Exhibit 10.7

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (this “Agreement”) is made and
entered into as of May 29, 2018 (the “Effective Date”), by and between Kiniksa
Pharmaceuticals Corp., a Delaware corporation (the “Company”), and Sanj K. Patel
(the “Executive”).

 

WHEREAS, the operations of the Company and its Affiliates (as defined below) are
a complex matter requiring direction and leadership in a variety of arenas;

 

WHEREAS, the Executive possesses certain experience and expertise that qualify
him to provide the direction and leadership required by the Company and its
Affiliates;

 

WHEREAS, the Company and the Executive are party to an Amended and Restated
Employment Agreement dated as of December June 29, 2017 (the “Original
Agreement”); and

 

WHEREAS, the Company and the Executive wish to amend and restate the Original
Agreement in accordance with the terms set forth herein and the Executive shall
continue to serve as its Chief Executive Officer on the terms and conditions set
forth in this Agreement, and the Executive wishes to continue such employment.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, terms, provisions and conditions set forth in this Agreement, the
parties hereby agree:

 

1.                                      Definitions.  Words or phrases that are
initially capitalized or are within quotation marks shall have the meanings
provided in this Section and as provided elsewhere herein.  For purposes of this
Agreement, the following definitions apply:

 

(a)                                 “Affiliates” shall mean all persons and
entities directly or indirectly controlling, controlled by or under common
control with the Company, where control may be by management authority, contract
or equity interest.

 

(b)                                 “Cause” shall mean:

 

(i)                                     The Executive’s gross negligence or
willful misconduct in performance of his duties to the Company, where such gross
negligence or willful misconduct has resulted in material damage to the Company
or any of its Affiliates or successors; or

 

(ii)                                  The Executive’s commission of any act of
fraud, embezzlement or professional dishonesty with respect to the business of
the Company or any of its Affiliates; or

 

(iii)                               The Executive’s commission of a felony or
crime involving moral turpitude; or

 

(iv)                              The Executive’s material breach of any
provision of this Agreement or any other written agreement between the Executive
and the Company; or

 

(v)                                 The Executive’s failure to comply with
lawful directives of the Parent Board (as defined below), which has caused
damage to the Company or any of its Affiliates or successors.

 

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(c)                                  “Change in Control” shall mean:

 

(i)                                     a sale of all or substantially all of
the Parent’s assets, or

 

(ii)                                  any merger, consolidation or other
business combination transaction of the Parent with or into another corporation,
entity or person, other than a transaction in which the holders of at least a
majority of the shares of voting capital shares of the Parent outstanding
immediately prior to such transaction continue to hold (either by such shares
remaining outstanding or by their being converted into shares of voting capital
stock of the surviving entity) a majority of the total voting power represented
by the shares of voting capital stock of the Parent (or the surviving entity)
outstanding immediately after such transaction;

 

(iii)                               A change in the composition of the Parent
Board such that the individuals who, as of the Effective Date, constitute the
Parent Board (such Parent Board shall be hereinafter referred to as the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Parent Board; provided, however, that, for purposes of this Agreement, any
individual who becomes a member of the Parent Board subsequent to the Effective
Date, whose election, or nomination for election by the Parent’s shareholders,
was approved by a vote of at least a majority of those individuals who are
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board;  or

 

(iv)                              the direct or indirect acquisition (including
by way of a tender or exchange offer) by any person, or persons acting as a
group, of beneficial ownership or a right to acquire beneficial ownership of
shares representing a majority of the voting power of the then outstanding
shares of capital shares of the Parent.  Notwithstanding the foregoing, a Change
in Control shall not be deemed to occur:

 

(A)                               on account of the acquisition of shares of
voting capital stock by any institutional investor or any affiliate thereof or
any other person, or persons acting as a group, that acquires the Parent’s
shares of voting capital shares in a transaction or series of related
transactions that are primarily a private financing transaction for the Parent,
or

 

(B)                               solely because the level of ownership held by
any institutional investor or any affiliate thereof or any other person, or
persons acting as a group (the “Subject Person”), exceeds the designated
percentage threshold of the outstanding voting capital shares as a result of a
repurchase or other acquisition of voting capital shares by the Parent reducing
the number of shares outstanding, provided that if a Change in Control would
occur (but for the operating of this sentence) as a result of the acquisition
voting capital shares by the Parent, and after such share acquisition, the
Subject Person becomes the owner of any additional voting capital shares that,
assuming the repurchase or other acquisition had not occurred, increases the
percentage of the then outstanding voting capital shares owned by such Subject
Person over the designated percentage threshold, then a Change in Control shall
be deemed to occur.

