EX-10.17



 Exhibit 10.17 
 CONATUS PHARMACEUTICALS INC. 
 ANNUAL INCENTIVE PLAN 

 

	1.	PURPOSE 

 This Conatus
Pharmaceuticals Inc. Annual Incentive Plan (the “Plan”) is intended to provide an incentive for eligible employees of Conatus Pharmaceuticals Inc. (the “Company”) to perform to the best of their
abilities, to further the growth, development and financial success of the Company, and to enable the Company to attract and retain highly qualified employees. 
  

	2.	PARTICIPANTS 

 All
employees of the Company and its subsidiaries meeting the eligibility requirements set forth in this Section 2 shall be eligible to receive a bonus award (an “Award”) hereunder (each such eligible employee, a
“Participant”). To receive an Award under the Plan with respect to any Incentive Plan Year (as defined below), a Participant must: 
 (a) Be an “Active” employee as of the date of payment of his or her Award. For purposes of this Plan, “Active” shall mean an employee who is actively
employed by the Company, including an employee on an approved leave of absence, such as medical, personal or military leave, but not an employee who has been moved to “inactive” status pursuant to the Company’s employee handbook.

 (b) Be a “Regular Full-Time Employee” at the end of the relevant Incentive Plan Year. For purposes of
this Plan, “Regular Full-Time Employee” shall mean an employee who is regularly scheduled to work at least 20 hours per week. The preceding hours requirement will be prorated for employees out on a medical leave of absence
covered by the federal Family and Medical Leave Act or similar state law. Temporary or seasonal employees, interns, independent contractors and consultants are ineligible to participate in the Plan. 

(c) Have been an eligible employee for at least two consecutive months prior to the end of the relevant Incentive Plan Year. 

(d) Be an employee in good standing (e.g., not on a performance improvement plan) as of the last day of the Incentive Plan Year or the
date the Awards are paid and performing at a minimum level of “Needs Improvement” or higher at the time his or her Award is paid. 
 (e) Not engage in and/or be involuntarily terminated as a result of serious misconduct (e.g., theft, dishonesty, workplace violence) or a violation of Company policy during the Incentive Plan Year
or prior to the payment of his or her Award, as determined by the Company. 
  

	3.	THE COMMITTEE 

 The Plan
shall be administered by a committee (the “Committee”) of the Board of Directors of the Company (the “Board”), which shall be appointed by the Board. Initially, the Compensation Committee of the Board
shall constitute the Committee. The Committee shall have the discretion and authority to administer and interpret the Plan, including the authority to establish one or more bonus programs under the Plan from time to time containing such terms and
conditions as the Committee may determine or deem appropriate in its discretion. 








	4.	PERFORMANCE GOALS 

 The
Plan is intended to provide incentive for the achievement of approved annual corporate and individual objectives (the “Performance Goals”) with respect to each calendar year during the term of the Plan (each an
“Incentive Plan Year”). 
 (a) Corporate Performance Goals. Prior to or at the beginning of each
Incentive Plan Year, the Committee shall select such objective corporate Performance Goals for such Incentive Plan Year as the Committee may determine in its sole discretion. It is intended that the corporate Performance Goals be objectively
determinable and based upon financial metrics set forth in the Company’s annual business plan or strategic objectives consistent with the Company’s annual business plan, with the weighting of the various objectives to be approved by the
Committee. 
 (b) Individual Performance Goals. All Participants in the Plan will work with their managers to develop a
list of key individual Performance Goals, which individual Performance Goals will be subject to the approval of each Participant’s manager. The individual Performance Goals for the executive officers of the Company, if applicable, will be
approved by the Chief Executive Officer of the Company. 
  

	5.	TARGET AWARD PERCENTAGES  


Each Participant will be assigned a “Target Award Percentage” based on his or her job classification and
responsibilities. A Participant’s Target Award Percentage for any given Incentive Plan Year will be based on his or her job classification as of December 31 of such Incentive Plan Year. The Target Award Percentages will be reviewed
annually by the Committee and adjusted as necessary or appropriate. The initial Target Award Percentages for purposes of the Plan will be as follows: 
  

					
	 Position
	  	Target Award Percentage
(% of base salary)	 
		
	 Chief Executive Officer
	  	 	50	% 
	 Senior Vice President
	  	 	35	% 
	 Vice President
	  	 	25	% 
	 Senior Director
	  	 	15	% 
	 Director
	  	 	10	% 
	 Manager
	  	 	7.5	% 
	 Professional
	  	 	5	% 
	 Clerical
	  	 	3	% 

 A “Target Award” for each Participant for each Incentive Plan Year will be
determined by multiplying his or her “Target Award Percentage” by his or her base salary as of December 31 of such Incentive Plan Year. 
  

