Exhibit 10.1

 

KALA PHARMACEUTICALS, INC. 

Non-qualified Stock Option Agreement

 

1.             Grant of Option.

 

This agreement evidences the grant by Kala Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), on [___________] (the “Grant Date”) to
[___________], an employee of the Company (the “Participant”), of an option to
purchase, in whole or in part, on the terms provided herein, a total of
[___________] shares (the “Shares”) of common stock, $0.001 par value per share,
of the Company (“Common Stock”) at $[_____] per Share.  Unless earlier
terminated, this option shall expire at 5:00 p.m., Eastern time, on
[___________]1 (the “Final Exercise Date”).

 

The option evidenced by this agreement was granted to the Participant pursuant
to the inducement grant exception under Nasdaq Listing Rule 5635(c)(4), and not
pursuant to the Company’s 2017 Equity Incentive Plan (the “Plan”) or any equity
incentive plan of the Company, as an inducement that is material to the
Participant’s employment with the Company.

 

It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the “Code”). 
Except as otherwise indicated by the context, the term “Participant”, as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.

 

2.             Vesting Schedule.

 

Except as otherwise provided herein, this option will become exercisable
(“vest”) as to 25% of the original number of Shares on one-year anniversary of
the Vesting Start Date and as to an additional 2.0833% of the original number of
Shares at the end of each successive month following the one-year anniversary of
the Vesting Start Date until the fourth anniversary of the Vesting Start
Date.  For purposes of this Agreement, the Vesting Start Date is [___________].

 

The right of exercise shall be cumulative so that to the extent the option is
not exercised in any period to the maximum extent permissible it shall continue
to be exercisable, in whole or in part, with respect to all Shares for which it
is vested until the earlier of the Final Exercise Date or the termination of
this option under Section 3 hereof.

 

3.             Exercise of Option.

 

(a)           Form of Exercise.  Each election to exercise this option shall be
in writing, in the form of the Stock Option Exercise Notice attached as Annex A,
signed by the Participant,  and received by the Company at its principal office,
accompanied by this agreement or in such

 

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

1 Termination date to be 10 years minus 1 day from Grant Date

 

 

 

 

 

 

 

 

 

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

 

other form (which may be electronic) as is approved by the Company, and payment
in full as follows:

 

(1)           in cash or by check, payable to the order of the Company;

 

(2)           by (i) delivery of an irrevocable and unconditional undertaking by
a creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price and any required tax withholding;

 

(3)           to the extent approved by the Board of Directors of the Company
(the “Board”), by delivery (either by actual delivery or attestation) of shares
of Common Stock owned by the Participant valued at their fair market value
(valued in the manner determined by (or in a manner approved by) the Board) (the
“Fair Market Value”), provided (i) such method of payment is then permitted
under applicable law, (ii) such Common Stock, if acquired directly from the
Company, was owned by the Participant for such minimum period of time, if any,
as may be established by the Board and (iii) such Common Stock is not subject to
any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

 

(4)           to the extent approved by the Board in its sole discretion, by
delivery of a notice of “net exercise” to the Company, as a result of which the
Participant would receive (i) the number of shares underlying the portion of
this option being exercised, less (ii) such number of shares as is equal to
(A) the aggregate exercise price for the portion of this option being exercised
divided by (B) the Fair Market Value on the date of exercise;

 

(5)           to the extent permitted by applicable law and approved by the
Board, by payment of such other lawful consideration as the Board may determine;
or

 

(6)           by any combination of the above permitted forms of payment.

 

The Participant may purchase less than the number of shares covered hereby,
provided that no partial exercise of this option may be for any fractional
share.  Share of Common Stock subject to this option will be delivered by the
Company as soon as practicable following exercise, subject to the terms and
conditions of this Agreement.

 

(b)           Continuous Relationship with the Company Required.  Except as
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he exercises this option, is, and has been at all
times since the Grant Date, an employee, director or officer of, or consultant
or advisor to, the Company or any other entity the employees, officers,
directors, consultants, or advisors of which are eligible to receive option
grants under the Plan (an “Eligible Participant”).

 

(c)           Termination of Relationship with the Company.  If the Participant
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent

 

 

 

 

 

 

 

 

 

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

 

that the Participant was entitled to exercise this option on the date of such
cessation.  Notwithstanding the foregoing, if the Participant, prior to the
Final Exercise Date, violates the non-competition, non-solicitation or
confidentiality provisions of any employment contract, restrictive covenant
agreement (including, without limitation, any confidentiality or non-competition
agreement) or other agreement between the Participant and the Company, the right
to exercise this option, if and to the extent permitted by applicable law, shall
terminate immediately upon such violation.

