Document:

Exhibit 4.2

 

KINIKSA PHARMACEUTICALS, LTD.
 SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), is made as of February 9, 2018, by and among Kiniksa Pharmaceuticals, Ltd., a Bermuda exempted company (the “Company”), each of the investors listed on Schedule A hereto (the “Investors”), each of the Founders (as defined below), and any additional Investor that becomes a party to this Agreement in accordance with Subsection 6.9 hereof.

 

RECITALS

 

WHEREAS, the Company and certain of the Investors (the “Prior Investors”) previously entered into an Amended and Restated Investors’ Rights Agreement, dated March 8, 2017 (the “Prior Agreement”), in connection with the purchase of Series B Preferred Shares of the Company, par value US $0.0001 per share (“Series B Preferred Shares”);

 

WHEREAS, the Prior Investors and the Company desire to induce certain other Investors to purchase Series C Preferred Shares of the Company, par value US $0.0001 per share (“Series C Preferred Shares”), pursuant to the Series C Preferred Shares Purchase Agreement dated as of the date hereof by and among the Company and the Investors (the “Purchase Agreement”) by amending and restating the Prior Agreement to provide the Investors with the rights and privileges as set forth herein.

 

NOW, THEREFORE, the Company and the Investors, including the Prior Investors, each hereby agree to amend and restate the Prior Agreement in its entirety as set forth herein, and the parties hereto further agree as follows:

 

1.                                      Definitions.  For purposes of this Agreement:

 

1.1                               “Affiliate” means, with respect to any specified Person, (i) any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, member, managing member, officer or director of such Person or any professional investment fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person and (ii) such Person’s Immediate Family Members or a trust for the benefit of such Person  or one or more of such Person’s Immediate Family Members.

 

1.2                               “Class A Common Shares” means the Company’s Class A common shares, par value US $0.0001 per share.

 

1.3                               “Class A’ Common Shares” means the Company’s Class A’ common shares, par value US $0.0001 per share.

 

 

1.4                               “Class B Common Shares” means the Company’s Class B common shares, par value US $0.0001 per share.

 

1.5                               “Class B’ Common Shares” means the Company’s Class B’ common shares, par value US$0.0001 per share.

 

1.6                               “Common Shares” means, collectively, common shares in the Company’s authorized share capital, including, without limitation, Class A Common Shares, Class A’ Common Shares, Class B Common Shares and Class B’ Common Shares.

 

1.7                               “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

1.8                               “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Class A Common Shares, including options and warrants, as well as Class A’ Common Shares, Class B Common Shares, Class B’ Common Shares and Preferred Shares.

 

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

 

1.10                        “Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a share option, share purchase, or similar plan, (ii) a registration relating to an SEC Rule 145 transaction, (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or (iv) a registration in which the only Common Shares being registered are Common Shares issuable upon conversion of debt securities that are also being registered.

 

1.11                        “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC, or any equivalent form for foreign filers, such as Form F-1.

 

1.12                        “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents 

 

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filed by the Company with the SEC, or any equivalent form for foreign filers, such as Form F-3.

 

1.13                        “Founders” means each of those shareholders listed on Schedule B hereto; provided that if any such shareholder is no longer providing services to the Company or any of its subsidiaries as an officer, director, employee or consultant, such shareholder shall no longer be a Founder and Schedule B shall be updated, without requiring the consent of any party hereto, to reflect the removal of such shareholder.

 

1.14                        “GAAP” means generally accepted accounting principles in the United States.

 

1.15                        “Holder” means any Investor that holds Registrable Securities who is a party to this Agreement.

 

1.16                        “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

 

1.17                        “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

1.18                        “IPO” means the Company’s first underwritten public offering of its Common Shares under the Securities Act.

 

1.19                        “Key Employee” means any executive-level employee (including, division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).

 

1.20                        “Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 1,700,000 shares of Registrable Securities on an as-converted basis (as adjusted for any share split, share dividend, combination, or other recapitalization or reclassification effected after the date hereof) (provided that any Investor that ceases to hold at least 1,700,000 such shares solely as a result of the exercise of the drag-along right of the Selling Investors (as defined in the Voting Agreement (as defined below)) on less than all of the shares held by such Investor, shall continue to be a Major Investor for the purposes of this Agreement).

 

1.21                        “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

 

1.22                        “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

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1.23                        “Preferred Director” means any director of the Company that the holders of record of the Preferred Shares are entitled to elect pursuant to the Restated Bye-Laws.

 

1.24                        “Preferred Shares” means, collectively, the Series A Preferred Shares of the Company, par value US $0.0001 per share, the Series B Preferred Shares and the Series C Preferred Shares.

 

1.25                        “Registrable Securities” means (i) any Class A Common Shares issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company (including any Derivative Securities) held by the Investors on the date hereof or acquired by the Investors after the date hereof, and (ii) any Common Shares issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (i) above; excluding in all cases, however, (x) any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Subsection 6.1, and excluding, for purposes of Section 2, any shares for which registration rights have terminated pursuant to Subsection 2.13 of this Agreement and (y) any Common Shares (including only those actually issued and outstanding) held by the Investors immediately prior to the Series C Original Issue Date (as defined in the Restated Bye-Laws).

 

1.26                        “Registrable Securities then outstanding” means the number of shares determined by adding the number of issued and outstanding Class A Common Shares that are Registrable Securities and the number of Class A Common Shares issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities (without respect to any period of notice that may be required to be given by the Investor to exercise or convert such securities).

 

1.27                        “Restricted Securities” means the securities of the Company required to be notated with the legend set forth in Subsection 2.12(b) hereof.

 

1.28                        “Restated Bye-Laws” means the Company’s Amended and Restated Bye-Laws, as amended and/or restated from time to time.

 

1.29                        “SEC” means the Securities and Exchange Commission.

 

1.30                        “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

1.31                        “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

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

 

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1.33                        “Selling Expenses” means all underwriting discounts, selling commissions, and share transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Subsection 2.6.

 

2.                                      Registration Rights.  The Company covenants and agrees as follows:

 

2.1             Demand Registration.

 

(a)                                 Form S-1 Demand.  If at any time after the earlier of (i) three years after the date of this Agreement or (ii) 180 days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of at least a majority of the Registrable Securities then outstanding, on an as-converted into Class A Common Shares basis, that the Company file a Form S-1 registration statement with an anticipated aggregate offering price of not less than $10 million, then the Company shall (x) within 10 days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders, and (y) as soon as practicable, and in any event within 60 days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 10 days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c) and 2.3.

 

(b)                                 Form S-3 Demand; Affiliate Holder Registration.  If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least 25% of the Registrable Securities then outstanding on an as-converted into Class A Common Shares basis that the Company file a Form S-3 registration statement with respect to issued and outstanding Registrable Securities of such Holders having an anticipated aggregate offering price of not less than $5 million, then the Company shall (i) within 10 days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders and (ii) as soon as practicable, and in any event within 20 days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within 10 days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c) and 2.3.  Notwithstanding the foregoing obligations, on the day the Company becomes eligible to use a Form S-3 registration statement (or the next business days thereafter if such day is not a business day), the Company shall, without obligation of any Demand Notice being provided by a Holder, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities held by any Holders who at the time would be considered an “affiliate” of the Company under SEC Rule 144 (“Affiliate Holders”).

 

(c)                                  Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 and/or the Affiliate Holders who are otherwise entitled to a registration under Subsection 2.1(b) a certificate signed 

 

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by the Company’s chief executive officer stating that, in the good faith judgment of the Company’s Board of Directors, it would be materially detrimental to the Company and its shareholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company, (ii) require premature disclosure of material information that  the Company has a bona fide business purpose for preserving as confidential, or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than 90 days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any 12-month period; and provided further that the Company shall not register any securities for its own account or that of any other shareholder during such 90-day period other than an Excluded Registration.

 

(d)                                 The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a)(i) during the period that is 45 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 180 days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective, (ii) after the Company has effected two registrations pursuant to Subsection 2.1(a), or (iii) if the Initiating Holders propose to dispose of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Subsection 2.1(b).  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b): (i) during the period that is 30 days before the Company’s good faith estimate of the date of filing of, and ending on a date that is 90 days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective, or (ii) if the Company has effected two registrations pursuant to Subsection 2.1(b) within the 12-month period immediately preceding the date of such request.  A registration shall not be counted as “effected” for purposes of this Subsection 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC and all Registrable Securities requested to be registered have been so registered, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor and forfeit their right to one demand registration statement pursuant to Subsection 2.6; provided, however, that if the request to withdraw such registration is made as a result of a material adverse change of the Company, such withdrawn registration statement shall not be counted as “effected” for purposes of this Subsection 2.1(d).

 

2.2             Company Registration.  If the Company proposes to register (including, for this purpose, a registration effected by the Company for shareholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration.  Upon the request of each Holder given within 10 days after such notice is given by the Company, the Company shall, subject to 

 

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the provisions of Subsection 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration.  The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.6.

 

2.3             Underwriting Requirements.

 

(a)                                 If, pursuant to Subsection 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 2.1, and the Company shall include such information in the Demand Notice.  The underwriter(s) will be selected by the Initiating Holders, subject only to the reasonable approval of the Company.  In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall, together with the Company as provided in Subsection 2.4(e), enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting.  Notwithstanding any other provision of this Subsection 2.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned  by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

 

(b)                                 In connection with any offering involving an underwriting of the Company’s share capital pursuant to Subsection 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If the underwriters determine that less 

 

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than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.  Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from  the offering, or (ii) the number of Registrable Securities included in the offering be reduced below 25% of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other shareholder’s securities are included in such offering.  For purposes of the provision in this Subsection 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, shareholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

2.4             Obligations of the Company.  Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)                                 prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to 120 days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such 120-day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Shares (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

 

(b)                                 prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)                                  furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other 

 

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documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)                                 use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)                                  in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f)                                   use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)                                  provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)                                 promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

(i)                                     notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j)                                    after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

 

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2.5             Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6             Expenses of Registration.  All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $50,000, of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsection 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b).  All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.7             Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.8             Indemnification.  If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)                 To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and shareholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(a) shall not apply to amounts paid in settlement of 

 

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any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)                                 To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such  registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(b) shall not apply to amounts paid in settlement of  any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Subsections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c)                                  Promptly after receipt by an indemnified party under this Subsection 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Subsection 2.8, give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one  separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action.  The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Subsection 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action.  The failure to give notice to the indemnifying party will not relieve 

 

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it of any liability that it may have to any indemnified party otherwise than under this Subsection 2.8.

 

(d)                                 To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Subsection 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Subsection 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Subsection 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party  in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Subsection 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)                                  Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(f)                                   Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Subsection 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

 

2.9             Reports Under Exchange Act.  With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at 

 

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any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)                                 make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)                                 use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)                                  furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after 90 days after the effective date of the registration statement filed by the Company for the IPO), the  Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies), and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10                        Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included, or (ii) would allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Subsection 6.9 with respect to the registration rights afforded hereunder.

 

2.11                        Lock-Up Agreement.  If requested by the managing underwriter in connection with the IPO, each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of any portion of its share capital and ending on the date specified by the Company and the managing underwriter (such period not to exceed 180 days): (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any Class A Common Shares or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Class A 

 

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Common Shares held immediately before the effective date of the registration statement for such offering, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Shares or other securities, in cash, or otherwise.  The foregoing provisions of this Subsection 2.11 shall not apply to: (x) any Class A Common Shares purchased by a Holder in the subject offering or at any time subsequent to the subject offering, (y) the sale of any shares to an underwriter pursuant to an underwriting agreement, or (z) the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company obtains a similar agreement from all shareholders individually owning more than 1% of the Company’s issued and outstanding Common Shares (after giving effect to conversion into Common Shares of all issued and outstanding Preferred Shares).  The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Subsection 2.11 or that are necessary to give further effect thereto.  Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.

 

2.12                        Restrictions on Transfer.

 

(a)                                 The Preferred Shares, the Common Shares and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act.  A transferring Holder will cause any proposed purchaser, pledgee, or transferee of Preferred Shares, Common Shares and/or  Registrable Securities held by such Holder, as applicable, to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(b)                                 Each certificate, instrument, or book entry representing an Investor’s (i) Preferred Shares, (ii) Common Shares, (iii) Registrable Securities and (iv) any other securities issued in respect of the securities referenced in clauses (i), (ii) and (iii), upon any share split, share dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Subsection 2.12(c)) be notated with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  SUCH SHARES MAY NOT BE SOLD, 

 

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PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The holders of such Restricted Securities consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Subsection 2.12.

 

(c)                                  The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2.  Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the holder thereof shall give notice to the Company of such holder’s intention to effect such sale, pledge, or  transfer.  Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act, (ii) a “no action” letter from the SEC to the effect that the proposed  sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto, or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the holder to the Company.  The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144, or (y) in any transaction in which such holder distributes Restricted Securities to an Affiliate of such holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Subsection 2.12.  Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.12(b), except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13                        Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsections 2.1 or 2.2 shall terminate upon (a) the closing of a Deemed Liquidation Event, as such term is defined in the Restated Bye-Laws; or (b) such time as SEC Rule 144 would permit sale of all of such Holder’s shares without restriction.

 

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3.                                      Information Rights.

