Document:

Exhibit 4.5

 

WARRANT TO PURCHASE ORDINARY SHARES 

REPRESENTED BY AMERICAN DEPOSITARY SHARES

 

KITOV PHARMACEUTICALS HOLDINGS LTD.

 

	American Depositary Shares: _______	 	Initial Exercise Date: _________ __, 2016
	 	 	 
	 	 	Date of Issuance _________ __, 2016

 

THIS WARRANT TO PURCHASE
ORDINARY SHARES REPRESENTED BY AMERICAN DEPOSITARY SHARES (the “Warrant”) certifies that, for value received,
_____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise
and the conditions hereinafter set forth, at any time on or after _________ __, 2016 (the “Initial Exercise Date”)
and, in accordance with FINRA Rule 5110(f)(2)(G)(i), will expire at 5:00 p.m. (New York time) on the date that is five (5) years
following the Date of Issuance (the “Termination Date”) but not thereafter, to subscribe for and purchase from
Kitov Pharmaceuticals Holdings Ltd., an Israeli company (the “Company”), up to ______ ordinary shares, no par
value per share, of the Company (the “Warrant Shares”) which are represented by ________ American Depositary
Shares (each, an “ADS” and, collectively, the “ADSs” and the ADSs issuable upon exercise
of this Warrant, the “Warrant ADSs”), as subject to adjustment hereunder. The purchase price of one Warrant
ADS shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.          Definitions.
In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section
1:

 

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board
of Directors” means the board of directors of the Company.

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.

 

“Commission”
means the United States Securities and Exchange Commission.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Liens”
means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

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“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading
Day” means a day on which the New York Stock Exchange is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which ADSs and/or the Ordinary Shares are listed or quoted
for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange or the Tel Aviv Stock Exchange (or any successors to any of the foregoing).

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the ADSs are then listed or
quoted on a Trading Market, the daily volume weighted average price of the ADS for such date (or the nearest preceding date) on
the Trading Market on which an ADS is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of an ADS for such date (or the nearest preceding date) on the OTCQB or OTCQX as applicable, (c) if ADSs are not
then listed or quoted for trading on the OTCQB or OTCQX and if prices for ADSs are then reported in the “Pink Sheets”
published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of an ADS so reported, or (d) in all other cases, the fair market value of an ADS as determined
by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses
of which shall be paid by the Company.

 

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Section 2.          Exercise.

 

a)        Exercise
of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company
and the Depositary) of a duly executed facsimile copy of the Notice of Exercise in the form annexed hereto. Within three (3) Trading
Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant ADSs specified
in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless
exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. Notwithstanding anything
herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has
purchased all of the Warrant ADSs available hereunder and the Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant
ADSs available hereunder shall have the effect of lowering the outstanding number of Warrant ADSs purchasable hereunder in an amount
equal to the applicable number of Warrant ADSs purchased. The Holder and the Company shall maintain records showing the number
of Warrant ADSs purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within
two (2) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant ADSs hereunder, the
number of Warrant ADSs available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b)        Exercise
Price. The exercise price per ADS under this Warrant shall be $_______1,
subject to adjustment hereunder (the “Exercise Price”).

 

c)        Cashless
Exercise. If at any time after the 6 months anniversary of the Initial Exercise Date, there is no effective registration statement
registering, or the prospectus contained therein is not available for the issuance of the Warrant ADSs to the Holder, then this
Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive the number of Warrant ADSs equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the
VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless
exercise,” as set forth in the applicable Notice of Exercise;

 

(B) = the
Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) =
the number of Warrant ADSs that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a cashless exercise.

 

  

 

1
Higher of (i) 120% of the per Class A Unit price paid by the investors in
the offering, and (ii) the exercise price of the Series A Warrants (as defined in the Prospectus) immediately following the closing
of the Offering.

   

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If
Warrant ADSs are issued in such a “cashless exercise,” the parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Warrant ADSs shall take on the registered characteristics of the Warrants being exercised, and
the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant ADSs.  The Company
agrees not to take any position contrary to this Section 2(c).

 

Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant
to this Section 2(c).

 

d)           Mechanics
of Exercise.

 

i.            Delivery
of Warrant ADSs Upon Exercise. The Company shall cause its registrar to deposit the Warrant Shares subject to such exercise
with the Israeli custodian of The Bank of New York Mellon, the Depositary for the ADSs (the “Depositary”), and
cause the Depositary to credit the account of the Holder’s prime broker with The Depository Trust Company through its Deposit/Withdrawal
At Custodian system (“DWAC”) if the Depositary is then a participant in such system and either (A) there is
an effective registration statement permitting the issuance of the Warrant ADSs to or resale by the Holder or (B) the Warrant ADSs
are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 and, in either case, the
Warrant ADSs have been sold by the Holder prior to the Warrant ADS Delivery Date (as defined below), and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise, by the date that is three (3) Trading Days after the
delivery to the Company of the Notice of Exercise (such date, the “Warrant ADS Delivery Date”), provided that
the Company shall not be obligated to deliver the Warrant ADSs hereunder unless the Company has received the aggregate Exercise
Price on or before the Warrant ADS Delivery Date. If the Warrant ADSs can be delivered via DWAC, then in addition to the delivery
of the Warrant Shares to the Depositary, within 3 Trading Days of the applicable exercise, the Depositary shall have received from
the Company any legal opinions or other documentation required by the Depositary to deliver such ADSs without legend (subject to
receipt by the Company of reasonable back up documentation from the Underwriter, including with respect to affiliate status) and,
if applicable and requested by the Company prior to the Warrant ADS Delivery Date, the Depositary shall have received from the
Holder a confirmation of sale of the Warrant ADSs (provided the requirement of the Holder to provide a confirmation as to the sale
of Warrant ADSs shall not be applicable to the issuance of unlegended Warrant ADSs upon a cashless exercise of this Warrant if
the Warrant ADSs are then eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares represented by the Warrant ADSs shall
be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become
the holder of record of such Warrant Shares represented by the Warrant ADSs for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to
be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such Warrant ADSs having been paid. If the
Company fails for any reason to deliver to the Holder the Warrant ADSs subject to a Notice of Exercise by the second Trading Day
following the Warrant ADS Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty,
for each $1,000 of Warrant ADSs subject to such exercise (based on the VWAP of an ADS on the date of the applicable Notice of Exercise),
$10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue)
for each Trading Day after the second Trading Day following such Warrant ADS Delivery Date until such Warrant ADSs are delivered
or Holder rescinds such exercise.

 

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ii.         Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the Warrant ADSs, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant ADSs called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iii.         Rescission
Rights. If the Company fails to cause the Depositary to deliver to the Holder the Warrant ADSs pursuant to Section 2(d)(i)
by the Warrant ADS Delivery Date, then the Holder will have the right to rescind such exercise; provided, however,
that the Holder shall be required to return any Warrant ADSs or Ordinary Shares subject to any such rescinded exercise notice concurrently
with the return to Holder of the aggregate Exercise Price paid to the Company for such Warrant ADSs and the restoration of Holder’s
right to acquire such Warrant ADSs pursuant to this Warrant (including, issuance of a replacement warrant certificate evidencing
such restored right).

