Document:

Exhibit 10.2

 

RECEPTOS, INC.

 

2008 STOCK PLAN

 

1.                                      Purposes of the Plan.  The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business.  The Plan permits the grant of Options and Restricted Stock as the Administrator may determine.

 

2.                                      Definitions.  As used herein, the following definitions shall apply:

 

(a)                                 “Administrator” means the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 hereof.

 

(b)                                 “Applicable Laws” means the requirements relating to the administration of equity compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Awards are granted under the Plan.

 

(c)                                  “Award” means, individually or collectively, a grant under the Plan of Options or Restricted Stock.

 

(d)                                 “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms and conditions of the Plan.

 

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

 

(f)                                   “Change in Control” means the occurrence of any of the following events:

 

(i)                                     Change in Ownership of the Company.  A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Change in Control; or

 

(ii)                                  Change in Effective Control of the Company.  If the Company has filed a registration statement declared effective pursuant to Section 12(g) of the Exchange Act with respect to any of the Company’s securities, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.  For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

 

 

(iii)                               Change in Ownership of a Substantial Portion of the Company’s Assets.  A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.  For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

For purposes of this Section 2(f)(iii), persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

 

Notwithstanding the foregoing, a transaction shall not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.

 

Further and for the avoidance of doubt, a transaction shall not constitute a Change in Control if: (i) its sole purpose is to change the state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that shall be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

 

(g)                                  “Code” means the Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code herein shall be a reference to any successor or amended section of the Code.

 

(h)                                 “Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board, or by the compensation committee of the Board, in accordance with Section 4 hereof.

 

(i)                                     “Common Stock” means the Common Stock of the Company.

 

(j)                                    “Company” means Receptos, Inc., a Delaware corporation.

 

(k)                                 “Consultant” means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity.

 

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

 

(m)                             “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

 

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(n)                                 “Employee” means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company.  Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

 

(o)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(p)                                 “Exchange Program” means a program under which (i) outstanding Options are surrendered or cancelled in exchange for Options of the same type (which may have lower  or higher exercise prices and different terms), Options of a different type, and/or cash, and/or (ii) the exercise price of an outstanding Option is reduced.  The terms and conditions of any Exchange Program shall be determined by the Administrator in its sole discretion.

 

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

 

(i)                                     If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Market, the Nasdaq Global Select Market or the Nasdaq Capital Market, its Fair Market Value shall be the closing sales price for such stock (or, if no closing sales price was reported on that date, as applicable, on the last trading date such closing sales price was reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii)                                  If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported); or

 

(iii)                               In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.

 

(r)                                    “Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

 

(s)                                   “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

 

(t)                                    “Option” means a stock option granted pursuant to the Plan.

 

(u)                                 “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(v)                                 “Participant” means the holder of an outstanding Award.

 

(w)                               “Plan” means this 2008  Stock Plan.

 

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(x)                                 “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued pursuant to the early exercise of an Option.

 

(y)                                 “Restricted Stock Purchase Agreement” means a written or electronic agreement between the Company and the Participant evidencing the terms and restrictions applying to Shares purchased under a Restricted Stock award.  The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the notice of grant.

 

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

 

(aa)                          “Service Provider” means an Employee, Director or Consultant.

 

(bb)                          “Share” means a share of the Common Stock, as adjusted in accordance with Section 11 below.

 

(cc)                            “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.                                      Stock Subject to the Plan.  Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 850,000 Shares.  The Shares may be authorized but unissued, or reacquired Common Stock.

 

If an Award expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Exchange Program, the unpurchased Shares that were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated).  However, Shares that have actually been issued under the Plan, upon exercise of an Award, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if unvested Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.  Notwithstanding the foregoing and, subject to adjustment provided in Section 11, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate Share number stated in the first paragraph of this Section, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this second paragraph of this Section.

 

4.                                      Administration of the Plan.

 

(a)                                 Administrator.  The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.

