Document:

Exhibit 10.4

 

ENTASIS THERAPEUTICS HOLDINGS INC.

 

2018 EMPLOYEE STOCK PURCHASE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS: September 13, 2018

APPROVED BY THE STOCKHOLDERS: September 14, 2018

 

1.                                      GENERAL; PURPOSE.

 

(a)                                 The Plan provides a means by which Eligible Employees of the Company and certain designated Related Corporations may be given an opportunity to purchase shares of Common Stock.  The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan.

 

(b)                                 The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.

 

2.                                      ADMINISTRATION.

 

(a)                                 The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).

 

(b)                                 The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

(i)                                    To determine how and when Purchase Rights will be granted and the provisions of each Offering (which need not be identical).

 

(ii)                                To designate from time to time which Related Corporations of the Company will be eligible to participate in the Plan.

 

(iii)                            To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective.

 

(iv)                             To settle all controversies regarding the Plan and Purchase Rights granted under the Plan.

 

(v)                                 To suspend or terminate the Plan at any time as provided in Section 12.

 

(vi)                             To amend the Plan at any time as provided in Section 12.

 

(vii)                         Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Related Corporations and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan.

 

(viii)                     To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States.

 

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(c)                                  The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.  Whether or not the Board has delegated administration of the Plan to a Committee, the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.

 

(d)                                 All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

 

3.                                      SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

 

(a)                                 Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares of Common Stock that may be issued under the Plan will not exceed 140,000 shares of Common Stock, plus the number of shares of Common Stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on the first January 1 following the IPO Date and ending on (and including) January 1, 2028, in an amount equal to the lesser of (i) 1% of the total number of shares of Capital Stock outstanding on December 31st of the preceding calendar year, and (ii) 250,000 shares of Common Stock.  Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year to provide that there will be no January 1st increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.

 

(b)                                 If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common Stock not purchased under such Purchase Right will again become available for issuance under the Plan.

 

(c)                                  The stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

 

4.                                      GRANT OF PURCHASE RIGHTS; OFFERING.

 

(a)                                 The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board.  Each Offering will be in such form and will contain such terms and conditions as the Board will deem appropriate, and will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges.  The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan.  The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.

 

(b)                                 If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in forms delivered to the Company: (i) each form will apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted 

 

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Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.

 

(c)                                  The Board will have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then (i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Purchase Period.

 

5.                                      ELIGIBILITY.

 

(a)                                 Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation.  Except as provided in Section 5(b), an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company or the Related Corporation, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event will the required period of continuous employment be equal to or greater than two years.  In addition, the Board may provide that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company or the Related Corporation is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.

 

(b)                                 The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be deemed to be a part of that Offering.  Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:

 

(i)                                    the date on which such Purchase Right is granted will be the “Offering Date” of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;

 

(ii)                                the period of the Offering with respect to such Purchase Right will begin on its Offering Date and end coincident with the end of such Offering; and

 

(iii)                            the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she will not receive any Purchase Right under that Offering.

 

(c)                                  No Employee will be eligible for the grant of any Purchase Rights if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation.  For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options will be treated as stock owned by such Employee.

 

(d)                                 As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s 

 

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rights to purchase stock of the Company or any Related Corporation to accrue at a rate which exceeds $25,000 of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.

 

(e)                                  Officers of the Company and any designated Related Corporation, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan.  Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate.

 

6.                                      PURCHASE RIGHTS; PURCHASE PRICE.

 

(a)                                 On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, will be granted a Purchase Right to purchase up to that number of shares of Common Stock purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding 15% of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.

 

(b)                                 The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering.

 

(c)                                  In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering.  If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participant’s accumulated Contributions) allocation of the shares of Common Stock available will be made in as nearly a uniform manner as will be practicable and equitable.

 

(d)                                 The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be not less than the lesser of:

 

(i)                                    an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the Offering Date; or

 

(ii)                                an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.

 

7.                                      PARTICIPATION; WITHDRAWAL; TERMINATION.

 

(a)                                 An Eligible Employee may elect to authorize payroll deductions as the means of making Contributions by completing and delivering to the Company, within the time specified in the Offering, an enrollment form provided by the Company. The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board. Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where applicable law requires that Contributions be deposited with a third party. If permitted in the Offering, a Participant may begin such Contributions with the first payroll occurring on or 

 

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after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior  Offering but before the Offering Date of the next new Offering, Contributions from such payroll will be included in the new Offering).  If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions.  If specifically provided in the Offering, in addition to making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash or check prior to a Purchase Date.

