to the underwritten public offering of
securities (or during such shorter or longer period of time as the Committee
shall determine in its sole discretion, which period of time shall commence from
and after such effective date of such registration statement). Without limiting
the generality of the foregoing provisions of this Section 10.5, if in
connection with any underwritten public offering of securities of the Company
the managing underwriter of such offering requires that the Company’s directors
and officers enter into a lock-up agreement containing provisions that are more
restrictive than the provisions set forth in the preceding sentence, then
(a) each holder of shares of Stock acquired pursuant to the Plan (regardless of
whether such person has complied or complies with the provisions of clause
(b) below) shall be bound by, and shall be deemed to have agreed to, the same
lock-up terms as those to which the Company’s directors and officers are
required to adhere; and (b) at the request of the Company or such managing
underwriter, each such person shall execute and deliver a lock-up agreement in
form and substance equivalent to that which is required to be executed by the
Company’s directors and officers.

10.6. Placement of Legends; Stop Orders; etc. Each share of Stock to be issued
pursuant to Awards granted under the Plan may bear a reference to the investment
representations made in accordance with Section 10.4 in addition to any other
applicable restrictions under the Plan, and the terms of the Award and, if
applicable, to the fact that no registration statement has been filed with the
Securities and Exchange Commission in respect to such shares of Stock. All
shares of Stock or other securities issued under the Plan shall be subject to
such stop transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of any stock
exchange upon which the Stock is then listed, and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions, or, if the Stock will be held in book-entry position through the
direct registration system of the Company’s transfer agent, the restrictions
will be appropriately noted.

10.7. Tax Withholding. Whenever shares of Stock are issued or to be issued
pursuant to Awards granted under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
federal, state, local, foreign or other withholding tax requirements if, when,
and to the extent required by law (whether so required to secure for the Company
an otherwise available tax deduction or otherwise) prior to the delivery of any
certificate or certificates, held in book-entry position through the direct
registration system of the Company’s transfer agent, for such shares. The
obligations of the Company under the Plan shall be conditional on satisfaction
of all such withholding obligations and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to a Participant or to utilize any other withholding
method prescribed by the Committee from time to time. However, in such cases
Participants may elect, subject to the approval of the Committee, acting in its
sole discretion, to satisfy an applicable withholding requirement, in whole or
in part, by having the Company withhold shares of Stock to satisfy their tax
obligations. All elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee deems appropriate. If shares of Stock are withheld to satisfy an
applicable withholding requirement, the shares of Stock withheld shall have a
Market Value on the date the tax is to be determined equal to the minimum
statutory total tax (or tax calculated at such higher rates as determined by the
Committee) which could be imposed on the transaction.

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10.8. Company Certificate of Incorporation and Bylaws; Other Company Policies.
This Plan and all Awards granted hereunder are subject to the certificate of
incorporation and bylaws of the Company, as they may be amended from time to
time, and all other Company policies duly adopted by the Board, the Committee or
any other committee of the Board and as in effect from time to time regarding
the acquisition, ownership or sale of Stock by officers, employees, directors,
consultants, advisors and other service providers, including, without
limitation, policies intended to limit the potential for insider trading and to
avoid or recover compensation payable or paid on the basis of inaccurate
financial results or statements, employee conduct, and other similar events.

11. Reservation of Stock

The Company shall at all times during the term of the Plan and any outstanding
Awards granted hereunder reserve or otherwise keep available such number of
shares of Stock as will be sufficient to satisfy the requirements of the Plan
(if then in effect) and the Awards and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith.

12. Limitation of Rights in Stock; No Special Service Rights

A Participant shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the shares of Stock subject to an Award, unless
and until a certificate shall have been issued therefor and delivered to the
Participant or his agent, or the Stock shall be issued through the direct
registration system of the Company’s transfer agent. Any Stock to be issued
pursuant to Awards granted under the Plan shall be subject to all restrictions
upon the transfer thereof which may be now or hereafter imposed by the
certificate of incorporation and the bylaws of the Company. Nothing contained in
the Plan or in any Award Agreement shall confer upon any recipient of an Award
any right with respect to the continuation of his or her employment or other
association with the Company (or any Affiliate), or interfere in any way with
the right of the Company (or any Affiliate), subject to the terms of any
separate employment or consulting agreement or provision of law or certificate
of incorporation or bylaws to the contrary, at any time to terminate such
employment or consulting agreement or to increase or decrease, or otherwise
adjust, the other terms and conditions of the recipient’s employment or other
association with the Company and its Affiliates.