 

(b)                                 Powers of the Administrator.  Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion:

 

(i)                                     to determine the Fair Market Value;

 

(ii)                                  to select the Service Providers to whom Awards may from time to time be granted hereunder;

 

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(iii)                               to determine the number of Shares to be covered by each such Award granted hereunder;

 

(iv)                              to approve forms of agreement for use under the Plan;

 

(v)                                 to determine the terms and conditions of any Award granted hereunder.  Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

 

(vi)                              to institute an Exchange Program;

 

(vii)                           to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

 

(viii)                        to modify or amend each Award (subject to Section 19(c) of the Plan) including but not limited to the discretionary authority to extend the post-termination exercise period of Awards and to extend the maximum term of an Option (subject to Section 6(a) regarding Incentive Stock Options);

 

(ix)                              to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;  and

 

(x)                                 to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan.

 

(c)                                  Effect of Administrator’s Decision.  All decisions, determinations and interpretations of the Administrator shall be final and binding on all Participants.

 

5.                                      Eligibility.  Nonstatutory Stock Options and Restricted Stock may be granted to Service Providers.  Incentive Stock Options may be granted only to Employees.

 

6.                                      Stock Options.

 

(a)                                 Term of Option.  The term of each Option shall be stated in the Award Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof.  In the case of an Incentive Stock Option granted to a Participant who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

 

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(b)                                 Option Exercise Price and Consideration.

 

(i)                                     Exercise Price.  The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following:

 

(A)                               In the case of an Incentive Stock Option

 

a)                                     granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than one hundred and ten percent (110%) of the Fair Market Value per Share on the date of grant.

 

b)                                     granted to any other Employee, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(B)                               In the case of a Nonstatutory Stock Option, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(C)                               Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above in accordance with and pursuant to a transaction described in Section 424 of the Code.

 

(ii)                                  Forms of Consideration.  The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant).  Such consideration may consist of, without limitation, (1) cash, (2) check, (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised and provided that accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company, (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, (6) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws, or (7) any combination of the foregoing methods of payment.  In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.

 

(c)                                  Exercise of Option.

 

(i)                                     Procedure for Exercise; Rights as a Stockholder.  Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement.  An Option may not be exercised for a fraction of a Share.

 

An Option shall be deemed exercised when the Company receives (i) written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is

 

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exercised, together with any applicable withholding taxes.  Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan.  Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse.  Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised.  No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11 of the Plan.

 

Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

 

(ii)                                  Termination of Relationship as a Service Provider.  If a Participant ceases to be a Service Provider, such Participant may exercise his or her Option within such period of time as is specified in the Award Agreement, to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Award Agreement).  In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for three (3) months following the Participant’s termination.  Unless the Administrator provides otherwise, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan.  If, after termination, the Participant does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

(iii)                               Disability of Participant.  If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such longer period of time as is specified in the Award Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement).  In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12) months following the Participant’s termination.  Unless the Administrator provides otherwise, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan.  If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

(iv)                              Death of Participant.  If a Participant dies while a Service Provider, the Option may be exercised within such longer period of time as is specified in the Award Agreement, to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to the Participant’s death in a form acceptable to the Administrator.  If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with

 

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the laws of descent and distribution.  In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12) months following the Participant’s termination.  If, at the time of death, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan.  If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

(v)                                 Incentive Stock Option Limit.  Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Nonstatutory Stock Options.  For purposes of this Section 6(c)(v), Incentive Stock Options shall be taken into account in the order in which they were granted.  The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

 

7.                                      Restricted Stock.

 

(a)                                 Rights to Purchase.  Restricted Stock may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan.  After the Administrator determines that it shall offer Restricted Stock under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid (if any), and the time within which such person must accept such offer.

 

(b)                                 Repurchase Option.  Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable within ninety (90) days of the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or Disability).  Unless the Administrator provides otherwise, the purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company.  The repurchase option shall lapse at such rate as the Administrator may determine.

 

(c)                                  Other Provisions.  The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.