 

(b)                                 During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company a withdrawal form provided by the Company.  The Company may impose a deadline before a Purchase Date for withdrawing.  Upon such withdrawal, such Participant’s Purchase Right in that Offering will immediately terminate and the Company will distribute to such Participant all of his or her accumulated but unused Contributions and such Participant’s Purchase Right in that Offering shall thereupon terminate.  A Participant’s withdrawal from that Offering will have no effect upon his or her eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.

 

(c)                                  Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason (subject to any post-employment participation period required by law) or (ii) is otherwise no longer eligible to participate. The Company will distribute to such individual all of his or her accumulated but unused Contributions.

 

(d)                                 During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant.  Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10.

 

(e)                                  Unless otherwise specified in the Offering, the Company will have no obligation to pay interest on Contributions.

 

8.                                      EXERCISE OF PURCHASE RIGHTS.

 

(a)                                 On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares of Common Stock, up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering.  No fractional shares will be issued unless specifically provided for in the Offering.

 

(b)                                 Unless otherwise provided in the Offering, if any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from or is not eligible to participate in such Offering, in which case such amount will be distributed to such Participant after the final Purchase Date, without interest.  If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one whole share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will not roll over to the next Offering and will instead be distributed in full to such Participant after the final Purchase Date of such Offering without interest.

 

(c)                                  No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan.  If on a Purchase Date the shares of Common Stock are not

 

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so registered or the Plan is not in such compliance, no Purchase Rights will be exercised on such Purchase Date, and the Purchase Date will be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than 6 months from the Offering Date.  If, on the Purchase Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all applicable laws, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed to the Participants without interest.

 

9.                                      COVENANTS OF THE COMPANY.

 

The Company will seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder.  If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.

 

10.                               DESIGNATION OF BENEFICIARY.

 

(a)                                 The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any shares of Common Stock and/or Contributions from the Participant’s account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant.  The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company.

 

(b)                                 If a Participant dies, and in the absence of a valid beneficiary designation, the Company will deliver any shares of Common Stock and/or Contributions to the executor or administrator of the estate of the Participant.  If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or Contributions to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

11.                               ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

 

(a)                                 In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing Offering.  The Board will make these adjustments, and its determination will be final, binding and conclusive.

 

(b)                                 In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock within ten business days prior to the 

 

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Corporate Transaction under the outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.

 

12.                               AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)                                 The Board may amend the Plan at any time in any respect the Board deems necessary or advisable.  However, except as provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by applicable law or listing requirements, including any amendment that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) above only to the extent stockholder approval is required by applicable law or listing requirements.

 

(b)                                 The Board may suspend or terminate the Plan at any time.  No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.

 

(c)                                  Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment.  To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code.

 

13.                               EFFECTIVE DATE OF PLAN.

 

The Plan will become effective immediately prior to and contingent upon the IPO Date.  No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.

 

14.                               MISCELLANEOUS PROVISIONS.

 

(a)                                 Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the Company.

 

(b)                                 A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).

 

(c)                                  The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering will in any way alter the at will nature of a Participant’s employment or  be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company 

 

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or a Related Corporation, or on the part of the Company or a Related Corporation to continue the employment of a Participant.

 

(d)                                 The provisions of the Plan will be governed by the laws of the State of Delaware without resort to that state’s conflicts of laws rules.

 

15.                               DEFINITIONS.

 

As used in the Plan, the following definitions will apply to the capitalized terms indicated below:

 

(a)                                 “Board” means the Board of Directors of the Company.

 

(b)                                 “Capital Stock” means each and every class of common stock of the Company, regardless of the number of votes per share.

 

(c)                                  “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the date the Plan is adopted by the Board without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

 

(d)                                 “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

 

(e)                                  “Committee” means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).

 

(f)                                   “Common Stock” means, as of the IPO Date, the common stock of the Company.

 

(g)                                 “Company” means Entasis Therapeutics Holdings Inc., a Delaware corporation.

 

(h)                                 “Contributions” means the payroll deductions and other additional payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account if specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions.

 

(i)                                    “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)                                    a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its subsidiaries;

 

(ii)                                a sale or other disposition of more than 50% of the outstanding securities of the Company;

 

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(iii)                            a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

(iv)                             a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

 

(j)                                    “Director” means a member of the Board.

 

(k)                                 “Eligible Employee” means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.

 

(l)                                    “Employee” means any person, including an Officer or Director, who is “employed” for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation.  However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.

