Document:

EX-10.17

 Exhibit 10.17 
  

 
  

			
		  	Mesoblast Limited
		
		  	Australian Loan Funded Share Plan
		  	Rules
		
		  	Mesoblast Limited
		  	ACN 109 431 870
		
		  	November 2011

  
 © 2011 Deloitte 

 CONTENTS 
  

							
	SECTION 1 - DEFINITIONS AND INTERPRETATION	  	 	3	  
			
	1	  	Definitions and Interpretation	  	 	3	  
		
	SECTION 2 - PLAN DURATION, ELIGIBILITY AND PARTICIPATION	  	 	6	  
			
	2	  	Commencement, Duration and Termination of Plan	  	 	6	  
	3	  	Limit on equity to be offered under Plan	  	 	6	  
	4	  	Offer and Acceptance	  	 	7	  
	5	  	Loan Terms	  	 	8	  
		
	SECTION 3 - CONDITIONS AND RESTRICTIONS ON LOAN FUNDED SHARES AND/OR SHARES ACQUIRED	  	 	9	  
			
	6	  	Conditions generally	  	 	9	  
	7	  	Vesting Conditions	  	 	9	  
	8	  	Forfeiture Conditions	  	 	9	  
	9	  	Disposal of Shares or Buy-back	  	 	10	  
	10	  	Proceeds of disposal or Buy-back	  	 	11	  
		
	SECTION 4 - PARTICIPANT’S RIGHTS	  	 	11	  
			
	11	  	Rights attaching to Loan Funded Shares	  	 	11	  
		
	SECTION 5 - ADMINISTRATION OF PLAN	  	 	13	  
			
	12	  	Administration of the Plan	  	 	13	  
	13	  	Appointment of Trustee	  	 	14	  
	14	  	Listing Rules	  	 	14	  
	15	  	Amendment of Plan	  	 	14	  
	16	  	Notices	  	 	15	  
	17	  	Governing law	  	 	15	  

  
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 SECTION 1 - DEFINITIONS AND INTERPRETATION 

 

	1	Definitions and Interpretation 

 Definitions 

 

	1.1	In these Rules the following words and expressions have the meanings indicated, unless stated otherwise: 

“Acceptance” means a properly executed document from the Eligible Person accepting the Offer in accordance with rule 4.5. 

“After-tax Amount” means in respect of a financial year the dividend amount paid in cash by the Company multiplied by the
After-tax Rate. 
 “After-tax Rate” means in respect of a financial year during which a Company dividend is paid on a Loan
Funded Share, the rate that will be calculated as 1 minus the top marginal income tax rate for resident individuals for that year inclusive of Medicare Levy but exclusive of any Medicare Levy Surcharge. 

“Associated Body Corporate” of the Company means each: 

 

	 	(a)	related body corporate of the Company, within the meaning of section 50 of the Corporations Act; 

  

	 	(b)	body corporate that has voting power in the Company of not less than 20%; or 

  

	 	(c)	body corporate in which the Company has voting power of not less than 20%, 

 where “voting
power” has the meaning in section 610 of the Corporations Act. 
 “ASX” means the Australian Securities Exchange
Limited ACN 008 624 691. 
 “Bad Leaver” is a Participant who ceases to be employed by the Company where the Board
determines that the Participant has: 
  

	 	(a)	breached any term of the Loan Agreement; 

  

	 	(b)	committed any serious or persistent breach of any provisions of employment; 

  

	 	(c)	been convicted of any criminal offence which involves fraud or dishonesty; 

  

	 	(d)	engaged in any conduct which brings the Company into substantial disrepute; 

  

	 	(e)	committed any wrongful or negligent act or omission which has caused the Company substantial liability; 

  

	 	(f)	engaged in grave misconduct or recklessness in the discharge of the Participant’s duties; 

  

	 	(g)	become disqualified from managing corporations in accordance with Part 2D.6 of the Corporations Act or has committed any act that, pursuant to the Corporations Act, may result in the Participant being banned from
managing a corporation; or 

  

	 	(h)	engaged in any other conduct which the Board reasonably considers to be analogous to, or having a substantially similar seriousness to, any of the circumstances specified in (a) to (g) above.

 “Board” means all or some of the directors of the Company acting as the board of directors or a person or
committee delegated by the board of directors in accordance with rule 12.2. 
 “Bonus Share” means a Share issued as a part
of a pro rata bonus issue to shareholders of the Company. 
 “Buy-back” means the procedure by which the Company may
buy-back Shares held by Participants as specified under rule 9. 

  
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 “Capital Reconstruction” means any of the following events: 

 

	 	(a)	the Company issues Shares by way of capitalisation of profits or reserves; 

  

	 	(b)	the Company gives Shareholders the right (pro-rata with existing shareholding and on terms including the payment of some consideration by the Shareholders on exercising the right) to subscribe for additional Shares;

  

	 	(c)	the Company subdivides or consolidates its Shares; 

  

	 	(d)	the Company returns issued capital to holders of Shares; 

  

	 	(e)	the Company issues or cancels Shares on a pro-rata basis; or 

  

	 	(f)	the Company reorganises its issued capital in any other manner (other than in lieu of dividends or by way of dividend reinvestment). 

“Change of Control Event” means any of the following: 

 

	 	(a)	an offer is made by a person for the whole of the issued ordinary share capital of the Company (or any part as is not at the time owned by the offeror or any person acting in concert with the offeror) and after
announcement of the offer the offeror (being a person who did not Control the Company prior to the offer) acquires Control of the Company; 

  

	 	(b)	any other event occurs which causes a change in Control of the Company; or 

  

	 	(c)	any other event which the Board reasonably considers should be regarded as a Control Event. 

“Company” means Mesoblast Limited ACN 109 431 870. 

“Condition” means any or all of the Vesting Conditions and Forfeiture Conditions. 

“Constitution” means the constitution of the Company. 

“Control” of an entity means having the right: 
  

	 	(a)	to vote 50% (or more) of the votes that can be cast on the election or removal of the entity’s directors; 

  

	 	(b)	to appoint or remove directors who possess 50% (or more) of the votes exercisable by all directors of the entity; or 

  

	 	(c)	to 50% (or more) of the profits or distributions of the entity or of its net liquidation proceeds. 

“Corporations Act” means the Corporations Act 2001 (Cth). 

“Eligible Person” means a full-time or part-time employee, executive or director of the Group or any of its subsidiaries, or
any other person who the Board determines is eligible to participate in the Plan. 
 “Forfeiture Conditions” means any
conditions determined in accordance with rule 8 that could or may result in a Participant forfeiting the Loan Funded Share or any interest in the Loan Funded Share. 

“Grant Date” means the date the Board resolves to grant Loan Funded Shares to a Participant. 

“Group” means the Company and each Associated Body Corporate of the Company. 

“Holding Lock” means a “holding lock” as defined in the Listing Rules. 

“Leaver” means a Participant who ceases employment and who is not a Bad Leaver. A Leaver will include, but is not limited to,
a Participant who ceases employment due to resignation or retirement. 
 “Listing Rules” means the official listing rules of
the ASX. 

  
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 “Loan” means a loan made or to be made by the Company to an Eligible Person
under rule 5 for the purpose of acquiring a Share. 
 “Loan Agreement” means any agreement between the Company and the
Eligible Person evidencing the terms and conditions of the Loan. 
 “Loan Funded Share” means a Share that is subject to a
Loan and/or to any Conditions. Once all Conditions are met and the Participant no longer has any outstanding obligations pursuant to the Loan Agreement, the Loan Funded Shares revert to being Shares. 