13. Unfunded Status of Plan

The Plan is intended to constitute an “unfunded” plan for incentive
compensation, and the Plan is not intended to constitute a plan subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
With respect to any payments not yet made to a Participant by the Company,
nothing contained herein shall give any such Participant any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Stock or payments with respect
to Awards hereunder, provided, however, that the existence of such trusts or
other arrangements is consistent with the unfunded status of the Plan.

14. Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor any action taken in connection
with the adoption or operation of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including without limitation, the granting of stock
options and restricted stock other than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.

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15. No Guarantee of Tax Consequences

It is intended that all Awards shall be granted and maintained on a basis which
ensures they are exempt from, or otherwise compliant with, the requirements of
Section 409A of the Code, pertaining non-qualified plans of deferred
compensation, and the Plan shall be governed, interpreted and enforced
consistent with such intent. However, neither the Company nor any Affiliate, nor
any director, officer, agent, representative or employee of either, guarantees
to the Participant or any other person any particular tax consequences as a
result of the grant of, exercise of rights under, or payment in respect of an
Award, including but not limited to that an Option granted as an Incentive
Option has or will qualify as an “incentive stock option” within the meaning of
Section 422 of the Code or that the provisions and penalties of Section 409A of
the Code will or will not apply and no person shall have any liability to a
Participant or any other party if a payment under an Award that is intended to
benefit from favorable tax treatment or avoid adverse tax treatment fails to
realize such intention or for any action taken by the Board or the Committee
with respect to the Award.

16. Termination and Amendment of the Plan

16.1. Termination or Amendment of the Plan. Subject to the limitations contained
in Section 16.3 below, including specifically the requirement of stockholder
approval, if applicable, the Committee may at any time suspend or terminate the
Plan or make such modifications of the Plan as it shall deem advisable. Unless
the Committee otherwise expressly provides, no amendment of the Plan shall
affect the terms of any Award outstanding on the date of such amendment.

16.2. Termination or Amendment of Outstanding Awards; Assumptions. Subject to
the limitations contained in Section 16.3 below, including specifically the
requirement of stockholder approval, if applicable, the Committee may at any
time:

(a) amend the terms of any Award theretofore granted, prospectively or
retroactively, provided that the Award as amended is consistent with the terms
of the Plan;

(b) within the limitations of the Plan, modify, extend or assume outstanding
Awards or accept the cancellation of outstanding Awards or of outstanding stock
options or other equity-based compensation awards granted by another issuer in
return for the grant of new Awards for the same or a different number of shares
of Stock and on the same or different terms and conditions (including but not
limited to the exercise price of any Option); and

(c) offer to buy out for a payment in cash or cash equivalents an Award
previously granted or authorize the recipient of an Award to elect to cash out
an Award previously granted, in either case at such time and based upon such
terms and conditions as the Committee shall establish.

16.3. Limitations on Amendments,  Etc.

(a) Without the approval of the Company’s stockholders, no amendment or
modification of the Plan by the Committee may (i) increase the number of shares
of Stock which may be issued under the Plan, (ii) change the description of the
persons eligible for Awards, or (iii) effect any other change for which
stockholder approval is required by law or the rules of any relevant stock
exchange. Awards may be made under the Plan that involve shares of Stock in
excess of the number of shares then available for issuance under the Plan,
provided no shares shall actually be issued pursuant to those Awards until the
number of shares of Stock available for issuance under the Plan is sufficiently
increased by stockholder approval of an amendment of the Plan authorizing such
increase. If such stockholder approval

-  21  -

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is not obtained within twelve (12) months after the date the first excess Award
is made, then all Awards granted on the basis of such excess shares shall
terminate and cease to be outstanding.