 

(m)                             “Employee Stock Purchase Plan” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.

 

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

 

(o)                                 “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

 

(i)                                    If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in such source as the Board deems reliable.  Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing sales price on the last preceding date for which such quotation exists.

 

(ii)                                In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith in compliance with applicable laws and in a manner that complies with Sections 409A of the Code.

 

(iii)                            Notwithstanding the foregoing, for any Offering that commences on the IPO Date, the Fair Market Value of the shares of Common Stock on the Offering Date will be the price per share at which shares are first sold to the public in the Company’s initial public offering as specified in the final prospectus for that initial public offering.

 

(p)                                 “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

 

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(q)                                 “Offering” means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the “Offering Document” approved by the Board for that Offering.

 

(r)                                  “Offering Date” means a date selected by the Board for an Offering to commence.

 

(s)                                   “Officer” means a person who is an officer of the Company or a Related Corporation within the meaning of Section 16 of the Exchange Act.

 

(t)                                    “Participant” means an Eligible Employee who holds an outstanding Purchase Right.

 

(u)                                 “Plan” means this Entasis Therapeutics Holdings Inc. 2018 Employee Stock Purchase Plan.

 

(v)                                 “Purchase Date” means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering.

 

(w)                               “Purchase Period” means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date.  An Offering may consist of one or more Purchase Periods.

 

(x)                                 “Purchase Right” means an option to purchase shares of Common Stock granted pursuant to the Plan.

 

(y)                                 “Related Corporation” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

 

(z)                                  “Securities Act” means the Securities Act of 1933, as amended.

 

(aa)                          “Trading Day” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including but not limited to the NYSE, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.

 

10Exhibit

EXHIBIT 10.1

Broadridge Financial Solutions, Inc.
Executive Officer Annual Incentive Compensation Plan

1.  Purpose.  The purpose of the Broadridge Financial Solutions, Inc. Executive Officer Annual Incentive Compensation Plan (the “Plan”) is to advance the interests of Broadridge Financial Solutions, Inc. (the “Company”), by providing for annual or other periodic bonuses for executive officers of the Company and its subsidiaries who are designated as participants in the Plan, in order to enhance the Company’s competitiveness and its ability to attract, motivate and retain top talent and to reward annual financial and individual performance that complements the Company’s longer-term strategic focus.  Capitalized terms not otherwise defined herein will have the meanings set forth in the Company’s 2018 Omnibus Award Plan.
2.  Administration.  The Plan shall be administered by the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”).  The Committee shall administer and interpret the Plan.  The majority of the members of the Committee shall constitute a quorum.  The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.  The Committee shall have the sole discretion to interpret and construe the Plan.  All designations, determinations, interpretations, and other decisions under, or with respect to, the Plan or any bonus payable pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all parties.

3.  Eligibility/Forfeiture.

(a)  The executive officers of the Company and its subsidiaries will be eligible to participate in the Plan for each fiscal year of the Company (a “Plan Year”) during which they serve as executive officers.   Executive officers selected by the Committee who participate in the Plan are referred to herein as “Participants.”  

(b)  Unless otherwise provided in an applicable severance or change in control plan or agreement, a Participant whose employment terminates during a Plan Year shall not be entitled to the payment of a bonus under the Plan for the Plan Year, except as the Committee may otherwise determine in its sole discretion.  Notwithstanding the foregoing, unless otherwise determined by the Committee in its sole discretion, in the event a Participant dies or terminates employment due to his or her Disability or Retirement during a Plan Year, the Participant (or his or her estate, in the case of death) will be entitled to a pro-rated bonus based on the number of days of the Participant’s employment during the Plan Year and the level of achievement of the Performance Goals for the entire Plan Year, as determined by the Committee, and such amount will be paid at the time provided in Section 5(a) below.  

For purposes of this Plan, “Disability” shall mean qualification for long-term disability benefits under the long-term disability plan or policy, as it may be amended from time to time, of the Company or, if different, the Affiliate which employs the Participant (the “Employer”), regardless of whether the Participant is covered by such policy.  If the Employer does not have a long-term disability policy, “Disability” means that a Participant is unable to carry out the responsibilities and functions of the position held by the Participant by reason of any medically determined physical or mental impairment for a period of not less than one hundred and eighty (180) consecutive days.  A Participant shall not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Committee in its sole discretion.  