 

(d)           Exercise Period Upon Death or Disability.  If the Participant dies
or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior
to the Final Exercise Date while he is an Eligible Participant and the Company
has not terminated such relationship for “cause” as specified in paragraph
(e) below, this option shall be exercisable, within the period of one year
following the date of death or disability of the Participant, by the Participant
(or in the case of death by an authorized transferee), provided that this option
shall be exercisable only to the extent that this option was exercisable by the
Participant on the date of his death or disability, and further provided that
this option shall not be exercisable after the Final Exercise Date.

 

(e)           Termination for Cause.  If prior to the Final Exercise Date, the
Participant’s employment or other relationship with the Company is terminated by
the Company for Cause (as defined below), the right to exercise this option
shall terminate immediately upon the effective date of such termination of
employment or other relationship.  If, prior to the Final Exercise Date, the
Participant is given notice by the Company of the termination of his employment
by the Company for Cause, and the effective date of such employment termination
is subsequent to the date of delivery of such notice, the right to exercise this
option shall be suspended from the time of the delivery of such notice until the
earlier of (i) such time as it is determined or otherwise agreed that the
Participant’s employment shall not be terminated for Cause as provided in such
notice or (ii) the effective date of such termination of employment (in which
case the right to exercise this option shall, pursuant to the preceding
sentence, terminate upon the effective date of such termination of employment).
If the Participant is subject to an individual employment agreement with the
Company (other than any restrictive covenant or confidentiality agreement) or
eligible to participate in a Company severance plan or arrangement, in any case
which agreement, plan or arrangement contains a definition of “cause” for
termination of employment or other relationship with us, “Cause” shall have the
meaning ascribed to such term in such agreement, plan or arrangement. Otherwise,
“Cause” shall mean willful misconduct by the Participant or willful failure by
the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant’s employment
shall be considered to have been terminated for Cause if the Company determines,
within 30 days after the Participant’s resignation, that termination for Cause
was warranted.

 

4.Withholding.  No Shares will be issued pursuant to the exercise of this option
unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.  The
Participant must satisfy all applicable federal, state, and local or other
income and employment tax withholding obligations before the Company will
deliver stock certificates or otherwise recognize ownership of Common Stock
under this option.  The

 

 

 

 

 

 

 

 

 

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

 

Company may elect to satisfy the withholding obligations through additional
withholding on salary or wages.  If the Company elects not to or cannot withhold
from other compensation, the Participant must pay the Company the full amount,
if any, required for withholding or have a broker tender to the Company cash
equal to the withholding obligations.  Payment of withholding obligations is due
before the Company will issue any shares on exercise of this option or at the
same time as payment of the exercise price, unless the Company determines
otherwise.  If approved by the Board, a Participant may satisfy the tax
obligations in whole or in part by delivery (either by actual delivery or
attestation) of shares of Common Stock, including shares retained from this
option, valued at their Fair Market Value; provided, however, except as
otherwise provided by the Board, that the total tax withholding where stock is
being used to satisfy such tax obligations cannot exceed the Company’s minimum
statutory withholding obligations (based on minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes, that are applicable
to such supplemental taxable income), except that, to the extent that the
Company is able to retain shares of Common Stock having a Fair Market Value that
exceeds the statutory minimum applicable withholding tax without financial
accounting implications or the Company is withholding in a jurisdiction that
does not have a statutory minimum withholding tax, the Company may retain such
number of shares of Common Stock (up to the number of shares having a Fair
Market Value equal to the maximum individual statutory rate of tax) as the
Company shall determine in its sole discretion to satisfy the tax liability
associated with this option.  Shares used to satisfy tax withholding
requirements cannot be subject to any repurchase, forfeiture, unfulfilled
vesting or other similar requirements.

