Document:

Exhibit 10.25

 

MERSANA THERAPEUTICS, INC.

2017 EMPLOYEE STOCK PURCHASE PLAN

 

1.                                      DEFINED TERMS

 

The following terms, when used in the Plan (as defined below), have the meanings and are subject to the provisions set forth below:

 

(a)                                 “401(k) Plan”:  A savings plan qualifying under Section 401(k) of the Code that is sponsored by the Company for the benefit of its employees.

 

(b)                                 “Account”:  A notional payroll deduction account maintained in the Participant’s name on the books of the Company.

 

(c)                                  “Administrator”:  The Compensation Committee, except that the Compensation Committee may delegate (i) to one or more of its members (or one or more other members of the Board, including the full Board) such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant Awards to the extent permitted by Section 152 or 157(c) of the Delaware General Corporation Law; and (iii) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate.  In the event of any delegation described in the preceding sentence, the term “Administrator” will include the person or persons so delegated to the extent of such delegation.

 

(d)                                 “Affiliate”:  Any corporation or other entity that stands in a relationship to the Company that would result in the Company and such corporation or other entity being treated as a single employer under Sections 414(b) or 414(c) of the Code, except that such sections shall be applied by substituting “at least 50%” for “at least 80%” wherever applicable.  The Company may at any time by amendment provide that different ownership thresholds apply.

 

(e)                                  “Board”:  The Board of Directors of the Company.

 

(f)                                   “Business Day”:   Any day on which the national stock exchange on which the Stock is traded is available and open for trading.

 

(g)                                 “Code”:  The U.S. Internal Revenue Code of 1986, as from time to time amended and in effect, or any successor statute as from time to time in effect.

 

(h)                                 “Company”:  Mersana Therapeutics, Inc.

 

(i)                                    “Compensation Committee”:  The Compensation Committee of the Board.

 

(j)                                    “Corporate Transaction”:  A (i)  consolidation, merger or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company (or any Affiliate) is not the surviving corporation or which results in the acquisition of all or substantially all of the then-outstanding shares of Stock by a single person or entity or by a group of persons and/or entities acting in concert; (ii) sale or transfer of all or substantially all of the Company’s assets; (iii) dissolution or liquidation of the Company; or (iv) a “change in

 

 

control event” as that term is defined in the regulations under Section 409A.  For the avoidance of doubt, an initial public offering shall not constitute a Change in Control.  Where a Corporate Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) as determined by the Compensation Committee of the Board, the Corporate Transaction shall be deemed to have occurred upon consummation of the tender offer.

 

(k)                                 “Designated Subsidiary”:  A Subsidiary of the Company that has been designated by the Board or the Compensation Committee from time to time as eligible to participate in the Plan as set forth on Exhibit A.

 

(l)                                    “Effective Date”:  The date set forth in Section 23.

 

(m)                             “Eligible Employee”:  Any Employee who meets the eligibility requirements set forth in Section 4.

 

(n)                                 “Employee”:  Any person who is employed by the Company or a Designated Subsidiary.  For the avoidance of doubt, independent contractors and consultants are not “Employees” for purposes of the Plan.

 

(o)                                 “Eligible Compensation”:  Regular base salary, overtime payments, annual bonuses, commissions and other sales incentives (excluding, for the avoidance of doubt, any long-term incentive payments).  Eligible Compensation will not be reduced by any income or employment tax withholdings or any contributions by the Employee to a 401(k) Plan or a plan intended to qualify under Section 125 of the Code, but will be reduced by any contributions made on the Employee’s behalf by the Company or any Subsidiary to any deferred compensation plan or welfare benefit program now or hereafter established.

 

(p)                                 “Exercise Date”:  The date set forth in Section 5 or otherwise designated by the Administrator with respect to a particular Option Period on which a Participant will be deemed to have exercised the Option granted to him or her for such Option Period.

 

(q)                                 “Fair Market Value”:  As of a particular date, (i) the closing price for a share of Stock reported on the Nasdaq Stock Market (or any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the immediately preceding date on which a closing price was reported or (ii) in the event that the Stock is not traded on a national securities exchange, the fair market value of a share of Stock determined by the Administrator consistent with the rules of Section 409A and Section 422 of the Code, to the extent applicable.

 

(r)                                  “Maximum Share Limit”:  The meaning set forth in Section 10.

 

(s)                                   “Option”:  An option granted pursuant to the Plan entitling the holder thereof to acquire shares of Stock upon payment of the Purchase Price with respect to such shares of Stock.