	6.	WEIGHTINGS 

 Other than
the Chief Executive Officer of the Company, whose Award will be determined solely by reference to corporate Performance Goal achievement as set forth below, a portion of each Participant’s Award will be based on corporate Performance Goal
achievement and a portion will be based on individual Performance Goal achievement. The relative weight between these goals will vary based on levels within the organization. The weighting will be reviewed annually by the Committee and be adjusted,
as necessary or appropriate. 

  
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 The initial weightings for purposes of the Plan will be as follows: 

 

									
	 	  	Corporate	 	 	Individual	 
			
	 Chief Executive Officer
	  	 	100	% 	 	 	0	% 
	 Senior Vice President
	  	 	80	% 	 	 	20	% 
	 Vice President
	  	 	70	% 	 	 	30	% 
	 Senior Director/Director
	  	 	60	% 	 	 	40	% 
	 All other employees
	  	 	50	% 	 	 	50	% 

  

	7.	PERFORMANCE MEASUREMENT 


Separate “Performance Factors” will be established for each of the corporate and individual Performance Goals
applicable to each Award for each Incentive Plan Year. 
 (a) Corporate Performance Factor. The Chief Executive Officer
of the Company will present to the Committee for its approval his assessment of the level of the Company’s achievement of its corporate Performance Goals, in the Committee’s sole discretion. The corporate “Performance Factor”
shall be expressed as a percentage within the range specified by the Committee with respect to each Incentive Plan Year, which percentage may exceed 100%. The same corporate “Performance Factor,” as approved by the Committee, shall be used
for the corporate component of each Participant’s Award. 
 (b) Individual Performance Factor. A Participant’s
achievement level relative to his or her individual Performance Goals will be used to calculate a Performance Factor for such Participant, which shall be expressed as a percentage within the range specified by the Committee or its designee with
respect to each Incentive Plan Year, which percentage may exceed 100%. While a Participant’s direct manager shall take a Participant’s achievement with respect to his or her individual Performance Goals for the Incentive Plan Year into
account in determining the individual Performance Factor, any such determination remains in the sole discretion of the direct manager based on their subjective assessment of a Participant’s overall performance. The proposed individual
Performance Factors for the executive officers of the Company will be presented by the Chief Executive Officer of the Company to the Committee for its approval, which shall retain the sole discretion to determine such executives’ individual
Performance Factors based on its subjective assessment of each executive’s overall performance. 
 (c) Performance
Measurement. Unless otherwise determined by the Committee, the corporate Performance Factor and each individual Performance Factor will be within the following ranges: 

 

			
	 Performance Category
	  	Performance Factor
		
	 1.       Performance for the year was outstanding and exceeded objectives (EC
rating)
	  	100% to 150%
		
	 2.       Performance for the year met or exceeded objectives or was excellent in view of
prevailing conditions (EE rating)
	  	75% to 100%
		
	 3.       Performance generally met the year’s objectives or was very acceptable
in
	  	25% to 75%


  
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	 view of prevailing conditions (ME rating)
	  	
		
	 4.       Performance for the year met some but not all objectives (BE rating)
	  	1% to 25%
		
	 5.       The goal was not achieved and performance was not acceptable in view of prevailing
conditions
	  	0%

 Unless otherwise determined by the Committee, each goal will be evaluated separately, the appropriate
weighting applied and a total Performance Factor determined. 
  

	8.	AWARD CALCULATIONS 

 The
actual Award for a Participant will be calculated by allocating the Target Award for such Participant between the corporate and individual weightings for the relevant Incentive Plan Year, and then applying the corresponding corporate and individual
Performance Factors to each such amount, respectively. 
 The example below shows a sample Award calculation under the Plan.
First, a total Target Award is calculated by multiplying the Plan Participant’s base salary by the Target Award Percentage. The resulting amount is then divided into its corporate component and its individual component, if any, based on the
relative weightings for that Participant’s specific position. This calculation establishes specific dollar Target Award for the Plan year for each component of the Award. 