“Loan Period” means in respect of each Loan the period determined under rule 5.5. 

“Market Value” means the value of a Share determined in accordance with rule 9.5. 

“Offer” means an offer of Loan Funded Shares made by the Company to an Eligible Person under this Plan. 

“Participant” means an Eligible Person to whom the Board has resolved to grant Loan Funded Shares under this Plan. 

“Plan” means the Mesoblast Australian Loan Funded Share Plan as constituted by the Rules. 

“Price” means the amount, as set out in the Offer, that a Participant is required pay to acquire a Loan Funded Share. 

“Rules” means the rules contained in this document known as the Mesoblast Loan Funded Share Plan Rules. 

“Security Trading Policies” means the Company’s security trading policies (if any). 

“Share” means an ordinary share in the capital of the Company. 

“Term” means the period specified by the Board in the Offer and / or Loan Agreement (but in any case not exceeding 10 years
from the Grant Date) before which time the Loan must be repaid in full. 
 “Total Cost” means the Price of each Loan Funded
Share multiplied by the total number of Loan Funded Shares specified in the Offer. 
 “Trustee” means a trustee (if any)
appointed by the Board under rule 13. 
 “Vesting Conditions” means any condition determined in accordance with rule 7 that
must be satisfied before a Loan Funded Share vests. Loan Funded Shares will be “Unvested Loan Funded Shares” until all Vesting Conditions are satisfied, lifted or removed in accordance with rule 6.2 after which point they become
“Vested Loan Funded Shares”. 
 “Vesting Period” means the period starting at the Grant Date and ending
when the Vesting Conditions relating to Loan Funded Shares are satisfied. 
 Interpretation 

 

	1.2	In this Plan, unless a contrary intention appears, or context otherwise requires: 

  

	 	(a)	a reference to any document includes any variation, replacement, or equivalent, of the document; 

  

	 	(b)	a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; 

 

	 	(c)	headings do not affect the interpretation of these terms and conditions; 

  

	 	(d)	singular includes the plural and vice versa; 

  
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	 	(e)	words importing a particular gender include other genders; 

  

	 	(f)	a reference in these terms and conditions to a person includes that person’s administrators, successors and permitted assignees; 

 

	 	(g)	a reference to “$” or “dollar” is a reference to Australian currency; 

  

	 	(h)	words or phrases that have a defined meaning are identified by the use of a capital letter; 

  

	 	(i)	the word “includes” in any form is not a word of limitation; and 

  

	 	(j)	where a word or phrase is defined, cognate words and phrases have corresponding meanings. 

Headings 
  

	1.3	In this Agreement headings are for convenience of reference only and do not affect interpretation. 

Construction 
  

	1.4	If any provision of these Rules is invalid, unenforceable or otherwise ineffective, that invalidity, unenforceability or ineffectiveness does not affect the validity, enforceability, operation, construction or
interpretation of any other provision of these Rules, with the intent that the invalid, unenforceable or ineffective provision will be read down or, if it is not capable of being read down, will be treated for all purposes as severable from these
Rules. 

 SECTION 2 - PLAN DURATION, ELIGIBILITY AND PARTICIPATION 

 

	2	Commencement, Duration and Termination of Plan 

  

	2.1	The Plan will commence on the date determined by the Board. 

  

	2.2	The Plan continues in operation until the Board determines the Plan is terminated, suspended or discontinued. The Board may decide to terminate or suspend the operation of the Plan either for a fixed period or
indefinitely and may also decide to end any period of suspension. 

  

	2.3	If the Plan terminates, is suspended or is discontinued for any reason, the accrued rights of the Participants will not be prejudiced. 

 

	3	Limit on equity to be offered under Plan 

  

	3.1	An Offer of Loan Funded Shares must not be made if the total number of shares to be issued to employees or directors of the Group pursuant to the following would exceed 5% of the number of Shares on issue at the time of
the Offer: 

  

	 	(a)	the number of Shares which are the subject of the proposed Offer; 

  

	 	(b)	the total number of Shares which are the subject of any outstanding Offers under this Plan or any other employee share plan of the Company; and 

 

	 	(c)	the total number of new Shares issued in the 5 years up to and including the date of the proposed Offer pursuant to any employee share plan of the Company (adjusted if necessary in each case for Capital Reconstruction),
but excluding existing Shares transferred to a Participant under the Plan that were acquired on-market or off-market for that purpose; but, 

  

	 	(d)	excluding: 

  

	 	I.	Offers made to Participant’s outside of Australia; 

  

	 	II.	Offers made under a disclosure document (as defined in the Corporations Act); 

  
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	 	III.	Offers for which disclosure is not required due to section 708 of the Corporations Act; and, 

  

	 	IV.	the total number of Shares granted pursuant to this Plan that have subsequently been forfeited. 

  

	4	Offer and Acceptance 

 Eligibility to participate 

 

	4.1	The Board determines whether or not a person is an Eligible Person for the purposes of this Plan. 

Making of Offer 
  

	4.2	An Offer may only be made if approved by the Board. It must be in writing and must be made in accordance with these Rules. 

  

	4.3	The terms of any Offer are to be determined by the Board and must include the following: 

  

	 	(a)	the name of the Eligible Person; 

  

	 	(b)	the number of Loan Funded Shares being offered; 

  

	 	(c)	the Price of each Loan Funded Share and the Total Cost if the Participant accepts all of the Loan Funded Shares being offered; 

  

	 	(d)	the value of the Loan funds; 

  

	 	(e)	the Term of the Loan; 

  

	 	(f)	whether Loan Funded Shares will be subject to Conditions and / or Disposal Restrictions, and if so, those Conditions and / or Disposal Restrictions; 

 

	 	(g)	the closing date for accepting the Offer; and 

  

	 	(h)	any other terms and conditions the Board considers appropriate. 

  

	4.4	An Offer is not transferable by an Eligible Person. 

 Offer is conditional on proper
Acceptance and on exercise of discretion by the Board to grant Shares 
  

	4.5	If the Eligible Person wishes to participate in the Plan, they must, on or before the closing date for Acceptance stated in the Offer (or any other date that the Company may allow either generally or in a particular
case) do what is specified in the Offer in order to accept it. 

  

	4.6	Upon receiving the Acceptance, the Board shall determine the number of Loan Funded Shares to grant to the Eligible Person up to the Loan value that has been accepted by the Eligible Person. The date on which this
determination is made by the Board shall be the Grant Date and shall constitute the date on which the Offer and Acceptance become binding. 

  

	4.7	As soon as reasonably practicable after the Board making the determination referred to in rule 4.6 to grant the Eligible Person Loan Funded Shares, the Company will allot or transfer the relevant Loan Funded Shares to
the Participant. 

 Transaction costs 
  

	4.8	The Company may, but is not required to, bear all brokerage, commission or other transaction costs (if any) payable by a Participant in relation to acquisition of Shares under the Plan. 

  
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	5	Loan Terms 

 Loan terms 

 

	5.1	The Board may determine the value of the Loan that will be provided to the Eligible Person to facilitate the acquisition of the Loan Funded Shares and shall state the value of the Loan in the Offer. 

 

	5.2	A Participant who accepts a Loan irrevocably authorises the Company to apply the Loan funds on behalf of the Participant in payment of the Total Cost of the Loan Funded Shares to be acquired under the Offer.