 

iv.         Compensation
for Buy-In on Failure to Timely Deliver Warrant ADSs Upon Exercise. In addition to any other rights available to the Holder,
if the Company fails to cause the Depositary to deliver to the Holder the Warrant ADSs in accordance with the provisions of Section
2(d)(i) above on or before second Trading Day following the Warrant ADS Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases,
ADSs to deliver in satisfaction of a sale by the Holder of the Warrant ADSs which the Holder anticipated receiving upon such exercise
(a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the ADSs so purchased exceeds (y) the amount obtained by multiplying
(1) the number of Warrant ADSs that the Company was required to deliver to the Holder in connection with the exercise at issue
times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent number of Warrant ADSs for which such exercise was not honored
(in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of ADSs that would have been issued
had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases ADSs
having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of ADSs with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall
be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit
a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver ADSs upon
exercise of the Warrant as required pursuant to the terms hereof.

 

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v.           No
Fractional Shares or Scrip. No fractional Warrant Shares or Warrant ADSs shall be issued upon the exercise of this Warrant.
As to any fraction of an ADS which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at
its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price or round up to the next whole ADS.

 

vi.         Charges,
Taxes and Expenses. Issuance of Warrant ADSs shall be made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant ADSs, all of which taxes and expenses shall be paid by the Company,
and such Warrant ADSs shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided,
however, that in the event that Warrant ADSs are to be issued in a name other than the name of the Holder, this Warrant
when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company
may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The
Company shall pay all Depositary fees required for same-day processing of any Notice of Exercise.

 

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vii.         Closing
of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

e)            Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and the Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates and any
other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, collectively, the
“Attribution Parties”) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of Ordinary Shares beneficially owned by the Holder and its Attribution Parties
shall include the number of Ordinary Shares underlying ADSs held by the Holder and its Attribution Parties plus the number of Ordinary
Shares underlying ADSs issuable upon exercise of this Warrant with respect to which the determination is being made, but shall
exclude the number of Ordinary Shares underlying ADSs which would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any Attribution Parties and (ii) exercise or conversion of the nonexercised
or nonconverted portion of any other securities of the Company (including, without limitation, any Ordinary Share Equivalents)
subject to a limitation on conversion or exercise analogous to the limitation contained herein that are beneficially owned by the
Holder or any of its Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.
To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with any Attribution Parties) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be
the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together
with any Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination
as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding Ordinary Shares,
the Holder may rely on the number of Ordinary Shares as reflected in (x) the Company's most recent Annual Report on Form 20-F,
Current Report on Form 6-K or other public filing with the Commission, as the case may be, (y) a more recent public announcement
by the Company or (z) any other written notice by the Company or Depositary setting forth the number of Ordinary Shares outstanding.
Upon the written or oral request of the Holder, the Company shall within two (2) Trading Days confirm orally and in writing or
by electronic mail to the Holder the number of Ordinary Shares then outstanding. In any case, the number of outstanding Ordinary
Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant,
by the Holder and any Attribution Party since the date as of which such number of outstanding Ordinary Shares was reported. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of Ordinary Shares outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the
Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of Ordinary Shares outstanding immediately after giving effect to
the issuance of Ordinary Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall
continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the sixty-first (61st)
day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant. 

 

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Section 3.          Certain
Adjustments.

 

a)        Share
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a share dividend or otherwise
makes a distribution or distributions on its Ordinary Shares or ADSs or any other equity or equity equivalent securities payable
in Ordinary Shares or ADSs (which, for avoidance of doubt, shall not include any ADSs issued by the Company upon exercise of this
Warrant), as applicable, (ii) subdivides outstanding Ordinary Shares or ADSs into a larger number of shares or ADSs, as applicable,
(iii) combines (including by way of reverse share split) outstanding Ordinary Shares or ADSs into a smaller number of shares or
ADSs, as applicable, or (iv) issues by reclassification of Ordinary Shares, ADSs or any shares of capital stock of the Company,
as applicable, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number
of Ordinary Shares or ADSs, as applicable, (excluding treasury shares, if any) outstanding immediately before such event and of
which the denominator shall be the number of Ordinary Shares or ADSs, as applicable, outstanding immediately after such event,
and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision, combination or re-classification. For the purposes
of clarification, the Exercise Price of this Warrant will not be adjusted in the event that the Company or any Subsidiary thereof,
as applicable, sells or grants any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue
(or announce any offer, sale, grant or any option to purchase or other disposition) any Ordinary Shares or Ordinary Share Equivalents,
at an effective price per share less than the Exercise Price then in effect.

 

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b)        [RESERVED]

 

c)        Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues
or sells any Ordinary Share Equivalents or rights to purchase shares, warrants, securities or other property pro rata to the record
holders of any class of Ordinary Shares or ADSs (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of Ordinary Shares or ADSs acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date
as of which the record holders of Ordinary Shares or ADSs are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such ADSs as a result of such Purchase Right to such extent) and such Purchase Right to such
extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).

 

d)        Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend (other
than cash dividends) or other distribution of its assets (or rights to acquire its assets) to holders of Ordinary Shares or ADSs,
by way of return of capital or otherwise (including, without limitation, any distribution of shares or other securities, property
or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of Ordinary Shares or ADSs acquirable upon complete exercise of this Warrant (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record
is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Ordinary Shares or ADSs
are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's
right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the
Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any Ordinary
Shares or ADSs as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance
for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution,
such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.

 

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e)        Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets
in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of Ordinary Shares are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Ordinary
Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares is effectively
converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more
related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other
Person or group acquires more than 50% of the outstanding ADSs (not including any ADSs held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement
or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately
prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section
2(e) on the exercise of this Warrant), the number of shares of capital stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of Ordinary Shares or ADSs for which this Warrant
is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to
apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one Ordinary Share
or ADS, as applicable, in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Ordinary Shares or ADSs are given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction
in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable
delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this
Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this
Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity)
equivalent to the Ordinary Shares or ADSs acquirable and receivable upon exercise of this Warrant (without regard to any limitations
on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative value of the Ordinary Shares or ADSs pursuant to
such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise
price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations
of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been
named as the Company herein.

 

    	 	10	 

     

    

 

f)           Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of an ADS, as the case may be. For
purposes of this Section 3, the number of Ordinary Shares or ADSs, as applicable, deemed to be issued and outstanding as of a given
date shall be the sum of the number of Ordinary Shares or ADSs, as applicable, (excluding treasury shares, if any) issued and outstanding.

 

g)           Notice
to Holder.

 

i.            Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of
Warrant ADSs and setting forth a brief statement of the facts requiring such adjustment.

