Exhibit 10.5


 


Daniel
Grau


Name
of Employee


 


COMBINATORX,
INCORPORATED


2004
Incentive Plan


 


Restricted
Stock Award Agreement


 


CombinatoRx, Incorporated

650 Albany St.


Boston, MA 02118


 


Attn:  Alexis Borisy


 


Ladies and Gentlemen:


 


The undersigned (i) acknowledges
that he has received an award (the “Award”) of restricted stock from CombinatoRx,
Incorporated (the “Company”) under the 2004 Incentive Plan (the “Plan”),
subject to the terms set forth below and in the Plan; (ii) further acknowledges
receipt of a copy of the Plan as in effect on the date hereof; and (iii) agrees
with the Company as follows:


 


1.               Effective
Date.  This
Agreement shall take effect as of January 26, 2006, which is the date of grant
of the Award.


 


2.               Shares
Subject to Award.  The Award
consists of 50,000 shares (the “Shares”) of common stock of the Company (“Stock”).  The undersigned’s rights to the Shares are
subject to the restrictions described in this Agreement and the Plan (which is
incorporated herein by reference with the same effect as if set forth herein in
full) in addition to such other restrictions, if any, as may be imposed by law.


 


3.               Meaning
of Certain Terms.  Except as
otherwise expressly provided, all terms used herein shall have the same meaning
as in the Plan.  The term “vest” as used
herein with respect to any Share means the lapsing of the restrictions described
herein with respect to such Share.


 


4.               Nontransferability
of Shares.  The Shares
acquired by the undersigned pursuant to this Agreement shall not be sold,
transferred, pledged, assigned or otherwise encumbered or disposed of except as
provided below and in the Plan.


 


5.               Accelerated
Vesting of Unvested Shares After a Change of Control.  If a Change of Control (as defined below)
occurs, and within two (2) years following the consummation date of such Change
of Control the Company terminates employment of the undersigned other than for
Cause (as defined below), then all unvested Shares will immediately become
vested.


 


For purposes of this
Agreement, the term “Change of Control” shall mean: (a) a sale, merger or
consolidation after which securities possessing more than fifty (50%) percent
of the total combined voting power of the Company’s outstanding securities have
been transferred to or acquired by a person or persons different from the
persons who held such percentage of the total combined voting power immediately
prior to such transaction; or (b) the sale, transfer or 


 

















 


other disposition of all or
substantially all of the Company’s assets to one or more persons (other than a
wholly owned subsidiary of the Company or a parent company whose stock
ownership after the transaction is the same as the Company’s ownership before
the transaction); or (c) an acquisition, merger or similar transaction or a
divestiture of a substantial portion of the Company’s business after which the
role of the undersigned is not substantially the same as such role prior to the
transaction.


 


For the purposes of this
Agreement, the term “Cause”
shall mean (a) the conviction of the undersigned of any felony; (b) the willful
failure to perform or gross negligence in the performance of the duties and
responsibilities of the undersigned in accordance with the terms or
requirements of his employment, which neglect or dereliction of duties and
responsibilities continues 30 days after written notice given to the
undersigned; (c) material breach by the
undersigned of any terms or requirements of his employment, which breach
continues or remains uncured after thirty (30) days’ notice to the undersigned setting
forth in reasonable detail the nature of such breach; or (d) engaging in
material fraudulent conduct toward the Company. A determination that there is
for Cause termination of the undersigned’s employment shall be made by Chief
Executive Officer in good faith, and only after notice to undersigned providing
in reasonable detail the nature of the Cause and providing the undersigned an
opportunity to be heard by the Chief Executive Officer.


 


6.               Forfeiture
Risk.  If the
undersigned ceases to be employed by the Company and its subsidiaries because
of death or disability or for any reason other than as specified in Section 5
above, any then outstanding and unvested Shares acquired by the undersigned
hereunder shall be automatically and immediately forfeited.  With respect to any Shares that are forfeited
under this Section 6, the undersigned hereby (i) appoints the Company as the
attorney-in-fact of the undersigned to take such actions as may be necessary or
appropriate to effectuate a transfer of the record ownership of any such shares
that are unvested and forfeited hereunder, (ii) agrees to deliver to the
Company, as a precondition to the issuance of any certificate or certificates
with respect to unvested Shares hereunder, one or more stock powers, endorsed
in blank, with respect to such Shares, and (iii) agrees to sign such other
powers and take such other actions as the Company may reasonably request to
accomplish the transfer or forfeiture of any unvested Shares that are forfeited
hereunder.