 

(d)                                 Rights as a Stockholder.  Once the Restricted Stock is purchased or otherwise issued, the purchaser shall have rights equivalent to those of a stockholder and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company.  No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Restricted Stock is purchased or otherwise issued, except as provided in Section 11 of the Plan.

 

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8.                                      Tax Withholding.  Prior to the delivery of any Shares pursuant to an Award (or exercise thereof), the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).  The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, shall determine in what manner it shall allow a Participant to satisfy such tax withholding obligation and may permit the Participant to satisfy such tax withholding obligation, in whole or in part by one (1) or more of the following: (a) paying cash (or by check), (b) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum amount statutorily required to be withheld, or (c) selling a sufficient number of such Shares otherwise deliverable to a Participant through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the minimum amount statutorily required to be withheld.

 

9.                                      Limited Transferability of Awards.  Unless determined otherwise by the Administrator, Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Participant, only by the Participant.

 

10.                               Leaves of Absence; Transfers.

 

(a)                                 Unless the Administrator provides otherwise, or except as otherwise required by Applicable Laws, vesting of Awards granted hereunder shall be suspended during any unpaid leave of absence.

 

(b)                                 A Service Provider shall not cease to be a Service Provider in the case of (i) any leave of absence approved by the Company, or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.

 

(c)                                  For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave, any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

 

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11.                               Adjustments; Dissolution or Liquidation; Merger or Change in Control.

 

(a)                                 Adjustments.  In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award.

 

(b)                                 Dissolution or Liquidation.  In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction.  To the extent it has not been previously exercised, an Award shall terminate immediately prior to the consummation of such proposed action.

 

(c)                                  Merger or Change in Control.  In the event of a merger or Change in Control, each outstanding Award shall be treated as the Administrator determines, including, without limitation, that each Award be assumed or an equivalent award substituted by the successor corporation or a Parent or Subsidiary of the successor corporation.  The Administrator shall not be required to treat all Awards similarly in the transaction.

 

Notwithstanding the foregoing, in the event of a Change in Control in which the successor corporation does not assume or substitute for the Award, the Participant shall fully vest in and have the right to exercise his or her outstanding Awards, including Shares as to which such Award would not otherwise be vested or exercisable, and restrictions on all of the Participant’s Restricted Stock shall lapse.  In addition, if an Award is not assumed or substituted in the event of a merger or Change in Control, the Administrator shall notify the Participant in writing or electronically that the Award shall be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and any Award not assumed or substituted for shall terminate upon the expiration of such period for no consideration, unless otherwise determined by the Administrator.

 

For the purposes of this Section 11(c), the Award shall be considered assumed if, following the merger or Change in Control, the option or right confers the right to purchase or receive, for each Share subject to the Award immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each Share subject to the Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of common stock in the merger or Change in Control.

 

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12.                               Time of Granting Awards.  The date of grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination granting such Award, or such later date as is determined by the Administrator.  Notice of the determination shall be given to each Service Provider to whom an Award is so granted within a reasonable time after the date of such grant.

 

13.                               No Effect on Employment or Service.  Neither the Plan nor any Award shall confer upon any participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate such relationship at any time, with or without cause, and with or without notice.

 

14.                               Conditions Upon Issuance of Shares.

 

(a)                                 Legal Compliance.  Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

(b)                                 Investment Representations.  As a condition to the exercise of an Award, the Administrator may in its discretion require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares.

 

15.                               Inability to Obtain Authority.  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

16.                               Reservation of Shares.  The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

17.                               Stockholder Approval.  The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted.  Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws.

 

18.                               Term of Plan.  Subject to stockholder approval in accordance with Section 17, the Plan shall become effective upon its adoption by the Board.  Unless sooner terminated under Section 19, it shall continue in effect for a term of ten (10) years from the later of (a) the effective date of the Plan, or (b) the earlier of the most recent Board or stockholder approval of an increase in the number of Shares reserved for issuance under the Plan.

 

19.                               Amendment and Termination of the Plan.

 

(a)                                 Amendment and Termination.  The Board may at any time amend, alter, suspend or terminate the Plan.