 

(t)                                    “Option Period”:  An offering period established in accordance with Section 5.

 

(u)                                 “Parent”:  A “parent corporation” as defined in Section 424(e) of the Code.

 

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(v)                                 “Participant”:  An Eligible Employee who elects to enroll in the Plan.

 

(w)                               “Plan”:  The Mersana Therapeutics, Inc. 2017 Employee Stock Purchase Plan, as from time to time amended and in effect.

 

(x)                                 “Purchase Price”:  The price per share of Stock with respect to an Option Period determined in accordance with Section 9.

 

(y)                                 “Section 409A”:  Section 409A of the Code and the regulations thereunder.

 

(z)                                  “Section 423”:  Section 423 of the Code and the regulations thereunder.

 

(aa)                          “Stock”:  Common stock of the Company, par value $0.0001 per share.

 

(bb)                          “Subsidiary”:  A “subsidiary corporation” as defined in Section 424(f) of the Code.

 

2.                                      PURPOSE

 

The Plan is intended to enable Eligible Employees to use payroll deductions to purchase shares of Stock in offerings under the Plan, and thereby acquire an interest in the future of the Company.  The purposes of the Plan are to attract, retain and reward Eligible Employees, to incentivize them to generate stockholder value, to enable them to participate in the growth of the Company and to align their interests with the interests of the Company’s stockholders.  The Plan is intended to qualify as an “employee stock purchase plan” under Section 423 and to be exempt from the application and requirements of Section 409A, and is to be construed accordingly.

 

3.                                      OPTIONS TO PURCHASE STOCK

 

Subject to adjustment pursuant to Section 16, the aggregate number of shares of Stock available for purchase pursuant to the exercise of Options granted under the Plan to Eligible Employees will be 225,000 shares of Stock, plus an annual increase, to be added as of January 1st of each year from January 1, 2018 to January 1, 2027, equal to least of (i) 450,000 shares of Stock; (ii) one percent of the number of shares of Stock outstanding as of the close of business on the immediately preceding December 31st; and (iii) the number of shares of Stock determined by the Board on or prior to such date for such year, up to maximum of 4,725,000 shares of Stock in the aggregate.  The shares of Stock to be delivered upon exercise of Options under the Plan may be either shares of authorized but unissued Stock, treasury Stock, or Stock acquired in an open-market transaction.  If any Option granted under the Plan expires or terminates for any reason without having been exercised in full or ceases for any reason to be exercisable in whole or in part, the unpurchased shares of Stock subject to such Option will again be available for purchase pursuant to the exercise of Options under the Plan.  If, on an Exercise Date, the total number of shares of Stock that would otherwise be subject to Options granted under the Plan exceeds the number of shares then available under the Plan (after deduction of all shares for which Options have been exercised or are then-outstanding), the Administrator shall make a pro rata allocation of the shares remaining available for the Option grants in as uniform a manner as shall be practicable and as it shall determine to be equitable.  In such event, the Administrator

 

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shall give written notice to each Participant of such reduction of the number of Options affected thereby and shall similarly reduce the rate of the Participant’s payroll deductions, if necessary.

 

4.                                      ELIGIBILITY

 

(a)                                 Eligibility Requirements.  Subject to Section 13, and the exceptions and limitations set forth in Sections 4(b) and (c) and 6, or as may be provided elsewhere in the Plan, each Employee (i) who has been continuously employed by the Company or a Designated Subsidiary, as applicable, for a period of at least ten (10) Business Days as of the first day of an Option Period; (ii) whose customary Employment with the Company or a Designated Subsidiary, as applicable, is for more than five (5) months per calendar year; (iii) who customarily works twenty (20) hours or more per week; and (iv) who satisfies the requirements set forth in the Plan, will be an Eligible Employee.

 

(b)                                 Five Percent Shareholders.  No Employee may be granted an Option under the Plan if, immediately after the Option is granted, the Employee would own (or pursuant to Section 424(d) of the Code, would be deemed to own) stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of its Parent or Subsidiaries, if any.

 

(c)                                  Additional Requirements.  The Administrator may, for Option Periods that have not yet commenced, establish additional or other eligibility requirements, or amend the eligibility requirements set forth in subsection (a) above, in each case, not inconsistent with Section 423.