  

	5.3	The Board may determine that the terms of the Loan will be varied for one or more Participants. 

  

	5.4	Unless otherwise determined by the Board, Loans will be interest-free. 

  

	5.5	Unless otherwise determined by the Board, the Loan Period commences when the Loan is drawn down and ends on the date on which the first of the following events occurs: 

 

	 	(a)	Loan Funded Shares are forfeited by the Participant in accordance with rule 8; 

  

	 	(b)	Loan Funded Shares are disposed of or Bought-back in accordance with rule 9; 

  

	 	(c)	the Loan expires; or 

  

	 	(d)	the parties to the Loan Agreement otherwise agree in writing. 

 Repayment 

 

	5.6	Unless otherwise determined by the Board, a Participant may repay all or part of a Loan at any time after Vesting and before the expiration of the Loan Period. 

 

	5.7	Unless otherwise determined by the Board, the Company will apply and each Participant irrevocably directs the Company to so apply the After-tax Amount of any dividends payable in respect of the Participant’s Loan
Funded Shares towards repayment of the outstanding balance of the Loan. 

  

	5.8	The balance of any dividends remaining after the application of clause 5.7 will be paid in cash to the Participant. 

  

	5.9	In the event of a capital distribution, unless otherwise determined by the Board, any capital distribution in respect of a Participant’s Loan Funded Shares must first be applied in payment of the outstanding
balance of the Loan. 

  

	5.10	Unless otherwise determined by the Board, at the end of the Loan Period (determined in accordance with rule 5.5), the Loan amount to be repaid will be the lesser of the following amounts: 

 

	 	(a)	the Loan less any amounts already paid or applied, in the case of dividends and capital distributions, in reduction of the Loan; and 

 

	 	(b)	the Market Value of the Loan Funded Shares to which the Loan relates as at the end of the Loan Period. 

  

	5.11	In the event a Participant forfeits his or her interest in Loan Funded Shares, the Participant’s Loan Funded Shares will be Bought-back in accordance with rule 9 and the application of those funds in repayment of
the Loan will be taken to repay the Loan in full and the Participant is discharged from any further liability or obligation in respect of the Loan. 

  
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 SECTION 3 - CONDITIONS AND RESTRICTIONS ON LOAN FUNDED SHARES AND/OR SHARES ACQUIRED 

 

	6	Conditions generally 

 Board may determine Conditions 

 

	6.1	The Board may determine that Loan Funded Shares offered will be subject to such Conditions as are detailed in the Offer including: 

  

	 	(a)	Vesting Conditions in accordance with rule 7; and 

  

	 	(b)	Forfeiture Conditions in accordance with rule 8. 

  

	6.2	The Board may determine at any time that any or all of the Conditions and disposal restrictions applicable to any or all of a Participant’s Loan Funded Shares have been removed or, in the case of Vesting
Conditions, been deemed satisfied. 

 No sale or dealing 

 

	6.3	A Participant must not sell, transfer, encumber or otherwise deal with a Loan Funded Share unless otherwise permitted under this Plan or determined by the Board (“Disposal Restrictions”). 

 

	7	Vesting Conditions 

 Board may determine Vesting Conditions 

 

	7.1	The nature and content of the Vesting Conditions are determined by the Board and may include conditions relating to any or all of: 

  

	 	(a)	continuing employment; 

  

	 	(b)	performance of the Participant; 

  

	 	(c)	performance of the Company; or 

  

	 	(d)	the occurrence of specific events. 

 A condition of the nature described in paragraphs (b),
(c) or (d) constitutes a “Performance Condition”. 
 Vesting on Change of Control Event 

If the Company becomes, or in the opinion of the Board is likely to become, subject to a Change of Control Event, the Board may determine that
a Loan Funded Share may vest, whether or not any or all applicable Exercise Conditions have been met, on the occurrence of a Control Event. 
  

	8	Forfeiture Conditions 

 Board may determine Forfeiture Conditions 

 

	8.1	Unless determined otherwise by the Board, while Loan Funded Shares are held by a Participant, they are subject to forfeiture if any of the following Forfeiture Conditions are satisfied: 

 

	 	(a)	if the Participant breaches any term of the Loan Agreement; 

  

	 	(b)	if the Participant ceases employment, on their cessation the Board will determine whether the Participant is a Bad Leaver or Leaver: 

 

	 	(i)	Bad Leaver - all rights, entitlements and interests in any Vested and Unvested Loan Funded Shares held by the Participant will be forfeited; 

  
 9 

	 	(ii)	Leaver - Unvested Loan Funded Shares will normally be forfeited. A Leaver may retain Vested Loan Funded Shares subject to repayment of the Loan within 60 days of cessation of employment, or within a longer period
if so determined by the Board. 

  

	 	(c)	if, in the opinion of the Board, any of the Vesting Conditions have not been or cannot be satisfied for any reason, all of the Participant’s Loan Funded Shares will be forfeited. 

 

	8.2	The Board may waive any or all of the forfeiture conditions. 

 Effect of Forfeiture
Conditions 
  

	8.3	If some or all of a Participant’s Loan Funded Shares are forfeited, the forfeited Loan Funded Shares will be Bought-back in accordance with rule 9 and the Participant will forfeit any right, interest or
entitlements in respect of those Loan Funded Shares. 

 Participant has no right to proceeds upon forfeiture 

 

	8.4	Unless communicated otherwise in the Offer, a Participant will have no right to the proceeds from any Loan Funded Shares forfeited under this rule 8 and will release and hold harmless the Company from any claim in
respect thereof. 

  

	9	Disposal of Shares or Buy-back 

  

	9.1	The Company may determine that Loan Funded Shares held by a Participant may be Bought-back (in accordance with the requirements of the Constitution and the Corporations Act) if any of the following occur:

  

	 	(a)	Loan Funded Shares are forfeited under rule 8; 

  

	 	(b)	a Change of Control Event occurs and the Board determines that the Company will Buy-back all Vested Loan Funded Shares, or where the Participant requests a Buy-Back pursuant to rule 9.2(b); 

 

	 	(c)	the Loan Period ends; 

  

	 	(d)	the Board determines there will be a Buy-back of the Participant’s Loan Funded Shares pursuant to rule 8.1(b)(ii); or, 

  

	 	(e)	in respect of Vested Loan Funded Shares, for any other reason determined by the Board. 

Dealing with Loan Funded Shares upon repaying the Loan and satisfying the Conditions 

 

	9.2	In the case of Vested Loan Funded Shares, a Participant may, providing that the terms of the Loan Agreement are complied with: 

  

	 	(a)	dispose of those Vested Loan Funded Shares on his or her own behalf; or 

  

	 	(b)	request in writing to the Trustee that those Vested Loan Funded Shares be sold on behalf of the Participant or that the Vested Loan Funded Shares be Bought-back. 

Trustee 
  

	9.3	The Trustee may, where a request is received from a Participant to sell his or her Vested Loan Funded Shares, pay the Participant any amounts owing in accordance with these Rules and retain the Vested Loan Funded Shares
for the purposes of the Plan. 

 Sale or Buy-back price 

 

	9.4	Unless otherwise specified in these Rules, Loan Funded Shares will be sold or Bought-back at: 

  

	 	(a)	an amount agreed with the Participant at any time; or 

  

	 	(b)	at an amount equal to Market Value (determined in accordance with rule 9.5). 

  
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 Market Value of Shares 

 

	9.5	The Market Value is the weighted average price of a Share traded on the ASX on the [five] trading days preceding the day of the Buy-back or such other method as the Board determines. 