 

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(b)                                 Stockholder Approval.  The Board shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

 

(c)                                  Effect of Amendment or Termination.  No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing (which may include e-mail) and signed by the Participant and the Company.  Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

 

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APPENDIX A

 

TO

 

RECEPTOS, INC. 2008 STOCK PLAN

 

(for California residents only, to the extent required by 25102(o))

 

This Appendix A to the Receptos, Inc. 2008 Stock Plan shall apply only to  the Participants  who are residents of the State of California and who are receiving an Award under the Plan.  Capitalized terms contained herein shall have the same meanings given to them in the Plan, unless otherwise provided by this Appendix A.  Notwithstanding any provisions contained in the Plan to the contrary and to the extent required by Applicable Laws, the following terms shall apply to all Awards granted to residents of the State of California, until such time as the Administrator amends this Appendix A or the Administrator otherwise provides.

 

(a)                                                         The term of each Option shall be stated in the Award Agreement, provided, however, that the term shall be no more than ten (10) years from the date of grant thereof.

 

(b)                                                         Unless determined otherwise by the Administrator, Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Participant, only by the Participant.  If the Administrator in its sole discretion makes an Award transferable, such Award may only be transferred (i) by will, (ii) by the laws of descent and distribution, (iii) to a revocable trust, or (iv) as permitted by Rule 701 of the Securities Act of 1933, as amended.

 

(c)                                                          If a Participant ceases to be a Service Provider, such Participant may exercise his or her Option within such period of time as specified in the Award Agreement, which shall not be less than thirty (30) days following the date of the Participant’s termination, to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Award Agreement).  In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for three (3) months following the Participant’s termination.

 

(d)                                                         If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as specified in the Award Agreement, which shall not be less than six (6) months following the date of the Participant’s termination, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement).  In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12) months following the Participant’s termination.

 

(e)                                                          If a Participant dies while a Service Provider, the Option may be exercised within such period of time as specified in the Award Agreement, which shall not be less than six (6) months following the date of the Participant’s death, to the extent the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) by the Participant’s designated beneficiary, personal representative, or by the person(s)

 

13

 

to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution.  In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12) months following the Participant’s termination.

 

(f)                                                           No Award shall be granted to a resident of California more than ten (10) years after the earlier of the date of adoption of the Plan or the date the Plan is approved by the stockholders.

 

(g)                                                          In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall adjust the number and class of shares of common stock that may be delivered under the Plan and/or the number, class, and price of shares covered by each outstanding Option.  The Administrator shall also make such adjustments to the extent required by Section 25102(o) of the California Corporations Code.

 

(h)                                                         This Appendix A shall be deemed to be part of the Plan and the Administrator shall have the authority to amend this Appendix A in accordance with Section 19 of the Plan.

 

14

 

AMENDMENT TO THE

RECEPTOS, INC.

2008 STOCK PLAN

(f/k/a Receptor Pharmaceuticals, Inc. 2008 Stock Plan)

 

This amendment amends the 2008 Stock Plan (the “Plan”) of Receptos, Inc., a Delaware corporation (the “Company”), as previously amended.  Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to action by the Company’s Board of Directors (the “Board”) at a meeting held January 25, 2012, the Board determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 1,100,000 Shares;(1)

 

NOW, THEREFORE, be it resolved that the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan.  Section 3 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 7,938,541 Shares.”

 

2.                                      Date of Amendment.  To record the adoption of this Amendment to the Plan by the Board as of January 25, 2012, and the approval by the stockholders of this Amendment effective as of January 25, 2012, the Company has caused its authorized officer to execute the same.

 

	
 
    	
RECEPTOS, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Jim Schmidt
    
	
 
    	
Jim   Schmidt
    
	
 
    	
VP   Finance & Administration
    

 

(1)                                 Prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 6,838,541 Shares.

 

 

AMENDMENT TO THE

RECEPTOS, INC.