 

5.                                      OPTION PERIODS

 

The Plan will generally be implemented by a series of separate offerings referred to as “Option Periods”.  Unless otherwise determined by the Administrator, the Option Periods will be successive periods of approximately six (6) months commencing on the first Business Day in January and July of each year, anticipated to be on or around January 1 and July 1, and ending approximately six (6) months later on the last Business Day in June or December, as applicable, of each year, anticipated to be on or around June 30 and December 31, as applicable, of each year.  The last Business Day of each Option Period will be an “Exercise Date”.  The Administrator may change the Exercise Date and the commencement date, ending date and duration of the Option Periods to the extent permitted by Section 423, provided, however, that no Option may be exercised after 27 months from its grant date.

 

6.                                      OPTION GRANT

 

Subject to the limitations set forth in Sections 4 and 10, on the first day of an Option Period, each Participant automatically will be granted an Option to purchase shares of Stock on the Exercise Date; provided, however, that no Participant will be granted an Option under the Plan that permits the Participant’s right to purchase shares of Stock under the Plan and under all other employee stock purchase plans of the Company and its Parent and Subsidiaries, if any, to accrue at a rate that exceeds $25,000 in Fair Market Value (or such other maximum as may be prescribed from time to time by the Code) for each calendar year during which any Option granted to such Participant is outstanding at any time, as determined in accordance with Section 423(b)(8) of the Code.

 

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7.                                      METHOD OF PARTICIPATION

 

(a)                                 Payroll Deduction Authorization.  To participate in an Option Period, an Eligible Employee must execute and deliver to the Administrator a payroll deduction authorization, in accordance with the procedures prescribed by, and in a form acceptable to, the Administrator and, in so doing, the Eligible Employee will thereby become a Participant as of the first day of such Option Period.  Such an Eligible Employee will remain a Participant with respect to subsequent Option Periods until his or her participation in the Plan is terminated as provided herein.  Such payroll deduction authorization must be delivered not later than ten (10) Business Days prior to the first day of an Option Period, or such other time as specified by the Administrator.

 

(b)                                 Changes to Payroll Deduction Authorization for Subsequent Option Periods.  A Participant’s payroll deduction authorization will remain in effect for subsequent Option Periods unless the Participant files a new payroll deduction authorization not later than ten (10) Business Days prior to the first day of the subsequent Option Period, or such other time as specified by the Administrator, or the Participant’s Option is cancelled pursuant to Section 13 or 14.

 

(c)                                  Changes to Payroll Deduction Authorization for Current Option Period.  During an Option Period, a Participant’s payroll deduction may not be reduced or increased.  A Participant may terminate his or her payroll deduction authorization during an Option Period by canceling his or her Option in accordance with Section 13.

 

(d)                                 Payroll Deduction Percentage.  Each payroll deduction authorization will request payroll deductions as a whole percentage from one percent (1%) to ten percent (10%) of an employee’s Eligible Compensation each payroll period.

 

(e)                                  Payroll Deduction Account.  All payroll deductions made pursuant to this Section 7 will be credited to the Participant’s Account.  Amounts credited to a Participant’s Account will not be required to be set aside in trust or otherwise segregated from the Company’s general assets.

 

8.                                      METHOD OF PAYMENT

 

A Participant must pay for shares of Stock purchased upon the exercise of an Option with accumulated payroll deductions credited to the Participant’s Account.

 

9.                                      PURCHASE PRICE

 

The Purchase Price of shares of Stock issued pursuant to the exercise of an Option on each Exercise Date will be eighty-five percent (85%) (or such greater percentage specified by the Administrator to the extent permitted under Section 423) of the lesser of (i) the Fair Market Value of a share of Stock on the date on which the Option was granted pursuant to Section 6(i.e., the first day of the Option Period) and (ii) the Fair Market Value of a share of Stock on the date on which the Option is deemed exercised pursuant to Section 10 (i.e., the Exercise Date).

 

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10.                               EXERCISE OF OPTIONS

 

(a)                                 Purchase of Shares.  Subject to the limitations set forth in Section 6 and this Section 10, with respect to each Option Period, on the applicable Exercise Date, each Participant will be deemed to have exercised his or her Option and the accumulated payroll deductions in the Participant’s Account will be applied to purchase the greatest number of shares of Stock (rounded down to the nearest whole share) that can be purchased with such Account balance at the applicable Purchase Price; provided, however, that no more than 4,000 shares of Stock may be purchased by a Participant on any Exercise Date, or such lesser number as the Administrator may prescribe in accordance with Section 423 (the “Maximum Share Limit”).  As soon as practicable thereafter, shares of Stock so purchased will be placed, in book-entry form, into a recordkeeping account in the name of the Participant.  No fractional shares of Stock will be purchased pursuant to the exercise of an Option under the Plan; any accumulated payroll deductions in a Participant’s Account that are not sufficient to purchase a whole share of Stock will be retained in the Participant’s Account for the subsequent Option Period, subject to earlier withdrawal by the Participant as provided in Section 13.