 

	10	Proceeds of disposal or Buy-back 

  

	10.1	If Loan Funded Shares are sold on behalf of the Participant or there is a Buy-back of Loan Funded Shares, the Participant irrevocably directs the proceeds of sale or Buy-back will be applied in the following order:

  

	 	(a)	in reduction of the outstanding amount of the Loan (if any) in accordance with rule 5; 

  

	 	(b)	in payment of any costs and expenses of the sale incurred by the Company; and 

  

	 	(c)	the remainder, if any: 

  

	 	(i)	in payment to the Participant to the extent the Participant is entitled to the proceeds; or 

  

	 	(ii)	if the Participant is not entitled to the proceeds, for retention by the Company to be applied for the purposes, and for the benefit of the Plan as determined by the Board. 

 

	10.2	Where Loan Funded Shares are Bought-back by the Company, the Company will: 

  

	 	(a)	prepare all necessary transfer documents and arrange for the Participant or an agent or attorney of the Participant to complete the transfer documents on their behalf; 

 

	 	(b)	pay all relevant taxes, duties or other imposts in respect of the transfer other than any taxes, duties or imposts which are for the account of the Participant; and 

 

	 	(c)	cancel the Loan Funded Shares which are Bought-back and, where a limit on the number of Shares able to be issued under the Plan has been set by the Board, the cancelled Shares will not be counted in the number of Shares
issued under the Plan. 

 SECTION 4 - PARTICIPANT’S RIGHTS 

 

	11	Rights attaching to Loan Funded Shares 

 Rights generally 

 

	11.1	Subject to rule 11.2 below, a Participant is entitled to any rights which accrue to Loan Funded Shares held by the Participant and may deal with those rights in accordance with the terms of these Rules and the Offer.

  

	11.2	Shares acquired under the Plan rank equally in all respects with all shareholder entitlements for the same class of shares (including but not limited to voting rights, rights issues, dividends and other distributions
to, or entitlements of, holders of existing Shares) which have a record date for determining entitlements on or after the Grant Date of the Loan Funded Shares. 

Bonus Shares 
  

	11.3	A Participant is entitled to any Bonus Shares which accrue to any Loan Funded Shares held by the Participant. 

  

	11.4	Upon allotment of Bonus Shares to a Participant, the Bonus Shares are deemed, for the purposes of the Plan, to be Shares which were allotted to the Participant at the time the Loan Funded Shares to which the Bonus
Shares accrued were allotted to the Participant and are therefore bound by the same terms and conditions applicable to those Loan Funded Shares. 

  
 11 

 Capital Reconstructions 

 

	11.5	In the event of a Capital Reconstruction, subject to the Listing Rules, the Board may adjust the number of Loan Funded Shares held by a Participant. 

 

	11.6	Any offer made to shareholders in the Company (including but not limited to a rights issue) must be made to any Participant. 

  

	11.7	Any adjustment made in accordance with rule 11.5 must result in an outcome where the benefits conferred on Participants are the same as (to the extent possible) or better than the benefits conferred on Participants
prior to the Capital Reconstruction but will not confer on Participants any benefit to which the shareholders in the Company will not be entitled. This rule does not prevent a rounding up of the number of Shares the Participant may receive on Vested
Loan Funded Shares if the rounding up is approved at the meeting of shareholders which approves the Capital Reconstruction. 

No effect on contract of employment 
  

	11.8	Nothing in these Rules: 

  

	 	(a)	confers on a Participant the right to receive any Loan Funded Shares; 

  

	 	(b)	confers on a Participant the right to continue as an Eligible Person; 

  

	 	(c)	affects any rights which the Company may have to terminate the employment of any Eligible Person; or 

  

	 	(d)	may be used to increase damages in any action brought against the Company in respect of any such termination. 

Enforcement of rights 
  

	11.9	These Rules, any determination of the Board made pursuant to the Rules, and the terms and conditions of any Loan Funded Shares granted under the Plan will be deemed to form a contract between the Company and the
Participant in a court of competent jurisdiction. Each party will in addition to damages be able to seek specific performance of the contract between them as far as specific performance is applicable under a court of competent jurisdiction.

 Attorney 
  

	11.10	The Participant irrevocably appoints the person who from time to time occupies the position of secretary of the Company (or the secretary’s authorised delegate) as his or her attorney to complete and execute any
documents including share transfers and to do all acts or things in his or her name on his or her behalf which may be convenient or necessary for the purpose of giving effect to the provisions of these Rules. 

 

	11.11	The Participant covenants that the Participant will ratify and confirm any act, or thing done, pursuant to power granted to the attorney (or the attorney’s duly authorised delegate) under rule 11.10 and will
indemnify the attorney (or his duly authorised delegate) in respect of any or act, or thing done, by the attorney in exercising the power. 

Applicability of Rules to Participants in particular countries 

 

	11.12	Where a grant is made under this Plan to an Eligible Person who does not reside in Australia, the Rules of the Plan apply subject to any alterations or additions as the Board sees fit having regard to any applicable
laws, matters of convenience or similar factors which may have application to the Eligible Person or to the Company in relation to the grant. 

  
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 SECTION 5 - ADMINISTRATION OF PLAN 

 

	12	Administration of the Plan 

 Management by Board 

 

	12.1	The Board administers the Plan: 

	 	(a)	in accordance with these Rules, the Constitution and any applicable laws; 

  

	 	(b)	no act will be done or determination made in accordance with these Rules where to do so would be a breach of any applicable laws, Listing Rules, or the constituent documents of the Company and where any such act is done
or determination made, it will be considered voidable and to the extent possible be unwound and of no effect in respect of the Loan Funded Shares; 

  

	 	(c)	every exercise of a power or discretion by the Company or the Board and any decision by the Company or the Board regarding the interpretation, effect or application of these Rules: 

 

	 	(i)	is made at its absolute and sole discretion; 

  

	 	(ii)	may be made at any time; and 

  

	 	(iii)	is final, conclusive and binding; and 

  

	 	(d)	the Board may exercise any power or discretion conferred on them by these Rules in the interest of, or for the benefit of the Company, and in so doing the Board is not required to act in the interests of another person
or as requested by another person and will not be under any fiduciary obligation to another person. 

 Delegation of power
by the Board 
  

	12.2	The Board may delegate some or all of its powers and functions under the Plan to a person or to a committee of two or more persons. Where the Board has delegated a power or function to a person or to a committee,
references in this Plan to the Company or Board in relation to that power or function will be read as references to that person or committee, as the case may be. 

Loan Funded Shares may be held in Trust 
  

	12.3	The Company may determine that any or all of the Participant’s Loan Funded Shares will be held by a Trustee on behalf of the Participant. 

 

	12.4	Loan Funded Shares held in Trust for a Participant will be transferred to the Participant, upon the Participant’s request, after satisfaction (whether by performance or by exercise of the Board’s discretion)
of any Conditions. 

 Board may receive instructions from Participant’s legal representative 

 

	12.5	Any communication received by the Company from a Participant’s duly appointed legal representative will be deemed a communication from the Participant. The Board reserves the right to make any inquiries or
investigations that are necessary to satisfy itself, should there be any doubt, that the representative has been properly appointed. 

  
 13 

	13	Appointment of Trustee 

  

	13.1	The Company may appoint a Trustee, on terms and conditions that it considers appropriate, to do all such things and perform all such functions as considered appropriate to enable the implementation of the Plan,
including to acquire and hold Shares, or other securities of the Company, on behalf of Participants, for transfer to future Participants or otherwise for the purposes of the Plan. 