2008 STOCK PLAN

(f/k/a Receptor Pharmaceuticals, Inc. 2008 Stock Plan)

 

This amendment amends the 2008 Stock Plan (the “Plan”) of Receptos, Inc., a Delaware corporation (the “Company”), as previously amended.  Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to action by the Company’s Board of Directors (the “Board”) at a meeting held on June 29, 2011, the Board determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 1,152,139 Shares;(1)

 

 

NOW, THEREFORE, be it resolved that the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan.  Section 3 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 6,838,541 Shares.”

 

2.                                      Date of Amendment.  To record the adoption of this Amendment to the Plan by the Board as of June 29, 2011, and the approval by the stockholders of this Amendment effective as of June 29, 2011, the Company has caused its authorized officer to execute the same.

 

	
 
    	
RECEPTOS, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Jim Schmidt
    
	
 
    	
Jim   Schmidt,
    
	
 
    	
Chief   Financial Officer
    

 

(1)                                 Prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 5,686,402 Shares.

 

 

AMENDMENT TO THE

RECEPTOS, INC.

2008 STOCK PLAN

(f/k/a Receptor Pharmaceuticals, Inc. 2008 Stock Plan)

 

This amendment amends the 2008 Stock Plan (the “Plan”) of Receptos, Inc., a Delaware corporation (the “Company”), as previously amended.  Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a unanimous written consent of the Company’s Board of Directors (the “Board”) dated as of November 8, 2009, the Board determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 2,111,962 Shares;(1)

 

 

NOW, THEREFORE, be it resolved that the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan.  Section 3 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 5,686,402 Shares.”

 

2.                                      Date of Amendment.  To record the adoption of this Amendment to the Plan by the Board as of November 8, 2009, and the approval by the stockholders of this Amendment effective as of November 8, 2009, the Company has caused its authorized officer to execute the same.

 

	
 
    	
RECEPTOS, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Jim Schmidt
    
	
 
    	
Jim   Schmidt,
    
	
 
    	
Chief   Financial Officer
    

 

(1)                                 Prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 3,574,440 Shares.

 

 

AMENDMENT TO THE

RECEPTOS, INC.

2008 STOCK PLAN

(f/k/a Receptor Pharmaceuticals, Inc. 2008 Stock Plan)

 

This amendment amends the 2008 Stock Plan (the “Plan”) of Receptos, Inc., a Delaware corporation (the “Company”), as previously amended.  Unless otherwise specifically defined herein, each capitalized term used herein shall have the meaning afforded such term under the Plan.

 

W I T N E S S E T H:

 

WHEREAS, pursuant to action by unanimous written consent effective as of February 15, 2013, the Company’s Board of Directors (the “Board”) determined it to be in the best interests of the Company to amend the Plan to increase the number of Shares that may be subject to Awards thereunder by 1,725,100 Shares;(1)

 

NOW, THEREFORE, be it resolved that the Plan is hereby amended as follows:

 

1.                                      Shares Subject to Plan.  Section 3 of the Plan shall be amended by replacing the first sentence of such section with the following:

 

“Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 9,663,641 Shares.”

 

2.                                      Date of Amendment.  To record the adoption of this Amendment to the Plan by the Board as of February 15, 2013, and the approval by the stockholders of this Amendment effective as of February 15, 2013, the Company has caused its authorized officer to execute the same.

 

 

	
 
    	
RECEPTOS, INC.,
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
s/s   James Schmidt
    
	
 
    	
James   Schmidt
    
	
 
    	
VP   Finance & Administration
    

 

(1)                                 Prior to the effectiveness of this Amendment, the number of Shares that may be subject to Awards under the Plan was 7,938,541 Shares.Exhibit 10.26

 

RECEPTOS, INC.
  10835 Road to the Cure, #205
 San Diego, CA 92121

 

February 6, 2013

 

Mr. Graham Cooper

17 Selborne Drive

Piedmont, CA 94611

 

Re: Offer of Employment with Receptos, Inc.

 

Dear Graham:

 

Receptos, Inc. (the “Company”) is very pleased to offer you employment as its Chief Financial Officer (“CFO”) beginning on February 7, 2013. This offer contains the basic terms of your employment with the Company. If you agree to the terms and conditions set forth in this offer letter, please sign at the end of this letter in the space indicated.