 

(d)                                 “Code” shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder.

 

(e)                                  “Employee Benefit Plan” shall have the
meaning ascribed to such term in Section 3(3) of ERISA, as amended from
time-to-time.

 

(f)                                   “Founder Invention and Non-Disclosure
Agreement” shall mean the Founder Invention and Non-Disclosure Agreement, dated
as of September 16, 2015.

 

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(g)                                  “Founder Non-Competition and
Non-Solicitation Agreement” shall mean the Founder Non-Competition and
Non-Solicitation Agreement, dated as of September 16, 2015.

 

(h)                                 “Good Reason” shall mean any of the
following, occurring without the Executive’s written consent:

 

(i)                                     the assignment to the Executive of
duties materially inconsistent with the Executive’s title, position, status,
reporting relationships, authority, duties or responsibilities as contemplated
by Section 3, or any other action by the Company which results in a diminution
in the Executive’s title, position, status, reporting relationships, authority,
duties or responsibilities; or

 

(ii)                                  a requirement that the Executive relocate
his primary reporting location to a location more than fifty (50) miles from the
location of the Company’s offices in Lexington, Massachusetts as of the
Effective Date; or

 

(iii)                               any failure by the Company to comply with
any of the provisions of Section 4(a), 4(b) 4(c) or 4(d) hereof, other than
insubstantial or inadvertent failures not in bad faith which are remedied by the
Company promptly after receipt of notice thereof given by the Executive; or

 

(iv)                              a material diminution in the budget over which
Executive has responsibility; or

 

(v)                                 a breach by the Company of this Agreement
between the Company and Executive.

 

(i)                                     “Parent” shall mean the Company’s parent
entity, Kiniksa Pharmaceuticals, Ltd., a Bermuda exempted company.

 

(j)                                    “Person” shall mean an individual, a
corporation, a limited liability company, an association, a partnership, an
estate, a trust and any other entity or organization, other than the Company or
any of its Affiliates.

 

2.                                      Acceptance and Term.  Executive hereby
accepts employment subject to the terms and conditions set forth in this
Agreement.  Executive’s employment shall continue until terminated pursuant to
Section 5 hereof (the “Term”).

 

3.                                      Position, Duties and Responsibilities.

 

(a)                                 During the Term, the Executive shall serve
the Company as its Chief Executive Officer and shall report to the Board of
Directors of the Parent (the “Parent Board”).  During the Term, the Executive
shall be employed by the Company on a full-time basis and shall perform the
duties and responsibilities of his position.

 

(b)                                 The Executive is currently in the role of
Chairman of the Parent Board and the Company, and shall continue to serve as a
member of the Parent Board and the Company.  The Parent shall propose to the
shareholders of the Parent Board at each appropriate annual meeting of such
shareholders during Executive’s employment the reelection of the Executive as a
director of the Parent Board, provided that the Executive is otherwise eligible
for such election.

 

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(c)                                  In addition, and without further
compensation, the Executive shall serve as a director and/or officer of one or
more of the Company’s Affiliates if so elected or appointed from time-to-time.

 

(d)                                 During the Term, the Executive shall devote
his full business time and his best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests of the
Company and its Affiliates and to the discharge of his duties and
responsibilities hereunder.  The Executive shall not engage in any other
business activity or serve in any industry, trade, professional, governmental or
academic position during the term of this Agreement, except such activities as
shall not interfere with the performance of his duties to the Company. 
Notwithstanding the foregoing, the Executive shall be entitled to attend to
personal and family affairs and investments, be involved in not-for-profit,
charitable and professional activities and serve on up to two (2) for-profit
boards, provided that the foregoing does not, individually or in the aggregate,
materially interfere with Executive’s responsibilities under this Agreement.