 

(b)                                 Return of Account Balance.  Except as provided in Section 10(a) with respect to fractional shares, any amount of payroll deductions in a Participant’s Account that is not used for the purchase of shares of Stock, whether because of the Participant’s withdrawal from participation in an Option Period or for any other reason, will be returned to the Participant (or his or her designated beneficiary or legal representative, as applicable), without interest, as soon as administratively practicable after such withdrawal or other event, as applicable.  If the Participant’s accumulated payroll deductions on the Exercise Date of an Option Period would otherwise enable the Participant to purchase shares of Stock in excess of the Maximum Share Limit or the limits set forth in Section 6, the excess of the amount of the accumulated payroll deductions over the aggregate Purchase Price of the shares of Stock actually purchased will be returned to the Participant, without interest, as soon as administratively practicable after such Exercise Date.

 

11.                               INTEREST

 

No interest will be payable on any amount held in the Account of any Participant.

 

12.                               TAXES

 

Payroll deductions will be made on an after-tax basis.  The Administrator will have the right, as a condition to exercising an Option, to make such provision as it deems necessary to satisfy the Company’s obligations to withhold federal, state, local or other taxes incurred by reason of the purchase or disposition of shares of Stock under the Plan.  In the Administrator’s discretion and subject to applicable law, such tax obligations may be satisfied in whole or in part by delivery of shares of Stock to the Company, including shares of Stock purchased under the Plan, valued at Fair Market Value, but not in excess of the maximum withholding amount consistent with the award being subject to equity accounting treatment under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor provision.

 

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13.                               CANCELLATION AND WITHDRAWAL

 

(a)                                 Cancellation of Payroll Deduction Authorization.  A Participant who holds an Option under the Plan may cancel all (but not less than all) of his or her Option and terminate his or her payroll deduction authorization by notice delivered to the Administrator in accordance with the procedures prescribed by, and in a form acceptable to, the Administrator.  To be effective with respect to an upcoming Exercise Date, such cancellation notice must be delivered not later than ten (10) Business Days prior to such Exercise Date (or such other time as specified by the Administrator).  Upon such termination and cancellation, the balance in the Participant’s Account will be returned to the Participant, without interest, as soon as administratively practicable thereafter.  For the avoidance of doubt, a Participant who reduces his or her withholding rate for future payroll periods to zero percent (0%) pursuant to Section 7 will be deemed to have terminated his or her payroll deduction authorization and cancelled his or her Option as to future Option Periods, unless the Participant has delivered a new payroll deduction authorization for a subsequent Option Period in accordance with the rules of Section 7(b).

 

(b)                                 401(k) Hardship Withdrawal.  A Participant who makes a hardship withdrawal from a 401(k) Plan will be deemed to have terminated his or her payroll deduction authorization for subsequent payroll dates relating to the then-current Option Period as of the date of such hardship withdrawal and amounts accumulated in the Participant’s Account as of such date will be returned to the Participant, without interest, as soon as administratively practicable thereafter.  An Employee who has made a hardship withdrawal from a 401(k) Plan will not be permitted to participate in Option Periods commencing after the date of his or her hardship withdrawal until the first Option Period that begins at least six months after the date of his or her hardship withdrawal.

 

14.                               TERMINATION OF EMPLOYMENT OR DEATH OF PARTICIPANT

 

Upon the termination of a Participant’s employment with the Company or a Designated Subsidiary, as applicable, for any reason or the death of a Participant during an Option Period prior to an Exercise Date or in the event the Participant ceases to qualify as an Eligible Employee, the Participant will cease to be a Participant, any Option held by him or her under the Plan will be deemed canceled, the balance in the Participant’s Account will be returned to the Participant (or his or her estate or designated beneficiary, in the event of the Participant’s death), without interest, as soon as administratively practicable thereafter, and the Participant will have no further rights under the Plan.

 

15.                               EQUAL RIGHTS; PARTICIPANT’S RIGHTS NOT TRANSFERABLE

 

All Participants granted Options in an offering under the Plan will have the same rights and privileges, consistent with the requirements set forth in Section 423.  Any Option granted under the Plan will be exercisable during the Participant’s lifetime only by him or her and may not be sold, pledged, assigned, or transferred in any manner.  In the event any Participant violates or attempts to violate the terms of this Section 15, as determined by the Administrator in its sole discretion, any Options held by him or her may be terminated by the Company and, upon the return to the Participant of the balance of his or her Account, without interest, all of the Participant’s rights under the Plan will terminate.