 

ii.           Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Ordinary Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Ordinary Shares or
ADSs, (C) the Company shall authorize the granting to all holders of the Ordinary Shares or ADSs rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company
shall be required in connection with any reclassification of the Ordinary Shares or ADSs, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share
exchange whereby the Ordinary Shares are converted into other securities, cash or property, or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company
shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least
20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Ordinary Shares or ADSs of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the
Ordinary Shares of record shall be entitled to exchange their Ordinary Shares for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified
in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant
to a Report on Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

    	 	11	 

     

    

 

Section 4.          Transfer
of Warrant.

 

a)        Transferability.
Pursuant to FINRA Rule 5110(g)(1), neither this Warrant nor any Warrant ADSs issued upon exercise of this Warrant shall be sold,
transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction
that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following
the date of effectiveness or commencement of sales of the offering pursuant to which this Warrant is being issued, except the transfer
of any security:

 

i.            by
operation of law or by reason of reorganization of the Company;

 

ii.         to
any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred remain
subject to the lock-up restriction in this Section 4(a) for the remainder of the time period;

 

iii.         if
the aggregate amount of securities of the Company held by the Holder or related person do not exceed 1% of the securities being
offered;

 

    	 	12	 

     

    

 

iv.         that
is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages
or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity
in the fund; or

 

v.           the
exercise or conversion of any security, if all securities received remain subject to the lock-up restriction in this Section 4(a)
for the remainder of the time period.

 

Subject to
the foregoing restriction, any applicable securities laws and the conditions set forth in Section 4(d), this Warrant and all rights
hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially
in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified
in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant ADSs without having a new Warrant issued.

 

b)        New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial
issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant ADSs issuable pursuant
thereto.

 

c)        Warrant
Register; No Registration Rights. The Company shall register this Warrant, upon records to be maintained by the Company for
that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. The Holder acknowledges, by receipt
of this Warrant, that the Company is not obligated to register for resale the Warrant ADSs underlying this Warrant.

 

    	 	13	 

     

    

 

d)        Representation
by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any
exercise hereof, will acquire the Warrant ADSs issuable upon such exercise, for its own account and not with a view to or for distributing
or reselling such Warrant ADSs or any part thereof in violation of the Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities Act.

 

Section 5.
        Miscellaneous.

 

a)        No
Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

b)        Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any certificate relating to the Warrant ADSs,
and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant,
shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of
such Warrant or stock certificate.

 

c)        Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

d)        Authorized
Shares.

 

The Company covenants
that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Ordinary Shares a sufficient
number of shares to provide for the issuance of the Warrant ADSs and underlying Ordinary Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant ADSs may be issued as
provided herein without violation of any applicable law or regulation, or of any requirements of the applicable Trading Market
upon which the Ordinary Shares and ADSs may be listed. The Company covenants that all Warrant ADSs which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant
and payment for such Warrant ADSs in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).

 

    	 	14	 

     

    

 

Except and
to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting
the generality of the foregoing, the Company will (i) not increase the par value of any Warrant ADSs above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Warrant ADSs upon the exercise of this Warrant
and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking
any action which would result in an adjustment in the number of Warrant ADSs for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any
public regulatory body or bodies having jurisdiction thereof.

 

e)        Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Letter Agreement, dated May 20, 2016, between the Company and H.C. Wainwright & Co., LLC, as amended.

   

f)         Restrictions.
The Holder acknowledges that the Warrant ADSs acquired upon the exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

g)        Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision
of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to
cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

    	 	15	 

     

    

 

h)        Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.

 

i)         Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase
Warrant ADSs, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder
for the purchase price of any Ordinary Shares or ADSs or as a shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.

 

j)         Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.

 

k)        Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant ADSs.

 

l)         Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)        Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.

 

n)        Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.

 

********************

 

(Signature Page Follows)

 

    	 	16	 

     

    

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	 	KITOV PHARMACEUTICALS HOLDINGS LTD.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	 	17	 

     

    

 

NOTICE OF EXERCISE

 

		To:	KITOV PHARMACEUTICALS HOLDINGS LTD.,
	 	 	the bank of new york mellon

 

(1)  The undersigned
hereby elects to purchase ________ Warrant ADSs of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)  Payment
shall take the form of (check applicable box):

 

☐  in lawful money of the United States; or

 

☐ if permitted
the cancellation of such number of Warrant ADSs as is necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant ADSs purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).

 

(3)  Please
register and issue said Warrant ADSs in the name of the undersigned or in such other name as is specified below:

 

	 	 	 	 

 

The Warrant ADSs shall be delivered to
the following DWAC Account Number or by physical delivery of a certificate to:

 

	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

(4)  Accredited
Investor. If the Warrant is being exercised via cash exercise, the undersigned is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as amended.

   

[SIGNATURE
OF HOLDER]

 

	Name of Investing Entity:	 

	Signature of Authorized Signatory of Investing Entity:	 

	Name of Authorized Signatory:	 

	Title of Authorized Signatory:	 

	Date:	 

 

     

     

    

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [____]
all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________
whose address is

 

_______________________________________________________________.

 

_______________________________________________________________

 

	 	Dated:  ______________, _______	 

 

	 	Holder’s Signature:	 	 
	 	 	 	 
	 	Holder’s Address:	 	 
	 	 	 	 
	 	 	 	 

 

NOTE: The signature to this Assignment
Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever.
Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority
to assign the foregoing Warrant.EX-10.36

 Exhibit 10.36 

VANDA PHARMACEUTICALS INC. 

2016 EQUITY INCENTIVE PLAN 

(ADOPTED EFFECTIVE AS OF JUNE 16, 2016) 

 TABLE OF CONTENTS 

 

							
	 	 	 	  	Page	 
	 ARTICLE 1.
	 	 INTRODUCTION
	  	 	1	  
			
	 ARTICLE 2.
	 	 ADMINISTRATION
	  	 	1	  
	 2.1
	 	 Committee Composition
	  	 	1	  
	 2.2
	 	 Committee Responsibilities
	  	 	1	  
	 2.3
	 	 Committee for Non-Officer Grants
	  	 	2	  
			
	 ARTICLE 3.
	 	 SHARES AVAILABLE FOR GRANTS
	  	 	2	  
	 3.1
	 	 Basic Limitation
	  	 	2	  
	 3.2
	 	 Shares Returned to Reserve
	  	 	2	  
			
	 ARTICLE 4.
	 	 ELIGIBILITY
	  	 	2	  
	 4.1
	 	 Incentive Stock Options
	  	 	2	  
	 4.2
	 	 Other Grants
	  	 	3	  
			
	 ARTICLE 5.
	 	 OPTIONS
	  	 	3	  
	 5.1
	 	 Stock Option Agreement
	  	 	3	  
	 5.2
	 	 Number of Shares
	  	 	3	  
	 5.3
	 	 Exercise Price
	  	 	3	  
	 5.4
	 	 Exercisability and Term
	  	 	3	  
	 5.5
	 	 Effect of Change in Control
	  	 	3	  
	 5.6
	 	 Modification or Assumption of Options
	  	 	4	  
			