 

	13.2	In the event the Company appoints a Trustee, subject to the terms of the relevant trust deed appointing that Trustee: 

  

	 	(a)	every exercise of a power or discretion by the Company or the Board in these Rules may be exercised by the Trustee; 

  

	 	(b)	any reference to the Company or the Board in these Rules will accordingly be interpreted as a reference to the Trustee (as applicable); 

 

	 	(c)	Shares may be issued or transferred to the Trustee on behalf of the Participant; and 

  

	 	(d)	the Trustee on behalf of each and all of the Participants will be entitled to any rights specified in rule 11 which accrue to Shares held for the benefit of those Participants. 

 

	14	Listing Rules 

 Listing of Shares 

 

	14.1	The Loan Funded Shares offered under the Plan will be listed for quotation on the ASX. In addition, or as an alternative to the Shares being held by a Trustee, the Company may use a Holding Lock (or any other mechanism
that it deems appropriate), to enforce the terms and conditions of the Loan Funded Shares. 

 Application of Listing Rules

  

	14.2	The provisions of the Listing Rules apply to the Plan, and to the extent that the Plan and the Rules are inconsistent, the Listing Rules apply. 

 

	15	Amendment of Plan 

 Amendments 

 

	15.1	Subject to rule 15.2, the Board may add to, repeal, amend, alter or vary any or all of the provisions of these Rules in writing in any respect whatsoever, including the rights or obligations of the Participant.

 No reduction of rights 
  

	15.2	No addition, repeal, amendment, alteration or variation of these terms and conditions will: 

  

	 	(a)	without the Participant’s consent in writing, materially reduce the Participant’s accrued benefits or entitlements as they existed before the date of the amendment; 

 

	 	(b)	without the Participant’s consent in writing, impose additional obligations on the Participant in respect of his or her Loan Funded Shares; or 

 

	 	(c)	repeal, amend, alter or vary this rule 15.2, 

 unless the addition, repeal, amendment,
alteration or variation is introduced primarily: 
  

	 	(d)	for the purpose of complying with or conforming to present or future laws or regulating the maintenance or operation of the Plan or like plans; 

 

	 	(e)	to correct any manifest error or mistake; or 

  

	 	(f)	to enable the Plan or the Company to comply with the Corporations Act, the Listing Rules or its Constitution. 

  
 14 

 Retrospective effect 

 

	15.3	Any amendment made pursuant to rule 15.1 may be given such retrospective effect as is specified in the written instrument or resolution by which the amendment is made. 

 

	16	Notices 

 Address for notices 

 

	16.1	Any notice given under or for the purposes of these terms and conditions will be given in writing, signed, and addressed to: 

  

	 	(a)	in the case of the Company – the secretary of the Company at such address as is nominated by the Company; or 

  

	 	(b)	in the case of an Eligible Person – the Eligible Person or the Participant at the address nominated by the Eligible Person or the Participant. 

 

	17	Governing law 

  

	17.1	These terms and conditions will be governed by and construed in accordance with the laws of the State of Victoria, Australia, and the Eligible Persons, Participants and the Company agree to submit to the non-exclusive
jurisdiction of the courts of the State of Victoria, Australia, and any courts hearing appeals from those courts. 

  
 15EX-10.18

 Exhibit 10.18 

Rules of Employee Share Option Plan 

Mesoblast Limited 
 ACN 109 431 870

 Middletons Lawyers & Mesoblast 

Dated: 10 November 2011 

Melbourne office 

Ref:LDM.LGT.1753918 

 Table of Contents 

 

							
	 1.
		The plan		 	1	  
			
	 2.
		Eligibility		 	1	  
			
	 3.
		Participation		 	1	  
			
	 3.1
		Invitation to participate		 	1	  
	 3.2
		Letter of offer to participate		 	1	  
	 3.3
		Participant bound by application form, rules and constitution		 	1	  
			
	 4.
		Grant of options		 	2	  
			
	 4.1
		Grant of options		 	2	  
	 4.2
		No payment for options		 	2	  
	 4.3
		Options non-transferable		 	2	  
	 4.4
		Option certificate		 	2	  
	 4.5
		Limit on issues of new shares		 	2	  
			
	 5.
		Exercise of options		 	2	  
			
	 5.1
		Manner of exercise of options		 	2	  
	 5.2
		Exercise conditions		 	2	  
	 5.3
		Control event		 	3	  
	 5.4
		Issue or transfer of shares on exercise		 	3	  
	 5.5
		Shares rank equally		 	3	  
	 5.6
		Quotation on ASX		 	3	  
	 5.7
		Financial assistance		 	3	  
			
	 6.
		Cessation of appointment/employment and lapsing of options		 	3	  
			
	 6.1
		Cessation of employment as a Bad Leaver		 	3	  
	 6.2
		Cessation of employment as a Leaver		 	3	  
	 6.3
		Liquidation		 	4	  
	 6.4
		Fraud		 	4	  
	 6.5
		Forfeiture conditions		 	4	  
	 6.6
		Lost Options		 	4	  
	 6.7
		End of exercise period		 	4	  
			
	 7.
		Changes in circumstances		 	4	  
			
	 7.1
		Reconstruction		 	4	  
	 7.2
		Participation in new issues		 	4	  
	 7.3
		Adjustment to exercise price - rights issues		 	4	  
	 7.4
		Adjustment to number of underlying securities - bonus issues		 	5	  
			
	 8.
		Amendment		 	5	  
			
	 9.
		Powers of the Board		 	5	  
			
	 9.1
		Powers of the Board		 	5	  
	 9.2
		Indemnification		 	5	  
	 9.3
		Commencement of Plan		 	6	  
	 9.4
		Termination or suspension of Plan		 	6	  
	 9.5
		Resolution to terminate, suspend, supplement or amend		 	6	  
			
	 10.
		Powers of the administrator		 	6	  
			
	 10.1
		Appointment of administrator		 	6	  
	 10.2
		Role of administrator		 	6	  

  
 -i- 

 Table of Contents (ctd) 

 

							
	 11.
		Contracts of employment and other employment rights		 	6	  
			
	 11.1
		Discretion of board		 	6	  
	 11.2
		No right to grant of options		 	6	  
	 11.3
		Calculation of employee benefits		 	6	  
	 11.4
		No right to future employment etc.		 	6	  
	 11.5
		Acknowledgment by Participant		 	7	  
			
	 12.
		Connection with other plans		 	7	  
			
	 13.
		Notices		 	7	  
			
	 14.
		General		 	7	  
			
	 15.
		Plan costs		 	7	  
			
	 15.1
		Plan Costs		 	7	  
	 15.2
		Reimbursement		 	7	  
			
	 16.
		Overseas eligible employees		 	7	  
			
	 17.
		Governing law		 	8	  
			
	 18.
		Definitions and interpretation		 	8	  
			
	 18.1
		Definitions		 	8	  
	 18.2
		Interpretation		 	10	  

  
 -ii- 

 Mesoblast Limited Employee Share Option Plan 

 

	1.	The plan 

 The purpose of the Plan is to provide Eligible Employees with an incentive to
remain with the Group and to improve the longer-term performance of the Company and its return to shareholders. It is intended that the Plan will enable the Group to retain and attract skilled and experienced employees and provide them with the
motivation to make the Group more successful. 
  

	2.	Eligibility 

 The Board may determine at any time that any Eligible Employee is not
entitled to participate in the Plan if the Eligible Employee’s participation would be unlawful. 
  

	3.	Participation 

  

	3.1	Invitation to participate 

 Subject to these rules, the Board may invite any Eligible
Employee selected by it to participate in the Plan. 
  