 

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16.                               CHANGE IN CAPITALIZATION; CORPORATE TRANSACTION

 

(a)                                 Change in Capitalization.  In the event of any change in the outstanding Stock by reason of a stock dividend, stock split, reverse stock split, split-up, recapitalization, merger, consolidation, reorganization, or other capital change, the aggregate number and type of shares of Stock available under the Plan, the number and type of shares of Stock granted under any outstanding Options, the maximum number and type of shares of Stock purchasable under any outstanding Option, and the Purchase Price under any outstanding Option will be appropriately adjusted; provided, that any such adjustment shall be made in a manner that complies with Section 423.

 

(b)                                 Corporate Transaction.  In the event of a Corporate Transaction, the Administrator may, in its discretion, (i) if the Company is merged with or acquired by another corporation, provide that each outstanding Option will be assumed or exchanged for a substitute Option granted by the acquirer or successor corporation or by a parent or subsidiary of the acquirer or successor corporation; (ii) cancel each outstanding Option and return the balances in Participants’ Accounts to the Participants; and/or (iii) pursuant to Section 18, terminate the Option Period on or before the date of the proposed Corporate Transaction.

 

17.                               ADMINISTRATION OF PLAN

 

The Plan will be administered by the Administrator, which will have the authority to interpret the Plan, determine eligibility under the Plan, prescribe forms, rules and procedures relating to the Plan and otherwise do all things necessary or appropriate to carry out the purposes of the Plan.  All determinations and decisions by the Administrator regarding the interpretation or application of the Plan will be final and binding on all Participants and all other persons.

 

The Administrator may specify the manner in which the Company and/or Employees are to provide notices and forms under the Plan, and may require that such notices and forms be submitted electronically.

 

18.                               AMENDMENT AND TERMINATION OF PLAN

 

(a)                                 Amendment.  The Board reserves the right at any time or times to amend the Plan to any extent and in any manner it may deem advisable; provided, however, that any amendment that would be treated as the adoption of a new plan for purposes of Section 423 will have no force or effect unless approved by the shareholders of the Company within 12 months before or after its adoption.

 

(b)                                 Termination.  The Board reserves the right at any time or times to suspend or terminate the Plan.  In connection therewith, the Board may provide, in its sole discretion, either that outstanding Options will be exercisable either at the Exercise Date for the applicable Option Period or on such earlier date as the Board may specify (in which case such earlier date will be treated as the Exercise Date for the applicable Option Period), or that the balance of each Participant’s Account will be returned to the Participant, without interest.

 

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19.                               APPROVALS

 

Shareholder approval of the Plan will be obtained prior to the date that is 12 months after the date of Board approval.  In the event that the Plan has not been approved by the shareholders of the Company prior to June 13, 2018, all Options to purchase shares of Stock under the Plan will be cancelled and become null and void.

 

Notwithstanding anything herein to the contrary, the obligation of the Company to issue and deliver shares of Stock under the Plan will be subject to the approval required of any governmental authority in connection with the authorization, issuance, sale or transfer of such shares of Stock and to any requirements of any national securities exchange applicable thereto, and to compliance by the Company with other applicable legal requirements in effect from time to time.

 

20.                               PARTICIPANTS’ RIGHTS AS SHAREHOLDERS AND EMPLOYEES

 

A Participant will have no rights or privileges as a shareholder of the Company and will not receive any dividends in respect of any shares of Stock covered by an Option granted hereunder until such Option has been exercised, full payment has been made for such shares of Stock, and the shares of Stock have been issued to the Participant.

 

Nothing contained in the provisions of the Plan will be construed as giving to any Employee the right to be retained in the employ of the Company or any Designated Subsidiary or as interfering with the right of the Company or any Designated Subsidiary to discharge, promote, demote or otherwise re-assign any Employee from one position to another within the Company or any Designated Subsidiary at any time.

 

21.                               RESTRICTIONS ON TRANSFER; INFORMATION REGARDING DISQUALIFYING DISPOSITIONS

 

Shares of Stock purchased under the Plan may, in the discretion of the Administrator, be subject to a restriction prohibiting the transfer, sale, pledge or alienation of such shares of Stock by a Participant, other than by will or by the laws of descent and distribution, for such period following such purchase as may be determined by the Administrator.