 

3.1             Delivery of Financial Statements.  The Company shall deliver to each Major Investor:

 

(a)                                 as soon as practicable, but in any event within 180 days after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of shareholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of recognized standing selected by the Company;

 

(b)                                 as soon as practicable, but in any event within 40 days after the end of each quarter of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of shareholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments, and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(c)                                  as soon as practicable, but in any event within 40 days after the end of each of the first three quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of the Company’s share capital and securities convertible into or exercisable for shares in the Company’s share capital outstanding at the end of the period, the Common Shares issuable upon conversion or exercise of any issued and outstanding securities convertible or exercisable for Common Shares and the exchange ratio or exercise price applicable thereto, and the number of issued share options and share options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete and correct;

 

(d)                                 as soon as practicable, but in any event within 45 days of the end of each year, the tax information required of the Investors under United States tax law related to the Company’s foreign residence, including, but not limited to, the Company’s status for United States federal income tax purposes as a “passive foreign investment company.”

 

(e)                                  as soon as practicable, but in any event 7 days before the end of each fiscal year, a budget for the next fiscal year (collectively, the “Budget”), presented to the Board of Directors, including balance sheets, income statements, and statements of cash flow and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and

 

(f)                                   such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Subsection 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality 

 

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agreement, in a form acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

Notwithstanding anything else in this Subsection 3.1 to the contrary, the Company may cease providing the information set forth in this Subsection 3.1 during the period starting with the date 30 days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Subsection 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

 

3.2                               Inspection.  The Company shall permit each Major Investor, at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

3.3                               Termination of Information.  The covenants set forth in Subsection 3.1 and Subsection 3.2 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Restated Bye-laws, whichever event occurs first.

 

3.4                               Confidentiality.  Each Investor agrees that such Investor will keep confidential and will not disclose or divulge any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Subsection 3.4 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.4, (iii) to any 

 

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Affiliate, partner, limited partner, member, shareholder, or wholly owned subsidiary of such Investor or its Affiliates in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information, or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

 

4.                                      Rights to Future Share Issuances.

 

4.1            Right of First Offer.  Subject to the terms and conditions of this Subsection 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Holder and each Founder.  Each Holder and each Founder shall be entitled to apportion the right of first offer hereby granted to it, in such proportions as it deems appropriate, among (i) itself, (ii) its Affiliates and (iii) its beneficial interest holders, such as limited partners, members, or any other Person having “beneficial ownership,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of such Holder (“Investor Beneficial Owners”); provided that each such Affiliate or Investor Beneficial Owner agrees to enter into this Agreement and each of the Voting Agreement and Second Amended and Restated Right of First Refusal and Co-Sale Agreement of even date herewith among the Company, the Investors and the other parties named therein, as an “Investor” under each such agreement.

 

(a)                                 The Company shall give notice (the “Offer Notice”) to each Holder and Founder, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(b)                                 By notification to the Company within 10 days after the Offer Notice is given, each Holder and Founder may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities (without duplication for any Holder that is also a Founder) which equals the proportion that the Class A Common Shares then held by such Holder or Founder (including all Class A Common Shares then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Shares and any other Derivative Securities then held by such Holder or Founder) bears to the total Class A Common Shares of the Company then issued and outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Shares and other Derivative Securities (directly or indirectly) into Class A Common Shares).  At the expiration of such 10-day period, the Company shall promptly notify each Holder that has elected to purchase or acquire all the shares available to it (each, a “Fully Exercising Holder”) and each Founder that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Founder”) of any other Holder’s or Founder’s, as the case may be, failure to do likewise.  During the 10-day period commencing after the Company has given such notice, each Fully Exercising Holder and Fully Exercising Founder may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Holders or Founders were entitled to subscribe but that were not subscribed for by the Holders or Founders which is equal to the proportion that the Class A Common Shares issued 

 

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and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Shares and any other Derivative Securities then held, by such Fully Exercising Holder or Fully Exercising Founder bears to the Class A Common Shares issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Shares and any other Derivative Securities then held, by all Fully Exercising Holders and/or Fully Exercising Founders who wish to purchase such unsubscribed shares.  The closing of any sale pursuant to this Subsection 4.1(b) shall occur within the later of 90 days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Subsection 4.1(c).

 

(c)                                  If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Subsection 4.1(b), the Company may, during the 90-day period following the expiration of the periods provided in Subsection 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice.

 

(d)                                 The right of first offer in this Subsection 4.1 shall not be applicable to: (i) Exempted Securities (as defined in the Restated Bye-Laws); (ii) any Common Shares issued in the IPO; and (iii) any Preferred Shares issued pursuant to the Purchase Agreement.

 

4.2            Termination.  The covenants set forth in Subsection 4.1 and Subsection 4.2 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) upon a Deemed Liquidation Event, as such term is defined in the Restated Bye-Laws, whichever event occurs first.

 

5.                                      Additional Covenants.

 

5.1            Insurance.  The Company shall use commercially reasonable efforts to maintain from financially sound and reputable insurers Directors and Officers liability insurance in an amount and on terms and conditions satisfactory to the Board of Directors until such time as the Board of Directors determines that such insurance should be discontinued.

 

5.2            Employee Agreements and Share Vesting.  The Company will cause (a) each person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement, and (b) each Founder to enter into (i) a one-year noncompetition and non-solicitation agreement, substantially in the form approved by the Board of Directors, and (ii) a non-disclosure and proprietary rights assignment.  In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, either of the above-referenced agreements or any restricted share agreement between the Company and any employee, without the unanimous consent of the Preferred Directors.  Unless otherwise approved by the Board of Directors, all future employees and consultants of the Company who purchase, receive options to purchase, or receive awards of shares is the Company’s authorized share capital after the date hereof shall be required to execute restricted shares or option agreements, as applicable, providing for (x) vesting of shares over a four-year period, with the first 25% of such shares vesting following 12 

 

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months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following 36 months, and (y) a lock-up agreement provision substantially similar to that in Subsection 2.11.  In addition, unless otherwise approved by the Board of Directors, the Company shall retain a “right of first refusal” on employee transfers until the Company’s IPO and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted shares.

 

5.3            Matters Requiring Investor Director Approval.  So long as the holders of Preferred Shares are entitled to elect one or more Preferred Directors, the Company hereby covenants and agrees with each of the Investors that it shall not, and shall procure that its subsidiaries shall not, without approval of the Board of Directors, which approval must include the affirmative vote of all of the Preferred Directors then serving as directors:

 

(a)                                 make any loan or advance to, or own any shares or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

 

(b)                                 make any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee shares or option plan approved by the Board of Directors;

 

(c)                                  guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;

 

(d)                                 make any investment inconsistent with any investment policy approved by the Board of Directors;

 

(e)                                  incur any aggregate indebtedness in excess of $750,000 that is not already included in a budget approved by the Board of Directors, other than trade credit incurred in the ordinary course of business;

 

(f)                                   otherwise enter into or be a party to any transaction with any director, officer, or employee of the Company or its subsidiaries or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, except for (i) transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s and/or its subsidiaries’ business and upon fair and reasonable terms that are approved by a majority of the Board of Directors and (ii) transactions contemplated by the Purchase Agreement;

 

(g)                                  change the compensation of the Chief Executive Officer of the Company, including approving any option grants or share awards;

 

(h)                                 change the principal business of the Company or any subsidiary, enter new lines of business, or exit the current line of business;

 

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(i)                                     sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business;

 

(j)                                    enter into any in-license, asset transfer, merger or acquisition or similar corporate strategic relationship involving Company or subsidiary assets greater than $1,500,000; or

 

(k)                                 increase the size of the board of directors of the Subsidiary (as defined below).

 

5.4            Board Matters.  Unless otherwise determined by the vote of a majority of the directors then in office, the Board of Directors shall meet at least quarterly in accordance with an agreed-upon schedule.  The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors. At each annual or special meeting of shareholders of the Company’s wholly owned subsidiary, Kiniksa Pharmaceuticals Corp. (the “Subsidiary”), at which an election of directors is held, or pursuant to any written consent of the shareholders of the Subsidiary, the Company shall cause at least two Preferred Directors designated from time to time pursuant to Section 1.2 of that certain Second Amended and Restated Voting Agreement, dated as of the date hereof, by and among the Company and the other parties thereto (as may be amended and/or restated from time to time, the “Voting Agreement”) as members of the Board of Directors of the Company to be elected to the board of directors of the Subsidiary.

 

5.5            Successor Indemnification.  If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Restated Bye-Laws or elsewhere, as the case may be.

 

5.6            Indemnification Matters.  The Company shall enter into indemnification agreements with each Preferred Director (the “Indemnitees”).  The Company hereby acknowledges that such directors and affiliated funds may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their affiliates (collectively, the “Fund Indemnitors”), and hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Indemnitee are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Indemnitee to the extent legally permitted and as required by the Restated Bye-Laws (or any agreement between the Company and such Indemnitee), without regard to any rights such Indemnitee may have against the Fund Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims 

 

 

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against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of any such Indemnitee with respect to any claim for which such Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Indemnitee against the Company.

 

5.7                                           Right to Conduct Activities.  The Company hereby agrees and acknowledges that Baker Bros. Life Sciences, L.P. (together with its Affiliates, “Baker Bros.”), HH RSV-XVII Holdings Limited (together with its Affiliates, “Hillhouse”), Venrock Healthcare Capital Partners II, L.P. (together with its Affiliates, “Venrock”), Sofinnova Venture Partners X, L.P. (together with its Affiliates, “Sofinnova”) and Deerfield Special Sitautions Fund, L.P. (together with its Affiliates, “Deerfield”) are professional investment funds, and as such invest in numerous portfolio companies, some of which may be deemed competitive with the Company’s business (as currently conducted or as currently proposed to be conducted).  The Company hereby agrees that, to the extent permitted under applicable law, Baker Bros., Hillhouse, Venrock, Sofinnova and Deerfield shall not be liable to the Company for any claim arising out of, or based upon, (a) the investment by Baker Bros., Hillhouse, Venrock, Sofinnova or Deerfield in any entity competitive with the Company, or (b) actions taken by any partner, officer or other representative of Baker Bros., Hillhouse, Venrock, Sofinnova or Deerfield to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (i) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (ii) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.

 

5.8                                           No Publicity. The parties will not, without the prior written consent of the relevant Investor, use in advertising, publicity, marketing communications regarding any Company financing (whether oral or written) or other public communication or filing, the “Baker Brothers”, “Hillhouse”, “高瓴”, “Gaoling” names or, to its knowledge, the name of any partner, employee, Affiliate and/or controlling person thereof, nor any of their Affiliates and/or controlling persons, nor any trade name, trademark, trade device, service mark, symbol or any abbreviation, or contraction thereof owned by such Investor, except that the Company may make any such disclosure if, upon the advice of counsel, there is no alternative to such disclosure because it is required by applicable law or regulation and the relevant Investors are notified in advance and given reasonable opportunity to minimize such disclosure.  In addition, the Company may respond to inquiries about any public disclosure that was required by law or regulation, by confirming the accuracy of such disclosure.

 

Notwithstanding the foregoing, the Company may disclose the name of the Investors in connection with the provision of any details regarding the agreements executed by the Company and the Investors to any of its executive officers, directors, accountants, counsel and financial advisors, with a need to know such information, provided that such recipient agrees to abide by the foregoing confidentiality obligations.

 

22

 

5.9                                           Termination of Covenants.  The covenants set forth in this Section 5, except for Subsections 5.5 and 5.9, shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO or (ii) upon a Deemed Liquidation Event, as such term is defined in the Restated Bye-Laws, whichever event occurs first.

 

6.                                      Miscellaneous.

 

6.1            Successors and Assigns.  The rights under this Agreement may be assigned (but only with all related obligations) by a Holder or Founder to a transferee of Registrable Securities or other Common Shares that (a) is an Affiliate of such Holder or Founder, as the case may be, (b) is such Holder’s or Founder’s Immediate Family Member or trust for the benefit of an individual Holder or Founder or one or more of such Holder’s or Founder’s Immediate Family Members, or (c) after such transfer, holds at least 10,000 shares of Registrable Securities (subject to appropriate adjustment for share splits, share dividends, combinations, and other recapitalizations); provided, however, that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities or other Common Shares with respect to which such rights are being transferred, and (ii) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Subsection 2.11.  For the purposes of determining the number of Registrable Securities or Common Shares held by a transferee, the holdings of a transferee (x) that is an Affiliate or shareholder of a Holder or Founder, (y) who is a Holder’s Immediate Family Member, or (z) that is a trust for the benefit of an individual Holder or Founder or such Holder’s or Founder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder or Founder, as the case may be; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement.  The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

6.2            Governing Law.  This Agreement shall be governed by the internal law of the State of Delaware.

 

6.3            Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.4            Titles and Subtitles.  The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

23

 

6.5            Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (a) personal delivery to the party to be notified, (b) when sent, if sent by  electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their addresses as set forth on Schedule A or Schedule B (as applicable) hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 6.5. Notwithstanding the foregoing, any communications to HH RSV-XVII Holdings Limited shall be sent to Hillhouse Capital Management, Suite 1606, One Exchange Square, 8 Connaught Place, Central, Hong Kong with an email copy to legal@hillhousecap.com. If notice is given to the Company, a copy shall also be sent to Latham & Watkins LLP, 200 Clarendon Street, 27th Floor, Boston, MA 02116, Attention: Johan Brigham.