	3.2	Letter of offer to participate 

 The Board must give to each Eligible Employee invited to
participate in the plan, a letter of offer to participate, together with the following information relating to the Options allocated to the Eligible Employee: 
  

	 	(a)	the date of grant or intended date of grant; 

  

	 	(b)	the total number of Options to be granted; 

  

	 	(c)	the Exercise Period; 

  

	 	(d)	the Exercise Price or the method of determining the Exercise Price; 

  

	 	(e)	the Exercise Conditions attaching to the Options (if any); 

  

	 	(f)	the Disposal Restrictions attaching to any Shares issued on exercise (if any); 

  

	 	(g)	the Forfeiture Conditions attaching to the Options (if any); 

  

	 	(h)	any other terms and conditions relating to the grant which, in the opinion of the Board, are fair and reasonable but not inconsistent with these rules; 

 

	 	(i)	in respect of the initial grant made to an Eligible Employee, a summary, or a copy of these rules; and 

  

	 	(j)	any other information or documents required to be notified by the Corporations Act or the Listing Rules. 

  

	3.3	Participant bound by application form, rules and constitution 

 By completing and
returning the Application Form, a Participant agrees to be bound by the terms of the Application Form, these rules and the Constitution. 

	4.	Grant of options 

  

	4.1	Grant of options 

 The Board may grant Options to a Participant on acceptance of a duly
signed and completed Application Form. 
  

	4.2	No payment for options 

 Unless otherwise determined by the Board, no payment is required
for the grant of Options under the Plan. 
  

	4.3	Options non-transferable 

 An Option granted under the Plan is not capable of being
transferred or encumbered by a Participant, unless the Board determines otherwise. The Company has no obligation to apply for quotation of the Options on the ASX. 
  

	4.4	Option certificate 

 The Company must issue a Certificate to a Participant in respect of
the Options granted to that Participant. The Company must comply with the provisions of the Constitution, the Listing Rules and the Corporations Act relating to the issue of the Certificate. 

 

	4.5	Limit on issues of new shares 

 The number of Shares that would be issued were Options
granted under this rule 4 to be exercised, when aggregated with the number of Shares that would be issued were each outstanding offer or option to acquire unissued shares, being an offer made or option acquired pursuant to the Plan or any other
employee share scheme extended only to employees or directors of the Group, to be accepted or exercised (as the case may be), disregarding any offer made, or option acquired or share issued by way of or as a result of an offer to directors of the
Company, must not exceed: 
  

	 	(a)	In respect of Shares over which US incentive stock options may be issued 10,000,000 and 

  

	 	(b)	In respect of options issued to Australian residents, that limit imposed under ASIC Class Order [CO 03/184] 

  

	5.	Exercise of options 

  

	5.1	Manner of exercise of options 

 The exercise of any Option granted under the Plan may
only be effected in such form and manner as the Board may prescribe. 
  

	5.2	Exercise conditions 

 Subject to rules 5.3 and 6, an Option granted under the Plan may
only be exercised: 
  

	 	(a)	if all the Exercise Conditions have been met; 

  

	 	(b)	if the Exercise Price has been paid to the Company or as the Company may direct; and 

  

	 	(c)	within the Exercise Period relating to the Option. 

 An Option granted under the Plan may not be
exercised once it has lapsed. 

  
 -2- 

	5.3	Control event 

 Notwithstanding rule 5.2, the Board may determine that an Option may be
exercised, whether or not any or all applicable Exercise Conditions have been met, on the occurrence of a Control Event. 
  

	5.4	Issue or transfer of shares on exercise 

 Following exercise of an Option by a
Participant, the Company must, within such time as the Board determines, allot and issue or procure the transfer to the Participant of the number of Shares in respect of which the Option has been exercised, credited as fully paid. 

 

	5.5	Shares rank equally 

 Subject to the satisfaction of any applicable Disposal
Restrictions, Shares allotted and issued under the Plan must rank equally in all respects with all other Shares from the date of allotment and issue, including: 
  

	 	(a)	voting rights; and 

  

	 	(b)	entitlements to participate in: 

  

	 	(i)	distributions and dividends; and 

  

	 	(ii)	future rights issues and bonus issues, 

 where the record date for determining entitlements
falls on or after the date of allotment and issue. 
  

	5.6	Quotation on ASX 

 The Company must apply for quotation on the official list of the ASX
of Shares allotted and issued on the exercise of Options as soon as practicable after the allotment and issue of those Shares, so long as Shares are quoted on the official list of ASX at that time. 

 

	5.7	Financial assistance 

 The Company may financially assist a person to pay for the grant
of an Option, to pay any Exercise Price for an Option or to acquire Shares under the Plan, subject to compliance with the provisions of the Corporations Act and the Listing Rules relating to financial assistance. 

 

	6.	Cessation of appointment/employment and lapsing of options 

  

	6.1	Cessation of employment as a Bad Leaver 

 If upon the Participant ceasing employment, the
Board determines that the Participant is a Bad Leaver, all rights, entitlements and interests in any unexercised Options (including those that are Vested Options) held by the Participant will be forfeited and will lapse immediately. 

 

	6.2	Cessation of employment as a Leaver 

 If upon the Participant ceasing employment, the
Board determines the Participant is a Leaver: 
  

	 	(a)	A Leaver may retain Vested Options, however, they must be exercised within 60 days of cessation of employment (or within a longer period if so determined by the Board), after which time they will lapse.

  
 -3- 

	 	(b)	Unvested Options will normally be forfeited and lapse. 

  

	6.3	Liquidation 

 On Liquidation, all Options which are not Vested Options will lapse. 

 

	6.4	Fraud 

 If, in the opinion of the Board, a Participant (or, where a Participant is a
person nominated by an Eligible Employee, the employee or director who nominated the Participant) has acted fraudulently or dishonestly, the Board may determine that any Option granted to that Participant should lapse, and the Option will lapse
accordingly. 
  

	6.5	Forfeiture conditions 

 An Option will lapse on the occurrence of a Forfeiture Condition
relating to that Option, unless the Board determines otherwise. 
  

	6.6	Lost Options 

 A Participant may submit a request to the Board that an Option granted to
that Participant should lapse. On receipt of that request, the Board may determine that the Option should lapse, in which case the option will lapse accordingly. 
  

	6.7	End of exercise period 

 If an Option has not lapsed earlier in accordance with this rule
6, it will lapse at the end of the Exercise Period. 
  

	7.	Changes in circumstances 

  

	7.1	Reconstruction 

 In the event of any reconstruction (including consolidation,
subdivision, reduction, capital return, buy back or cancellation) of the share capital of the Company, the number of Options to which each Participant is entitled and/or the Exercise Price of those Options must be reconstructed in accordance with
the Listing Rules. Options must be reconstructed in a manner which will not result in any additional benefits being conferred on Participants which are not conferred on other shareholders of the Company. 

 

	7.2	Participation in new issues 

 Subject to the Listing Rules, a Participant is only
entitled to participate (in respect of Options granted under the Plan) in a new issue of Shares to existing shareholders generally if the Participant has validly exercised his or her Options within the relevant Exercise Period and become a
Shareholder prior to the relevant record date, and is then only entitled to participate in relation to Shares of which the Participant is the registered holder. 
  