 

(e)                                  Immediately upon termination of Executive’s
employment with the Company for any reason, Executive will be deemed to resign
any and all positions held by him, whether as an officer or director of the
Company, the Parent or any Affiliate of the Company, or as a member of any
committees thereof.

 

4.                                      Compensation and Benefits.  As
compensation for all services performed by the Executive during the Term and
subject to the Executive’s performance of his duties and obligations to the
Company and its Affiliates, pursuant to this Agreement or otherwise, the Company
shall provide the Executive with the following compensation and benefits:

 

(a)                                 Base Salary.  During the Term, the Company
shall pay the Executive at the rate of not less than $750,000 per annum, payable
in accordance with the payroll practices of the Company for its executives and
subject to increase from time-to-time by the Parent Board, in its sole
discretion (such base salary, as from time-to-time increased, the “Base
Salary”).  The Base Salary shall not be reduced at any time (including after any
such increase) without the Executive’s prior written consent, and the term Base
Salary as used in this Agreement shall refer to Executive’s Base Salary as so
increased.

 

(b)                                 Bonus Compensation.  During the Employment
Period, the Executive shall be paid an annual cash bonus (“Annual Bonus”) with a
minimum target level of 60% of Annual Base Salary (the “Target Bonus”). The
applicable corporate and individual performance targets shall be determined by
the Compensation Committee of the Parent Board (the “Compensation Committee”)
after consultation with the Executive, within the first ninety (90) days of each
calendar year.  The actual Annual Bonus for each calendar year shall be
determined in good faith by the Compensation Committee based upon actual
corporate and individual performance against established objective for such year
(and, if determined by the Compensation Committee, may exceed the Target Bonus)
and shall be payable in accordance with the procedures specified by the
Compensation Committee; provided that the Annual Bonus shall be paid to
Executive no later than March 15th of the calendar year immediately following
the calendar year in which it was earned.

 

(c)                                  Equity Participation.  Executive shall be
eligible to receive equity awards annually under the Parent’s 2018 Incentive
Award Plan or any other equity plan (collectively with the Parent’s 2015 Equity
Incentive Plan, the “Equity Plan”), and the award agreements related to such
plans, as determined in the discretion of the Parent Board, commencing upon the
Effective Date. Notwithstanding the provisions of the Equity Plan or any
agreement or award, Executive shall be immediately 100% fully vested in all
equity awards granted to him under this Agreement or any other agreement that
vest solely based on the passage of time in the event of a Change in Control in
which the

 

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award is not being assumed or substituted as provided for in the applicable
Equity Plan (for the avoidance of doubt, with any equity awards that vest in
whole or in part based on the attainment of performance-vesting conditions being
governed by the terms of the applicable award agreement).

 

(d)                                 Vacation.  During the Term, the Executive
shall be entitled to earn vacation at the rate of five (5) weeks per year, to be
taken at such times and intervals as shall be determined by the Executive,
subject to the reasonable business needs of the Company.  The Executive shall be
entitled to carryover up to two (2) weeks of vacation into the following
calendar year.  Vacation shall otherwise be governed by the policies of the
Company, as in effect from time-to-time.

 

(e)                                  Other Benefits.  During the Term, the
Executive shall be entitled to participate in any and all Employee Benefit Plans
from time-to-time in effect for employees of the Company generally, except to
the extent any such Employee Benefit Plan is in a category of benefit otherwise
provided to the Executive (e.g., a severance pay plan).  Such participation
shall be subject to the terms of the applicable plan documents and generally
applicable Company policies.  The Company may alter, modify, add to or delete
its Employee Benefit Plans at any time as it, in its sole judgment, determines
to be appropriate, without recourse by the Executive.