 

6.6            Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party.  Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Holder without the written consent of such Holder, unless such amendment, termination, or waiver applies to all Holders in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction).  Further, this Agreement may not be amended, and no provision hereof may be waived, in each case, in any way which would adversely affect the rights of the Founders hereunder in a manner disproportionately to any adverse effect such amendment or waiver would have on the rights of the Investors hereunder, without also the written consent of the holders of a majority of the Common Shares held by the Founders who are then providing services to the Company or any of its subsidiaries as officers, directors, employees or consultants. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver.  Any amendment, termination, or waiver effected in accordance with this Subsection 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto.  No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

24

 

6.7            Severability.  In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

6.8            Aggregation of Shares.  All Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

6.9            Additional Investors.  Notwithstanding anything to the contrary contained herein, if the Company issues additional Preferred Shares in compliance with the limitations set forth in the Restated Bye-Laws after the date hereof, whether pursuant to the Purchase Agreement or otherwise, any purchaser of such Preferred Shares may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder.  No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

 

6.10     Entire Agreement; Effect on Prior Agreement.  This Agreement (including any Schedules) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.  Upon the execution and delivery of this Agreement by the Company and the other parties required to amend the Prior Agreement pursuant to its terms, the Prior Agreement automatically shall terminate and be of no further force and effect and shall be amended and restated in its entirety as set forth in this Agreement.

 

6.11     Dispute Resolution.  The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of New York and to the jurisdiction of the United States District Court for the Southern District of New York  for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of New York or the United States District Court for the Southern District of New York, and (c) hereby 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 it is not subject personally to the jurisdiction of the above-named courts, that its 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 this Agreement or the subject matter hereof may not be enforced in or by such court.

 

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR 

 

25

 

THE SUBJECT MATTER HEREOF OR THEREOF.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS.  EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

6.12     Delays or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

6.13     Acknowledgment.  The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company.  Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company; provided, however, that the foregoing shall not relieve (i) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (ii) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.

 

[Remainder of Page Intentionally Left Blank]

 

26

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	
 
    	
KINIKSA   PHARMACEUTICALS, LTD.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Sanj K. Patel
    
	
 
    	
Name:
    	
Sanj K. Patel
    
	
 
    	
Title:
    	
Chief Executive Officer
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
667,   L.P.
    
	
 
    	
 
    
	
 
    	
BY:         BAKER BROS. ADVISORS LP, management company and investment   adviser to 667, L.P., pursuant to authority   granted to it by Baker Biotech Capital, L.P., general partner to 667, L.P.,   and not as the general partner.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Scott Lessing
    
	
 
    	
Scott   Lessing
    
	
 
    	
President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BAKER   BROTHERS LIFE SCIENCES, L.P.
    
	
 
    	
 
    
	
 
    	
By:         BAKER BROS. ADVISORS LP,  
   management company and investment adviser to Baker   Brothers Life Sciences, L.P., pursuant to authority granted to it   by Baker Brothers Life Sciences Capital, L.P., general partner to Baker   Brothers Life Sciences, L.P., and not as the general partner.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Scott Lessing
    
	
 
    	
Scott   Lessing
    
	
 
    	
President
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MERIDIAN   SMALL CAP GROWTH FUND
    
	
 
    	
 
    
	
 
    	
By:   its Investment Adviser
    
	
 
    	
ArrowMark   Partners
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ARROWMARK   FUNDAMENTAL OPPORTUNITY FUND, L.P.
    
	
 
    	
 
    
	
 
    	
By:   its General Partner
    
	
 
    	
ArrowMark   Partners GP, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LOOKFAR   INVESTMENTS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
IRON   HORSE INVESTMENTS LLC
    
	
 
    	
 
    
	
 
    	
By:   its Investment Adviser
    
	
 
    	
ArrowMark   Partners
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
THB   IRON ROSE LLC
    
	
 
    	
 
    
	
 
    	
By:   its Investment Adviser
    
	
 
    	
ArrowMark   Partners
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
THB   IRON ROSE LLC, LIFE SCIENCE 
   PORTFOLIO
    
	
 
    	
 
    
	
 
    	
By:   its Investment Adviser
    
	
 
    	
ArrowMark   Partners
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Tony Yao
    
	
 
    	
Tony   Yao
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MERIDIAN   GROWTH FUND
    
	
 
    	
 
    
	
 
    	
By:   its Investment Adviser
    
	
 
    	
ArrowMark   Partners
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Corkins
    
	
 
    	
Name:
    	
David   Corkins
    
	
 
    	
Title:
    	
Managing   Member
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EEJ, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Edward F. Keely
    
	
 
    	
Name:
    	
Edward   F. Keely
    
	
 
    	
Title:
    	
Manager
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
HH   RSV-XVII HOLDINGS LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Colm O’Connell
    
	
 
    	
Name:
    	
Colm   O’Connell
    
	
 
    	
Title:
    	
Authorized   signatory
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
MOSSROCK   CAPITAL, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas Malley
    
	
 
    	
Name:
    	
Thomas   Malley
    
	
 
    	
Title:
    	
President
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NEW   DIRECTION IRA, INC. FBO ROBERT DESNICK ROTH IRA
    
	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Robert Desnick
    
	
 
    	
Name:
    	
Robert   Desnick
    
	
 
    	
Title:
    	
Principal
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
170   E. 93rd St.
    
	
 
    	
 
    	
New   York, NY 10128
    
				

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
VENROCK   HEALTHCARE CAPITAL PARTNERS II, L.P
    
	
 
    	
BY:   VHCP MANAGEMENT II, LLC
    
	
 
    	
ITS:   GENERAL PARTNER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David L. Stepp
    
	
 
    	
Name:
    	
David   L. Stepp
    
	
 
    	
Title:
    	
Authorized   Signature
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
3340   Hillview Avenue
    
	
 
    	
Palo   Alto, CA 94304
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
VHCP   CO-INVESTMENT HOLDINGS II, LLC
    
	
 
    	
BY:   VHCP MANAGEMENT II, LLC
    
	
 
    	
ITS:   MANAGER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David L. Stepp
    
	
 
    	
Name:
    	
David   L. Stepp
    
	
 
    	
Title:
    	
Authorized   Signature
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
3340   Hillview Avenue
    
	
 
    	
Palo   Alto, CA 94304
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
STURM   FAMILY CAPITAL, LLLP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Donald L. Sturm
    
	
 
    	
Name:
    	
Donald   L. Sturm, Managing Partner
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
3033   E. 1st Avenue, Suite 300
    
	
 
    	
Denver,   CO 80206
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
BOXER   CAPITAL LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Aaron Davis
    
	
 
    	
Name:
    	
Aaron   Davis
    
	
 
    	
Title:
    	
CEO
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
11682   El Camino Real, Suite 320
    
	
 
    	
San   Diego, CA, 92130
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
FORESITE   CAPITAL FUND IV, L.P.
    
	
 
    	
By:   FORESITE CAPITAL MANAGEMENT IV, LLC
    
	
 
    	
Its:   GENERAL PARTNER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Dennis D. Ryan
    
	
 
    	
Name:
    	
Dennis   D. Ryan
    
	
 
    	
Title:
    	
Chief   Financial Officer
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
600 Montgomery Street, Suite 4500
    
	
 
    	
San Francisco, CA 94111
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
CORMORANT   PRIVATE HEALTHCARE FUND I, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Bihua Chen
    
	
 
    	
Name:
    	
Bihua   Chen
    
	
 
    	
Title:
    	
Managing   Member of the GP
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
200 Clarendon Street, 52nd Floor
    
	
 
    	
Boston, MA 02116
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CORMORANT   GLOBAL HEALTHCARE 
   MASTER FUND, LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Bihua Chen
    
	
 
    	
Name:
    	
Bihua   Chen
    
	
 
    	
Title:
    	
Managing   Member of the GP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
200 Clarendon Street, 52nd Floor
    
	
 
    	
Boston, MA 02116
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
CRMA   SPV, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Bihua Chen
    
	
 
    	
Name:
    	
Bihua   Chen
    
	
 
    	
Title:
    	
CEO/CIO   of Cormorant Asset Management LLC
    
	
 
    	
Its:   Attorney-In-Fact
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
PO Box 309
    
	
 
    	
Ugland House
    
	
 
    	
Grand Cayman
    
	
 
    	
KY1-1104 Cayman Islands
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SOFINNOVA   VENTURE PARTNERS X, L.P.
    
	
 
    	
By:   SOFINNOVA MANAGEMENT X, L.L.C.
    
	
 
    	
Its:   GENERAL PARTNER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Anand Mehra
    
	
 
    	
Name:
    	
Anand   Mehra
    
	
 
    	
Title:
    	
Managing   Member
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
3000   Sand Hill Road, Bldg. 4, Suite 250
    
	
 
    	
Menlo   Park, CA 94025
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
DEERFIELD   SPECIAL SITUATIONS FUND, L.P.
    
	
 
    	
BY:   DEERFIELD MGMT, L.P., GENERAL 
   PARTNER
    
	
 
    	
BY:   J.E. FLYNN CAPITAL, LLC, GENERAL 
   PARTNER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   David J. Clark
    
	
 
    	
Name:
    	
David   J. Clark
    
	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
780   Third Avenue
    
	
 
    	
New   York, NY 10017
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Stephen Frank Mahoney
    
	
 
    	
Stephen   Frank Mahoney
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Sanj J. Patel
    
	
 
    	
Sanj   K. Patel
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Thomas Beetham
    
	
 
    	
Thomas   W. Beetham
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Christopher Heberlig
    
	
 
    	
Christopher   Heberlig
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Carsten Boess
    
	
 
    	
Carsten   Boess
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Rasmus Holm-Jorgensen
    
	
 
    	
Rasmus   Holm-Jorgensen
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Aaron Isadore Young
    
	
 
    	
Aaron   Isadore Young
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
[xxxx]
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

 

SCHEDULE A

 

Investors

 

	
667,   L.P.
    
	
667   Madison Avenue, 21st Floor
    
	
New   York, New York 10065
    
	
 
    
	
Baker   Brothers Life Sciences, L.P.
    
	
667   Madison Avenue, 21st Floor
    
	
New   York, New York 10065
    
	
 
    
	
New   Direction IRA, Inc.
    
	
FBO   Robert Desnick Roth IRA
    
	
1070   W. Century Drive Suite 101
    
	
Louisville,   CO 80027
    
	
 
    
	
Sanj   K. Patel
    
	
[xxxx]
    
	
 
    
	
Stephen   Frank Mahoney
    
	
[xxxx]
    
	
 
    
	
Thomas   W. Beetham
    
	
[xxxx]
    
	
 
    
	
Christopher   Heberlig
    
	
[xxxx]
    
	
 
    
	
Carsten   Boess
    
	
[xxxx]
    
	
 
    
	
Rasmus   Holm-Jorgensen
    
	
[xxxx]
    
	
 
    

 

 

	
Gregory   Alex Grabowski
    
	
[xxxx]
    
	
 
    
	
Aaron   Isadore Young
    
	
[xxxx]
    
	
 
    
	
Eben   P. Tessari
    
	
[xxxx]
    
	
 
    
	
Meridian   Small Cap Growth Fund
    
	
100   Fillmore Street, Suite 325
    
	
Denver,   CO 80206
    
	
 
    
	
Arrowpoint   Fundamental Opportunity Fund, L.P.
    
	
100   Fillmore Street, Suite 325
    
	
Denver,   CO 80206
    
	
 
    
	
Lookfar   Investments LLC
    
	
100   Fillmore Street, Suite 325
    
	
Denver,   CO 80206
    
	
 
    
	
Iron   Horse Investments LLC
    
	
100   Fillmore Street, Suite 325
    
	
Denver,   CO 80206
    
	
 
    
	
THB   Iron Rose LLC
    
	
100   Fillmore Street, Suite 325
    
	
Denver,   CO 80206
    
	
 
    
	
THB   Iron Rose LLC, Life Science Portfolio
    
	
100   Fillmore Street, Suite 325
    
	
Denver,   CO 80206
    
	
 
    
	
Tony   Yao
    
	
[xxxx]
    
	
 
    

 

 

	
EEJ,   LLC
    
	
3033   E. 1st Avenue, Suite 415
    
	
Denver,   CO 80206
    
	
 
    
	
HH   RSV-XVII Holdings Limited
    
	
Hillhouse   Capital Management, Suite 1606
    
	
One   Exchange Square
    
	
8   Connaught Place
    
	
Central,   Hong Kong
    
	
 
    
	
Mossrock   Capital, LLC
    
	
19   Martin Lane
    
	
Englewood   CO 80113
    
	
 
    
	
Edward   Schuchman, Ph.D, as Trustee for the
    
	
Desnick   / Herzig 2012 GST Trust UAD 10/23/12
    
	
[xxxx]
    
	
 
    
	
Venrock   Healthcare Capital Partners II, L.P
    
	
3340   Hillview Avenue
    
	
Palo   Alto, CA 94304
    
	
 
    
	
VHCP   Co-Investment Holdings II, LLC
    
	
3340   Hillview Avenue
    
	
Palo   Alto, CA 94304
    
	
 
    
	
Sturm   Family Capital, LLLP
    
	
3033   E. 1st Avenue, Suite 300
    
	
Denver,   CO 80206
    
	
 
    
	
Boxer   Capital LLC
    
	
Attn:   Christopher Fuglesang
    
	
11682   El Camino Real, Suite 320
    
	
San   Diego, CA, 92130
    
	
 
    
	
Foresite   Capital Fund IV, L.P.
    
	
600   Montgomery Street, Suite 4500
    
	
San   Francisco, CA 94111
    

 

 

	
Cormorant   Private Healthcare Fund I, L.P.
    