	 ARTICLE 6.
	 	 PAYMENT FOR OPTION SHARES
	  	 	4	  
	 6.1
	 	 General Rule
	  	 	4	  
	 6.2
	 	 Surrender of Stock
	  	 	4	  
	 6.3
	 	 Exercise/Sale
	  	 	4	  
	 6.4
	 	 Promissory Note
	  	 	4	  
	 6.5
	 	 Other Forms of Payment
	  	 	4	  
			
	 ARTICLE 7.
	 	 STOCK APPRECIATION RIGHTS
	  	 	4	  
	 7.1
	 	 SAR Agreement
	  	 	4	  
	 7.2
	 	 Number of Shares
	  	 	5	  
	 7.3
	 	 Exercise Price
	  	 	5	  
	 7.4
	 	 Exercisability and Term
	  	 	5	  
	 7.5
	 	 Effect of Change in Control
	  	 	5	  
	 7.6
	 	 Exercise of SARs
	  	 	5	  
	 7.7
	 	 Modification or Assumption of SARs
	  	 	5	  
			
	 ARTICLE 8.
	 	 RESTRICTED SHARES
	  	 	6	  
	 8.1
	 	 Restricted Stock Agreement
	  	 	6	  
	 8.2
	 	 Payment for Awards
	  	 	6	  
	 8.3
	 	 Vesting Conditions
	  	 	6	  
	 8.4
	 	 Voting and Dividend Rights
	  	 	7	  

  
 i 

							
	 ARTICLE 9.
	 	 STOCK UNITS
	  	 	7	  
	 9.1
	 	 Stock Unit Agreement
	  	 	7	  
	 9.2
	 	 Payment for Awards
	  	 	7	  
	 9.3
	 	 Vesting Conditions
	  	 	7	  
	 9.4
	 	 Voting and Dividend Rights
	  	 	7	  
	 9.5
	 	 Form and Time of Settlement of Stock Units
	  	 	8	  
	 9.6
	 	 Death of Recipient
	  	 	8	  
	 9.7
	 	 Creditors’ Rights
	  	 	8	  
			
	 ARTICLE 10.
	 	 PROTECTION AGAINST DILUTION
	  	 	8	  
	 10.1
	 	 Adjustments
	  	 	8	  
	 10.2
	 	 Dissolution or Liquidation
	  	 	9	  
	 10.3
	 	 Reorganizations
	  	 	9	  
			
	 ARTICLE 11.
	 	 AWARDS UNDER OTHER PLANS
	  	 	10	  
			
	 ARTICLE 12.
	 	 PAYMENT OF DIRECTOR’S FEES IN SECURITIES
	  	 	10	  
	 12.1
	 	 Effective Date
	  	 	10	  
	 12.2
	 	 Elections to Receive NSOs, Restricted Shares or Stock Units
	  	 	10	  
	 12.3
	 	 Number and Terms of NSOs, Restricted Shares or Stock Units
	  	 	11	  
			
	 ARTICLE 13.
	 	 LIMITATION ON RIGHTS
	  	 	11	  
	 13.1
	 	 Retention Rights
	  	 	11	  
	 13.2
	 	 Stockholders’ Rights
	  	 	11	  
	 13.3
	 	 Regulatory Requirements
	  	 	11	  
			
	 ARTICLE 14.
	 	 TAXES
	  	 	11	  
	 14.1
	 	 General Withholding Obligations
	  	 	11	  
	 14.2
	 	 Share Withholding
	  	 	11	  
	 14.3
	 	 Code Section 409A Matters
	  	 	12	  
			
	 ARTICLE 15.
	 	 LIMITATION ON PAYMENTS
	  	 	12	  
	 15.1
	 	 Scope of Limitation
	  	 	12	  
	 15.2
	 	 Basic Rule
	  	 	12	  
	 15.3
	 	 Reduction of Payments
	  	 	13	  
	 15.4
	 	 Overpayments and Underpayments
	  	 	13	  
	 15.5
	 	 Related Corporations
	  	 	13	  
			
	 ARTICLE 16.
	 	 FUTURE OF THE PLAN
	  	 	13	  
	 16.1
	 	 Term of the Plan
	  	 	13	  
	 16.2
	 	 Amendment or Termination
	  	 	14	  
	 16.3
	 	 Stockholder Approval
	  	 	14	  

  
 ii 

 VANDA PHARMACEUTICALS INC. 

2016 EQUITY INCENTIVE PLAN 

 

	 	ARTICLE 1.	INTRODUCTION. 

 The Plan was adopted by the Board effective April 27, 2016,
and will become effective upon its approval by the Company’s stockholders at the Company’s 2016 Annual Meeting of Stockholders. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder
value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications
and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares, Stock Units,
Options (which may constitute ISOs or NSOs) or stock appreciation rights. 
 The Plan shall be governed by, and construed in accordance
with, the laws of the State of Delaware (except their choice-of-law provisions). 
  

	 	ARTICLE 2.	ADMINISTRATION. 

 2.1 Committee Composition. The Committee shall
administer the Plan. The Committee shall consist exclusively of two or more directors of the Company, who shall be appointed by the Board. In addition, each member of the Committee shall meet the following requirements: 

(a) Any listing standards prescribed by the principal securities market on which the Company’s equity securities are
traded; 
 (b) Such requirements as the Internal Revenue Service may establish for outside directors acting under plans
intended to qualify for exemption under section 162(m)(4)(C) of the Code; 
 (c) Such requirements as the Securities and
Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and 

(d) Any other requirements imposed by applicable law, regulations or rules. 

2.2 Committee Responsibilities. The Committee shall (a) select the Employees, Outside Directors and Consultants who are to receive
Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such 

 
Awards, (c) interpret the Plan, (d) make all other decisions relating to the operation of the Plan and (e) carry out any other duties delegated to it by the Board. The Committee
may adopt such rules or guidelines as it deems appropriate to implement the Plan. The Committee’s determinations under the Plan shall be final and binding on all persons. 

2.3 Committee for Non-Officer Grants. The Board may also appoint a secondary committee of the Board, which shall be composed of one or
more directors or executive officers of the Company who need not satisfy the requirements of Section 2.1. Such secondary committee may administer the Plan with respect to Employees and Consultants who are not Outside Directors and are not
considered executive officers of the Company under section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and Consultants and may determine all features and conditions of such Awards. Within the limitations of this
Section 2.3, any reference in the Plan to the Committee shall include such secondary committee. 
  

	 	ARTICLE 3.	SHARES AVAILABLE FOR GRANTS. 

 3.1 Basic Limitation. Common Shares
issued pursuant to the Plan may be authorized but unissued shares or treasury shares. The aggregate number of Common Shares issued under the Plan shall not exceed (a) 2,000,000 plus (b) the additional Common Shares described in
Section 3.2. The number of Common Shares that are subject to Awards outstanding at any time under the Plan shall not exceed the number of Common Shares that then remain available for issuance under the Plan. All Common Shares available under
the Plan may be issued upon the exercise of ISOs. The limitations of this Section 3.1 shall be subject to adjustment pursuant to Article 10. 