 

(f)                                   Business Expenses.  The Company shall
promptly pay or reimburse the Executive for all reasonable business expenses
incurred or paid by the Executive in the performance of his duties and
responsibilities hereunder, subject to reasonable substantiation and
documentation, as may be specified by the Company from time-to-time.

 

5.                                      Termination of Employment and Severance
Benefits.  The Executive’s employment hereunder shall terminate under the
following circumstances:

 

(a)                                 Death.  In the event of the Executive’s
death, the Executive’s employment hereunder shall immediately and automatically
terminate.

 

(b)                                 Disability.

 

(i)                                     The Company may terminate the
Executive’s employment hereunder, upon notice to the Executive, in the event
that the Executive becomes disabled during his employment hereunder through any
illness, injury, accident or condition of either a physical or psychological
nature and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder, notwithstanding the provision of any reasonable
accommodation, for ninety (90) consecutive days.

 

(ii)                                  The Parent Board may designate another
employee to act in the Executive’s place during any period of the Executive’s
disability.  Notwithstanding any such designation, the Executive shall continue
to receive the Base Salary in accordance with Section 4(a) and benefits in
accordance with Section 4(e), to the extent permitted by the then-current terms
of the applicable benefit plans, until the Executive becomes eligible for
disability income benefits under the Company’s disability income plan or until
the termination of his employment, whichever shall first occur.

 

(iii)                               While receiving disability income payments
under any disability income plan of the Company, the Executive shall not be
entitled to receive any Base Salary under Section 4(a) hereof, but shall
continue to participate in Company benefit plans in accordance with
Section 4(e) and the terms of such plans, until the termination of his
employment.

 

(c)                                  By the Company for Cause.  The Company may
terminate the Executive’s employment hereunder for Cause at any time upon notice
to the Executive setting forth in reasonable detail

 

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the nature of such Cause. In the cases of Section 1(b)(i), 1(b)(iv), or
1(b)(v) above, the Company may not effectuate the termination for Cause unless
and until: (i) the Company provides Executive with written notice setting forth
in reasonable detail the nature for such Cause which must be given to Executive
no later than the thirtieth (30) day following the initial commission of the
acts or omissions constituting Cause, and (ii) Executive fails to cure the
alleged conduct or events supporting Cause within thirty (30) days following
Executive’s receipt of such notice.

 

(d)                                 By the Company Other than for Cause.  The
Company may terminate the Executive’s employment hereunder other than for Cause
at any time upon written notice to the Executive.

 

(e)                                  By the Executive for Good Reason.  The
Executive may terminate his employment hereunder for Good Reason (i) by
providing notice to the Company specifying in reasonable detail the condition
giving rise to the Good Reason no later than thirty (30) days following the
occurrence of that condition; (ii) by providing the Company a period of thirty
(30) days to remedy the condition and so specifying in the notice; and (iii) by
terminating his employment for Good Reason within thirty (30) days following the
expiration of the period to remedy if the Company fails to remedy the situation.

 

(f)                                   By the Executive Other than for Good
Reason.  The Executive may terminate his employment hereunder at any time upon
sixty (60) days’ notice to the Company.  In the event of termination of the
Executive pursuant to this Section 5(f), the Parent Board or the Company may
elect to waive the period of notice, or any portion thereof.  In the event that
the Parent Board or the Company so waives some or all of the period of notice,
the Company shall pay the Executive his Base Salary for the period so waived.

 

6.                                      Severance Payments and Other Matters
Related to Separation from Service.

 

(a)                                 Final Compensation.  Following the
termination of the Executive’s employment for any reason, the Company shall pay
to the Executive:  (i) any Base Salary earned but not paid during the final
payroll period of the Executive’s employment through the date of termination,
(ii) pay for any vacation time earned but not used through the date of
termination, (iii) any unpaid Annual Bonus due to Executive for the calendar
year prior to the year in which the termination occurs, and (iv) any business
expenses incurred by the Executive but un-reimbursed on the date of termination,
provided that such expenses and required substantiation and documentation are
submitted within thirty (30) days of termination and that such expenses are
reimbursable under Company policy (all of the foregoing, “Final Compensation”). 
Any Base Salary and any earned, unused vacation time shall be paid to the
Executive at the time required by law, but not later than the Company’s next
regular pay date following the date of termination.  Any business expenses due
under this Section 6(a) shall be paid within sixty (60) days following the date
of termination.  Other than as expressly provided in Section 6(b), the Company
shall have no further obligation to the Executive hereunder.