	
200   Clarendon Street, 52nd Floor
    
	
Boston,   MA 02116
    
	
 
    
	
Cormorant   Global Healthcare Master Fund, LP
    
	
200   Clarendon Street, 52nd Floor
    
	
Boston,   MA 02116
    
	
 
    
	
CRMA   SPV, L.P.
    
	
PO   Box 309
    
	
Ugland   House
    
	
Grand   Cayman
    
	
KY1-1104   Cayman Islands
    
	
 
    
	
Soffinova   Venture Partners X, L.P.
    
	
3000   Sand Hill Road, Bldg. 4, Suite 250
    
	
Menlo   Park, CA 94025
    
	
 
    
	
Deerfield   Special Situations Fund, L.P.
    
	
780   Third Avenue
    
	
New   York, NY 10017
    

 

 

SCHEDULE B

 

Founders

 

	
Name and Address
    	
 
    
	
 
    	
 
    
	
Sanj K. Patel
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Sanjiv K. Patel,   as Trustee
    	
 
    
	
for the Manisha   S. Patel
    	
 
    
	
2016 Irrevocable   Trust
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Stephen Frank   Mahoney
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Krisha S.   Mahoney as Trustee
    	
 
    
	
for the Stephen   F. Mahoney
    	
 
    
	
2016 Irrevocable   Trust
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Thomas W.   Beetham
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Christopher   Heberlig
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Carsten Boess
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Rasmus   Holm-Jorgensen
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    

 

 

	
Gregory   Alex Grabowski
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Aaron   Isadore Young
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Eben P.   Tessari
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Jennifer   Lynne Mason
    	
 
    
	
[xxxx]
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Mickenzie   Elizabeth Gallagher
    	
 
    
	
[xxxx]EXHIBIT 10.1

 

PLAN AMENDMENT

 

Kiniksa Pharmaceuticals, Ltd., a Bermuda exempted company (the “Company”), has adopted the 2015 Equity Incentive Plan (the “Plan”). Unless otherwise defined herein, all capitalized terms shall have the meaning set forth in the Plan.

 

Section 3, Paragraph (a) of the Plan shall be amended in its entirety to read as follows:

 

“(a)                           The number of Shares which may be issued from time to time pursuant  to this Plan shall be thirteen million ninety nine thousand six hundred and fourteen (13,099,614), or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any share split, share dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of the Plan.”

 

Except as expressly amended hereby, the Plan shall remain unchanged and in full force and effect and is hereby ratified and confirmed.

 

Adopted by the Company’s Board of Directors:                                                                                    March 6, 2017

 

Adopted by the Company’s Shareholders:                                                                                                                  March 6, 2017

 

 

IN WITNESS WHEREOF, the undersigned has acknowledged this Plan Amendment this  8th  day of March, 2017.

 

	
 
    	
By:
    	
/s/   Sanj K. Patel
    
	
 
    	
 
    	
Sanj   K. Patel
    
	
 
    	
 
    	
President   and Chief Executive Officer
    

 

SIGNATURE PAGE TO PLAN AMENDMENT

 

 

KINIKSA PHARMACEUTICALS, LTD.

 

2015 EQUITY INCENTIVE PLAN

 

1.                                      DEFINITIONS.

 

Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Kiniksa Pharmaceuticals, Ltd. 2015 Equity Incentive Plan, have the following meanings:

 

Administrator means the Board of Directors, unless it has delegated power to act on its behalf to the Committee, in which case the Administrator means the Committee.

 

Affiliate means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect.

 

Agreement means an agreement between the Company and a Participant delivered pursuant to the Plan and pertaining to a Share Right, in such form as the Administrator shall approve.

 

Board of Directors means the Board of Directors of the Company.

 

California Participant means a Participant who resides in the State of California.

 

Cause means, with respect to a Participant (a) dishonesty with respect to the Company or any Affiliate, (b) insubordination, substantial malfeasance or non-feasance of duty, (c) unauthorized disclosure of confidential information, (d) breach by a Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or similar agreement between the Participant and the Company or any Affiliate, and (e) conduct substantially prejudicial to the business of the Company or any Affiliate; provided, however, that any provision in an agreement between a Participant and the Company or an Affiliate, which contains a conflicting definition of Cause for termination and which is in effect at the time of such termination, shall supersede this definition with respect to that Participant.  The determination of the Administrator as to the existence of Cause will be conclusive on the Participant and the Company.

 

Code means the United States Internal Revenue Code of 1986, as amended including any successor statute, regulation and guidance thereto.

 

Committee means the committee of the Board of Directors to which the Board of Directors has delegated power to act under or pursuant to the provisions of the Plan.

 

Common Shares means Class A common shares of the Company, $0.0001 par value per share.

 

 

Company means Kiniksa Pharmaceuticals, Ltd., a Bermuda exempted company.

 

Consultant means any natural person who is an advisor or consultant that provides bona fide services to the Company or its Affiliates, provided that such services are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s or its Affiliates’ securities.

 

Disability or Disabled means permanent and total disability as defined in Section 22(e)(3) of the Code.

 

Employee means any employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer or director of the Company or of an Affiliate), designated by the Administrator to be eligible to be granted one or more Share Rights under the Plan.

 

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

Fair Market Value of a Share of Common Shares means:

 

(1)                                 If the Common Shares are listed on a national securities exchange or traded in the over-the-counter market and sales prices are regularly reported for the Common Shares, the closing or, if not applicable, the last price of the Common Shares on the composite tape or other comparable reporting system for the trading day on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date;

 

(2)                                 If the Common Shares are not traded on a national securities exchange but are traded on the over-the-counter market, if sales prices are not regularly reported for the Common Shares for the trading day referred to in clause (1), and if bid and asked prices for the Common Shares are regularly reported, the mean between the bid and the asked price for the Common Shares at the close of trading in the over-the-counter market for the trading day on which Common Shares was traded on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such date; and

 

(3)                                 If the Common Shares are neither listed on a national securities exchange nor traded in the over-the-counter market, such value as the Administrator, in good faith, shall determine.

 

ISO means an option intended to qualify as an incentive stock option under Section 422 of the Code.

 

Non-Qualified Option means an option which is not intended to qualify as an ISO.

 

Option means an ISO or Non-Qualified Option granted under the Plan.

 

2

 

Participant means an Employee, director or Consultant of the Company or an Affiliate to whom one or more Share Rights are granted under the Plan. As used herein, “Participant” shall include “Participant’s Survivors” where the context requires.

 

Plan means this Kiniksa Pharmacuticals, Ltd. 2015 Equity Incentive Plan, as may be amended and/or restated from time to time.

 

Securities Act means the Securities Act of 1933, as amended.

 

Shares means shares of the Common Shares as to which Share Rights have been or may be granted under the Plan or any shares into which the Shares are changed or for which they are exchanged within the provisions of Paragraph 3 of the Plan.  The Shares issued under the Plan may be authorized and unissued shares or shares held by the Company in its treasury, or both.

 

Share-Based Award means a grant by the Company under the Plan of an equity award or an equity based award which is not an Option or a Share Grant.

 

Share Grant means a grant by the Company of Shares under the Plan.

 

Share Right means a right to Shares or the value of Shares of the Company granted pursuant to the Plan — an ISO, a Non-Qualified Option, a Share Grant or a Share-Based Award.

 

Survivor means a deceased Participant’s legal representatives and/or any person or persons who acquired the Participant’s rights to a Share Right by will or by the laws of descent and distribution.

 

2.                                      PURPOSES OF THE PLAN.

 

The Plan is intended to encourage ownership of Shares by Employees and directors of and certain Consultants to the Company and its Affiliates in order to attract and retain such people, to induce them to work for the benefit of the Company or of an Affiliate and to provide additional incentive for them to promote the success of the Company or of an Affiliate.  The Plan provides for the granting of ISOs, Non-Qualified Options, Share Grants and Share-Based Awards.

 

3.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                 The number of Shares which may be issued from time to time pursuant to this Plan shall be            (           ), or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any share split, share dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of the Plan.

 

(b)                                 If an Option ceases to be “outstanding”, in whole or in part (other than by exercise), or if the Company shall reacquire (at not more than its original issuance price) any Shares issued pursuant to a Share Grant or Share-Based Award, or if any Share Right expires or 

 

3

 

is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued or reacquired Shares which were subject to such Share Right shall again be available for issuance from time to time pursuant to this Plan.  Notwithstanding the foregoing, if a Share Right is exercised, in whole or in part, by tender of Shares or if the Company or an Affiliate’s tax withholding obligation is satisfied by withholding Shares, the number of Shares deemed to have been issued under the Plan for purposes of the limitation set forth in Paragraph 3(a) above shall be the number of Shares that were subject to the Share Right or portion thereof, and not the net number of Shares actually issued.  However, in the case of ISOs, the foregoing provisions shall be subject to any limitations under the Code.

 

4.                                      ADMINISTRATION OF THE PLAN.

 

The Administrator of the Plan will be the Board of Directors, except to the extent the Board of Directors delegates its authority to the Committee, in which case the Committee shall be the Administrator.  Subject to the provisions of the Plan, the Administrator is authorized to:

 

(a)                                 Interpret the provisions of the Plan and all Share Rights and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan;

 

(b)                                 Determine which Employees, directors and Consultants shall be granted Share Rights;

 

(c)                                  Determine the number of Shares for which a Share Right or Share Rights shall be granted;

 

(d)                                 Specify the terms and conditions upon which a Share Right or Share Rights may be granted;

 

(e)                                  Amend any term or condition of any outstanding Share Right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting schedule or extend the expiration date, provided that (i) such term or condition as amended is permitted by the Plan; (ii) any such amendment shall not impair the rights of a Participant under any Share Right previously granted without such Participant’s consent or in the event of death of the Participant the Participant’s Survivors; and (iii) any such amendment shall be made only after the Administrator determines whether such amendment would cause any adverse tax consequences to the Participant, including, but not limited to, the annual vesting limitation contained in Section 422(d) of the Code and described in Paragraph 6(b)(iv) below with respect to ISOs and pursuant to Section 409A of the Code;

 

(f)                                   Buy out for a payment in cash or Shares, a Share Right previously granted and/or cancel any such Share Right and grant in substitution therefor other Share Rights, covering the same or a different number of Shares and having an exercise price or purchase price per share which may be lower or higher than the exercise price or purchase price of the cancelled Share Right, based on such terms and conditions as the Administrator shall establish and the Participant shall accept; and

 

(g)                                  Adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other 

 

4

 

laws applicable to the Company, any Affiliate or to Participants or to otherwise facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Share Rights or Shares issuable pursuant to a Share Right;

 

provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of not causing any adverse tax consequences under Section 409A of the Code and preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs.  Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Share Right granted under it shall be final, unless otherwise determined by the Board of Directors, if the Administrator is the Committee.  In addition, if the Administrator is the Committee, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the Committee.

 

To the extent permitted under applicable law, the Board of Directors or the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any portion of its responsibilities and powers to any other person selected by it. The Board of Directors or the Committee may revoke any such allocation or delegation at any time.

 

5.                                      ELIGIBILITY FOR PARTICIPATION.

 

The Administrator will, in its sole discretion, name the Participants in the Plan; provided, however, that each Participant must be an Employee, director or Consultant of the Company or of an Affiliate at the time a Share Right is granted.  Notwithstanding the foregoing, the Administrator may authorize the grant of a Share Right to a person not then an Employee, director or Consultant of the Company or of an Affiliate; provided, however, that the actual grant of such Share Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the execution of the Agreement evidencing such Share Right.  ISOs may be granted only to Employees who are deemed to be residents of the United States for tax purposes.  Non-Qualified Options, Share Grants and Share-Based Awards may be granted to any Employee, director or Consultant of the Company or an Affiliate.  The granting of any Share Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Share Rights or any grant under any other benefit plan established by the Company or any Affiliate for Employees, directors or Consultants.

 

6.                                      TERMS AND CONDITIONS OF OPTIONS.

 

Each Option shall be set forth in writing in an Option Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Administrator may provide that Options be granted subject to such terms and conditions, consistent with the terms and conditions specifically required under this Plan, as the Administrator may deem appropriate including, without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto.  The Option Agreements shall be subject to at least the following terms and conditions:

 

5

 

(a)                                 Non-Qualified Options:  Each Option intended to be a Non-Qualified Option shall be subject to the terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards for any such Non-Qualified Option:

 

(i)                                     Exercise Price: Each Option Agreement shall state the exercise price (per share) of the Shares covered by each Option, which exercise price shall be determined by the Administrator and shall be at least equal to the Fair Market Value per share of Common Shares on the date of grant of the Option, provided that if the exercise price is less than Fair Market Value, the terms of such Option must comply with the requirements of Section 409A of the Code unless granted to a Consultant to whom Section 409A of the Code does not apply.

 

(ii)                                  Number of Shares: Each Option Agreement shall state the number of Shares to which it pertains.

 

(iii)                               Option Periods:  Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain conditions or the attainment of stated goals or events.  For California Participants, the exercise period of the Option set forth in the Option Agreement shall not be more than 120 months from the date of grant.

 

(iv)                              Option Conditions:  Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the Administrator providing for certain protections for the Company and its other shareholders, including requirements that:

 

A.                                    The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and

 

B.                                    The Participant or the Participant’s Survivors may be required to execute letters of investment intent and must also acknowledge that the Shares will bear legends noting any applicable restrictions.

 

(v)                                 Term of Option:  Each Option shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide.