3.2 Shares Returned to Reserve. If Options, SARs, Restricted Shares or Stock Units are forfeited, settled in cash (in whole or in
part), or terminate for any other reason before being exercised or settled, then the Common Shares subject to such Options, SARs, Restricted Shares or Stock Units shall again become available for issuance under the Plan. If Restricted Shares or
Common Shares issued upon the exercise of Awards are reacquired by the Company pursuant to a forfeiture provision or for any other reason, then such Common Shares shall again become available for issuance under the Plan. Common Shares that are
(a) not issued or delivered as a result of the net settlement of an outstanding Option or SAR or (b) used or tendered by a Participant or withheld by the Company (i) in payment of the exercise price of an Option or SAR or (ii) in
satisfaction of any tax withholding obligation relating to any Award, shall not become available again for issuance under the Plan. 
  

	 	ARTICLE 4.	ELIGIBILITY. 

 4.1 Incentive Stock Options. Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding
stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(5) of the Code are satisfied. 

  
 2 

 4.2 Other Grants. Only Employees, Outside Directors and Consultants shall be eligible for
the grant of Restricted Shares, Stock Units, NSOs or SARs. 
  

	 	ARTICLE 5.	OPTIONS. 

 5.1 Stock Option Agreement. Each grant of an Option under
the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in the
Optionee’s other compensation. 
 5.2 Number of Shares. Each Stock Option Agreement shall specify the number of Common Shares
subject to the Option and shall provide for the adjustment of such number in accordance with Article 10. Options granted to any Optionee in a single fiscal year of the Company shall not cover more than 500,000 Common Shares, except that Options
granted to a new Employee in the fiscal year of the Company in which his or her Service as an Employee first commences shall not cover more than 1,000,000 Common Shares. The limitations set forth in the preceding sentence shall be subject to
adjustment in accordance with Article 10. 
 5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise Price;
provided that the Exercise Price shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant. This Section 5.3 shall not apply to an Option granted pursuant to the assumption of, or substitution for,
another option in a manner that complies with section 424(a) of the Code (whether or not the Option is an ISO). 
 5.4 Exercisability and
Term. Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become exercisable; provided that, except as otherwise set forth in the Stock Option Agreement, the Option will not become
exercisable prior to the Optionee completing at least one year of Service following the Vesting Commencement Date of such Option. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an Option shall in no
event exceed 10 years from the date of grant. A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other events and may provide for expiration prior to the
end of its term in the event of the termination of the Optionee’s Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited. 

5.5 Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall
become exercisable as to all or part of the Common Shares subject to such Option in the event that a Change in Control occurs with respect to the Company or in the event that the Optionee is subject to an Involuntary Termination after a Change in
Control. However, in the case of an ISO, the acceleration of exercisability shall not occur without the Optionee’s written consent. In addition, acceleration of exercisability may be required under Section 10.3. 

  
 3 

 5.6 Modification or Assumption of Options. Within the limitations of the Plan, the
Committee may modify, extend or assume outstanding options. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such Option. Notwithstanding
anything in this Plan to the contrary, and except for the adjustments provided in Article 10, neither the Committee nor any other person may, without the approval of the Company’s stockholders: (a) decrease the exercise price for any
outstanding Option after the date of grant, (b) cancel or allow an optionee to surrender an outstanding Option to the Company in exchange for cash or as consideration for the grant of a new Option with a lower exercise price or the grant of
another type of Award the effect of which is to reduce the exercise price of any outstanding Option or (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the NASDAQ Stock
Market (or such other principal U.S. national securities exchange on which the Common Shares are traded). 
  

	 	ARTICLE 6.	PAYMENT FOR OPTION SHARES. 

 6.1 General Rule. The entire Exercise Price of Common
Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased, except that the Committee at its sole discretion may accept payment of the Exercise Price in any other form(s)
described in this Article 6. However, if the Optionee is an Outside Director or executive officer of the Company, he or she may pay the Exercise Price in a form other than cash or cash equivalents only to the extent permitted by
section 13(k) of the Exchange Act. 
 6.2 Surrender of Stock. With the Committee’s consent, all or any part of the Exercise
Price may be paid by surrendering, or attesting to the ownership of, Common Shares that are already owned by the Optionee. Such Common Shares shall be valued at their Fair Market Value on the date when the new Common Shares are purchased under the
Plan. 
 6.3 Exercise/Sale. With the Committee’s consent, all or any part of the Exercise Price and any withholding taxes may be
paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds
to the Company. 
 6.4 Promissory Note. To the extent permitted by section 13(k) of the Exchange Act, with the Committee’s
consent, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) a full-recourse promissory note. 

6.5 Other Forms of Payment. With the Committee’s consent, all or any part of the Exercise Price and any withholding taxes may be
paid in any other form that is consistent with applicable laws, regulations and rules. 
  

	 	ARTICLE 7.	STOCK APPRECIATION RIGHTS. 

 7.1 SAR Agreement. Each grant of an SAR
under the Plan shall be evidenced by an SAR Agreement between the Optionee and the Company. Such SAR shall be 

  
 4 

 
subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Agreements entered into under the Plan
need not be identical. SARs may be granted in consideration of a reduction in the Optionee’s other compensation. 
 7.2 Number of
Shares. Each SAR Agreement shall specify the number of Common Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Article 10. SARs granted to any Optionee in a single fiscal year shall in
no event pertain to more than 500,000 Common Shares, except that SARs granted to a new Employee in the fiscal year of the Company in which his or her Service as an Employee first commences shall not pertain to more than 1,000,000 Common Shares. The
limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 10. 
 7.3 Exercise
Price. Each SAR Agreement shall specify the Exercise Price; provided that the Exercise Price shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant. 

7.4 Exercisability and Term. Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable;
provided that, except as otherwise set forth in the SAR Agreement, the SAR will not become exercisable prior to the Optionee completing at least one year of Service following the Vesting Commencement Date of such SAR. The SAR Agreement shall also
specify the term of the SAR; provided that the term shall not exceed 10 years. An SAR Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the Optionee’s Service. An SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control. 