 

(b)                                 Severance.  In the event the Executive’s
employment terminates pursuant to Section 5(a), 5(b), 5(d) or 5(e) of this
Agreement, in addition to Final Compensation, the Company (i) shall accelerate
the vesting of all unvested equity awards that vest solely based on the passage
of time either then held by, or previously granted to, Executive (including,
without limitation, restricted stock, restricted stock units, stock options or
other equity-based awards) by eighteen (18) months (for the avoidance of doubt,
with any equity awards that vest in whole or in part based on the attainment of
performance-vesting conditions being governed by the terms of the applicable
award agreement); and (ii) shall pay the Executive (A) a lump sum equal to the
Base Salary plus the Target Bonus divided by twelve (12), then multiplied by the
number of months set forth in the Severance Period (as defined below) (such
payment, the “Severance Payment”), (B) the Post-Termination Bonus (as defined
below) and (C) an additional one-time bonus of $25,000 (the “One-Time Bonus”). 
Subject to Sections 6(e) and 7(a) of this Agreement (i) the Severance Payment
and the One-Time Bonus shall be paid on the sixtieth (60th) day following the
date of termination

 

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and (ii) the Post-Termination Bonus shall be paid at the time provided in the
applicable Bonus Plan or form of annual award issued thereunder, but in no event
later than March 15 of the year following the year in which the Separation from
Service occurs; provided that if the termination occurs during the twelve (12)
month period following a Change in Control, (i) the Post-Termination Bonus shall
be paid by the sixtieth (60th) day following the date of termination and
(ii) notwithstanding the provisions of the Equity Plan, the Executive shall be
immediately 100% fully vested in all unvested equity awards that vest solely
based on the passage of time of Parent or its Affiliates (including, without
limitation, restricted stock, restricted stock units, stock options or other
equity-based awards, whether granted to or held by Executive either before or
after the date of this Agreement, and for the avoidance of doubt, with any
equity awards that vest in whole or in part based on the attainment of
performance-vesting conditions being governed by the terms of the applicable
award agreement).

 

(c)                                  Severance Period.  For the purposes of this
Agreement, the “Severance Period” shall be twenty-four (24) months.

 

(d)                                 Post-Termination Bonus.  For the purposes of
this Agreement, the “Post-Termination Bonus” shall be a pro-rata share of the
Target Bonus for the year in which the termination occurs.

 

(e)                                  Release of Claims.  Executive’s right to
receive the payments and benefits set forth in Section 6(b) is conditioned on
the Executive’s signing and returning to the Company a general release of claims
in the form provided by the Company at the time the Executive’s employment is
terminated (the “Employee Release”).  The Executive must sign and return the
Employee Release, if at all, by the deadline specified therein, which deadline
shall in no event be later than the sixtieth (60th) calendar day following the
termination date.  The Employee Release shall take effect on the expiration of
any revocation period specified therein, which shall be no longer than seven
(7) days from the date of the Executive’s signature

 

(f)                                   Effect of Termination.  Payment by the
Company of Final Compensation and the payments and benefits set forth in
Section 6(b) shall constitute the sole obligations of the Company in connection
with the termination of the Executive’s employment hereunder.  Except for any
right of the Executive to continue medical and dental plan participation in
accordance with applicable law, benefits shall terminate pursuant to the terms
of the applicable benefit plans based on the date of termination of the
Executive’s employment without regard to the payment of any Severance Payment or
Post-Termination Bonus.

