Exhibit 10.4

 

2018 EMPLOYEE STOCK PURCHASE PLAN

 

The purpose of the Assembly Biosciences, Inc. 2018 Employee Stock Purchase Plan
(“the Plan”) is to provide eligible employees of Assembly Biosciences, Inc. (the
“Company”) and each Designated Subsidiary (as defined in Section 11) with
opportunities to purchase shares of the Company’s common stock, par value $0.01
per share (the “Common Stock”). An aggregate of 400,000 shares of Common Stock
have been approved and reserved for this purpose.

 

The Plan includes two components: a Code Section 423 Component (the “423
Component”) and a non-Code Section 423 Component (the “Non-423 Component”). It
is intended for the 423 Component to constitute an “employee stock purchase
plan” within the meaning of Section 423(b) of the U.S. Internal Revenue Code of
1986, as amended (the “Code”) and the 423 Component shall be interpreted in
accordance with that intent (although the Company makes no undertaking or
representation to maintain such qualification). In addition, this Plan
authorizes the grant of options under the Non-423 Component that does not
qualify as an “employee stock purchase plan” under Section 423 of the Code.
Except as otherwise provided herein, the Non-423 Component will operate and be
administered in the same manner as the 423 Component.

 

1.        Administration. The Plan will be administered by the person or persons
(the “Administrator”) appointed by the Company’s Board of Directors (the
“Board”) for such purpose. The Administrator has authority at any time to:
(i) adopt, alter and repeal such rules, guidelines and practices for the
administration of the Plan and for its own acts and proceedings as it shall deem
advisable; (ii) interpret the terms and provisions of the Plan; (iii) make all
determinations it deems advisable for the administration of the Plan;
(iv) decide all disputes arising in connection with the Plan; and (v) otherwise
supervise the administration of the Plan. All interpretations and decisions of
the Administrator shall be binding on all persons, including the Company and the
Participants. No member of the Board or individual exercising administrative
authority with respect to the Plan shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.

 

2.        Offerings. The Company will make one or more offerings to eligible
employees to purchase Common Stock under the Plan (“Offerings”). Unless
otherwise determined by the Administrator, the initial Offering will begin on
June 15, 2018 and will end on the following November 14th (the “Initial
Offering”). Thereafter, unless otherwise determined by the Administrator, an
Offering will begin on the first business day occurring on or after each
November 15th and May 15th and will end on the last business day occurring on or
before the following May 14th and November 14th, respectively. The Administrator
may, in its discretion, designate a different period for any Offering, provided
that no Offering shall exceed six months in duration or overlap any other
Offering.

 

3.        Eligibility. All individuals classified as employees on the payroll
records of the Company and each Designated Subsidiary are eligible to
participate in any one or more of the Offerings under the Plan, provided that as
of the first day of the applicable Offering (the “Offering Date”) they are
employed by the Company or a Designated Subsidiary and have completed at least
30 days of employment. Notwithstanding any other provision herein, individuals
who are not contemporaneously classified as employees of the Company or a
Designated Subsidiary for purposes of the Company’s or applicable Designated
Subsidiary’s payroll system are not considered to be eligible employees of the
Company or any Designated Subsidiary and shall not be eligible to participate in
the Plan. In the event any such individuals are reclassified as employees of the
Company or a Designated Subsidiary for any purpose, including, without
limitation, common law or statutory employees, by any action of any third party,
including, without limitation, any government agency, or as a result of any
private lawsuit, action or administrative proceeding, such individuals shall,
notwithstanding such reclassification, remain ineligible for participation.
Notwithstanding the foregoing, the exclusive means for individuals who are not
contemporaneously classified as employees of the Company or a Designated
Subsidiary on the Company’s or Designated Subsidiary’s payroll system to become
eligible to participate in this Plan is through an amendment to this Plan, duly
executed by the Company, which specifically renders such individuals eligible to
participate herein.

 

4.        Participation.

 

(a) An eligible employee who is not a Participant in any prior Offering may
participate in a subsequent Offering by submitting an enrollment form to his or
her appropriate payroll location at least 15 business days before the Offering
Date (or by such other deadline as shall be established by the Administrator for
the Offering).