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For purposes of this Plan, “Retirement” means termination of employment for any reason (other than due to death or Disability of the Participant or by the Company for Cause) if such termination occurs after: (i) the Participant has reached age sixty (60) and the Participant has at least five (5) years of continuous service with the Company or its subsidiaries (including service with a predecessor of the Company or a subsidiary) or (ii) the Participant has reached age sixty-five (65).  

For purposes of this Plan, “Cause” means: (1) the Participant is convicted of, or pleads nolo contendere to, a felony; (2) willful misconduct by the Participant resulting in material harm to the Company; (3) the Participant commits an act constituting fraud, embezzlement, theft, or dishonesty against the Company or a subsidiary resulting in material harm to the Company; (4) continuing failure by the Participant to perform his or her duties after written notice thereof from the Company or a subsidiary; or (5) material breach by the Participant of any term of any confidentiality, non-solicitation and/or non-competition agreements with the Company or a subsidiary.

4.  Bonuses. 

(a)  Each Participant in the Plan for a Plan Year shall be eligible to receive such bonus, if any, for the Plan Year as may be payable based on achievement of the Performance Goals selected by the Committee as described below.  The Committee shall establish for the Plan Year a “Target Bonus” for each Participant equal to a percentage of such Participant’s annualized base salary in effect as of the last day of the Plan Year, and the maximum amount of a Target Bonus that may be awarded to a Participant for a Plan Year shall be 200% thereof.  Participants shall have their bonuses, if any, determined on the basis of the degree of achievement of the Performance Goals established by the Committee and in accordance with the formula established by the Committee and any proration determined by the Committee, e.g. for partial year service, changes from full-time status to part-time status (or vice versa), instances of leaves of absence, or changes in Target Bonus occurring during the Plan Year.

(b)  “Performance Goals” shall mean, for a Plan Year, the one or more goals established by the Committee for the Plan Year based upon the Performance Criteria.  In the event more than one Performance Goal is selected by the Committee, the Committee will determine weightings for each Performance Goal.  The Performance Goals for a Plan Year and relevant weightings, if applicable, may vary from Participant to Participant, in the sole discretion of the Committee.  Unless otherwise determined by the Committee in its sole discretion, the Performance Goals will be established within the first ninety (90) days of the applicable Plan Year.  The Committee is authorized at any time during the Plan Year or at any time thereafter, in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Plan Year based on the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary, unusual or infrequently occurring events; (vi) acquisitions or divestitures; (vii) foreign exchange gains and losses; (viii) a change in the Company’s fiscal year; and (ix) any other events affecting the Company or relating to the Participant, as determined by the Committee.

(c)  The “Performance Criteria” shall be measured in terms of any performance criteria selected by the Committee, which may include, without limitation, one or more of the following objectives or any other metric or objective determined by the Committee to be appropriate from time to time, each as described as they relate to Company-wide objectives or of an Affiliate, a subsidiary, division, department or function of the Company or an Affiliate: (i) earnings per share; (ii) stock price; (iii) stockholder return; (iv) return on investment; (v) return on capital; (vi) earnings before interest, taxes, depreciation and/or amortization; (vii) income before taxes and extraordinary items; (viii) gross or net profits; (ix) gross or net 

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revenues; (x) net earnings or net income (before or after taxes); (xi) operating income; (xii) operating profit or net operating profit (before or after taxes); (xiii) return measures (including, but not limited to, return on assets or net assets, capital, invested capital, equity, or sales); (xiv) cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); (xv) gross or operating margins; (xvi) fair market value of the shares of the Company’s Common Stock; (xvii) the growth in the value of an investment in the Company’s Common Stock assuming the reinvestment of dividends; (xviii) productivity ratios; (xix) expense targets; (xx) margins; (xxi) operating efficiency; (xxii) objective measures of customer satisfaction; (xxiii) cost reductions or savings; (xxiv) market share; (xxv) working capital targets; (xxvi) measures of economic value added; (xxvii) sales; (xxviii) enterprise value; (xxix) client retention; (xxx) competitive market metrics; (xxxi) employee retention; (xxxii) timely completion of new product rollouts; (xxxiii) strategic and leadership goals; or (xxxiv) any combination of the foregoing.  The foregoing performance criteria may be measured on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group.  For the avoidance of doubt, the Committee may: (i) designate additional objective or subjective performance criteria on which the Performance Criteria may be based, which may include criteria that are applicable to individual Participants or (ii) adjust, modify or amend the aforementioned criteria.