 

5.             Transfer Restrictions.  This option may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Participant, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, and, during
the lifetime of the Participant, this option shall be exercisable only by the
Participant; provided, however, that, the Board may permit the gratuitous
transfer of this option by the Participant to or for the benefit of any
immediate family member, family trust or other entity established for the
benefit of the Participant and/or an immediate family member thereof if the
Company would be eligible to use a Form S-8 under the Securities Act of 1933, as
amended, for the registration of the sale of the Common Stock subject to this
option to such proposed transferee; provided further, that the Company shall not
be required to recognize any such permitted transfer until such time as such
permitted transferee shall, as a condition to such transfer, deliver to the
Company a written instrument in form and substance satisfactory to the Company
confirming that such transferee shall be bound by all of the terms and
conditions of this option.  References to a Participant, to the extent relevant
in the context, shall include references to authorized transferees.  For the
avoidance of doubt, nothing contained in this Section 5 shall be deemed to
restrict a transfer to the Company.

 

6.             Adjustments for Changes in Common Stock and Certain Other Events.

 

(a)           Changes in Capitalization.  In the event of any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any dividend or distribution to holders of Common Stock other than
an ordinary cash dividend, the number and class of securities and exercise price
per share of this option shall be equitably adjusted by the Company in the
manner determined by the Board.  Without limiting the generality of the
foregoing, in the event the

 

 

 

 

 

 

 

 

 

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

 

Company effects a split of the Common Stock by means of a stock dividend and the
exercise price of and the number of shares subject to this option are adjusted
as of the date of the distribution of the dividend (rather than as of the record
date for such dividend), then the Participant, if he exercises this option
between the record date and the distribution date for such stock dividend shall
be entitled to receive, on the distribution date, the stock dividend with
respect to the shares of Common Stock acquired upon exercise of this option,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.

 

(b)           Reorganization Events.  A “Reorganization Event” shall mean: 
(a) any merger or consolidation of the Company with or into another entity as a
result of which all of the Common Stock of the Company is converted into or
exchanged for the right to receive cash, securities or other property or is
cancelled, (b) any transfer or disposition of all of the Common Stock of the
Company for cash, securities or other property pursuant to a share exchange or
other transaction or (c) any liquidation or dissolution of the Company.  In
connection with a Reorganization Event, the Board may take any one or more of
the following actions with respect to this option (or any portion thereof) on
such terms as the Board determines: (i) provide that this option shall be
assumed, or a substantially equivalent option shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written
notice to the Participant, provide that the unvested portion of this option will
be forfeited immediately prior to the consummation of the Reorganization Event
and/or the unexercised portion of this option will terminate immediately prior
to the consummation of such Reorganization Event unless exercised by the
Participant (to the extent then exercisable) within a specified period following
the date of such notice, (iii) provide that this option shall become
exercisable, realizable, or deliverable, or restrictions applicable to this
option shall lapse, in whole or in part prior to or upon such Reorganization
Event, (iv) in the event of a Reorganization Event under the terms of which
holders of Common Stock will receive upon consummation thereof a cash payment
for each share surrendered in the Reorganization Event (the “Acquisition
Price”), make or provide for a cash payment to the Participant with respect to
this option equal to (A) the number of shares of Common Stock subject to the
vested portion of this option (after giving effect to any acceleration of
vesting that occurs upon or immediately prior to such Reorganization Event)
multiplied by (B) the excess, if any, of (I) the Acquisition Price over (II) the
exercise price of this option and any applicable tax withholdings, in exchange
for the termination of this option, (v) provide that, in connection with a
liquidation or dissolution of the Company, this option shall convert into the
right to receive liquidation proceeds (net of the exercise price thereof and any
applicable tax withholdings) and (vi) any combination of the foregoing.

 

For purposes of clause (i) above, this option shall be considered assumed if,
following consummation of the Reorganization Event, this option confers the
right to purchase, for each share of Common Stock subject to this option
immediately prior to the consummation of the Reorganization Event, the
consideration (whether cash, securities or other property) received as a result
of the Reorganization Event by holders of Common Stock for each share of Common
Stock held immediately prior to the consummation of the Reorganization Event
(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
Common Stock); provided, however, that if the consideration received as a result
of the Reorganization Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may, with the
consent

 

 

 

 

 

 

 

 

 

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

 

of the acquiring or succeeding corporation, provide for the consideration to be
received upon the exercise of this option to consist solely of such number of
shares of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) that the Board determines to be equivalent in value (as of
the date of such determination or another date specified by the Board) to the
per share consideration received by holders of outstanding shares of Common
Stock as a result of the Reorganization Event.