 

(g)                                  Survival.  Provisions of this Agreement
shall survive any termination if so provided herein or if necessary or desirable
to accomplish the purposes of other surviving provisions, including without
limitation the obligations of the Executive under Sections 8 hereof.  The
obligation of the Company to make, and the right of the Executive to retain, any
payments or benefits set forth in Section 6(b) is expressly conditioned upon the
Executive’s continued full performance of obligations under Section 8, the
Founder Invention and Non-Disclosure Agreement, and the Founder Non-Solicitation
and Non-Competition Agreement.

 

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7.                                      Timing of Payments and Section 409A.

 

(a)                                 Notwithstanding anything to the contrary in
this Agreement, if at the time of the Executive’s termination of employment, the
Executive is a Specified Employee (as defined below), such amounts that may be
subject to the Specified Employee rules set forth at (a)(2)(B)(i) of
Section 409A of the Code (“Section 409A”) and payable under Section 6 on account
of such Separation from Service (as defined below) that would (but for this
provision) be payable within six (6) months following the date of termination,
shall instead be paid on the next business day following the expiration of such
six (6) month period.

 

(b)                                 For purposes of this Agreement, “Separation
from Service” shall be determined in a manner consistent with subsection
(a)(2)(A)(i) of Section 409A, and the term “Specified Employee” shall mean an
individual determined by the Company to be a specified employee as defined in
subsection (a)(2)(B)(i) of Section 409A.

 

(c)                                  Each payment made under this Agreement
shall be treated as a separate payment and the right to a series of installment
payments under this Agreement is to be treated as a right to a series of
separate payments.

 

(d)                                 The Executive’s right to reimbursement for
business expenses hereunder shall be subject to the following additional rules:
(i) the amount of expenses eligible for reimbursement during any calendar year
shall not affect the expenses eligible for reimbursement in any other taxable
year, (ii) reimbursement shall be made not later than December 31 of the
calendar year following the calendar year in which the expense was incurred, and
(iii) the right to reimbursement is not subject to liquidation or exchange for
any other benefit.

 

(e)                                  In no event shall the Company have any
liability relating to any payment or benefit under this Agreement failing to
comply with, or be exempt from, the requirements of Section 409A.

 

8.                                      Confidentiality; Cooperation

 

(a)                                 Confidentiality and Other Covenants. As a
condition of Executive’s employment with the Company, the Executive has executed
the Founder Invention and Non-Disclosure Agreement, and the Founder
Non-Solicitation and Non-Competition Agreement. The parties hereto acknowledge
and agree that this Agreement, the Founder Invention and Non-Disclosure
Agreement, and the Founder Non-Solicitation and Non-Competition Agreement shall
be considered separate contracts. In addition, Executive represents and warrants
that he shall be able to and will perform the duties of this position without
utilizing any material confidential and/or proprietary information that
Executive may have obtained in connection with employment with any prior
employer, and that he shall not (i) disclose any such information to the
Company, or (ii) induce any Company employee to use any such information, in
either case in violation of any confidentiality obligation, whether by agreement
or otherwise.

 

(b)                                 Litigation and Regulatory Cooperation.
During and after Executive’s employment, Executive shall reasonably cooperate
with the Company in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Company which relate to events or occurrences that transpired while the Company
employed Executive, provided, that the Executive will not have an obligation
under this paragraph with respect to any claim in which the Executive has filed
directly against the Company or related persons or entities. The Executive’s
reasonable cooperation in connection with such claims or actions shall include,
but not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Company at mutually
convenient times. During and after Executive’s employment, Executive also shall
reasonably

 

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cooperate with the Company in connection with any investigation or review of any
federal, state or local regulatory authority as any such investigation or review
relates to events or occurrences that transpired while Executive was employed by
the Company, provided Executive will not have any obligation under this
paragraph with respect to any claim in which Executive has filed directly
against the Company or related persons or entities. The Company shall reimburse
Executive for any reasonable out-of-pocket expenses incurred in connection with
Executive’s performance of obligations pursuant to this Section 8(b).