	7.3	Adjustment to exercise price - rights issues 

 Subject to the Listing Rules, if there is
a Pro Rata Issue (except a Bonus Issue) to the holders of Shares, the Exercise Price of an Option will be reduced according to the following formula: 
  

					
	O’ = O –	 	E[P -(S + D)]	 	 
		 	 N+1
	 	

 where: 

  
 -4- 

					
	O’		=		the Exercise Price immediately following the adjustment;
			
	O		=		the Exercise Price immediately prior to the adjustment;
			
	E		=		the number of Shares into which one Option is exercisable;
			
	P		=		the average market price per Share (weighted by reference to volume) during the 5 trading days ending on the day before the ex rights date or ex entitlements date;
			
	S		=		the subscription price for a Share under the Pro Rata Issue;
			
	D		=		any dividend due but not yet paid on a Share (except any Share to be issued under the Pro Rata Issue); and
			
	N		=		the number of Shares with rights or entitlements that must be held to receive a right to one new Share.

  

	7.4	Adjustment to number of underlying securities - bonus issues 

 Subject to the Listing
Rules, if there is a Bonus Issue to the holders of Shares, the number of Shares over which an Option is exercisable will be increased by the number of Shares which the holder of the Option would have received if the Option had been exercised before
the record date for the Bonus Issue. 
  

	8.	Amendment 

 Subject to the Listing Rules, these rules may be amended or supplemented by
resolution of the Board. Unless the resolution of the Board expressly states otherwise, any amendment or supplement to these rules will not apply to any Options granted under these rules which have not yet been exercised. 

 

	9.	Powers of the Board 

  

	9.1	Powers of the Board 

 The Plan will be managed by the Board, which will have power to:

  

	 	(a)	determine appropriate procedures for the administration of the Plan consistent with these rules; 

  

	 	(b)	resolve conclusively all questions of fact or interpretation arising in connection with the Plan; 

  

	 	(c)	determine matters falling for determination under these rules in its discretion having regard to the interests of and for the benefit of the Company; 

 

	 	(d)	exercise the discretions conferred on it by these rules or which may otherwise be required in relation to the Plan; and 

  

	 	(e)	delegate to any one or more persons (for such period and on such conditions as it may determine) the exercise of any of its powers or discretions arising under the Plan. 

 

	9.2	Indemnification 

 The Company must indemnify, and keep indemnified, to the full extent
permitted by law, each person who is or has been a director or alternate director of the Company against all proceedings, actions, claims, demands, losses, liabilities, damages, costs and expenses which may be made, brought against, suffered or
incurred by the person arising directly or indirectly out of or in connection with the administration of the Plan. 

  
 -5- 

	9.3	Commencement of Plan 

 The Plan will take effect on and from such date as the Board may
resolve. 
  

	9.4	Termination or suspension of Plan 

 The Board may terminate or suspend the operation of
the Plan at any time. 
  

	9.5	Resolution to terminate, suspend, supplement or amend 

 In passing a resolution to
terminate or suspend the operation of the Plan or to supplement or amend these rules, the Board must consider and endeavour to ensure that there is fair and equitable treatment of all Participants. 

 

	10.	Powers of the administrator 

  

	10.1	Appointment of administrator 

 The Board may appoint an Administrator and may determine
the terms and conditions of the Administrator’s appointment. The Board may remove the Administrator. 
  

	10.2	Role of administrator 

 The Administrator must administer the Plan in accordance with
these rules and any procedures determined by the Board and agreed to as between the Board and the Administrator. 
  

	11.	Contracts of employment and other employment rights 

  

	11.1	Discretion of board 

 It is a condition of these rules that the Plan may be terminated at
any time at the discretion of the Board and that no compensation under any employment contract will arise as a result. 
  

	11.2	No right to grant of options 

 Participation in the Plan does not confer on any Eligible
Employee any right to a grant of Options. 
  

	11.3	Calculation of employee benefits 

 The value of the Options do not increase a
Participant’s income for the purpose of calculating any employee benefits. 
  

	11.4	No right to future employment etc. 

 Participation in the Plan does not confer on any
Participant any right to future employment and does not affect any rights which the Company may have to terminate the employment of any Participant. 

  
 -6- 

	11.5	Acknowledgment by Participant 

 It is acknowledged and accepted by each Participant that
the terms of the Plan do not form part of the terms and conditions of the Participant’s employment contract, nor do the terms of the Plan constitute a contract or arrangement (including any related condition or collateral arrangement) in
relation to the Participant’s employment contract. 
  

	12.	Connection with other plans 

 Unless the Board otherwise determines, participation in the
Plan does not affect, and is not affected by, participation in any other incentive or other plan operated by the Company unless the terms of that other plan provide otherwise. 

 

	13.	Notices 

 Any notice or direction given under these rules is validly given if it is
handed to the person concerned or sent by ordinary prepaid post to the person’s last known address or given in any reasonable manner which the Board from time to time determines. 

 

	14.	General 

 Notwithstanding any rule, Shares may not be allotted and issued, acquired,
transferred or otherwise dealt with under the Plan if to do so would contravene the Corporations Act, the Listing Rules, or any other applicable laws. 
  

	15.	Plan costs 

  

	15.1	Plan Costs 

 Unless otherwise determined by the Board, the Company must pay all costs,
charges and expenses relating to the establishment and operation of the Plan, including all costs incurred in or associated with an allotment, issue or acquisition of Shares for the purposes of enabling Participants to exercise Options granted to
them under the Plan. 
  

	15.2	Reimbursement 

 The Company and any Associated Body Corporate of the Company may provide
money to the trustee of any trust or any other person to enable them to acquire Shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by the Corporations Act. In
addition, the Company may require any Associated Body Corporate to enter into any other agreement or arrangement as it considers necessary to oblige that Associated Body Corporate to reimburse the Company for any amounts paid by the Company in
connection with this Plan, directly or indirectly, in relation to any employee or director of that Associated Body Corporate. 
  

	16.	Overseas eligible employees 

 The Company at the Board’s discretion may: 

 

	 	(a)	grant options to Eligible Employees and Participants who are resident outside of Australia; and 

  

	 	(b)	make regulations for the operation of the Plan which are not inconsistent with these rules to apply to Eligible Employees and Participants who are resident outside of Australia. 

  
 -7- 

	17.	Governing law 

 The laws of Victoria, Australia, govern these rules. 

 

	18.	Definitions and interpretation 

  

	18.1	Definitions 

 In this document, unless the context requires otherwise: 

Accounting Standards means the Australian Accounting Standards from time to time and if and to the extent that any matter is not covered
by Australian Accounting Standards means generally accepted accounting principles applied from time to time in Australia for a business similar to the Business. 

Administrator means the person (if any) selected by the Board to carry out the day to day administration of the Plan as contemplated by
rule 10.1. 
 Application Form means the form that the Board determines is to be used by an Eligible Employee to apply for Options
under the Plan. 
 Associated Body Corporate of the Company means each: 

 

	 	(a)	related body corporate of the Company, within the meaning of section 50 of the Corporations Act; 

  

	 	(b)	body corporate that has voting power in the Company of not less than 20%; or 

  

	 	(c)	body corporate in which the Company has voting power of not less than 20%, 

 where “voting
power” has the meaning in section 610 of the Corporations Act. 
 ASX means Australian Stock Exchange Limited (ACN 008 624 691).