 

By electing to participate in the Plan, each Participant agrees to provide such information about any transfer of Stock acquired under the Plan that occurs within two years after the first day of the Option Period in which such Stock was acquired and within one year after the acquisition of such Stock as may be requested by the Company or any Designated Subsidiary in order to assist it in complying with applicable tax laws.

 

22.                               GOVERNING LAW

 

The Plan will be governed by and interpreted consistently with the laws of the State of Delaware, except as may be necessary to comply with applicable requirements of federal law.

 

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23.                               EFFECTIVE DATE AND TERM

 

The Plan will become effective upon adoption of the Plan by the Board and no rights will be granted hereunder after the earliest to occur of (i) the Plan’s termination by the Company; (ii) the issuance of all shares of Stock available for issuance under the Plan; and (iii) the day before the 10-year anniversary of the date the Board approves the Plan.

 

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EXHIBIT A

 

Designated Subsidiaries

 

Designated Subsidiaries as of the date of adoption of the Plan by the Board are listed below:Exhibit 10.26

 

MERSANA THERAPEUTICS, INC.

2017 CASH BONUS PLAN

 

1.             DEFINED TERMS

 

The following terms, when used in the Plan (as defined below), have the meanings and are subject to the provisions set forth below:

 

(a)           “Administrator”:  The Compensation Committee and its delegates.  For purposes of Section 162(m) Awards, to the extent applicable, if any member of the Compensation Committee is not an “outside director” (as defined in Section 162(m)), “Administrator” means a subcommittee of the Compensation Committee consisting solely of those Compensation Committee members who are “outside directors” as so defined.  For purposes of the Plan, the term “Administrator” will include the Compensation Committee, a subcommittee of the Compensation Committee and the person or persons delegated authority under the Plan to the extent of such delegation, as applicable.

 

(b)           “Award”:  An award opportunity that is granted to a Participant with respect to a Performance Period.  An Award may be expressed as a percentage of the Participant’s base salary or as a fixed dollar amount.

 

(c)           “Board”:  The Board of Directors of the Company.

 

(d)           “Code”:  The U.S. Internal Revenue Code of 1986, as from time to time amended and in effect, or any successor statute as from time to time in effect.

 

(e)           “Compensation Committee”:  The Compensation Committee of the Board.

 

(f)            “Company”:  Mersana Therapeutics, Inc., a Delaware corporation.

 

(g)           “Participant”:  A person granted an Award under the Plan.

 

(h)           “Performance Criteria”:  Specified criteria, other than the mere continuation of employment or the mere passage of time, the satisfaction of which is a condition for the grant, vesting or full enjoyment of an Award.  A Performance Criterion and any targets with respect thereto need not be based upon an increase, a positive or improved result or avoidance of loss and may be applied to the Participant, a business unit or division, or the Company as a whole.  For purposes of Section 162(m) Awards, a Performance Criterion will mean an objectively determinable measure or objectively determinable measures of performance relating to any, or any combination of, the following (measured either absolutely or comparatively (including, without limitation, by reference to an index or indices or the performance of one or more companies) and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof and subject to such adjustments, if any, as the Administrator specifies, consistent with the requirements of Section 162(m)):  sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating;

 

 

market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings; and strategic business criteria, consisting of one or more objectives based on:  meeting specified market penetration or value added, product development or introduction (including, without any clinical trial accomplishments, regulatory or other filings or approvals, or other product development milestones), geographic business expansion, cost targets, cost reductions or savings, customer satisfaction, operating efficiency, acquisition or retention, employee satisfaction, information technology, corporate development (including, without limitation, licenses, innovation, research or establishment of third-party collaborations), manufacturing or process development, legal compliance or risk reduction, patent application or issuance goals, or goals relating to acquisitions or divestitures (in whole or in part), joint ventures or strategic alliances.  To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), the Administrator may provide in the case of any Award intended to qualify for such exception that one or more of the Performance Criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.

 

(i)            “Performance Period”:  A specified performance period, consisting of the Company’s fiscal year or such other period as the Administrator may determine.

 

(j)            “Plan”:  The Mersana Therapeutics, Inc. 2017 Cash Bonus Plan, as from time to time amended and in effect.

 

(k)           “Section 162(m)”:  Section 162(m) of the Code and the regulations thereunder.

 

(l)            “Section 162(m) Award”:  An Award intended to satisfy the requirements of the performance-based compensation exception under Section 162(m), as determined by the Administrator.