 

(b)                                 ISOs:  Each Option intended to be an ISO shall be issued only to an Employee who is deemed to be a resident of the United States for tax purposes, and shall be subject to the following terms and conditions, with such additional restrictions or changes as the Administrator determines are appropriate but not in conflict with Section 422 of the Code and relevant regulations and rulings of the Internal Revenue Service:

 

6

 

(i)                                     Minimum standards:  The ISO shall meet the minimum standards required of Non-Qualified Options, as described in Paragraph 6(a) above, except clause (i) and (v) thereunder.

 

(ii)                                  Exercise Price:  Immediately before the ISO is granted, if the Participant owns, directly or by reason of the applicable attribution rules in Section 424(d) of the Code:

 

A.                                    10% or less of the total combined voting power of all classes of shares of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 100% of the Fair Market Value per share of the Common Shares on the date of grant of the Option; or

 

B.                                    More than 10% of the total combined voting power of all classes of shares of the Company or an Affiliate, the exercise price per share of the Shares covered by each ISO shall not be less than 110% of the Fair Market Value per share of the Common Shares on the date of grant of the Option.

 

(iii)                               Term of Option:  For Participants who own:

 

A.                                    10% or less of the total combined voting power of all classes of shares of the Company or an Affiliate, each ISO shall terminate not more than ten years from the date of the grant or at such earlier time as the Option Agreement may provide; or

 

B.                                    More than 10% of the total combined voting power of all classes of shares of the Company or an Affiliate, each ISO shall terminate not more than five years from the date of the grant or at such earlier time as the Option Agreement may provide.

 

(iv)                              Limitation on Yearly Exercise:  The Option Agreements shall restrict the amount of ISOs which may become exercisable in any calendar year (under this or any other ISO plan of the Company or an Affiliate) so that the aggregate Fair Market Value (determined on the date each ISO is granted) of the shares with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed $100,000.

 

7.                                      TERMS AND CONDITIONS OF SHARE GRANTS.

 

Each Share Grant to a Participant shall state the principal terms in an Agreement duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  For California Participants, each Share Grant shall be issued within ten (10) years from the earlier of the date the Plan is adopted or approved by the Company’s shareholders.  The Agreement shall be in a form approved by the Administrator and shall contain 

 

7

 

terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards:

 

(a)                                 Each Agreement shall state the purchase price per share, if any, of the Shares covered by each Share Grant, which purchase price shall be determined by the Administrator but shall not be less than the minimum consideration required by Bermuda law, if any, on the date of the grant of the Share Grant;

 

(b)                                 Each Agreement shall state the number of Shares to which the Share Grant pertains; and

 

(c)                                  Each Agreement shall include the terms of any right of the Company to restrict or reacquire the Shares subject to the Share Grant, including the time and events upon which such rights shall accrue and the purchase price therefor, if any.

 

8.                                      TERMS AND CONDITIONS OF OTHER SHARE-BASED AWARDS.

 

The Administrator shall have the right to grant other Share-Based Awards based upon the Common Shares having such terms and conditions as the Administrator may determine, including, without limitation, the grant of Shares based upon certain conditions, the grant of securities convertible into Shares and the grant of share appreciation rights, phantom share awards or share units.  The principal terms of each Share-Based Award shall be set forth in an Agreement, duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company.

 

The Company intends that the Plan and any Share-Based Awards granted hereunder be exempt from the application of Section 409A of the Code or meet the requirements of paragraphs (2), (3) and (4) of subsection (a) of Section 409A of the Code, to the extent applicable, and be operated in accordance with Section 409A so that any compensation deferred under any Share-Based Award (and applicable investment earnings) shall not be included in income under Section 409A of the Code.  Any ambiguities in the Plan shall be construed to effect the intent as described in this Paragraph 8.

 

9.                                      EXERCISE OF OPTIONS AND ISSUE OF SHARES.

 

An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company or its designee (in a form acceptable to the Administrator, which may include electronic notice), together with provision for payment of the aggregate exercise price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement.  Such notice shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Administrator), shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement.  Payment of the exercise price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of Common Shares held for at least six 

 

8

 

months (if required to avoid negative accounting treatment) having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised, or (c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the Option is being exercised, or (d) at the discretion of the Administrator (after consideration of applicable securities, tax and accounting implications), by delivery of the grantee’s personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (e) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (f) at the discretion of the Administrator, by any combination of (a), (b), (c), (d) and (e) above or (g) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine. Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.

 

The Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be).  In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.  The Shares shall, upon delivery, be fully paid, non-assessable Shares.

 

10.                               PAYMENT IN CONNECTION WITH THE ISSUANCE OF SHARE GRANTS AND SHARE-BASED AWARDS AND ISSUE OF SHARES.

 

Any Share Grant or Share-Based Award requiring payment of a purchase price for the Shares as to which such Share Grant or Share-Based Award is being granted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of Common Shares held for at least six months (if required to avoid negative accounting treatment) and having a Fair Market Value equal as of the date of payment to the purchase price of the Share Grant or Share-Based Award, or (c) at the discretion of the Administrator (after consideration of applicable securities, tax and accounting implications), by delivery of the grantee’s personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the Administrator, by any combination of (a), (b) and (c) above, or (e) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine.

 

The Company shall when required by the applicable Agreement, reasonably promptly deliver the Shares as to which such Share Grant or Share-Based Award was made to the Participant (or to the Participant’s Survivors, as the case may be), subject to any escrow provision set forth in the applicable Agreement.  In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, 

 

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state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.

 

11.                               RIGHTS AS A SHAREHOLDER.

 

No Participant to whom a Share Right has been granted shall have rights as a shareholder with respect to any Shares covered by such Share Right except after due exercise of an Option or issuance of Shares as set forth in any Agreement, tender of the aggregate exercise or purchase price, if any, for the Shares being purchased and registration of the Shares in the Company’s share register in the name of the Participant.

 

12.                               ASSIGNABILITY AND TRANSFERABILITY OF SHARE RIGHTS.

 

By its terms, a Share Right granted to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as approved by the Administrator in its discretion and set forth in the applicable Agreement provided that no Share Right may be transferred by a Participant for value.  For California Participants, Share Rights shall not be transferable by the Participant other than by will or by the laws of descent and distribution, to a revocable trust, or as permitted by Rule 701 of the Securities Act. Notwithstanding the foregoing, an ISO transferred except in compliance with clause (i) above shall no longer qualify as an ISO.  The designation of a beneficiary of a Share Right by a Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph.  Except as provided above during the Participant’s lifetime a Share Right shall only be exercisable by or issued to such Participant (or his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.  Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Share Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Share Right, shall be null and void.

 

13.                               EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

 

Except as otherwise provided in a Participant’s Option Agreement, in the event of a termination of service (whether as an Employee, director or Consultant) with the Company or an Affiliate before the Participant has exercised an Option, the following rules apply:

 

(a)                                 A Participant who ceases to be an Employee, director or Consultant of the Company or of an Affiliate for any reason other than termination for Cause, Disability, or death, for which events there are special rules in Paragraphs 14, 15, and 16, respectively, may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in a Participant’s Option Agreement.

 

(b)                                 Except as provided in Subparagraph (c) below, or Paragraph 15 or 16, in no event may an Option intended to be an ISO, be exercised later than three months after the Participant’s termination of employment.  For Options granted to California Participants, an Option must be

 

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exercisable for at least thirty (30) days from the date of a Participant’s termination of employment.

 

(c)                                  The provisions of this Paragraph, and not the provisions of Paragraph 15 or 16, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, director status or consultancy; provided, however, in the case of a Participant’s Disability or death within three months after the termination of employment, director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one year after the date of the Participant’s termination of service, but in no event after the date of expiration of the term of the Option.

 

(d)                                 Notwithstanding anything herein to the contrary, if subsequent to a Participant’s termination of employment, termination of director status or termination of consultancy, but prior to the exercise of an Option, the Administrator determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute Cause, then such Participant shall forthwith cease to have any right to exercise any Option.

 

(e)                                  A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide; provided, however, that, for ISOs, any leave of absence granted by the Administrator of greater than ninety days, unless pursuant to a contract or statute that guarantees the right to reemployment, shall cause such ISO to become a Non-Qualified Option on the 91st day following such leave of absence.

 

(f)                                   Except as required by law or as set forth in a Participant’s Option Agreement, Options granted under the Plan shall not be affected by any change of a Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an Employee, director or Consultant of the Company or any Affiliate.

 

14.                               EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR CAUSE.

 

Except as otherwise provided in a Participant’s Option Agreement, the following rules apply if the Participant’s service (whether as an Employee, director or Consultant) with the Company or an Affiliate is terminated for Cause prior to the time that all his or her outstanding Options have been exercised:

 

(a)                                 All outstanding and unexercised Options as of the time the Participant is notified his or her service is terminated for Cause will immediately be forfeited.

 

(b)                                 Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service but prior to the exercise of an Option, that either prior or subsequent to the Participant’s 

 

11

 

termination the Participant engaged in conduct which would constitute Cause, then the right to exercise any Option is forfeited.

 

15.                               EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.

 

(a)                                 Except as otherwise provided in a Participant’s Option Agreement, a Participant who ceases to be an Employee, director or Consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant:

 

(i)                                     To the extent that the Option has become exercisable but has not been exercised on the date of the Participant’s termination of service due to Disability; and

 

(ii)                                  In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant’s termination of service due to Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled.  The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant’s termination of service due to Disability.

 

(b)                                 A Disabled Participant may exercise the Option only within the period ending one year after the date of the Participant’s termination of service due to Disability, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not been terminated due to Disability and had continued to be an Employee, director or Consultant or, if earlier, within the originally prescribed term of the Option.  For Options granted to California Participants, a Participant may exercise such rights for at least six (6) months from the date of termination of service due to Disability.

 

(c)                                  The Administrator shall make the determination both of whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.

 

16.                               EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

(a)                                 Except as otherwise provided in a Participant’s Option Agreement in the event of the death of a Participant while the Participant is an Employee, director or Consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors:

 

(i)                                     To the extent that the Option has become exercisable but has not been exercised on the date of death; and

 

(ii)                                  In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting 

 

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rights that would have accrued on the next vesting date had the Participant not died.  The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death.

 

(b)                                 If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an Employee, director or Consultant or, if earlier, within the originally prescribed term of the Option.  For Options granted to California Participants, the Participant’s Survivors must be allowed to take all necessary steps to exercise the Option for at least six (6) months from the date of death of such Participant.

 

17.                               EFFECT OF TERMINATION OF SERVICE ON SHARE GRANTS AND SHARE-BASED AWARDS.

 

In the event of a termination of service (whether as an Employee, director or Consultant) with the Company or an Affiliate for any reason before the Participant has accepted a Share Grant or a Share-Based Award and paid the purchase price, if required, such grant shall terminate.

 

For purposes of this Paragraph 17 and Paragraph 18 below, a Participant to whom a Share Grant or a Share-Based Award has been issued under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.

 

In addition, for purposes of this Paragraph 17 and Paragraph 18 below, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, director status or consultancy so long as the Participant continues to be an Employee, director or Consultant of the Company or any Affiliate.

 

18.                               EFFECT ON SHARE GRANTS OF TERMINATION OF SERVICE OTHER THAN FOR CAUSE OR DEATH OR DISABILITY.

 

Except as otherwise provided in a Participant’s Share Grant Agreement, in the event of a termination of service (whether as an Employee, director or Consultant), other than termination for Cause, Disability, or death, for which events there are special rules in Paragraphs 19, 20, and 21, respectively, before all forfeiture provisions or Company rights of repurchase shall have lapsed, then the Company shall have the right to cancel or repurchase that number of Shares subject to a Share Grant as to which the Company’s forfeiture or repurchase rights have not lapsed.

 

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19.                               EFFECT ON SHARE GRANTS OF TERMINATION OF SERVICE FOR CAUSE.

 

Except as otherwise provided in a Participant’s Share Grant Agreement, the following rules apply if the Participant’s service (whether as an Employee, director or Consultant) with the Company or an Affiliate is terminated for Cause:

 

(a)                                 All Shares subject to any Share Grant that remain subject to forfeiture provisions or as to which the Company shall have a repurchase right shall be immediately forfeited to the Company as of the time the Participant is notified his or her service is terminated for Cause.

 

(b)                                 Cause is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of Cause occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute Cause, then all Shares subject to any Share Grant that remained subject to forfeiture provisions or as to which the Company had a repurchase right on the date of termination shall be immediately forfeited to the Company.

 

20.                               EFFECT ON SHARE GRANTS OF TERMINATION OF SERVICE FOR DISABILITY.

 

Except as otherwise provided in a Participant’s Share Grant Agreement, the following rules apply if a Participant ceases to be an Employee, director or Consultant of the Company or of an Affiliate by reason of Disability:  to the extent the forfeiture provisions or the Company’s rights of repurchase have not lapsed on the date of Disability, they shall be exercisable; provided, however, that in the event such forfeiture provisions or rights of repurchase lapse periodically, such provisions or rights shall lapse to the extent of a pro rata portion of the Shares subject to such Share Grant through the date of Disability as would have lapsed had the Participant not become Disabled.  The proration shall be based upon the number of days accrued prior to the date of Disability.

 

The Administrator shall make the determination both as to whether Disability has occurred and the date of its occurrence (unless a procedure for such determination is set forth in another agreement between the Company and such Participant, in which case such procedure shall be used for such determination).  If requested, the Participant shall be examined by a physician selected or approved by the Administrator, the cost of which examination shall be paid for by the Company.