7.5 Effect of Change in Control. The Committee may determine, at the time of granting an SAR or thereafter, that such SAR shall become
fully exercisable as to all Common Shares subject to such SAR in the event that the Company is subject to a Change in Control or in the event that the Optionee is subject to an Involuntary Termination after a Change in Control. In addition,
acceleration of exercisability may be required under Section 10.3. 
 7.6 Exercise of SARs. Upon exercise of an SAR, the
Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the Committee shall determine. The
amount of cash and/or the Fair Market Value of Common Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Common Shares subject to the SARs exceeds
the Exercise Price. If, on the date when an SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed
to be exercised as of such date with respect to such portion. 
 7.7 Modification or Assumption of SARs. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding SARs. The foregoing 

  
 5 

 
notwithstanding, no modification of an SAR shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such SAR. Notwithstanding anything in this Plan to
the contrary, and except for the adjustments provided in Article 10, neither the Committee nor any other person may, without the approval of the Company’s stockholders: (a) decrease the exercise price for any outstanding SAR after the date
of grant, (b) cancel or allow an optionee to surrender an outstanding SAR to the Company in exchange for cash or as consideration for the grant of a new SAR with a lower exercise price or the grant of another type of Award the effect of which
is to reduce the exercise price of any outstanding SAR or (c) take any other action with respect to an SAR that would be treated as a repricing under the rules and regulations of the NASDAQ Stock Market (or such other principal U.S. national
securities exchange on which the Common Shares are traded). 
  

	 	ARTICLE 8.	RESTRICTED SHARES. 

 8.1 Restricted Stock Agreement. Each grant of
Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. 

8.2 Payment for Awards. Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine,
including (without limitation) cash, cash equivalents, property, full-recourse promissory notes, past services and future services. If the Participant is an Outside Director or executive officer of the Company, he or she may pay for Restricted
Shares with a promissory note only to the extent permitted by section 13(k) of the Exchange Act. Within the limitations of the Plan, the Committee may accept the cancellation of outstanding options in return for the grant of Restricted Shares.

 8.3 Vesting Conditions. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in
installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement; provided that, the Restricted Shares will not vest prior to the holder completing at least one year of Service following the Vesting Commencement Date of
such Award. The Committee may include among such conditions the requirement that the performance of the Company or a business unit of the Company for a specified period of one or more fiscal years equal or exceed a target determined in advance by
the Committee. The Company’s independent auditors shall determine such performance. Such target shall be based on one or more of the criteria set forth in Appendix A. The Committee shall identify such target not later than the 90th day of such period. In no event shall more than 500,000 Restricted Shares that are subject to performance-based vesting conditions be granted to any Participant in a single fiscal year of the
Company, subject to adjustment in accordance with Article 10. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant’s death or disability or other events. The Committee may determine, at the time
of granting Restricted Shares or thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company or in the event that the Participant is subject to an Involuntary
Termination after a Change in Control. 

  
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 8.4 Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan
shall have the same voting, dividend and other rights as the Company’s other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted
Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid. 
  

	 	ARTICLE 9.	STOCK UNITS. 

 9.1 Stock Unit Agreement. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions
of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipient’s other compensation. 

9.2 Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of
the Award recipients. 
 9.3 Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur,
in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement; provided that, the Stock Units will not vest prior to the recipient completing at least one year of Service following the Vesting Commencement
Date of such Award. The Committee may include among such conditions the requirement that the performance of the Company or a business unit of the Company for a specified period of one or more fiscal years equal or exceed a target determined in
advance by the Committee. The Company’s independent auditors shall determine such performance. Such target shall be based on one or more of the criteria set forth in Appendix A. The Committee shall identify such target not later than the
90th day of such period. In no event shall more than 500,000 Stock Units that are subject to performance-based vesting conditions be granted to any Participant in a single fiscal year of the
Company, subject to adjustment in accordance with Article 10. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or other events. The Committee may determine, at the time of
granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that the Company is subject to a Change in Control or in the event that the Participant is subject to an Involuntary Termination after a Change
in Control. In addition, acceleration of vesting may be required under Section 10.3. 
 9.4 Voting and Dividend Rights. The
holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be
credited with an amount equal to all cash dividends paid on one Common Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash,
in the form of Common Shares, or in a combination of both. Prior to distribution, any dividend equivalents that are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach. 

  
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 9.5 Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be
made in the form of (a) cash, (b) Common Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Common Shares over a series of trading days. Vested Stock Units may be
settled in a lump sum or in installments. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred
distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Article 10. 

9.6 Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the
recipient’s beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed
by filing the prescribed form with the Company at any time before the Award recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after
the recipient’s death shall be distributed to the recipient’s estate. 
 9.7 Creditors’ Rights. A holder of Stock
Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement. 

 

	 	ARTICLE 10.	PROTECTION AGAINST DILUTION. 

 10.1 Adjustments. In the event of a subdivision of
the outstanding Common Shares, a declaration of a dividend payable in Common Shares or a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common Shares, corresponding
proportionate adjustments shall automatically be made in each of the following: 
 (a) The number of Common Shares available
for grant subject to Awards under Article 3; 
 (b) The limitations set forth in Sections 5.2, 8.2, 8.3 and 9.3;

 (c) The number of Common Shares covered by each outstanding Option and SAR; 

(d) The Exercise Price under each outstanding Option and SAR; or 

(e) The number of Stock Units included in any prior Award that has not yet been settled. 

  
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 In the event of a declaration of an extraordinary dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of the foregoing.
Except as provided in this Article 10, a Participant shall have no rights by reason of any issuance by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of
any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 
 10.2
Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. 

10.3 Reorganizations. In the event that the Company is a party to a merger or consolidation, all outstanding Awards shall be subject to
the agreement of merger or consolidation. Such agreement shall provide for one or more of the following: 
 (a) The
continuation of such outstanding Awards by the Company (if the Company is the surviving corporation). 
 (b) The assumption
of such outstanding Awards by the surviving corporation or its parent, provided that the assumption of Options or SARs shall comply with section 424(a) of the Code (whether or not the Options are ISOs). 

(c) The substitution by the surviving corporation or its parent of new awards for such outstanding Awards, provided that the
substitution of Options or SARs shall comply with section 424(a) of the Code (whether or not the Options are ISOs). 

(d) Full exercisability of outstanding Options and SARs and full vesting of the Common Shares subject to such Options and SARs,
followed by the cancellation of such Options and SARs. The full exercisability of such Options and SARs and full vesting of such Common Shares may be contingent on the closing of such merger or consolidation. The Optionees shall be able to exercise
such Options and SARs during a period of not less than five full business days preceding the closing date of such merger or consolidation, unless (i) a shorter period is required to permit a timely closing of such merger or consolidation and
(ii) such shorter period still offers the Optionees a reasonable opportunity to exercise such Options and SARs. Any exercise of such Options and SARs during such period may be contingent on the closing of such merger or consolidation. 