 

2.             PURPOSE

 

The Plan has been established to advance the interests of the Company by providing for the grant of Awards to executive officers and key employees of the Company and its subsidiaries, including Awards intended to comply with the requirements for tax deductibility imposed by Section 162(m) of the Code, to the extent applicable.  The purposes of the Plan are to attract, retain and reward executive officers and key employees and to incentivize them to achieve key goals and objectives of the Company and/or its subsidiaries.

 

3.             ADMINISTRATION

 

The Administrator has discretionary authority, subject only to the express provisions of the Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive the terms and conditions of any Award; prescribe forms, rules and procedures relating to the Plan and Awards; and otherwise do all things necessary or desirable to carry out the purposes

 

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of the Plan.  Determinations of the Administrator made under the Plan are conclusive and bind all persons.

 

4.             ELIGIBILITY; PARTICIPANTS

 

Executive officers and key employees of the Company and its subsidiaries are eligible to participate in the Plan.  The Administrator will select, from among those eligible, the persons who will from time to time participate in the Plan (each, a “Participant”).  Receipt of an Award under the Plan will not entitle an individual to receive a subsequent Award or Awards under the Plan.

 

5.             GRANT OF AWARDS

 

A Participant who is granted an Award will be entitled to a payment, if any, under the Award only if all conditions to payment have been satisfied in accordance with the Plan and the terms of the Award.  By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) an Award, the Participant will be deemed to have agreed to the terms of the Award and the Plan.  The Administrator shall select the Participants, if any, who receive Awards for a Performance Period and, for each Award, shall establish the following:

 

(a)           the Performance Criterion or Criteria applicable to the Award;

 

(b)           the amount or amounts that will be payable (subject to adjustment in accordance with Section 6) if the Performance Criterion or Criteria are achieved; and

 

(c)           such other terms and conditions as the Administrator deems appropriate with respect to the Award.

 

For Section 162(m) Awards, (i) such terms shall be established by the Administrator not later than (A) the ninetieth (90th) day after the beginning of the Performance Period, in the case of a Performance Period of 360 days or longer, or (B) the end of the period constituting the first quarter of the Performance Period, in the case of a Performance Period of less than 360 days; and (ii) once the Administrator has established the terms of such Award in accordance with the foregoing, it shall not thereafter adjust such terms, except to reduce payments, if any, under the Award in accordance with Section 6 or as otherwise permitted in accordance with the Plan.

 

6.             CERTIFICATION OF PERFORMANCE; AMOUNT PAYABLE UNDER AWARDS

 

As soon as practicable after the end of a Performance Period, the Administrator will determine whether and to what extent, if at all, the Performance Criterion or Criteria applicable to each Award granted for the Performance Period have been satisfied and, in the case of Section 162(m) Awards, will take such steps as it determines to be sufficient to satisfy the certification requirement under Section 162(m) as to such performance results.  The Administrator shall then determine the amount payable, if any, under each Award.  The Administrator may, in its sole and absolute discretion and with or without specifying its reasons for doing so, after determining the amount that would otherwise be payable under any Award for a Performance Period, reduce (including to zero) the actual payment, if any, to be made under such Award or, in the case of

 

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Awards other than Section 162(m) Awards, otherwise adjust the amount payable under such Award.  The Administrator may exercise the discretion described in the immediately preceding sentence either in individual cases or in ways that affect more than one Participant.  The actual payment under a Section 162(m) Award may be less than (but in no event more than) the amount indicated by the certified level of achievement under the Award.  The actual payment under an Award other than a Section 162(m) Award may be more or less than the amount indicated by the level of achievement under the Award.  In each case, the Administrator’s discretionary determination, which may affect different Awards differently, will be binding on all parties.

 

7.             PAYMENT UNDER AWARDS

 

Except as otherwise determined by the Administrator or as otherwise provided in this Section 7, all payments under the Plan will be made, if at all, not later than March 15th of the calendar year following the calendar year in which the Performance Period ends; provided, that the Administrator may authorize elective deferrals of any Award payments in accordance with the deferral rules of Section 409A.  Except as determined otherwise by the Administrator, an Award payment will not be made unless the Participant has remained employed with the Company and its subsidiaries through the date of payment.  Any deferrals with respect to a Section 162(m) Award will be subject to adjustment for notional interest or other notional earnings on a basis, as determined by the Administrator, in a manner consistent with the requirements of Section 162(m).  Awards under the Plan are intended either to qualify for exemption from, or to comply with the requirements of, Section 409A.