 


7.               Retention
of Certificates.  Any
certificates representing unvested Shares shall be held by the Company.  If unvested Shares are held in book entry
form, the undersigned agrees that the Company may give stop transfer
instructions to the depository to ensure compliance with the provisions hereof.


 


8.               Vesting
of Shares.  The shares
acquired hereunder shall vest in accordance with the provisions of this Section
8 and applicable provisions of the Plan, as follows: 50% percent of the Shares
on January 26, 2007 and an additional 12.5% on each three months anniversary thereafter
until January 26, 2008.


 


Notwithstanding
the foregoing, no shares shall vest on any vesting date specified above unless
the undersigned is then, and since the date of grant has continuously been, employed
by the Company or its subsidiaries.


 


9.               Legends.  Any certificates representing unvested Shares
shall be held by the Company, and any such certificate shall contain legends substantially
in the following form:


 


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THE TRANSFERABILITY OF THIS
CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
AND CONDITIONS (INCLUDING FORFEITURE) OF THE 2004 INCENTIVE PLAN AND A
RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND COMBINATORX,
INCORPORATED.  COPIES OF SUCH PLAN AND
AGREEMENT ARE ON FILE IN THE OFFICES OF COMBINATORX, INCORPORATED.


 


THESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.


 


As soon as practicable following the vesting of any
such Shares the Company shall cause a certificate or certificates covering such
vested Shares to be issued and delivered to the undersigned without the first
legend set forth above referencing the Restricted Stock Award Agreement.  If any Shares are held in
book-entry form, the Company may take such steps as it deems necessary or
appropriate to record and manifest the restrictions applicable to such Shares.


 


10.         Dividends, etc..  The undersigned shall be entitled to (i)
receive any and all dividends or other distributions paid with respect to those
Shares of which he is the record owner on the record date for such dividend or
other distribution, and (ii) vote any Shares of which he is the record owner on
the record date for such vote; provided, however,
that any property (other than cash) distributed with respect to a share of
Stock (the “associated share”) acquired hereunder, including without limitation
a distribution of Stock by reason of a stock dividend, stock split or
otherwise, or a distribution of other securities with respect to an associated
share, shall be subject to the restrictions of this Agreement in the same
manner and for so long as the associated share remains subject to such
restrictions, and shall be promptly forfeited if and when the associated share
is so forfeited;  and
further provided, that the Administrator may require that any cash
distribution with respect to the Shares other than a normal cash dividend be
placed in escrow or otherwise made subject to such restrictions as the
Administrator deems appropriate to carry out the intent of the Plan.  References in this Agreement to the Shares
shall  refer, mutatis
mutandis, to any such restricted amounts.


 


11.         Sale of Vested Shares.  The undersigned understands
that he will be free to sell any Share once it has vested, subject to (i)
satisfaction of any applicable tax withholding requirements with respect to the
vesting or transfer of such Share; (ii) the completion of any
administrative steps (for example, but without limitation, the transfer of
certificates) that the Company may reasonably impose; and (iii) applicable
requirements of federal and state securities laws.


 


12.         Certain Tax Matters.  The undersigned expressly acknowledges the
following:


 


a.               The undersigned has been
advised to confer promptly with a professional tax advisor to consider whether
the undersigned should make a so-called “83(b) election” with respect to the
Shares.  Any such election, to be
effective, must be made in accordance with applicable regulations and within
thirty (30) days following the date of this Award.  The Company has made no recommendation to the
undersigned with respect to the advisability of making such an election.


 


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b.              The award or vesting of the
Shares acquired hereunder, and the payment of dividends with respect to such Shares,
may give rise to “wages” subject to withholding.  The undersigned expressly acknowledges and
agrees that his rights hereunder are subject to his promptly paying to the
Company in cash (or by such other means as may be acceptable to the Company in
its discretion, including, if the Administrator so determines, by the delivery
of previously acquired Stock or shares of Stock acquired hereunder or by the
withholding of amounts from any payment hereunder) all taxes required to be
withheld in connection with such award, vesting or payment.


 


	
   

  	
  Very truly yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Daniel Grau

  	
   

  
	
   

  	
  (Signature of Employee)

  	
   

  
	
   

  	
   

  	
   

  



Dated:


 


The foregoing Restricted Stock

Award Agreement is hereby accepted:


 


COMBINATORX, INCORPORATED


 


 


	
  By

  	
  /s/ Alexis Borisy

  	
   

  



 


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