(b) No action by the Board or the Committee pursuant to this Section 16 shall
impair the rights of the recipient of any Award outstanding on the date of such
amendment or modification of such Award, as the case may be, without the
Participant’s consent; provided, however, that no such consent shall be required
(A) in the case of any amendment or termination of any outstanding Award that is
permitted by any provision of this Plan that is set forth in Section 8,
Section 9 or in any other section of this Plan that is not Section 16.2 or
(B) if the Board or Committee, as the case may be, (i) determines in its sole
discretion and prior to the date of any Change of Control that such amendment or
alteration either is required or advisable in order for the Company, the Plan or
the Award to satisfy any law or regulation, including without limitation the
provisions of Section 409A of the Code, or to meet the requirements of or avoid
adverse financial accounting consequences under any accounting standard,
(ii) determines in its sole discretion and prior to the date of any Change of
Control that such amendment or alteration is not reasonably likely to
significantly diminish the benefits provided under the Award, or that any such
diminution has been adequately compensated, or (iii) reasonably determines on or
after the date of Change of Control that such amendment or alteration either is
required or advisable in order for the Company, the Plan or the Award to satisfy
any law or regulation, including without limitation the provisions of
Section 409A of the Code.

17. Recoupment

Participants shall be subject to any clawback, recoupment or other similar
policy adopted by the Board as in effect from time to time and Awards and any
cash, shares of Stock or other property or amounts due, paid or issued to a
Participant shall be subject to the terms of such policy, as in effect from time
to time.

18. Notices and Other Communications

Any communication or notice required or permitted to be given under the Plan
shall be in such form as the Committee may determine from time to time. If a
notice, demand, request or other communication is required or permitted to be
given in writing, then any such notice, demand, request or other communication
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by first class registered,
certified or overnight mail, postage prepaid, or by facsimile with a
confirmation copy by regular, certified or overnight mail, addressed or by
facsimile, as the case may be, (i) if to the recipient of an Award, at his or
her residence address last filed with the Company and (ii) if to the Company, at
its principal place of business, addressed to the attention of its Treasurer, or
to such other address or facsimile number, as the case may be, as the addressee
may have designated by notice to the addressor. All such notices, requests,
demands and other communications shall be deemed to have been received: (i) in
the case of personal delivery, on the date of such delivery; (ii) in the case of
mailing, when received by the addressee; and (iii) in the case of facsimile
transmission, when confirmed by facsimile machine report.

19. Governing Law

The Plan and all Award Agreements and actions taken hereunder and thereunder
shall be governed, interpreted and enforced in accordance with the laws of the
State of Delaware, without regard to the conflict of laws principles thereof.

[End of document.]

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RHYTHM PHARMACEUTICALS, INC.
2017 EQUITY INCENTIVE PLAN

Stock Option Agreement

This Stock Option Agreement, dated as of [______________, 20__] (this
“Agreement”), is between Rhythm Pharmaceuticals, Inc., a corporation organized
under the laws of the State of Delaware (the “Company”), and the individual
identified in paragraph 1 below, currently residing at the address set out at
the end of this Agreement (the “Optionee”). Capitalized terms used in this
Agreement without definition shall have the respective meaning ascribed to such
capitalized terms in the Plan (as defined below).

1.Grant of Option. Pursuant and subject to the Company’s 2017 Equity Incentive
Plan (as the same may be amended from time to time, the “Plan”), the
Company grants to you, the Optionee identified in the table below, an option
(the “Option”) to purchase from the Company all or any part of a total of the
number of shares identified in the table below (the “Optioned Shares”) of the
common stock, par value $0.001 per share, in the Company (the “Stock”), at the
exercise price per share set out in the table below.

 

 

Optionee

 

 

 

Number of Shares

 

 

 

Exercise Price Per Share

 

 

 

Grant Date

 

 

 

Expiration Date1

 

2.Character of Option. This Option [is/is not]2 intended to be treated as an
“incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

3.Expiration of Option.  This Option shall expire at 5:00 p.m. EST on the
Expiration Date or, if earlier, the earliest of the dates specified in whichever
of the following applies:

a) If the termination of your employment or other association is on account of
your death or disability, the first anniversary of the date your employment
ends.

b) If the termination of your employment or other association is due to any
other reason, three (3) months after your employment or other association ends.

--------------------------------------------------------------------------------

1For ISOs, not later than the day immediately preceding the tenth anniversary of
the Grant Date.

2Either “is” or “is not”, as the Committee or the Board has determined.