 

8.             PAYMENT LIMITS

 

The maximum amount payable to any person in any calendar year under Section 162(m) Awards will be $5,000,000, which limitation, with respect to any such Awards for which payment is deferred in accordance with Section 7 above, shall be applied without regard to such deferral.

 

9.             TAX WITHHOLDING; LIMITATION ON LIABILITY

 

All payments under the Plan will be subject to reduction for applicable tax and other legally or contractually required withholdings.

 

10.          AMENDMENT AND TERMINATION

 

The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any future grants of Awards; provided, however, that except as otherwise expressly provided in the Plan the Administrator may not, without the Participant’s consent, alter the terms of an Award so as to affect materially and adversely the Participant’s rights under the Award, unless the Administrator expressly reserved the right to do so at the time the Award was granted.   Any amendments to the Plan or any Section 162(m) Award will be conditioned upon stockholder approval only to the extent, if any, such approval is required to preserve the eligibility of Awards as exempt performance-based compensation.

 

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11.          RECOVERY OF COMPENSATION

 

The Administrator may provide in any case that any outstanding Award and payments in respect of an Award will be subject to forfeiture and disgorgement to the Company, with interest and other related earnings, if the Participant to whom the Award was granted violates (i) a non-competition, non-solicitation, confidentiality or other restrictive covenant by which he or she is bound or (ii) any Company policy applicable to the Participant that provides for forfeiture or disgorgement with respect to incentive compensation that includes Awards under the Plan.  In addition, the Administrator may require forfeiture and disgorgement to the Company of any outstanding Award and payments received in respect of any Award, with interest and other related earnings, to the extent required by law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Securities Exchange Act of 1934, as amended, and any applicable Company policy.

 

12.          MISCELLANEOUS

 

(a)           Coordination with Other Plans.  Awards under the Plan may be granted in tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards made under other compensatory plans or programs of the Company or any of its subsidiaries.

 

(b)           Waiver of Jury Trial.  By accepting or being deemed to have accepted an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim will be tried before a court and not before a jury.  By accepting or being deemed to have accepted an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers.  Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to binding arbitration as a condition of receiving an Award hereunder.

 

(c)           Limitation of Liability.  Notwithstanding anything to the contrary in the Plan, neither the Company, nor any of its subsidiaries, nor the Administrator, nor any person acting on behalf of the Company, any of its subsidiaries, or the Administrator, will be liable to any Participant or other person by reason of any acceleration of income, or any additional tax (including any interest and penalties), asserted by reason of the failure of an Award to satisfy the requirements of Section 409A or by reason of Section 4999 of the Code, or otherwise asserted with respect to the Award.

 

(d)           Governing Law.  Except as otherwise provided by the express terms of an Award agreement, the domestic substantive laws of the Commonwealth of Massachusetts govern the provisions of the Plan and Awards under the Plan and all claims or disputes arising out of or based upon the Plan or any Award under the Plan or relating to the subject matter hereof or

 

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thereof without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.  By accepting an Award, each Participant will be deemed to (i) have submitted irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Award; (ii) agree not to commence any suit, action or other proceeding arising out of or based upon the Plan or an Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Massachusetts; and (iii) waive, and agree not to assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts, that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or an Award or the subject matter thereof may not be enforced in or by such court.

 

(e)           Other Compensation Arrangements.  The existence of the Plan or the grant of any Award will not affect the Company’s right to award a person bonuses or other compensation in addition to Awards under the Plan.

 

(f)            Rights Limited.  Nothing in the Plan may be construed as giving any person the right to be granted an Award or to continued employment or service with the Company or any of its subsidiaries.  The loss of existing Awards will not constitute an element of damages in the event of termination of employment for any reason, even if the termination is in violation of an obligation of the Company or any of its subsidiaries to the Participant.

 

(g)           Section 162(m).  Awards will not be required to comply with the provisions of the Plan applicable to Section 162(m) Awards (including, without limitation, the composition of the Administrator as set forth in Section 1(a) above) if and to the extent they are eligible for exemption from such limitations by reason of the transition relief set forth in Section 1.162-27(f) of the Treasury Regulations, as determined by the Administrator, or otherwise.

 

(h)           Effective Date.  The Plan shall be effective upon adoption of the Plan by the Board of Directors and shall supersede and replace the Company’s annual cash bonus program with respect to Awards granted to eligible executive officers and employees for fiscal years beginning after the date of such adoption.

 

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