(e) The cancellation of outstanding Options and SARs and a payment to the Optionees equal to the excess of (i) the Fair
Market Value of the Common Shares subject to such Options and SARs (whether or not such Options and SARs are then exercisable or such Common Shares are then vested) as of the 

  
 9 

 
closing date of such merger or consolidation over (ii) their Exercise Price. Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or
its parent with a Fair Market Value equal to the required amount. Except to the extent it would cause the Award to become subject to additional tax under Code Section 409A, such payment may be made in installments, may be deferred until the
date or dates when such Options and SARs would have become exercisable or such Common Shares would have vested, and/or may be subject to vesting based on the Optionee’s continuing Service, provided that the vesting schedule shall not be less
favorable to the Optionee than the schedule under which such Options and SARs would have become exercisable or such Common Shares would have vested. If the Exercise Price of the Common Shares subject to such Options and SARs exceeds the Fair Market
Value of such Common Shares, then such Options and SARs may be cancelled without making a payment to the Optionees. For purposes of this Subsection (e), the Fair Market Value of any security shall be determined without regard to any vesting
conditions that may apply to such security. 
 (f) The cancellation of outstanding Stock Units and a payment to the
Participants equal to the Fair Market Value of the Common Shares subject to such Stock Units (whether or not such Stock Units are then vested) as of the closing date of such merger or consolidation. Such payment shall be made in the form of cash,
cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount. Except to the extent it would cause the Award to become subject to additional tax under Code Section 409A, such
payment may be made in installments, may be deferred until the date or dates when such Stock Units would have vested, and/or may be subject to vesting based on the Participant’s continuing Service, provided that the vesting schedule shall not
be less favorable to the Participant than the schedule under which such Stock Units would have vested. For purposes of this Subsection (f), the Fair Market Value of any security shall be determined without regard to any vesting conditions that
may apply to such security. 
  

	 	ARTICLE 11.	AWARDS UNDER OTHER PLANS. 

 The Company may grant awards under other plans
or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units and shall, when issued, reduce
the number of Common Shares available under Article 3. 
  

	 	ARTICLE 12.	PAYMENT OF DIRECTOR’S FEES IN SECURITIES. 

 12.1 Effective
Date. No provision of this Article 12 shall be effective unless and until the Board has determined to implement such provision. 

12.2 Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive his or her annual retainer
payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a 

  
 10 

 
combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Article 12 shall be filed with the
Company on the prescribed form. 
 12.3 Number and Terms of NSOs, Restricted Shares or Stock Units. The number of NSOs, Restricted
Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The Board shall also determine the terms of such
NSOs, Restricted Shares or Stock Units. 
  

	 	ARTICLE 13.	LIMITATION ON RIGHTS. 

 13.1 Retention Rights. Neither the Plan nor
any Award granted under the Plan shall be deemed to give any individual a right to remain an Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the Service of any
Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Company’s certificate of incorporation and by-laws and a written employment agreement (if any). 

13.2 Stockholders’ Rights. A Participant shall have no dividend rights, voting rights or other rights as a stockholder with
respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, if applicable, the time when he or she becomes entitled to receive such Common Shares by filing any required
notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan. 

13.3 Regulatory Requirements. Any other provision of the Plan notwithstanding, the obligation of the Company to issue Common Shares
under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Common Shares pursuant to any
Award prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing. 

 

	 	ARTICLE 14.	TAXES. 

 14.1 General Withholding Obligations. To the extent
required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan.
The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied. 

14.2 Share Withholding. To the extent that applicable law subjects a Participant to tax withholding obligations, the Committee may
permit such Participant to satisfy all or part of such obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he or
she previously acquired. Such Common Shares shall be valued at their Fair Market Value on the date when they are withheld or surrendered. 

  
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 14.3 Code Section 409A Matters. To the fullest extent applicable and unless otherwise
expressly indicated in an applicable Award agreement, Awards granted under this Plan are intended to be exempt from the definition of “nonqualified deferred compensation” under Code Section 409A in accordance with one or more of the
exemptions available under the final Treasury regulations promulgated under Code Section 409A and the terms of the Plan and the applicable Award agreement shall be interpreted and administered in a manner consistent with that intent. To the
extent that an Award is, or becomes subject to, Code Section 409A either intentionally or due to a failure of an individual Award to qualify for an exemption from the definition of nonqualified deferred compensation in accordance with Code
Section 409A, such Award is intended to comply with the applicable requirements of Code Section 409A to the maximum extent possible and with respect to any such Award, the terms of the Plan and the applicable Award agreement shall be
interpreted and administered in a manner consistent with that intent. In no event will the Company be liable for any taxes, penalties or interest that may be imposed with respect to an Award under Code Section 409A or under any other similar
provision of state tax law, or for any damages for an Award’s failing to comply with Code Section 409A, any other similar provision of state tax law, or the provisions of this Section 15.3. 

 

	 	ARTICLE 15.	LIMITATION ON PAYMENTS. 

 15.1 Scope of Limitation. This
Article 15 shall apply to an Award only if: 
 (a) The independent auditors selected for this purpose by the Committee
(the “Auditors”) determine that the after-tax value of such Award to the Participant, taking into account the effect of all federal, state and local income taxes, employment taxes and excise taxes applicable to the Participant (including
the excise tax under section 4999 of the Code), will be greater after the application of this Article 15 than it was before the application of this Article 16; or 

(b) The Committee, at the time of making an Award under the Plan or at any time thereafter, specifies in writing that such
Award shall be subject to this Article 15 (regardless of the after-tax value of such Award to the Participant). 
 If this Article 15 applies to
an Award, it shall supersede any contrary provision of the Plan or of any Award granted under the Plan. 
 15.2 Basic Rule. In the
event that the Auditors determine that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a “Payment”) would be nondeductible by the Company for federal income tax purposes because of the
provisions concerning “excess parachute payments” in section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Article 15, the
“Reduced Amount” shall be the amount of the Payment, expressed as a present value, which provides the greatest economic benefit to the 

  
 12 

 
Participant without causing any of the Payments to be nondeductible by the Company because of section 280G of the Code, provided that if more than one manner of reduction of the Payments
necessary to arrive at the Reduced Amount yields the greatest economic benefit to the Participant, the Payments shall be reduced pro rata. Neither the Participant nor the Company shall have the authority to specify the order of reduction of the
Payments. 
 15.3 Reduction of Payments. If the Auditors determine that any Payment would be nondeductible by the Company because of
section 280G of the Code, then the Company shall promptly provide the Participant appropriate notice to that effect, including a copy of the detailed calculation thereof and of the Reduced Amount, and details regarding the manner in which the
reduction provided for under Section 15.2 shall be effected. For purposes of this Article 15, present value shall be determined in accordance with section 280G(d)(4) of the Code. All determinations made by the Auditors under this
Article 15 shall be binding upon the Company and the Participant and shall be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following such determination and the elections
hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under the Plan and shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as
become due to him or her under the Plan. 
 15.4 Overpayments and Underpayments. As a result of uncertainty in the application of
section 280G of the Code at the time of an initial determination by the Auditors hereunder, it is possible that Payments will have been made by the Company which should not have been made (an “Overpayment”) or that additional Payments
which will not have been made by the Company could have been made (an “Underpayment”), consistent in each case with the calculation of the Reduced Amount hereunder. In the event that the Auditors, based upon the assertion of a deficiency
by the Internal Revenue Service against the Company or the Participant that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the
Participant that he or she shall repay to the Company, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and
to the extent that such payment would not reduce the amount that is subject to taxation under section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or
transferred by the Company to or for the benefit of the Participant, together with interest at the applicable federal rate provided in section 7872(f)(2) of the Code. 