 

9.                                      Section 280G; Limitations on Payment

 

(a)                                 If any payment or benefit Executive shall or
may receive from the Company or otherwise (a “280G Payment”) would
(i) constitute a “parachute payment” within the meaning of Section 280G of the
Code, and (ii) but for this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided
pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. 
The “Reduced Amount” shall be either (x) the largest portion of the Payment that
would result in no portion of the Payment (after reduction) being subject to the
Excise Tax or (y) the largest portion, up to and including the total, of the
Payment, whichever amount (i.e., the amount determined by clause (x) or by
clause (y)), after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate), results in Executive’s receipt, on an after-tax
basis, of the greater economic benefit notwithstanding that all or some portion
of the Payment may be subject to the Excise Tax.  If a reduction in a Payment is
required pursuant to the preceding sentence and the Reduced Amount is determined
pursuant to clause (x) of the preceding sentence, the reduction shall occur in
the manner (the “Reduction Method”) that results in the greatest economic
benefit for Executive.  If more than one method of reduction shall result in the
same economic benefit, the items so reduced shall be reduced pro rata (the “Pro
Rata Reduction Method”).

 

(b)                                 Notwithstanding any provision of
Section 9(a) to the contrary, if the Reduction Method or the Pro Rata Reduction
Method would result in any portion of the Payment being subject to taxes
pursuant to Section 409A that would not otherwise be subject to taxes pursuant
to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method,
as the case may be, shall be modified so as to avoid the imposition of taxes
pursuant to Section 409A as follows:  (i) as a first priority, the modification
shall preserve to the greatest extent possible, the greatest economic benefit
for Executive as determined on an after-tax basis; (ii) as a second priority,
Payments that are contingent on future events (e.g., being terminated without
Cause), shall be reduced (or eliminated) before Payments that are not contingent
on future events; and (iii) as a third priority, Payments that are “deferred
compensation” within the meaning of Section 409A shall be reduced (or
eliminated) before Payments that are not deferred compensation within the
meaning of Section 409A.

 

(c)                                  Unless Executive and the Company agree on
an alternative accounting firm or law firm, the accounting firm engaged by the
Company for general tax compliance purposes as of the day prior to the effective
date of the change of control transaction shall perform the foregoing
calculations.  If the accounting firm so engaged by the Company is serving as
accountant or auditor for the individual, entity or group effecting the change
of control transaction, the Company shall appoint a nationally recognized
accounting or law firm to make the determinations required by this Section 9. 
The Company shall bear all expenses with respect to the determinations by such
accounting or law firm required to be made hereunder.  The Company shall use
commercially reasonable efforts to cause the accounting or law firm engaged to
make the determinations hereunder to provide its calculations, together with
detailed supporting documentation, to Executive and the Company within fifteen
(15) calendar days after the date on which Executive’s right to a 280G Payment
becomes reasonably likely to occur (if requested at that time by Executive or
the Company) or such other time as requested by Executive or the Company.

 

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(d)                                 If Executive receives a Payment for which
the Reduced Amount was determined pursuant to clause (x) of Section 9(a) and the
Internal Revenue Service determines thereafter that some portion of the Payment
is subject to the Excise Tax, Executive agrees to promptly return to the Company
a sufficient amount of the Payment (after reduction pursuant to clause (x) of
Section 9(a)) so that no portion of the remaining Payment is subject to the
Excise Tax.  For the avoidance of doubt, if the Reduced Amount was determined
pursuant to clause (y) of Section 9(a), Executive shall have no obligation to
return any portion of the Payment pursuant to the preceding sentence.

 

(e)                                  Notwithstanding anything contained herein
to the contrary, the requirements of this Section 9 shall apply only to the
extent the Company has completed an “initial public offering” which results in
the Company’s stock being publicly traded on an applicable public exchange.

 

10.                               Indemnification.  The Company shall indemnify
the Executive to the extent provided in its then current Certificate of
Incorporation or By-Laws.  The Executive agrees to promptly notify the Company
of any actual or threatened claim arising out of or as a result of his
employment with the Company.

 

11.                               Withholding.  All payments made by the Company
under this Agreement shall be reduced by any tax or other amounts required to be
withheld by the Company under applicable law.