 

1.                                      Duties. As the Company’s CFO, you will be responsible for the Company’s financial activities, accounting and reporting, and you will perform such duties as are ordinary, customary and necessary in your role. You will report directly to the Company’s Chief Executive Officer (the “CEO”) who will be primarily responsible for evaluating your performance. Of course, the Company may change your duties, compensation, benefits and place of employment from time to time as it deems necessary. In addition, during your employment with the Company, you shall devote your best efforts and your full business time, skill and attention to the performance of your duties on behalf of the Company.

 

2.                                      Salary and Bonus. You will be compensated for full-time service (pro rated for any part-time service) at a base rate of $275,000 per year, less all deductions and withholdings, to be paid in accordance with the Company’s standard payroll practices, as they may be changed from time to time. In addition, you shall be eligible to receive an annual discretionary bonus with a target of thirty percent (30%) of your base salary per 12-month period (pro rated for any partial period of less than 12 months), based upon a determination by the CEO and the Company’s Board of Directors (the “Board”) of the achievement of objectives to be set from time to time by the Board. The first measurement period for this purpose will end on approximately December 31, 2013. The Company may modify your compensation and benefits from time to time at its sole discretion.

 

3.                                      Stock Option. Subject to approval by the Board (including, for example, with respect to the establishment of an exercise price), you will be granted options (the “Options”) to purchase an aggregate of 1,100,000 shares of the Company’s common stock pursuant to the Company’s 2008 Stock Plan (the “Plan”). The Options shall be subject to the terms and conditions set forth in Notices of Stock Option Grant and accompanying Stock Option Agreements as well as the Plan; provided, however, that the Options shall vest as set forth on Exhibit A attached hereto. The exercise price for the shares at issue under the Options will be no less than their fair market value as determined by the Board on the date of grant. To the maximum extent permitted under federal tax law, the options will be Incentive Stock Options (ISOs).

 

 

4.                                      Commuting Expenses. You will be provided with a monthly commuting benefit of $2,000 in connection with your commute to San Diego from your primary residence in Oakland, California. This will be paid to you in the form of compensation (less all deductions and withholdings).

 

5.                                      Other Benefits. The Company will provide you with participation in Company- sponsored employee benefits programs on the same basis as such benefits are generally available to its employees, as determined from time to time by the Board. The Company may, from time to time, change these benefits. Additional information regarding these benefits is available for your review.

 

6.                                      Confidentiality Agreement. One of the conditions of your employment with the Company is the maintenance of the confidentiality (and proprietary nature) of the Company’s proprietary and confidential information. As such, you will be expected to sign the Company’s standard proprietary information and inventions agreement.

 

7.                                      At-Will Employment. Your employment with Company will be “at-will.” This means that either you or Company may terminate your employment at any time, with or without cause, and with or without notice. Any contrary representations or agreements, which may have been made to you, are superseded by this offer letter. The “at-will” nature of your employment described in this offer letter shall constitute the entire agreement between you and Company concerning the nature and duration of your employment. Though your duties, compensation, benefits and place of employment may change over time and you may be subject to incremental discipline that does not include a termination, none of these events change our agreement that you are an “at-will” employee. In addition, the fact that the rate of your salary, vesting schedule or other compensation is stated in units of years or months, and that your vacation and sick leave accrue annually or monthly, does not alter the at-will nature of the employment, and does not mean and should not be interpreted to mean that you are guaranteed employment to the end of any period of time or for any period of time. The “at-will” term of your employment with Company can only be changed in a writing signed by you and the Company.