 Bad Leaver is a Participant who ceases to be employed by the Company where the Board determines that the Participant has: 

 

	 	(a)	committed any serious or persistent breach of any provisions of employment; 

  

	 	(b)	been convicted of any criminal offence which involves fraud or dishonesty; 

  

	 	(c)	engaged in any conduct which brings the Company into substantial disrepute; 

  

	 	(d)	committed any wrongful or negligent act or omission which has caused the Company substantial liability; 

  

	 	(e)	engaged in grave misconduct or recklessness in the discharge of the Participant’s duties; 

  

	 	(f)	become disqualified from managing corporations in accordance with Part 2D.6 of the Corporations Act or has committed any act that, pursuant to the Corporations Act, may result in the Participant being banned from
managing a corporation; or 

  

	 	(g)	engaged in any other conduct which the Board reasonably considers to be analogous to, or having a substantially similar seriousness to, any of the circumstances specified in (a) to (f) above.

  
 -8- 

 Board means the board of directors of the Company or a committee appointed by the board of
directors of the Company. 
 Bonus Issue means a Pro Rata Issue of Shares to holders of Shares for which no consideration is payable
by them. 
 Certificate means, in relation to a Participant, the certificate or holding statement (in a form approved by the Board)
issued to the Participant which discloses the number of Options entered in the register of Option holders in the name of the Participant. 

Company means Mesoblast Ltd ACN 109 431 870. 

Constitution means the constitution of the Company. 

Control of an entity means having the right: 
  

	 	(a)	to vote 50% (or more) of the votes that can be cast on the election or removal of the entity’s directors; 

  

	 	(b)	to appoint or remove directors who possess 50% (or more) of the votes exercisable by all directors of the entity; or 

  

	 	(c)	to 50% (or more) of the profits or distributions of the entity or of its net liquidation proceeds. 

For this definition, if the entity does not have a board of directors, ‘director’ means a member of the entity’s governing body
with a role similar to a board of directors. 
 Control Event means any of the following: 

 

	 	(a)	an offer is made by a person for the whole of the issued ordinary share capital of the Company (or any part as is not at the time owned by the offeror or any person acting in concert with the offeror) and after
announcement of the offer the offeror (being a person who did not Control the Company prior to the offer) acquires Control of the Company; 

  

	 	(b)	any other event occurs which causes a change in Control of the Company; or 

  

	 	(c)	any other event which the Board reasonably considers should be regarded as a Control Event. 

Corporations Act means Corporations Act 2001 (Cth). 

Disposal Restrictions means, in relation to an Option, the restrictions (if any) determined by the Board that are required to be
satisfied before a Share acquired as a result of the exercise of the Option by the Participant can be sold, transferred or otherwise dealt with by a Participant. 

Eligible Employee means an employee or a director of any member of the Group who is determined by the Board to be an Eligible Employee
for the purposes of the Plan, or any other person who is determined by the Board to be an Eligible Employee for the purposes of the Plan. 

Exercise Conditions means, in relation to an Option, the period of time, performance hurdles and other conditions (if any) determined by
the Board that are required to be satisfied before the Option can be exercised. 
 Exercise Period means, in relation to an Option,
the period in which the Option may be exercised specified by the Board under rule 3.2, subject to any variation under rules 5.3 and 6. 

  
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 Exercise Price means the price per share that needs to be paid in order for the option to
convert to ordinary shares of the company, and will be determined by the Board, and will be subject to any adjustment under rule 7.3. 

Forfeiture Conditions means, in relation to an Option, the conditions (if any) determined by the Board that will result in the Option
lapsing if satisfied. 
 Group means the Company and each Associated Body Corporate of the Company. 

IPO Price means the price per Share at which Shares are offered under the prospectus issued in connection with the initial public
offering of Shares in the Company. 
 Leaver means a Participant who ceases employment and who is not a Bad Leaver. A Leaver
will include, but is not limited to, a Participant who ceases employment due to resignation or retirement. 
 Liquidation means the
passing of a resolution for voluntary winding up, or the making of an order for the compulsory winding up of the Company. 
 Listing
Rules means the listing rules (as defined in the Corporations Act) made or adopted by the ASX. 
 Market Price means, in relation
to an Option, the volume weighted average market price of Shares sold on the ASX on the 5 trading days immediately before the date of determination. 

Option means a right to subscribe for or acquire a Share, subject to any adjustment under rule 7.4. 

Participant means an Eligible Employee who has been invited to participate in the Plan and any other person who is nominated by that
Eligible Employee (following receipt of an invitation by the Board under rule 3.1) and who is determined by the Board to be a Participant for the purposes of the Plan. 

Permanent Disability means, in relation to a Participant, the inability, by reason of physical condition, mental illness or accident, of
the Participant to perform substantially all of the duties of the position in which the Participant has been employed or appointed (as determined by the Board). 

Plan means the Mesoblast Limited Employee Share Option Plan established and operated in accordance with these rules. 

Pro Rata Issue means an issue which has been offered to all holders of Shares on a pro rata basis. 

Share means a fully paid ordinary share in the capital of the Company. 

Vested Option means an Option in respect of which all Exercise Conditions have been met or which are otherwise exercisable (including as
contemplated by rules 5.3 and 6). 
  

	18.2	Interpretation 

 In these rules, unless the context otherwise requires: 

 

	 	(a)	a reference to any thing (including an amount or a provision of this document) is a reference to the whole and each part of it; 

  

	 	(b)	the singular includes the plural, and vice versa; 

  
 -10- 

	 	(c)	the word ‘person’ includes an individual, a body corporate, a firm, an unincorporated body, a society, an association and an authority; 

 

	 	(d)	a reference to a particular person includes their legal personal representatives, administrators, successors, substitutes and permitted assigns; 

 

	 	(e)	a reference to ‘costs’ includes charges, expenses and legal costs; 

  

	 	(f)	a reference to a “rule” or “these rules” is to the rule or these rules (as the case may be) as amended or replaced; 

 

	 	(g)	a reference to the Constitution includes a reference to any provision having substantially the same effect which is substituted for or replaces the Constitution; 

 

	 	(h)	where a Participant is a director of any member of the Group, but is not also an employee of any member of the Group, a reference to the employment with any member of the Group of that Participant is a reference to that
Participant holding office as a director of any member of the Group; 

  

	 	(i)	where a Participant is a person nominated by an Eligible Employee, a reference to the employment with any member of the Group of that Participant is a reference to the employment with any member of the Group of that
Eligible Employee; 

  

	 	(j)	a Participant does not cease to be employed by any member of the Group where the Participant ceases to be employed by one member of the Group but commences employment with another member of the Group provided that the
new employment commences within 60 days from the date of termination or such other period as the Board may determine by notice in writing; 

  

	 	(k)	a reference to ‘law’ means statute law, common law and equitable principles; 

  

	 	(l)	a reference to a particular law includes that law and any subordinate legislation (such as regulations) under it, in each case as amended, replaced, re-enacted or consolidated; 

 

	 	(m)	a reference to an accounting term is to that term as it is used in the Accounting Standards; 

  

	 	(n)	a reference to ‘dollars’, ‘$’ or ‘A$’ is to the lawful currency of Australia; 

  

	 	(o)	a time means that time in Melbourne, Australia; 

  

	 	(p)	a reference to a day or a month means a calendar day or calendar month; 

  

	 	(q)	if a period of time starts from a given day (or event), it is to be calculated exclusive of that day (or the day the event occurs); 

  

	 	(r)	the masculine includes the feminine, and vice versa; 

  

	 	(s)	the meaning of any general language is not restricted by any accompanying example and the words ‘includes’, ‘including’ ‘such as’ or ‘for example’ (or similar phrases) are not
words of limitation; and 

  

	 	(t)	headings in this document are for convenience only and do not affect its meaning. 

 If (but for
this rule) a provision of this document would be illegal, void or unenforceable or contravene the law, this document is to be interpreted as if the provision was omitted. 

  
 -11-

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