 

12.                               Assignment.

 

(a)                                 Neither the Company nor the Executive may
make any assignment of this Agreement or any interest herein, by operation of
law or otherwise, without the prior written consent of the other; provided,
however, that the Company may assign its rights and obligations under this
Agreement without the consent of the Executive in the event that the Executive
is transferred to a position with any of the Affiliates or in the event that the
Company shall hereafter effect a reorganization, consolidate with, or merge
into, any Person or transfer all or substantially all of its properties or
assets to any Person.  This Agreement shall inure to the benefit of and be
binding upon the Company and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns.

 

(b)                                 The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.  As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid.

 

13.                               Severability.  If any covenants or such other
provisions of this Agreement are found to be invalid or unenforceable by a final
determination of a court of competent jurisdiction, (a) the remaining terms and
provisions hereof shall be unimpaired, and (b) the invalid or unenforceable term
or provision hereof shall be deemed replaced by a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision hereof.

 

14.                               Waiver.  No waiver of any provision hereof
shall be effective unless made in writing and signed by the waiving party.  The
failure of either party to require the performance of any term or obligation of
this Agreement, or the waiver by either party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.

 

15.                               Notices.  Any and all notices, requests,
demands and other communications provided for by this Agreement shall be in
writing and shall be effective when delivered in person, consigned to a

 

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reputable national courier service or deposited in the United States mail,
postage prepaid, registered or certified, and addressed to the Executive at his
last known address on the books of the Company or, in the case of the Company,
at its principal place of business, attention of the Compensation Committee of
the Parent Board with a copy to the attention of the Chief Legal Officer, or to
such other address as either party may specify by notice to the other actually
received. Any notice so addressed shall be deemed to be given or received (a) if
delivered by hand, on the date of such delivery, (b) if mailed by courier or by
overnight mail, on the first business day following the date of such mailing,
and (c) if mailed by registered or certified mail, on the third business day
after the date of such mailing.

 

16.                               Entire Agreement.  This Agreement, together
with the Founder Invention and Non-Disclosure Agreement, and the Founder
Non-Solicitation and Non-Competition Agreement, constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings, and agreements between the
parties (including any offer letter given to Executive) relating to the subject
matter of this Agreement, including (without limitation) the Original
Agreement.  Notwithstanding the foregoing, the Company and the Executive
acknowledge that the Executive holds restricted stock of the Parent subject to a
Restricted Stock Agreement and that options and other equity awards have been
and, subject to the discretion and approval of the Parent Board, may be granted
to Executive under and pursuant to the Parent’s 2015 Equity Incentive Plan and
any amendments thereto, as well as additional grants under the Parent’s 2018
Incentive Award Plan or any additional equity plans of the Parent or its
Affiliates, and the award agreements related to such plans (collectively, the
“Awards”); and to the extent that the terms of this Agreement (including without
limitation, Section 6(b)) accelerate the vesting of any such Awards, then the
terms of this Agreement are intended to be in addition to the vesting provisions
of such Awards and are not intended to diminish any vesting rights contained in
such Awards.

 

17.                               Amendment.  This Agreement may be amended or
modified only by a written instrument signed by the Executive and by an
expressly authorized representative of the Company.

 

18.                               Headings.  The headings and captions in this
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement.

 

19.                               Counterparts.  This Agreement may be executed
in two or more counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument.

 

20.                               Governing Law.  This is a Massachusetts
contract and shall be construed and enforced under and be governed in all
respects by the laws of the Commonwealth of Massachusetts, without regard to the
conflict of laws principles thereof.

 

[Signature page follows immediately.]

 

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by the Executive, as of
the date first above written.

 

 

EXECUTIVE

 

KINIKSA PHARMACEUTICALS CORP.

 

 

 

 

 

 

 

 

/s/ Sanj K. Patel

 

By:

/s/ Thomas W. Beetham

Sanj K. Patel

 

Name:

Thomas W. Beetham

 

 

Title:

Executive Vice President, Chief Legal Officer and Corporate Development

 

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