15.5 Related Corporations. For purposes of this Article 15, the term “Company” shall include affiliated corporations to
the extent determined by the Auditors in accordance with section 280G(d)(5) of the Code. 
  

	 	ARTICLE 16.	FUTURE OF THE PLAN. 

 16.1 Term of the Plan. The Plan, as set forth
herein, shall become effective on the date of the Company’s initial public offering. The Plan shall remain in effect until the earlier of (a) the date when the Plan is terminated under Section 16.2 or (b) the 10th anniversary of the date when the Board adopted the Plan. 

  
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 16.2 Amendment or Termination. The Board may, at any time and for any reason, amend or
terminate the Plan. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan. 

16.3 Stockholder Approval. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the
extent required by applicable laws, regulations or rules, including the listing requirements of the primary securities exchange or over-the-counter market where the Common Shares are listed for trading. However, section 162(m) of the Code may
require that the Company’s stockholders approve the performance criteria set forth in Appendix A not later than the first meeting of stockholders that occurs in the fifth year following the year in which the Company’s stockholders
previously approved such criteria. 
 DEFINITIONS. 

“Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such
entity. 
 “Award” means any award of an Option, an SAR, a Restricted Share or a Stock Unit under the Plan. 

“Board” means the Company’s Board of Directors, as constituted from time to time. 

“Cause” means: 
 An
unauthorized use or disclosure by the Participant of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company; 

A material breach by the Participant of any agreement between the Participant and the Company; 

A material failure by the Participant to comply with the Company’s written policies or rules; 

The Participant’s conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States
or any State thereof; 
 The Participant’s gross negligence or willful misconduct; 

A continuing failure by the Participant to perform assigned duties after receiving written notification of such failure from the Board; or

 A failure by the Participant to cooperate in good faith with a governmental or internal investigation of the Company or its directors,
officers or employees, if the Company has requested the Participant’s cooperation. 

  
 14 

 “Change in Control” means: 

The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who
were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of
each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity; 

The sale, transfer or other disposition of all or substantially all of the Company’s assets; 

A change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either: 

Had been directors of the Company on the date 24 months prior to the date of such change in the composition of the Board (the “Original
Directors”); or 
 Were appointed to the Board, or nominated for election to the Board, with the affirmative votes of at least a
majority of the aggregate of (A) the Original Directors who were in office at the time of their appointment or nomination and (B) the directors whose appointment or nomination was previously approved in a manner consistent with this
Paragraph (ii); or 
 Any transaction as a result of which any person is the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company’s then outstanding voting securities. For purposes of this
Subsection (d), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to
create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction. 

“Code” means the Internal Revenue Code of 1986, as amended. 

“Committee” means a committee of the Board, as described in Article 2. 

“Common Share” means one share of the common stock of the Company. 

“Company” means Vanda Pharmaceuticals Inc., a Delaware corporation. 

“Consultant” means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as
an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.1. 

  
 15 

 “Employee” means a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate. 
 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 

“Exercise Price,” in the case of an Option, means the amount for which one Common Share may be purchased upon exercise of such
Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of an SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR. 
 “Fair Market Value” means the market price of one Common Share as
determined by the Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in The Wall Street Journal. Such determination
shall be conclusive and binding on all persons. 
 “Involuntary Termination” means the termination of the Participant’s
Service by reason of: 
 The involuntary discharge of the Participant by the Company (or the Parent, Subsidiary or Affiliate employing him
or her) for reasons other than Cause; or 
 The voluntary resignation of the Participant following (i) a material adverse change in his
or her title, stature, authority or responsibilities with the Company (or the Parent, Subsidiary or Affiliate employing him or her), (ii) a material reduction in his or her base salary or (iii) receipt of notice that his or her principal
workplace will be relocated by more than 30 miles. 
 “ISO” means an incentive stock option described in section 422(b) of
the Code. 
 “NSO” means a stock option not described in sections 422 or 423 of the Code. 

“Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Common Shares. 

“Optionee” means an individual or estate who holds an Option or SAR. 

“Outside Director” means a member of the Board who is not an Employee. Service as an Outside Director shall be considered employment
for all purposes of the Plan, except as provided in Section 4.1. 
 “Parent” means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such
chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. 

  
 16 

 “Participant” means an individual or estate who holds an Award. 

“Plan” means this Vanda Pharmaceuticals Inc. 2016 Equity Incentive Plan, as amended from time to time. 

“Restricted Share” means a Common Share awarded under the Plan. 

“Restricted Stock Agreement” means the agreement between the Company and the recipient of a Restricted Share that contains the
terms, conditions and restrictions pertaining to such Restricted Share. 
 “SAR” means a stock appreciation right granted under
the Plan. 
 “SAR Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and
restrictions pertaining to his or her SAR. 
 “Service” means service as an Employee, Outside Director or Consultant. 

“Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and
restrictions pertaining to his or her Option. 
 “Stock Unit” means a bookkeeping entry representing the equivalent of one Common
Share, as awarded under the Plan. 
 “Stock Unit Agreement” means the agreement between the Company and the recipient of a Stock
Unit that contains the terms, conditions and restrictions pertaining to such Stock Unit. 
 “Subsidiary” means any corporation
(other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. 

“Vesting Commencement Date” means (i) with respect any Award granted to a Participant upon the commencement of his or Service,
the date on which his or her Service commences and (ii) with respect to any other Award, the date on which such Award is granted. 
  

  
 17 

 APPENDIX A 

PERFORMANCE CRITERIA FOR RESTRICTED SHARES AND
STOCK UNITS 
 The performance goals that may be used by the Committee for such awards may consist of: (a) operating
profits (including EBITDA); (b) net profits; (c) earnings per share; (d) profit returns and margins; (e) revenues; (f) stockholder return and/or value; (g) stock price; (h) working capital; (i) regulatory
achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the Company or the
Company’s third-party manufacturer) and validation of manufacturing processes (whether the Company’s or the Company’s third-party manufacturer’s)); (j) clinical achievements (including initiating clinical studies, initiating
enrollment, completing enrollment or enrolling particular numbers of subjects in clinical studies, completing phases of a clinical study (including the treatment phase), or announcing or presenting preliminary or final data from clinical studies in
each case, whether on particular timelines or generally); and (k) other measurable objectives. 
 Performance goals may be measured solely on a
corporate, subsidiary or business unit basis, or a combination thereof. Further, performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other
external measure of the selected performance criteria. 
 Profit, earnings and revenues used for any performance goal measurement may exclude: gains or
losses on operating asset sales or dispositions; asset write-downs; litigation or claim judgments or settlements; accruals for historic environmental obligations; effect of changes in tax law or rate on deferred tax liabilities; accruals for
reorganization and restructuring programs; uninsured catastrophic property losses; the cumulative effect of changes in accounting principles; and any extraordinary non-recurring items determined in accordance with generally accepted accounting
principles and/or in management’s discussion and analysis of financial performance appearing in the Company’s annual report to stockholders for the applicable year.

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