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4.Exercise of Option.

a) You may exercise this Option, in full or in part and at any time prior to the
date this Option expires, as to the number of Optioned Shares for which this
Option shall have become exercisable (the “Vested Shares”) pursuant Section 4(b)
below. However, during any period that this Option remains outstanding after the
end of your association with the Company and its Affiliates in any and all
capacities as an officer, director, employee and/or consultant of the Company
and its Affiliates, you may exercise it only to the extent of any remaining
Vested Shares determined as of the effective time of the end of such
association. The procedure for exercising this Option is described in
Section 7.1(f) of the Plan; provided that in no event shall a fraction of a
share of Stock be purchasable or deliverable upon exercise.

b) [Vesting terms to be inserted]

c)  

 

 

Number of Shares
in Each Installment

Initial Exercise Date
for Shares in Installment

 

 

 

 

 

 

 

 

5.Transfer of Option. You may not transfer this Option except by will or the
laws of descent and distribution, and, during your lifetime, only you may
exercise this Option.

6.Incorporation of Plan Terms. This Option is granted subject to all of the
applicable terms and provisions of the Plan, including but not limited to the
limitations on the Company’s obligation to deliver Optioned Shares upon exercise
set forth in Section 9 therein.

7.Tax Consequences. The Company makes no representation or warranty as to the
tax treatment to you of your receipt or exercise of this Option or upon your
sale or other disposition of the Optioned Shares. You should rely on your own
tax advisors for such advice.

8.Treatment as Wages or Compensation. No amounts paid or payable in connection
with this Option shall constitute wages or compensation for purposes of any
applicable law, if ever, prior to the date on which such amount has been earned,
vested and become payable in accordance with the terms of this Agreement and the
Plan. No such amount shall be treated as wages or compensation for purposes of
any employee or other benefit plan of the Company and its Affiliates except to
the extent and at the time provided in the respective employee or other benefit
plan.

9.Acknowledgements. You acknowledge that you have reviewed and understand the
Plan and this Agreement in their entirety, and have had an opportunity to obtain
the advice of counsel prior to executing this Agreement. You hereby agree to
accept as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions arising under the Plan or this Agreement.

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10.Further Assurances. The parties agree to execute such further instruments and
to take such action as may reasonably be necessary to carry out the intent of
this Agreement.

[11.Community Property. Without prejudice to the actual rights of the spouses as
between each other, for all purposes of this Agreement, you shall be treated as
agent and attorney-in-fact for that interest held or claimed by your spouse with
respect to this Option and any Optioned Shares and the parties hereto shall act
in all matters as if the Optionee was the sole owner of this Option and
(following exercise) any such Optioned Shares. This appointment is coupled with
an interest and is irrevocable.]3

12.Miscellaneous. This Agreement shall be construed and enforced in accordance
with the laws of the State of Delaware, without regard to the conflict of laws
principles thereof and shall be binding upon and inure to the benefit of any
successor or assign of the Company and any executor, administrator, trustee,
guardian, or other legal representative of you. Capitalized terms used but not
defined herein shall have the meaning assigned under the Plan. This Agreement
may be executed in one or more counterparts all of which together shall
constitute but one instrument. In making proof of this Agreement it shall not be
necessary to produce or account for more than one such counterpart.

[The remainder of this page is intentionally left blank. Signature page to
follow.]

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3Consider for inclusion for grants to California residents (and residents of
other states with community property rules).

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RHYTHM PHARMACEUTICALS, INC.
2017 EQUITY INCENTIVE PLAN

Option Exercise Form

Rhythm Pharmaceuticals, Inc.
500 Boylston Street, 11th Floor
Boston, MA 02116

Attention:Controller

Dear Sir:

In accordance with, and subject to the terms and conditions of, the Rhythm
Pharmaceuticals, Inc. 2017 Equity Incentive Plan, as amended and in effect to
date, I hereby elect to exercise my option granted under the agreement dated
___________, to purchase _______________ shares of the common stock, par value
$0.001 per share, in Rhythm Pharmaceuticals, Inc. (the “Company”).

Enclosed herewith is payment to the Company in the amount of $_____________ in
full payment of the option price of $_____ per share, for said shares. [To be
revised as necessary for non-cash payment of exercise price.]

 

 

 

Sincerely yours,

 

 

 

 

 

Name:

 

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