 

					
	Example:	  	 Position:
	  	Vice President
		  	 Base Salary:
	  	$200,000
		  	 Target Award Percentage:
	  	25%
		  	 Target Award (in dollars):
	  	$50,000
		
		  	 Assumed Performance Factors based on the following assessment of corporate and individual
performance:

		  	 Corporate Performance Factor
	  	90%
		  	 Individual Performance Factor
	  	100%
			
		  	 Award Calculation:
	  	
		
		  	 Target Award components (based on weightings):

		  	 Corporate performance (70%):
	  	$35,000
		  	 Individual performance (30%):
	  	$15,000
			
		  	 Corporate component
	  	$31,500 ($35,000 x 90%)
		  	 Individual component
	  	$15,000 ($15,000 x 100%)
			
		  	Total Award:	  	$46,500 (93% of Target Award)

 Award calculations will be based on a Participant’s base salary as of the last day of the applicable
Incentive Plan Year. 

  
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 A Participant who has been an eligible employee for less than a year, but who is an eligible
employee for at least two months prior to the end of an Incentive Plan Year and remains continuously employed through the end of such Incentive Plan Year, will receive a pro-rata Award based on the portion of the Incentive Plan Year he or she was an
eligible employee. Award payments may also be prorated for any time during an Incentive Plan Year an otherwise eligible employee was not classified as an Active employee or Regular Full-Time Employee during such Incentive Plan Year, in the
discretion of the Committee. Other than as stated above, Awards will not be prorated for partial year service. 
 The Committee
may, in its discretion, reduce or eliminate an Award otherwise payable to any Participant. Any such reduction or elimination may be made based on such objective or subjective determinations as the Committee determines appropriate. 

 

	9.	PAYMENT OF AWARDS 

 The
payment of Awards under the Plan shall be made on any date or dates determined by the Committee during the calendar year following the Incentive Plan Year to which such Awards relate and shall be subject to such terms and conditions as may be
determined by the Committee in its sole discretion. As provided in Section 2, a Participant must be an Active employee of the Company or its subsidiaries and in good standing as of the date on which the Award is paid in order to be entitled to
receive such Award. If a Participant dies or a Participant’s employment is terminated for any reason prior to the payment of his or her Award, the payment of any Award (and in the case of death, the person or persons to whom such payment shall
be made) shall be determined at the sole discretion of the Committee. 
 Any Award that becomes payable under the Plan may be
paid in the form of cash, shares of the Company’s common stock or a combination of both, as determined by the Committee in its sole discretion. To the extent that the Committee determines to pay an Award in the form of shares of the
Company’s common stock, such shares shall be awarded under the Company’s 2013 Incentive Award Plan, as amended from time to time, and shall be subject to the terms and conditions thereof. 

 

	10.	AMENDMENT, SUSPENSION AND TERMINATION 

 The Company may amend, suspend or terminate the Plan at any time in its sole discretion. Such discretion may be exercised any time before, during, and after the Plan year is completed. In the event of the
Plan’s termination prior to the payment of an Award, such Award will not be payable under this Plan. Such discretion may be exercised any time before, during and after the Incentive Plan Year is completed. No Participant shall have any vested
right to receive any payment until actual delivery of such compensation. This Plan shall supersede and replace the Company’s Employee Incentive Compensation Plan. 
  


	11.	MISCELLANEOUS 

 (a) The
Company shall deduct all federal, state, and local taxes required by law or Company policy from any Award paid hereunder. 
 (b)
In no event shall the Company be obligated to pay to any Participant an Award for any period by reason of the Company’s payment of an Award to such Participant in any other period, or by reason of the Company’s payment of an Award to any
other Participant or Participants in such period or in any other period. 

  
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 (c) This Plan does not, and Company policies and practices in administering this Plan do
not, constitute an express or implied contract or other agreement concerning the payment of any Award or the duration of any Participant’s employment with the Company. The employment relationship of each Participant is “at will” and
may be terminated at any time by the Company or by the Participant, with or without cause. 
 (d) The Plan shall be unfunded.
Amounts payable under the Plan are not and will not be transferred into a trust or otherwise set aside. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of
any Award under the Plan. Any accounts under the Plan are for bookkeeping purposes only and do not represent a claim against the specific assets of the Company. 
 (e) No rights of any Participant to payments of any amounts under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated. All rights with respect to an Award granted
to a Participant under the Plan shall be available during his or her lifetime only to the Participant. 
 (f) Any provision of
the Plan that is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Plan. 

(g) The Plan shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of
California (without regard to principles of conflicts of law). 

  
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