 

 

 

 

(b) The enrollment form will (a) state a whole percentage to be deducted from an
eligible employee’s Compensation (as defined in Section 11) per pay period,
(b) authorize the purchase of Common Stock in each Offering in accordance with
the terms of the Plan and (c) specify the exact name or names in which shares of
Common Stock purchased for such individual are to be issued pursuant to
Section 10. An employee who does not enroll in accordance with these procedures
will be deemed to have waived the right to participate. Unless a Participant
files a new enrollment form or withdraws from the Plan, such Participant’s
deductions and purchases will continue at the same percentage of Compensation
for future Offerings, provided he or she remains eligible.

 

(c) Notwithstanding the foregoing, participation in the Plan will neither be
permitted nor be denied contrary to the requirements of the Code.

 

5.        Employee Contributions. Each eligible employee may authorize payroll
deductions at a minimum of one percent up to a maximum of 15 percent of such
employee’s Compensation for each pay period. The Company will maintain book
accounts showing the amount of payroll deductions made by each Participant for
each Offering. No interest will accrue or be paid on payroll deductions.

 

6.       Deduction Changes. Except as may be determined by the Administrator in
advance of an Offering, a Participant may not increase or decrease his or her
payroll deduction during any Offering, but may increase or decrease his or her
payroll deduction with respect to the next Offering (subject to the limitations
of Section 5) by filing a new enrollment form at least 15 business days before
the next Offering Date (or by such other deadline as shall be established by the
Administrator for the Offering). The Administrator may, in advance of any
Offering, establish rules permitting a Participant to increase, decrease or
terminate his or her payroll deduction during an Offering.

 

7.         Withdrawal. A Participant may withdraw from participation in the Plan
by delivering a written notice of withdrawal to his or her appropriate payroll
location. The Participant’s withdrawal will be effective as of the next business
day. Following a Participant’s withdrawal, the Company will promptly refund such
individual’s entire account balance under the Plan to him or her (after payment
for any Common Stock purchased before the effective date of withdrawal). Partial
withdrawals are not permitted. Such an employee may not begin participation
again during the remainder of the Offering, but may enroll in a subsequent
Offering in accordance with Section 4.

 

8.         Grant of Options. On each Offering Date, the Company will grant to
each eligible employee who is then a Participant in the Plan an option
(“Option”) to purchase on the last day of such Offering (the “Exercise Date”),
at the Option Price hereinafter provided for, the lowest of (a) a number of
shares of Common Stock determined by dividing such Participant’s accumulated
payroll deductions on such Exercise Date by the Option Price (as defined
herein), (b) 1,000 shares; or (c) such other lesser maximum number of shares as
shall have been established by the Administrator in advance of the Offering;
provided, however, that such Option shall be subject to the limitations set
forth below. Each Participant’s Option shall be exercisable only to the extent
of such Participant’s accumulated payroll deductions on the Exercise Date. The
purchase price for each share purchased under each Option (the “Option Price”)
will be 85 percent of the Fair Market Value of the Common Stock on the Offering
Date or the Exercise Date, whichever is less.

 

Notwithstanding the foregoing, no Participant may be granted an option hereunder
if such Participant, immediately after the option was granted, would be treated
as owning stock possessing five percent or more of the total combined voting
power or value of all classes of stock of the Company or any Parent or
Subsidiary (as defined in Section 11). For purposes of the preceding sentence,
the attribution rules of Section 424(d) of the Code shall apply in determining
the stock ownership of a Participant, and all stock which the Participant has a
contractual right to purchase shall be treated as stock owned by the
Participant. In addition, no Participant may be granted an Option which permits
his or her rights to purchase stock under the Plan, and any other employee stock
purchase plan of the Company and its Parents and Subsidiaries, to accrue at a
rate which exceeds $25,000 of the fair market value of such stock (determined on
the option grant date or dates) for each calendar year in which the Option is
outstanding at any time. The purpose of the limitation in the preceding sentence
is to comply with Section 423(b)(8) of the Code and shall be applied taking
Options into account in the order in which they were granted.