 

21.                               EFFECT ON SHARE GRANTS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.

 

Except as otherwise provided in a Participant’s Share Grant Agreement, the following rules apply in the event of the death of a Participant while the Participant is an Employee, director or Consultant of the Company or of an Affiliate:  to the extent the forfeiture provisions or the Company’s rights of repurchase have not lapsed on the date of death, they shall be exercisable; provided, however, that in the event such forfeiture provisions or rights of repurchase lapse periodically, such provisions or rights shall lapse to the extent of a pro rata 

 

14

 

portion of the Shares subject to such Share Grant through the date of death as would have lapsed had the Participant not died.  The proration shall be based upon the number of days accrued prior to the Participant’s date of death.

 

22.                               PURCHASE FOR INVESTMENT.

 

Unless the offering and sale of the Shares shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue Shares under the Plan unless and until the following conditions have been fulfilled:

 

(a)                                 The person who receives a Share Right shall warrant to the Company, prior to the receipt of Shares, that such person is acquiring such Shares for his or her own account, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person acquiring such Shares shall be bound by the provisions of the following legend (or a legend in substantially similar form) (which shall be endorsed upon any certificate evidencing the Shares that the Company may issue pursuant to such exercise or such grant):

 

“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws.”

 

(b)                                 At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued in compliance with the Securities Act without registration thereunder.

 

23.                               DISSOLUTION OR LIQUIDATION OF THE COMPANY.

 

Upon the dissolution or liquidation of the Company, all Options granted under this Plan which as of such date shall not have been exercised and all Share Grants and Share-Based Awards which have not been accepted, to the extent required under the applicable Agreement, will terminate and become null and void; provided, however, that if the rights of a Participant or a Participant’s Survivors have not otherwise terminated and expired, the Participant or the Participant’s Survivors will have the right immediately prior to such dissolution or liquidation to exercise or accept any Share Right to the extent that the Share Right is exercisable or subject to acceptance as of the date immediately prior to such dissolution or liquidation.  Upon the dissolution or liquidation of the Company, any outstanding Share-Based Awards shall immediately terminate unless otherwise determined by the Administrator or specifically provided in the applicable Agreement.

 

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24.                               ADJUSTMENTS.

 

Upon the occurrence of any of the following events, a Participant’s rights with respect to any Share Right granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in a Participant’s Agreement:

 

(a)                                 Share Dividends and Share Splits.  If (i) the Common Shares shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any Common Shares as a share dividend on its outstanding Common Shares, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such Common Shares, each Share Right and the number of Common Shares deliverable thereunder shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made including, in the exercise or purchase price per share, to reflect such events.  The number of Shares subject to the limitations in Paragraph 3(a) shall also be proportionately adjusted upon the occurrence of such events.

 

(b)                                 Corporate Transactions.  If the Company is to be consolidated with or acquired by another entity in a merger, amalgamation, consolidation, or sale of all or substantially all of the Company’s assets other than a transaction to merely change the state of incorporation (a “Corporate Transaction”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding Common Shares in connection with the Corporate Transaction or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that such Options must be exercised (either (A) to the extent then exercisable or, (B) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph), within a specified number of days of the date of such notice, at the end of which period such Options which have not been exercised shall terminate; or (iii) terminate such Options in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of Common Shares into which such Option would have been exercisable (either (A) to the extent then exercisable or, (B) at the discretion of the Administrator, any such Options being made partially or fully exercisable for purposes of this Subparagraph) less the aggregate exercise price thereof.  For purposes of determining the payments to be made pursuant to Subclause (iii) above, in the case of a Corporate Transaction the consideration for which, in whole or in part, is other than cash, the consideration other than cash shall be valued at the fair value thereof as determined in good faith by the Board of Directors.

 

With respect to outstanding Share Grants, the Administrator or the Successor Board shall make appropriate provision for the continuation of such Share Grants on the same terms and conditions by substituting on an equitable basis for the Shares then subject to such Share Grants either the consideration payable with respect to such outstanding Shares in connection with the Corporate Transaction or securities of any successor or acquiring entity.  In lieu of the foregoing, in connection with any Corporate Transaction, the Administrator may provide that, upon consummation of the Corporate Transaction, each outstanding Share Grant shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of 

 

16

 

such Corporate Transaction to a holder of the number of Common Shares comprising such Share Grant (to the extent such Share Grant is no longer  subject to any forfeiture or repurchase rights then in effect or, at the discretion of the Administrator, all forfeiture and repurchase rights being waived upon such Corporate Transaction).

 

In taking any of the actions permitted under this Paragraph 24(b), the Administrator shall not be obligated by the Plan to treat all Share Rights, all Share Rights held by a Participant, or all Share Rights of the same type, identically.

 

(c)                                  Recapitalization or Reorganization.  In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding Common Shares, a Participant upon exercising an Option or accepting a Share Grant after the recapitalization or reorganization shall be entitled to receive for the price paid upon such exercise or acceptance if any, the number of replacement securities which would have been received if such Option had been exercised or Share Grant accepted prior to such recapitalization or reorganization.

 

(d)                                 Adjustments to Share-Based Awards.  Upon the happening of any of the events described in Subparagraphs (a), (b) or (c) above, any outstanding Share-Based Award shall be appropriately adjusted to reflect the events described in such Subparagraphs.  The Administrator or the Successor Board shall determine the specific adjustments to be made under this Paragraph 24, including, but not limited to the effect of any Corporate Transaction and, subject to Paragraph 4, its determination shall be conclusive.

 

(e)                                  Modification of Options.  Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph (a), (b) or (c) above with respect to Options shall be made only after the Administrator determines whether such adjustments would (i) constitute a “modification” of any ISOs (as that term is defined in Section 424(h) of the Code) or (ii) cause any adverse tax consequences for the holders of Options, including, but not limited to, pursuant to Section 409A of the Code.  If the Administrator determines that such adjustments made with respect to Options would constitute a modification or other adverse tax consequence, it may refrain from making such adjustments, unless the holder of an Option specifically agrees in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the Option.  This paragraph shall not apply to the acceleration of the vesting of any ISO that would cause any portion of the ISO to violate the annual vesting limitation contained in Section 422(d) of the Code, as described in Paragraph 6(b)(iv).

 

25.                               ISSUANCES OF SECURITIES.

 

Except as expressly provided herein, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Share Rights.  Except as expressly provided herein, no adjustments shall be made for dividends paid in cash or in property (including without limitation, securities) of the Company prior to any issuance of Shares pursuant to a Share Right.

 

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26.                               FRACTIONAL SHARES.

 

No fractional shares shall be issued under the Plan and the person exercising a Share Right shall receive from the Company cash in lieu of such fractional shares equal to the Fair Market Value thereof.

 

27.                               CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.

 

The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an Employee of the Company or an Affiliate at the time of such conversion.  At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action.  The Administrator, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion.

 

28.                               WITHHOLDING.

 

In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the issuance of a Share Right or Shares under the Plan or for any other reason required by law, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Shares or a promissory note, is authorized by the Administrator (and permitted by law).  For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner set forth under the definition of Fair Market Value provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise.  If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer.  The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.

 

29.                               NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

 

Each Employee who receives an ISO must agree to notify the Company in writing immediately after the Employee makes a Disqualifying Disposition of any Shares acquired pursuant to the exercise of an ISO.  A Disqualifying Disposition is defined in Section 424(c) of 

 

18

 

the Code and includes any disposition (including any sale or gift) of such Shares before the later of (a) two years after the date the Employee was granted the ISO, or (b) one year after the date the Employee acquired Shares by exercising the ISO, except as otherwise provided in Section 424(c) of the Code.  If the Employee has died before such Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.

 

30.                               TERMINATION OF THE PLAN.

 

The Plan will terminate on December 16, 2025, the date which is ten years from the earlier of the date of its adoption by the Board of Directors and the date of its approval by the shareholders of the Company.  The Plan may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the Company; provided, however, that any such earlier termination shall not affect any Agreements executed prior to the effective date of such termination.  Termination of the Plan shall not affect any Share Rights theretofore granted.

 

31.                               AMENDMENT OF THE PLAN AND AGREEMENTS.

 

The Plan may be amended by the shareholders of the Company.  The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify any or all outstanding Share Rights granted under the Plan or Share Rights to be granted under the Plan for favorable federal income tax treatment as may be afforded incentive stock options under Section 422 of the Code (including deferral of taxation upon exercise), and to the extent necessary to qualify the Shares issuable under the Plan for listing on any national securities exchange or quotation in any national automated quotation system of securities dealers.  Any amendment approved by the Administrator which the Administrator determines is of a scope that requires shareholder approval shall be subject to obtaining such shareholder approval.  Any modification or amendment of the Plan shall not, without the consent of a Participant, adversely affect his or her rights under a Share Right previously granted to him or her.  With the consent of the Participant affected, the Administrator may amend outstanding Agreements in a manner which may be adverse to the Participant but which is not inconsistent with the Plan.  In the discretion of the Administrator, outstanding Agreements may be amended by the Administrator in a manner which is not adverse to the Participant.

 

32.                               EMPLOYMENT OR OTHER RELATIONSHIP.

 

Nothing in this Plan or any Agreement shall be deemed to prevent the Company or an Affiliate from terminating the employment, consultancy or director status of a Participant, nor to prevent a Participant from terminating his or her own employment, consultancy or director status or to give any Participant a right to be retained in employment or other service by the Company or any Affiliate for any period of time.

 

33.                               GOVERNING LAW.

 

This Plan shall be construed and enforced in accordance with the law of Bermuda.

 

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Option No.        

 

KINIKSA PHARMACEUTICALS, LTD.

 

Share Option Grant Notice

Share Option Grant under the Company’s

2015 Equity Incentive Plan

 

	
1.
    	
 
    	
Name and Address of Participant:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
2.
    	
 
    	
Date of Option Grant:
    
	
 
    	
 
    	
 
    
	
3.
    	
 
    	
Type of Grant:
    
	
 
    	
 
    	
 
    
	
4.
    	
 
    	
Maximum Number of Shares for
    
	
 
    	
 
    	
which this Option is exercisable:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
5.
    	
 
    	
Exercise (purchase) price per share:
    
	
 
    	
 
    	
 
    
	
6.
    	
 
    	
Option Expiration Date:
    
	
 
    	
 
    	
 
    
	
7.
    	
 
    	
Vesting Start Date:
    
	
 
    	
 
    	
 
    
	
8.
    	
 
    	
Vesting Schedule: This Option shall become   exercisable (and the Shares issued upon exercise shall be vested) as follows   provided the Participant is an Employee, director or Consultant of the   Company or of an Affiliate on the applicable vesting date:
    

 

	
On the first   anniversary of the 

Vesting Start Date
    	
 
    	
25% of the Shares
    
	
 
    	
 
    	
 
    
	
Thereafter, on each one month 

anniversary of the   Vesting Start Date
    	
 
    	
an additional 2.0833% of the Shares
    

 

In accordance with the above, all the Shares subject to the Option shall be fully vested 4 years from the Vesting Start Date.

 

The foregoing rights are cumulative and are subject to the other terms and conditions of this Share Option Grant Notice, and the terms of the Share Option Agreement attached hereto, and the Company’s 2015 Equity Incentive Plan.

 

 

The Company and the Participant acknowledge receipt of this Share Option Grant Notice and agree to the terms of the Share Option Agreement attached hereto and incorporated by reference herein, the Company’s 2015 Equity Incentive Plan and the terms of this Share Option Grant Notice as set forth above.

 

	
 
    	
KINIKSA PHARMACEUTICALS, LTD.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Participant
    

 

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KINIKSA PHARMACEUTICALS, LTD.

 

SHARE OPTION AGREEMENT - INCORPORATED TERMS AND CONDITIONS

 

AGREEMENT made as of the date of grant set forth in the Share Option Grant Notice by and between Kiniksa Pharmaceuticals, Ltd. (the “Company”), a Bermuda exempted company, and the individual whose name appears on the Share Option Grant Notice (the “Participant”).

 

WHEREAS, the Company desires to grant to the Participant an Option to purchase Class A common shares, $0.0001 par value per share, of the Company (the “Shares”), under and for the purposes set forth in the Company’s 2015 Equity Incentive Plan (the “Plan”);

 

WHEREAS, the Company and the Participant understand and agree that any terms used and not defined herein have the same meanings as in the Plan; and

 

WHEREAS, the Company and the Participant each intend that the Option granted herein shall be of the type set forth in the Share Option Grant Notice.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.                                      GRANT OF OPTION.

 

The Company hereby grants to the Participant the right and option to purchase all or any part of an aggregate of the number of Shares set forth in the Share Option Grant Notice, on the terms and conditions and subject to all the limitations set forth herein, under United States securities and tax laws, and in the Plan, which is incorporated herein by reference. The Participant acknowledges receipt of a copy of the Plan.

 

2.                                      EXERCISE PRICE.

 

The exercise price of the Shares covered by the Option shall be the amount per Share determined in accordance with the Plan and set forth in the Share Option Grant Notice, subject to adjustment, as provided in the Plan, in the event of a share split, reverse share split or other events affecting the holders of Shares after the date hereof (the “Exercise Price”). Payment shall be made in accordance with Paragraph 9 of the Plan.

 

3.                                      EXERCISABILITY OF OPTION.

 

Subject to the terms and conditions set forth in this Agreement and the Plan, the Option granted hereby shall become vested and exercisable as set forth in the Share Option Grant Notice and is subject to the other terms and conditions of this Agreement and the Plan.