 

8.                                      Severance Payment. Without limiting the provisions of the foregoing Section 7, assuming your employment with the Company shall have been continuous from your start date through the occurrence of the applicable event and you execute and deliver a general release (in a customary form provided by the Company) of all claims against the Company or persons affiliated with the Company (with any potential revocation periods having expired), then: (i) in the event, following any Corporate Transaction, of any Termination without Cause or any Constructive Termination, you will be entitled to receive a payment equal to your then current base salary rate calculated for a period of twelve (12) months and, if you elect to continue your health insurance coverage under COBRA, then the Company will reimburse you for the same portion of your monthly premiums over such twelve (12) month period under COBRA as it is then paying (relative to health insurance coverage) for active employees; and (ii) in the event, prior to any Corporate Transaction but at least ninety (90) days following the commencement of your employment with the Company pursuant to this offer letter, of any Termination without Cause or any Constructive Termination, you will be entitled to receive a payment equal to your then current base salary rate calculated for a period of at least six (6) months (with any period

 

 

beyond six (6) months to be determined in the sole discretion of the Board) and, if you elect to continue your health insurance coverage under COBRA, then the Company will reimburse you for the same portion of your monthly premiums over such period of at least six (6) months (with any period beyond six (6) months to be determined in the sole discretion of the Board) under COBRA as it is then paying (relative to health insurance coverage) for active employees. The defined terms in the preceding sentence have their respective meanings as set forth on Exhibit A attached hereto.

 

9.                                      Arbitration. To aid in the rapid and economical resolution of any disputes that may arise in the course of the employment relationship, you and the Company agree that any and all disputes, claims, or demands in any way arising out of or relating to the terms of this letter agreement, your employment relationship with the Company, or the termination of your employment relationship with the Company, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration in San Diego, California, conducted before a single neutral arbitrator selected and administered in accordance with the commercial arbitration rules of JAMS. By agreeing to this arbitration procedure, you and the Company waive the right to resolve any such dispute, claim or demand through a trial by jury or judge or by administrative proceeding in any jurisdiction. You will have the right to be represented by legal counsel at any arbitration proceeding, at your expense. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be available under applicable law in a court proceeding; (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based; and (c) award to the prevailing party recovery of reasonable attorneys fees and costs, and determine which party shall be deemed the prevailing party and to what extent. The Company shall pay the arbitration fee unless, at your request, you elect to pay up to one-half of the fees. Nothing in this offer letter is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm (including, without limitation, pending the conclusion of any arbitration).

 

10.                               Code Section 409A. The intent of the parties is that payments and benefits under this letter and the Options comply with, or be exempt from, Section 409A of the Internal Revenue Code (“Code Section 409A”) and, accordingly, to the maximum extent permitted, this letter and the Options shall be interpreted to be in compliance therewith or exempt therefrom. If you notify the Company (with specificity as to the reason therefor) that you believe that any provision of this letter or the Options (or of any award of compensation, including equity compensation or benefits) would cause you to incur any additional tax or interest under Code Section 409A and the Company concurs with such belief or the Company independently makes such determination, the Company shall, after consulting with you, reform such provision to try to comply with Code Section 409A through good-faith modifications to the minimum extent reasonably appropriate to conform with Code Section 409A. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good-faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to you and the Company of the applicable provision without violating the provisions of Code Section 409A. Notwithstanding any provision herein to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision

 

 

of this letter providing for the payment of any amounts or benefits upon or following a termination of employment that are considered “nonqualified deferred compensation” under Code Section 409A unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” If you are deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B) of the Internal Revenue Code, then with regard to any payment that is considered nonqualified deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (A) the first business day following the expiration of the six (6)-month period measured from the date of your “separation from service” and (B) the date of your death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 10 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to you in a lump sum with interest at the prime rate as published in The Wall Street Journal on the first business day following the end of the Delay Period.

 

11.                               Miscellaneous. This letter states the complete and exclusive terms and conditions of your offer and supersedes any and all prior agreements, whether written or oral. By joining the Company, you are agreeing to abide by all applicable laws and regulations and all Company policies and procedures as they are established and that you will enter into the Company’s proprietary information and inventions agreement. Violation of such laws, regulations, policies, procedures or proprietary information and inventions agreement may lead to immediate termination of employment. The terms of this offer and your employment with the Company shall be governed in all aspects by the laws of the State of California. This agreement may be executed in more than one counterpart, and signatures transmitted via facsimile shall be deemed equivalent to originals. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

Please note: This letter will become void and without any effect whatsoever in the event that you have not executed and returned this letter to the Company prior to the close of business on February 6 2013.