 

7.             Miscellaneous.

 

(a)           No Right To Employment or Other Status.  The grant of this option
shall not be construed as giving the Participant the right to continued
employment or any other relationship with the Company.  The Company expressly
reserves the right at any time to dismiss or otherwise terminate its
relationship with the Participant free from any liability or claim hereunder,
except as otherwise expressly provided herein.

 

(b)           No Rights As Stockholder; Clawback.  Subject to the provisions of
this option, the  Participant shall not have any rights as a stockholder with
respect to any shares of Common Stock to be issued with respect to this option
until becoming the record holder of such shares.  In accepting this option, the
Participant agrees to be bound by any clawback policy the Company has in effect
or may adopt in the future.

 

(c)           Entire Agreement.  This Agreement constitutes the entire agreement
between the parties, and supersede all prior agreements and understandings,
relating to the subject matter hereof.

 

(d)           Amendment.  The Board may amend, modify or terminate this
Agreement, including but not limited to, substituting another option of the same
or a different type and changing the date of exercise or realization. 
Notwithstanding the foregoing, the Participant’s consent to such action shall be
required unless (i) the Board determines that the action, taking into account
any related action, would not materially and adversely affect the Participant’s
rights under this Agreement, or (ii) the change is permitted under Section 6. 

 

(e)            Acceleration.  The Board may at any time provide that this option
shall become immediately exercisable in whole or in part, free from some or all
restrictions or conditions, or otherwise realizable in whole or in part, as the
case may be.

  

(f)           Conditions on Delivery of Stock.  The Company will not be
obligated to deliver any shares of Common Stock pursuant to this Agreement until
(i) all conditions of this Agreement have been met to the satisfaction of the
Company, (ii) in the opinion of the Company’s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and regulations and any applicable
stock exchange or stock market rules and regulations, and (iii) the Participant
has executed and delivered to the Company such representations or agreements as
the Company may consider appropriate to satisfy the requirements of any
applicable laws, rules or regulations.

 

(g)            Administration by Board.  The Board will administer this
Agreement and may construe and interpret the terms hereof.  The Board may
correct any defect, supply any omission or reconcile any inconsistency in this
Agreement in the manner and to the extent it shall deem

 

 

 

 

 

 

 

 

 

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

 

expedient to carry the Agreement into effect and it shall be the sole and final
judge of such expediency.  No director or person acting pursuant to the
authority delegated by the Board shall be liable for any action or determination
relating to or under this Agreement made in good faith.

 

(h)            Appointment of Committees.  To the extent permitted by applicable
law, the Board may delegate any or all of its powers hereunder to one or more
committees or subcommittees of the Board (a “Committee”).  All references herein
to the “Board” shall mean the Board or a Committee to the extent that the
Board’s powers or authority hereunder have been delegated to such Committee.

 

(i)           Severability.  The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any other provision
hereof, and each such other provision shall be severable and enforceable to the
extent permitted by law.

 

(j)            Governing Law.  This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware, excluding
choice-of-law principles of the law of such state that would require the
application of the laws of a jurisdiction other than the State of Delaware.

 

(k)          Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one in the same instrument.

 

 

This option satisfies in full all commitments that the Company has to the
Participant with respect to the issuance of stock, stock options or other equity
securities.

 

 

 

 

KALA PHARMACEUTICALS, INC.

 

 

 

Signature of Participant

 

 

 

 

By:

 

Street Address

 

 

Name of Officer

 

 

 

Title:

City/State/Zip Code

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

ANNEX A

 

KALA PHARMACEUTICALS, INC.

Stock Option Exercise Notice

 

Kala Pharmaceuticals, Inc.

100 Beaver Street, Suite 201

Waltham, MA 02453

 

Dear Sir or Madam:

 I,                             (the “Participant”), hereby irrevocably exercise
the right to purchase                      shares of the Common Stock, $0.001
par value per share (the “Shares”), of Kala Pharmaceuticals, Inc. (the
“Company”) at $     per share pursuant to that certain stock option agreement
with the Company dated                            .  Enclosed herewith is a
payment of $     , the aggregate purchase price for the Shares.  The certificate
for the Shares should be registered in my name as it appears below or, if so
indicated below, jointly in my name and the name of the person designated below,
with right of survivorship.

 

Dated:

 

 

 

 

 

 

Signature

 

Print Name:

 

 

 

Address:

 

 

 

 

 

 Name and address of persons in whose name the Shares are to be jointly
registered (if applicable):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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