 

Notwithstanding the foregoing, in the event of a Change of Control in which the Option is not being assumed or substituted as provided in Paragraph 24(b)(i) of the Plan, the vesting and exercisability of the Option shall accelerate such that the Option shall become fully

 

 

vested and exercisable, effective as of immediately prior to the consummation of the Corporate Transaction that constitutes a Change of Control. The Company shall notify the Participant prior to such Change of Control in order to provide the Participant with the ability to exercise the Option as of the Change of Control. To the extent that the Option is not exercised prior to consummation of a Change of Control in which the Option is not being assumed or substituted, the Option shall terminate upon the consummation of the Change of Control transaction.

 

In the event (i) of a Change of Control, and (ii) the Option remains outstanding after such event, if the Participant is involuntarily terminated by the Company, an Affiliate or any successor corporation without Cause (not including death or disability) at the time of, or within one (1) year following the Change of Control, then the Option shall fully accelerate and become exercisable at the effective date of termination of the Participant.

 

Change of Control means (1) a sale of all or substantially all of the Company’s assets, or (2) any merger, amalgamation, consolidation or other business combination transaction of the Company with or into another corporation, entity or person, other than a transaction in which the holders of at least a majority of the voting shares of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into voting shares of the surviving entity) a majority of the total voting power represented by the voting shares of the Company (or the surviving entity) outstanding immediately after such transaction, or (3) the direct or indirect acquisition (including by way of a tender or exchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership of shares representing a majority of the voting power of the then outstanding shares of the Company. Notwithstanding the foregoing, a Change of Control shall not be deemed to occur (A) on account of the acquisition of voting shares by any institutional investor or any affiliate thereof or any other person, or persons acting as a group, that acquires the Company’s voting shares in a transaction or series of related transactions that are primarily a private financing transaction for the Company or (B) solely because the level of ownership held by any institutional investor or any affiliate thereof or any other person, or persons acting as a group (the “Subject Person”), exceeds the designated percentage threshold of the outstanding voting shares as a result of a repurchase or other acquisition of voting shares by the Company reducing the number of shares outstanding, provided that if a Change of Control would occur (but for the operating of this sentence) as a result of the acquisition of voting shares by the Company, and after such share acquisition, the Subject Person becomes the owner of any additional voting shares that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting shares owned by such Subject Person over the designated percentage threshold, then a Change of Control shall be deemed to occur.

 

4.                                      TERM OF OPTION.

 

This Option shall terminate on the Option Expiration Date as specified in the Share Option Grant Notice and, if this Option is designated in the Share Option Grant Notice as an ISO and the Participant owns as of the date hereof more than 10% of the total combined voting power of all classes of shares of the Company or an Affiliate, such date may not be more

 

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than five years from the date of this Agreement, but shall be subject to earlier termination as provided herein or in the Plan.

 

If the Participant ceases to be an Employee, director or Consultant of the Company or of an Affiliate for any reason other than the death or Disability of the Participant, or termination of the Participant for Cause (the “Termination Date”), the Option to the extent then vested and exercisable pursuant to Section 3 hereof as of the Termination Date, and not previously terminated in accordance with this Agreement, may be exercised within three months after the Termination Date, or on or prior to the Option Expiration Date as specified in the Share Option Grant Notice, whichever is earlier, but may not be exercised thereafter except as set forth below. In such event, the unvested portion of the Option shall not be exercisable and shall expire and be cancelled on the Termination Date.

 

If this Option is designated in the Share Option Grant Notice as an ISO and the Participant ceases to be an Employee of the Company or of an Affiliate but continues after termination of employment to provide service to the Company or an Affiliate as a director or Consultant, this Option shall continue to vest in accordance with Section 3 above as if this Option had not terminated until the Participant is no longer providing services to the Company. In such case, this Option shall automatically convert and be deemed a Non-Qualified Option as of the date that is three months from termination of the Participant’s employment and this Option shall continue on the same terms and conditions set forth herein until such Participant is no longer providing service to the Company or an Affiliate.

 

Notwithstanding the foregoing, in the event of the Participant’s Disability or death within three months after the Termination Date, the Participant or the Participant’s Survivors may exercise the Option within one year after the Termination Date, but in no event after the Option Expiration Date as specified in the Share Option Grant Notice.

 

In the event the Participant’s service is terminated by the Company or an Affiliate for Cause, the Participant’s right to exercise any unexercised portion of this Option even if vested shall cease immediately as of the time the Participant is notified his or her service is terminated for Cause, and this Option shall thereupon terminate. Notwithstanding anything herein to the contrary, if subsequent to the Participant’s termination, but prior to the exercise of the Option, the Administrator determines that, either prior or subsequent to the Participant’s termination, the Participant engaged in conduct which would constitute Cause, then the Participant shall immediately cease to have any right to exercise the Option and this Option shall thereupon terminate.

 

In the event of the Disability of the Participant, as determined in accordance with the Plan, the Option shall be exercisable within one year after the Participant’s termination of service due to Disability or, if earlier, on or prior to the Option Expiration Date as specified in the Share Option Grant Notice. In such event, the Option shall be exercisable:

 

(a)                                 to the extent that the Option has become exercisable but has not been exercised as of the date of the Participant’s termination of service due to Disability; and

 

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(b)                                 in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of the Participant’s termination of service due to Disability of any additional vesting rights that would have accrued on the next vesting date had the Participant not become Disabled. The proration shall be based upon the number of days accrued in the current vesting period prior to the date of the Participant’s termination of service due to Disability.

 

In the event of the death of the Participant while an Employee, director or Consultant of the Company or of an Affiliate, the Option shall be exercisable by the Participant’s Survivors within one year after the date of death of the Participant or, if earlier, on or prior to the Option Expiration Date as specified in the Share Option Grant Notice. In such event, the Option shall be exercisable:

 

(x)                                 to the extent that the Option has become exercisable but has not been exercised as of the date of death; and

 

(y)                                 in the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion through the date of death of any additional vesting rights that would have accrued on the next vesting date had the Participant not died. The proration shall be based upon the number of days accrued in the current vesting period prior to the Participant’s date of death.

 

5.                                      METHOD OF EXERCISING OPTION.

 

Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company or its designee, in substantially the form of Exhibit A attached hereto (or in such other form acceptable to the Company, which may include electronic notice). Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Company). Payment of the Exercise Price for such Shares shall be made in accordance with Paragraph 9 of the Plan. The Company shall update its Register of Members to give effect to the issue of such Shares as hereinafter provided and shall provide evidence of same to the Participant as soon as practicable after the notice shall be received, provided, however, that the Company may delay issuance of such Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including, without limitation, under Bermuda law and any state securities or “blue sky” laws). The Shares as to which the Option shall have been so exercised shall be registered in the Company’s register of members in the name of the person so exercising the Option (or, if the Option shall be exercised by the Participant and if the Participant shall so request in the notice exercising the Option, shall be registered in the Company’s register of members in the name of the Participant and another person jointly, with right of survivorship) and shall be delivered as provided above to or upon the written order of the person exercising the Option. In the event the Option shall be exercised, pursuant to Section 4 hereof, by any person other than the Participant, such notice shall be accompanied by appropriate proof of the right of

 

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such person to exercise the Option. All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable.

 

6.                                      PARTIAL EXERCISE.

 

Exercise of this Option to the extent above stated may be made in part at any time and from time to time within the above limits, except that no fractional share shall be issued pursuant to this Option.

 

7.                                      NON-ASSIGNABILITY.

 

The Option shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution. For California Participants, the Option shall not be transferable other than by will, by the laws of descent and distribution, to a revocable trust or as permitted by Rule 701 of the Securities Act of 1933. If this Option is a Non-Qualified Option then it may also be transferred pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act or the rules thereunder. Except as provided above in this paragraph, the Option shall be exercisable, during the Participant’s lifetime, only by the Participant (or, in the event of legal incapacity or incompetency, by the Participant’s guardian or representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 7, or the levy of any attachment or similar process upon the Option shall be null and void.

 

8.                                      NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE.

 

The Participant shall have no rights as a shareholder with respect to Shares subject to this Agreement until registration of the Shares in the Company’s share register in the name of the Participant. Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such registration.

 

9.                                      ADJUSTMENTS.

 

The Plan contains provisions covering the treatment of Options in a number of contingencies such as share splits and mergers. Provisions in the Plan for adjustment with respect to shares subject to Options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.

 

10.                               TAXES.

 

The Participant acknowledges and agrees that (i) any income or other taxes due from the Participant with respect to this Option or the Shares issuable upon exercise of this

 

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Option shall be the Participant’s responsibility; (ii) the Participant was free to use professional advisors of his or her choice in connection with this Agreement, has received advice from his or her professional advisors in connection with this Agreement, understands its meaning and import, and is entering into this Agreement freely and without coercion or duress; (iii) the Participant has not received and is not relying upon any advice, representations or assurances made by or on behalf of the Company or any Affiliate or any Employee of or counsel to the Company or any Affiliate regarding any tax or other effects or implications of the Option, the Shares or other matters contemplated by this Agreement and (iv) neither the Administrator, the Company, its Affiliates, nor any of its officers or directors, shall be held liable for any applicable costs, taxes, or penalties associated with the Option if, in fact, the Internal Revenue Service were to determine that the Option constitutes deferred compensation under Section 409A of the Code.

 

If this Option is designated in the Share Option Grant Notice as a Non-Qualified Option or if the Option is an ISO and is converted into a Non-Qualified Option and such Non- Qualified Option is exercised, the Participant agrees that the Company may withhold from the Participant’s remuneration, if any, the minimum statutory amount of federal, state and local withholding taxes attributable to such amount that is considered compensation includable in such person’s gross income. At the Company’s discretion, the amount required to be withheld may be withheld in cash from such remuneration, or in kind from the Shares otherwise deliverable to the Participant on exercise of the Option. The Participant further agrees that, if the Company does not withhold an amount from the Participant’s remuneration sufficient to satisfy the Company’s income tax withholding obligation, the Participant will reimburse the Company on demand, in cash, for the amount under-withheld.

 

11.                               PURCHASE FOR INVESTMENT.

 

Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such exercise unless the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act and until the following conditions have been fulfilled:

 

(a)                                 The person(s) who exercise the Option shall represent and warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend (which shall be endorsed upon any certificate(s) evidencing the Shares that the Company may issue pursuant to such exercise):

 

“The shares represented by this certificate have been taken for investment and they may not be sold or otherwise transferred by any person, including a pledgee, unless (1) either (a) a Registration Statement with respect to such shares shall be effective under the Securities Act of 1933, as amended, or (b) the Company shall have received an opinion of counsel

 

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satisfactory to it that an exemption from registration under such Act is then available, and (2) there shall have been compliance with all applicable state securities laws;” and

 

(b)             If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the Securities Act without registration thereunder. Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or “blue sky” laws).

 

12.                               RESTRICTIONS ON TRANSFER OF SHARES.

 

12.1                        The Shares acquired by the Participant pursuant to the exercise of the Option granted hereby shall not be transferred by the Participant except as permitted herein.

 

12.2                        [Intentionally left blank].

 

12.3                        It shall be a condition precedent to the validity of any sale or other transfer of any Shares by the Participant that the following restrictions be complied with (except as otherwise provided in this Section 12):

 

(i)                                   No Shares owned by the Participant may be sold, pledged or otherwise transferred (including by gift or devise) to any person or entity, voluntarily, or by operation of law, except in accordance with the terms and conditions hereinafter set forth.

 

(ii)                                Before selling or otherwise transferring all or part of the Shares, the Participant shall give written notice of such intention to the Company, which notice shall include the name of the proposed transferee, the proposed purchase price per share, the terms of payment of such purchase price and all other matters relating to such sale or transfer and shall be accompanied by a copy of the binding written agreement of the proposed transferee to purchase the Shares of the Participant. Such notice shall constitute a binding offer by the Participant to sell to the Company such number of the Shares then held by the Participant as are proposed to be sold in the notice at the monetary price per share designated in such notice, payable on the terms offered to the Participant by the proposed transferee (provided, however, that the Company shall not be required to meet any non-monetary terms of the proposed transfer, including, without limitation, delivery of other securities in exchange for the Shares proposed to be sold). The Company shall give written notice to the Participant as to whether such offer has been accepted in whole by the Company within 30 days after its receipt of written notice from the Participant. The Company shall have the option to purchase all or part of the offered Shares. Such acceptance notice shall fix a time, location and date for the Closing on such purchase (“Closing Date”) which shall not be less

 

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than 10 nor more than 30 days after the giving of the acceptance notice, provided, however, if any of the Shares to be sold pursuant to this Section 12.3 have been held by the Participant for less than 6 months, then the Closing Date may be extended by the Company until no more than 10 days after such Shares have been held by the Participant for 6 months if required under applicable accounting rules in effect at the time. At such Closing, the Participant shall accept payment as set forth herein and shall deliver to the Company in exchange therefor a duly executed instrument (or instruments) of transfer acceptable to the Company for the number of Shares stated in the notice (and any certificates representing such number of Shares if so issued).

 

(iii)                             If the Company shall fail to accept any such offer, the Participant shall be free to sell all, but not less than all, of the Shares set forth in his or her notice to the designated transferee at the price and terms designated in the Participant’s notice, provided that (i) such sale is consummated within 30 days after the giving of notice by the Participant to the Company as aforesaid, and (ii) the transferee first agrees in writing to be bound by the provisions of this Section 12 so that such transferee (and all subsequent transferees) shall thereafter only be permitted to sell or transfer the Shares in accordance with the terms hereof. After the expiration of such 30 days, the provisions of this Section 12.3 shall again apply with respect to any proposed voluntary transfer of the Participant’s Shares.