 

 

 

 

9.        Exercise of Option and Purchase of Shares. Each employee who continues
to be a Participant in the Plan on the Exercise Date shall be deemed to have
exercised his or her Option on such date and shall acquire from the Company such
number of whole shares of Common Stock reserved for the purpose of the Plan as
his or her accumulated payroll deductions on such date will purchase at the
Option Price, subject to any other limitations contained in the Plan. Any amount
remaining in a Participant’s account at the end of an Offering solely by reason
of the inability to purchase a fractional share will be carried forward to the
next Offering; any other balance remaining in a Participant’s account at the end
of an Offering will be refunded to the Participant promptly.

 

10.         Issuance of Certificates. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or in the name of a broker authorized by the
employee to be his, her or their, nominee for such purpose.

 

11.        Definitions.

 

The term “Compensation” means the amount of base pay, prior to salary reduction
pursuant to Sections 125, 132(f) or 401(k) of the Code, but excluding overtime,
commissions, incentive or bonus awards, allowances and reimbursements for
expenses such as relocation allowances or travel expenses, income or gains on
the exercise of Company stock options, and similar items.

 

The term “Designated Subsidiary” means any present or future Subsidiary (as
defined below) that has been designated by the Board to participate in the Plan.
The Board may so designate any Subsidiary, or revoke any such designation, at
any time and from time to time, either before or after the Plan is approved by
the stockholders and may further designate such Subsidiaries as participating in
the 423 Component or the Non-423 Component. The current list of Designated
Subsidiaries is attached hereto as Appendix A.

 

The term “Fair Market Value of the Common Stock” on any given date means the
fair market value of the Common Stock determined in good faith by the
Administrator; provided, however, that if the Common Stock

 

is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System (“NASDAQ”), NASDAQ Global Select Market or The NASDAQ
Capital Market of The NASDAQ Stock Market LLC or another national securities
exchange, the determination shall be made by reference to the closing price on
such date. If there is no closing price for such date, the determination shall
be made by reference to the last date preceding such date for which there is a
closing price.

 

The term “Parent” means a “parent corporation” with respect to the Company, as
defined in Section 424(e) of the Code.

 

The term “Participant” means an individual who is eligible as determined in
Section 3 and who has complied with the provisions of Section 4.

 

The term “Subsidiary” means a “subsidiary corporation” with respect to the
Company, as defined in Section 424(f) of the Code.

 

The term “Corporate Transaction” means any of the following transactions,
provided, however, that the Administrator shall determine under parts (iv) and
(v) whether multiple transactions are related, and its determination shall be
final, binding and conclusive:

 

(i)       a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
state in which the Company is incorporated;

 

(ii)       the sale, transfer or other disposition of all or substantially all
of the assets of the Company;

 

(iii)       the complete liquidation or dissolution of the Company;

 

 

 

 

(iv)       any reverse merger or series of related transactions culminating in a
reverse merger (including, but not limited to, a tender offer followed by a
reverse merger) in which the Company is the surviving entity but (A) the shares
of Common Stock outstanding immediately prior to such merger are converted or
exchanged by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, or (B) in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from
those who held such securities immediately prior to such merger or the initial
transaction culminating in such merger; or

 

(v)       acquisition in a single or series of related transactions by any
person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities.

 

12.         Rights on Termination of Employment. If a Participant’s employment
terminates for any reason before the Exercise Date for any Offering, no payroll
deduction will be taken from any pay due and owing to the Participant and the
balance in the Participant’s account will be paid to such Participant or, in the
case of such Participant’s death, to his or her designated beneficiary as if
such Participant had withdrawn from the Plan under Section 7. An employee will
be deemed to have terminated employment, for this purpose, if the corporation
that employs him or her, having been a Designated Subsidiary, ceases to be a
Subsidiary, or if the employee is transferred to any corporation other than the
Company or a Designated Subsidiary. An employee will not be deemed to have
terminated employment for this purpose, if the employee is on an approved leave
of absence for military service or sickness or for any other purpose approved by
the Company, if the employee’s right to reemployment is guaranteed either by a
statute or by contract or under the policy pursuant to which the leave of
absence was granted or if the Administrator otherwise provides in writing.

 

13.          Special Rules. Notwithstanding anything herein to the contrary, the
Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that if
such rules are inconsistent with the requirements of Section 423(b) of the Code,
these employees will participate in the Non-423 Component. Any special rules
established pursuant to this Section 13 shall, to the extent possible, result in
the employees subject to such rules having substantially the same rights as
other Participants in the Plan.