(d)  The specific Threshold, Target and Maximum attainment levels for each Performance Goal shall be established by the Committee each year at the time the Performance Goals are set. “Threshold” attainment shall mean the minimum level of attainment required for a bonus to be paid.  “Target” attainment shall mean the level of attainment required for a Target Bonus to be paid.  “Maximum” attainment shall mean the level of attainment required for the highest level of a bonus to be paid, subject to the limitations of Section 4(a), and is generally equated with superior performance or excellence.  For Performance Goal attainment levels that fall between the Threshold and Target attainment levels, interpolation between the Threshold and Target attainment levels will be used.  For Performance Goal attainment levels that fall between the Target and Maximum attainment levels, interpolation between the Target and Maximum attainment levels will be used.

(e)  The Committee may, in its sole discretion, (i) award or increase the amount of bonuses payable to one or more Participants even though not earned in accordance with the Performance Goals established pursuant to this Section 4, or (ii) decrease the amount of bonuses otherwise payable to one or more Participants even though earned in accordance with the Performance Goals established pursuant to this Section 4.

5.  Payment.  

(a)Payment of bonuses for a Plan Year shall be made as soon as reasonably practicable after the end of the Plan Year, but not later than the 15th day of the third month after the end of the Plan Year.  Such payments shall either be made in the form of cash or Company Common Stock under the Company’s 2018 Omnibus Award Plan (or a successor plan), as determined by the Committee in its sole discretion.

(b) To the extent that a Participant has elected under the applicable provisions of any savings or retirement program offered by or through the Company to have any part of the bonus payable to the Participant for any Plan Year reduced and to have an amount equal to such part of the Participant’s bonus contributed to such program as a contribution on the Participant’s behalf, an amount equal to such part of the Participant’s Bonus shall be contributed to such program on behalf of the Participant, and thereupon, the obligation of the Company under this Plan with respect to payment of such part of the Participant’s bonus shall be fully discharged.

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(c) The Company will not pay advances against future Bonus payments.

6.  Participant’s Interests.  A Participant’s interest in any bonus awards hereunder shall be a general unsecured and unfunded obligation of the Company subject to the terms and conditions of the Plan.  The Plan shall not give any person any right or security interest in any asset of the Company or any fund in which any deferred payment is deemed invested.  

7.  Non-Alienation of Benefits/Death.  All rights and benefits under the Plan are personal to the Participant and neither the Plan nor any right or interest of a Participant or any other person arising under the Plan is subject to voluntary or involuntary alienation, sale, transfer, or assignment without the Committee’s consent, which may be withheld in its sole discretion.  In the event of a Participant’s death, the Company shall pay any bonus payment the Committee determines to make to the Participant’s estate.

8.  Withholding.  Notwithstanding any other provision of this Plan, the Company may withhold from any payment made by it under the Plan such amount or amounts of required payroll deductions and tax withholdings.  The Company shall have no liability for any tax imposed on an employee as a result of amounts paid or payable to such associate under the Plan.

9.  No Employment Rights or Claim for Bonus.  Nothing contained in the Plan shall confer upon any Participant any right to be continued in the employ of the Company or any of its subsidiaries or interfere in any way with the right of the Company or any of its subsidiaries to terminate a Participant’s employment at any time.  No employee of the Company or a subsidiary, or other person, shall have any claim or right to be granted a bonus under the Plan or, having been selected for the grant of a bonus, to be selected for a grant of any other bonus under the Plan.

10.  No Liability of Committee Members.  No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his or her behalf in his or her capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

11.  Section 409A.  The Plan and bonuses payable thereunder are intended to be exempt from, or comply with, the applicable requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Plan shall be limited, construed and interpreted in accordance with such intent.  However, in no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on the Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code.

12.  Severability.  If any provision of the Plan is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the 

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Committee, materially altering the intent of the Plan, such provision shall be stricken as to such jurisdiction or person and the remainder of the Plan shall remain in full force and effect.

13.  Clawback Policy.  Notwithstanding any other provision herein, the recoupment or “clawback” policies adopted by the Company and applicable to incentive awards, as such policies are in effect from time to time, shall apply to this Plan and any bonuses paid or payable under this Plan.

14.  Amendment or Termination.  The Board may, in its sole discretion, terminate or amend the Plan at any time.

15. Successors.  The Plan will be binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase or otherwise.

16.  Non-U.S. Participants.  Without amending this Plan, the Committee may grant bonus awards to Participants who are employed outside the United States on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes, the Committee may make such modifications, amendments, procedures, sub-plans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its subsidiaries operates or has employees.

17. Controlling Law.  The Plan shall be construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof.

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