 

(iv)                            The restrictions on transfer contained in this Section 12.3 shall not apply to (a) transfers by the Participant to his or her spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust for the benefit of his or her Approved Relatives, (b) transfers by the Participant to his or her guardian or conservator, and (c) transfers by the Participant, in the event of his or her death, to his or her executor(s) or administrator(s) or to trustee(s) under his or her will (collectively, “Permitted Transferees”); provided however, that in any such event the Shares so transferred in the hands of each such Permitted Transferee shall remain subject to this Agreement, and each such Permitted Transferee shall so acknowledge in writing as a condition precedent to the effectiveness of such transfer.

 

(iv)                            The provisions of this Section 12.3 may be waived by the Company. Any such waiver may be unconditional or based upon such conditions as the Company may impose.

 

(v)                               The Company may assign its rights under this Section 12.3 with respect to any Shares in any particular transaction to one or more persons or entities.

 

12.4        In the event that the Participant or his or her successor in interest fails to deliver the Shares to be purchased by the Company under this Agreement, the Company may elect (a) to establish a segregated account in the amount of the purchase price, such account to be turned over to the Participant or his or her successor in interest upon delivery of such Shares, and (b) immediately to take such action as is appropriate to transfer record title of such Shares from

 

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the Participant to the Company and to treat the Participant and such Shares in all respects as if delivery of such Shares had been made as required by this Agreement. The Participant hereby irrevocably grants the Company a power of attorney which shall be coupled with an interest for the purpose of effectuating the preceding sentence.

 

12.5        If the Company shall pay a share dividend or declare a share split on or with respect to any of its Common Shares, or otherwise distribute securities of the Company to the holders of its Common Shares, the number of shares or other securities of the Company issued with respect to the shares then subject to the restrictions contained in this Agreement shall be added to the Shares subject to the Company’s rights to purchase pursuant to this Agreement. If the Company shall distribute to its shareholders shares of another corporation, the shares of such other corporation, distributed with respect to the Shares then subject to the restrictions contained in this Agreement, shall be added to the Shares subject to the Company’s rights to repurchase pursuant to this Agreement.

 

12.6        If the outstanding Common Shares of the Company shall be subdivided into a greater number of shares or combined into a smaller number of shares, or in the event of a reclassification of the outstanding Common Shares of the Company, or if the Company shall be a party to a merger, amalgamation, consolidation or capital reorganization, there shall be substituted for the Shares then subject to the restrictions contained in this Agreement such amount and kind of securities as are issued in such subdivision, combination, reclassification, merger, consolidation or capital reorganization in respect of the Shares subject immediately prior thereto to the Company’s rights to repurchase pursuant to this Agreement.

 

12.7        The Company shall not be required to transfer any Shares on its books which shall have been sold, assigned or otherwise transferred in violation of this Agreement, or to treat as owner of such Shares, or to accord the right to vote as such owner or to pay dividends to, any person or organization to which any such Shares shall have been so sold, assigned or otherwise transferred, in violation of this Agreement.

 

12.8        The provisions of Sections 12.1 and 12.3 shall terminate upon the earlier of the following events: (i) the closing of the sale of Common Shares in an underwritten public offering pursuant to an effective registration statement filed by the Company under the Securities Act; or (ii) a Corporate Transaction.

 

12.9        The Participant agrees, in connection with the initial underwritten public offering of any equity securities of the Company pursuant to a registration statement under the Securities Act, (i) not to (a) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Common Shares or any other securities of the Company or (b) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of Common Shares or other securities of the Company, whether any transaction described in clause (a) or (b) is to be settled by delivery of securities, in cash or otherwise, during the period beginning on the date of the filing of such registration statement with the Securities and Exchange Commission and ending 180 days after the date of the final prospectus relating to the offering (plus up to an additional 34

 

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days to the extent requested by the managing underwriters for such offering in order to address FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4) or any similar successor provision), and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering. The Company may impose stop-transfer instructions with respect to the Common Shares or other securities subject to the foregoing restriction until the end of the “lock-up” period.

 

12.10      The Participant acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or obligation to disclose to the Participant any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the service of the Participant by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity.

 

12.11      To the extent any of the Shares are certificated, all such certificates representing the Shares to be issued to the Participant pursuant to this Agreement shall have endorsed thereon a legend substantially as follows: “The shares represented by this certificate are subject to restrictions set forth in a Share Option Agreement dated            , 20 with this Company, a copy of which Agreement is available for inspection at the offices of the Company or will be made available upon request.”

 

13.                               NO OBLIGATION TO MAINTAIN RELATIONSHIP.

 

The Participant acknowledges that: (i) the Company is not by the Plan or this Option obligated to continue the Participant as an Employee, director or Consultant of the Company or an Affiliate; (ii) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (iii) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iv) all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable, will be at the sole discretion of the Company; (v) the Participant’s participation in the Plan is voluntary; (vi) the value of the Option is an extraordinary item of compensation which is outside the scope of the Participant’s employment or consulting contract, if any; and (vii) the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

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14.                               IF OPTION IS INTENDED TO BE AN ISO.

 

If this Option is designated in the Share Option Grant Notice as an ISO so that the Participant (or the Participant’s Survivors) may qualify for the favorable tax treatment provided to holders of Options that meet the standards of Section 422 of the Code then any provision of this Agreement or the Plan which conflicts with the Code so that this Option would not be deemed an ISO is null and void and any ambiguities shall be resolved so that the Option qualifies as an ISO. The Participant should consult with the Participant’s own tax advisors regarding the tax effects of the Option and the requirements necessary to obtain favorable tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements.

 

Notwithstanding the foregoing, to the extent that the Option is designated in the Share Option Grant Notice as an ISO and is not deemed to be an ISO pursuant to Section 422(d) of the Code because the aggregate Fair Market Value (determined as of the Date of Option Grant) of any of the Shares with respect to which this ISO is granted becomes exercisable for the first time during any calendar year in excess of $100,000, the portion of the Option representing such excess value shall be treated as a Non-Qualified Option and the Participant shall be deemed to have taxable income measured by the difference between the then Fair Market Value of the Shares received upon exercise and the price paid for such Shares pursuant to this Agreement.

 

Neither the Company nor any Affiliate shall have any liability to the Participant, or any other party, if the Option (or any part thereof) that is intended to be an ISO is not an ISO or for any action taken by the Administrator, including without limitation the conversion of an ISO to a Non-Qualified Option.

 

15.                               NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION OF AN ISO.

 

If this Option is designated in the Share Option Grant Notice as an ISO then the Participant agrees to notify the Company in writing immediately after the Participant makes a Disqualifying Disposition of any of the Shares acquired pursuant to the exercise of the ISO. A Disqualifying Disposition is defined in Section 424(c) of the Code and includes any disposition (including any sale) of such Shares before the later of (a) two years after the date the Participant was granted the ISO or (b) one year after the date the Participant acquired Shares by exercising the ISO, except as otherwise provided in Section 424(c) of the Code. If the Participant has died before the Shares are sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter.

 

16.                               NOTICES.

 

Any notices required or permitted by the terms of this Agreement or the Plan shall be given by recognized courier service, facsimile, registered or certified mail, return receipt requested, addressed as follows:

 

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If to the Company:

 

Kiniksa Pharmaceuticals, Ltd.

Clarendon House 
 2 Church Street

Hamilton HM 11 
 Bermuda

Attention: Treasurer

 

With a Copy To:

Kiniksa Pharmaceuticals Corp.

15 Walnut Street, Suite 200

Wellesley Hills, MA 02481

USA

Attention: Legal Department

 

If to the Participant at the address set forth on the Share Option Grant Notice

 

or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized courier service or three business days following mailing by registered or certified mail.

 

17.                               GOVERNING LAW.

 

This Agreement shall be governed by and construed in accordance with the laws of Bermuda, without giving effect to the conflict of law principles thereof.

 

18.                               BENEFIT OF AGREEMENT.

 

Subject to the provisions of the Plan and the other provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.

 

19.                               ENTIRE AGREEMENT.

 

This Agreement, together with the Plan and the Share Option Grant Notice, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret, change or restrict, the express terms and provisions of this Agreement, provided, however, in any event, this Agreement shall be subject to and governed by the Plan.

 

20.                               MODIFICATIONS AND AMENDMENTS.

 

The terms and provisions of this Agreement may be modified or amended as provided in the Plan.

 

12

 

21.                               WAIVERS AND CONSENTS.

 

Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

22.                               DATA PRIVACY.

 

By entering into this Agreement, the Participant: (i) authorizes the Company and each Affiliate, and any agent of the Company or any Affiliate administering the Plan or providing Plan recordkeeping services, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of options and the administration of the Plan; and (ii) authorizes the Company and each Affiliate to store and transmit such information in electronic form for the purposes set forth in this Agreement.

 

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13

 

Exhibit A

 

NOTICE OF EXERCISE OF SHARE OPTION

 

[Form for Unregistered Shares]

 

To:            Kiniksa Pharmaceuticals, Ltd.

 

Ladies and Gentlemen:

 

I hereby exercise my Share Option to purchase                                                                 Class  A common shares, $0.0001 par value (the “Shares”), of Kiniksa Pharmaceuticals, Ltd. (the “Company”), at the exercise price of $         per share, pursuant to and subject to the terms of that certain Share Option Agreement between the undersigned and the Company dated                          , 20      .

 

I am aware that the Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”), or any state securities laws. I understand that the reliance by the Company on exemptions under the 1933 Act is predicated in part upon the truth and accuracy of the statements by me in this Notice of Exercise.

 

I hereby represent and warrant that (1) I have been furnished with all information which I deem necessary to evaluate the merits and risks of the purchase of the Shares; (2) I have had the opportunity to ask questions concerning the Shares and the Company and all questions posed have been answered to my satisfaction; (3) I have been given the opportunity to obtain any additional information I deem necessary to verify the accuracy of any information obtained concerning the Shares and the Company; and (4) I have such knowledge and experience in financial and business matters that I am able to evaluate the merits and risks of purchasing the Shares and to make an informed investment decision relating thereto.

 

I hereby represent and warrant that I am purchasing the Shares for my own personal account for investment and not with a view to the sale or distribution of all or any part of the Shares.

 

I understand that because the Shares have not been registered under the 1933 Act, I must continue to bear the economic risk of the investment for an indefinite time and the Shares cannot be sold unless the Shares are subsequently registered under applicable federal and state securities laws or an exemption from such registration requirements is available.

 

I agree that I will in no event sell or distribute or otherwise dispose of all or any part of the Shares unless (1) there is an effective registration statement under the 1933 Act and applicable state securities laws covering any such transaction involving the Shares or (2) the Company receives an opinion of my legal counsel (concurred in by legal counsel for the Company) stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration.

 

Exhibit A-1

 

I consent to the placing of a legend on any certificate that may be issued by the Company representing the Shares stating that the Shares have not been registered and setting forth the restriction on transfer contemplated hereby and to the placing of a stop transfer order on the books of the Company and with any transfer agents against the Shares until the Shares may be legally resold or distributed without restriction.

 

I understand that at the present time Rule 144 of the Securities and Exchange Commission (the “SEC”) may not be relied on for the resale or distribution of the Shares by me. I understand that the Company has no obligation to me to register the sale of the Shares with the SEC and has not represented to me that it will register the sale of the Shares.

 

I understand the terms and restrictions on the right to dispose of the Shares set forth in the 2015 Equity Incentive Plan and the Share Option Agreement, both of which I have carefully reviewed. I consent to the placing of a legend on any certificate that may be issued by the Company representing the Shares referring to such restriction and the placing of stop transfer orders until the Shares may be transferred in accordance with the terms of such restrictions.

 

I have considered the Federal, state and local income tax implications of the exercise of my Option and the purchase and subsequent sale of the Shares.

 

I am paying the option exercise price for the Shares as follows:

 

Please issue the Shares (check one):

 

o to me; or

 

o to me and                                                , as joint tenants with right of survivorship 

 

and mail the certificate to me at the following address:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

Exhibit A-2

 

My mailing address for shareholder communications, if different from the address listed above is:

 

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Participant   (signature)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Print   Name
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Date
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Social   Security Number
    

 

Exhibit A-3

 

Exhibit B

 

NOTICE OF EXERCISE OF SHARE OPTION

 

[Form for Shares Registered in the United States]

 

To:            Kiniksa Pharmaceuticals, Ltd.

 

IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time as the Company has filed a Registration Statement with the Securities and Exchange Commission under which the issuance of the Shares for which this exercise is being made is registered and such Registration Statement remains effective.

 

Ladies and Gentlemen:

 

I hereby exercise my Share Option to purchase                                         Class  A common shares, $0.0001 par value (the “Shares”), of Kiniksa Pharmaceuticals, Ltd. (the “Company”), at the exercise price of $                per share, pursuant to and subject to the terms of that  Share Option Grant Notice dated                , 20     .

 

I understand the nature of the investment I am making and the financial risks thereof. I am aware that it is my responsibility to have consulted with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the purchase and subsequent sale of the Shares.

 

I am paying the option exercise price for the Shares as follows:

 

Please issue the Shares (check one):

 

o to me; or

 

o to me and                                                               , as joint tenants with right of survivorship, at the following address:

 

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

Exhibit B-1

 

My mailing address for shareholder communications, if different from the address listed above, is:

 

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Participant (signature)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Print Name
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Date
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Social Security Number
    

 

Exhibit B-2

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