 

14.        Optionees Not Stockholders. Neither the granting of an Option to a
Participant nor the deductions from his or her pay shall constitute such
Participant a holder of the shares of Common Stock covered by an Option under
the Plan until such shares have been purchased by and issued to him or her.

 

15.        Rights Not Transferable. Rights under the Plan are not transferable
by a Participant other than by will or the laws of descent and distribution, and
are exercisable during the Participant’s lifetime only by the Participant.

 

16.         Designation of Beneficiary.

 

(a)       A Participant may file a written designation of a beneficiary who is
to receive any shares of Common Stock and/or cash, if any, from the
Participant’s account under the Plan in the event of such Participant’s death
subsequent to the end of an Offering but prior to delivery to the Participant of
such shares of Common Stock or cash. In addition, a Participant may file a
written designation of a beneficiary who is to receive any cash from the
Participant’s account under the Plan in the event of such Participant’s death
during an Offering. Any such designation shall be on a form provided by or
otherwise acceptable to the Company.

 

(b)       The Participant may change such designation of beneficiary at any time
by written notice to the Company. In the event of the death of a Participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such Participant’s death, the Company shall deliver such shares
of Common Stock and/or cash to the executor or administrator of the estate of
the Participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its sole discretion, may deliver
such shares of Common Stock and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.

 

 

 

 

17.        Application of Funds. All funds received or held by the Company under
the Plan may be combined with other corporate funds and may be used for any
corporate purpose.

 

18.          Adjustment in Case of Changes Affecting Common Stock; Corporate
Transaction.

 

(a)       In the event of a subdivision of outstanding shares of Common Stock,
the payment of a dividend in Common Stock or any other change affecting the
Common Stock, the number of shares approved for the Plan and the share
limitation set forth in Section 8 shall be equitably or proportionately adjusted
to give proper effect to such event.

 

(b)        In the event of a Corporate Transaction, then the Participants’
accumulated payroll deductions under an ongoing Offering shall be used to
purchase shares of Common Stock subject to the limitations in this Plan on a
date determined by the Company within ten (10) business days prior to the
closing of the Corporate Transaction, which date shall constitute the Exercise
Date under this Plan, and the Plan shall terminate immediately after such
Exercise Date and the issuance of the shares purchased on such Exercise Date.

 

         

19.       Amendment of the Plan. The Board may at any time and from time to time
amend the Plan in any respect, except that without the approval within 12 months
of such Board action by the stockholders, no amendment shall be made increasing
the number of shares approved for the Plan or making any other change that would
require stockholder approval in order for the Plan, as amended, to qualify as an
“employee stock purchase plan” under Section 423(b) of the Code.

 

20.         Insufficient Shares. If the total number of shares of Common Stock
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among Participants in proportion to the amount of payroll deductions accumulated
on behalf of each Participant that would otherwise be used to purchase Common
Stock on such Exercise Date.

 

21.         Termination of the Plan. Except as otherwise contemplated under
Section 18(b) with respect to a Corporate Transaction, the Plan may be
terminated at any time by the Board. Upon termination of the Plan, all amounts
in the accounts of Participants shall be promptly refunded.

 

22.         Governmental Regulations. The Company’s obligation to sell and
deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of
such stock.

 

23.          Governing Law. This Plan and all Options and actions taken
thereunder shall be governed by, and construed in accordance with, the laws of
the State of Delaware, applied without regard to conflict of law principles.

 

24.         Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.

 

25.        Tax Withholding. Participation in the Plan is subject to any minimum
required tax withholding on income of the Participant in connection with the
Plan. Each Participant agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from any payment of
any kind otherwise due to the Participant, including shares issuable under the
Plan.

 

26.         Notification Upon Sale of Shares. Each Participant agrees, by
entering the Plan, to give the Company prompt notice of any disposition of
shares purchased under the Plan where such disposition occurs within two years
after the date of grant of the Option pursuant to which such shares were
purchased or within one year after the date such shares were purchased.

 

27.        Effective Date and Approval of Shareholders. The Plan shall take
effect on the later of the date it is adopted by the Board and the date it is
approved by the holders of a majority of the votes cast at a meeting of
stockholders at which a quorum is present or by written consent of the
stockholders.

  

 

 

 

 

APPENDIX A

 

Designated Subsidiaries

 

 

 

None