 

 

We look forward to having you join us. If you have any questions about the terms of this offer, please do not hesitate to call me to discuss our offer at your earliest convenience.

 

	
Best Regards,
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Faheem Hasnain
    	
 
    	
 
    
	
Faheem Hasnain
    	
 
    	
 
    
	
Chief Executive Officer and President
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
I have read this offer, and I understand and accept its   terms:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Graham Cooper
    	
 
    	
Date: February 6, 2013
    
	
Graham Cooper
    	
 
    	
 
    

 

 

Exhibit A

Vesting

 

You will acquire a vested interest in the 1,100,000 shares of the Company’s Common Stock subject to the Options (the “Shares”) as follows (assuming that you continue to work for the Company):

 

·                       Time-Based Shares. Measured from the commencement of your employment with the Company (the “Commencement Date”), you will acquire a vested interest in 800,000 of the Shares (the “Time-Based Shares”) as follows (assuming that you continue to work for the Company):

 

(a)                                 twenty-five percent (25%) of the Shares (i.e., 200,000 Shares) will vest on the first (1st) anniversary of the Commencement Date; and

 

(b)                                 1/48th of the total Shares will vest on the same day of each successive month after the first (1st) anniversary of the Commencement Date such that one hundred percent (100%) of the Shares will have become vested (assuming that you continue to work for the Company) as of the fourth (4th) anniversary of the Commencement Date.

 

·                      Milestone Shares. You will acquire a vested interest in 300,000 of the Shares (the “Milestone Shares”) as follows:

 

(a)                                 twenty-five percent (25%) of the Milestone Shares (i.e., 75,000 Shares) will vest upon the dosing of the first patient in the first clinical trial for a product candidate where: (i) the United States Food and Drug Administration (or any foreign equivalent administrative body unless determined by the Company’s Board of Directors not to be acceptable for this purpose) would recognize such clinical trial, assuming successful completion, as a pivotal study for submission of a New Drug Application or a Biologics License Application (or any foreign equivalent application) for the product candidate as determined in the reasonable discretion of the Company’s Board of Directors, although any Phase III  clinical study (as defined in 21 C.F.R. §312.21(c)) will be presumed to satisfy this requirement; and (ii) such product candidate is covered by any intellectual property right held (whether owned, co-owned, licensed or otherwise controlled) by the Company (herein the “Milestone”); and

 

(b)                                 an amount equal to 1/48th of the total Milestone Shares will vest on the same day of each successive month following the occurrence of the Milestone such that 100% of the Milestone Shares will have become vested (assuming that you continue to work for the Company) as of the third (3rd) anniversary of the occurrence of the Milestone; provided, however, that if the Milestone has been achieved by the Company prior to the fifth (5th) anniversary of the Commencement Date, then all of the unvested Milestone Shares will vest as of such fifth (5th) anniversary; and provided, further, that if the Milestone is achieved

 

 

by the Company on or after the fifth (5th) anniversary of the Commencement Date, then all of the unvested Milestone Shares will vest upon such achievement.

 

Vesting Acceleration.

 

(a)                                 Termination Without Cause or Constructive Termination prior to any Corporate Transaction. In the event of any Termination without Cause or any Constructive Termination prior to any Corporate Transaction, the following shall occur: (i) if the Milestone shall have occurred prior to such Termination without Cause or Constructive Termination, then vesting for fifty percent (50%) of the then unvested Milestone Shares shall accelerate as of such Termination without Cause or Constructive Termination.

 

(b)                                 Corporate Transaction. In the event of any Corporate Transaction (assuming that you continue to work for the Company immediately prior to such Corporate Transaction), the following shall occur: (i) vesting for fifty percent (50%) of the then unvested Time-Based Shares shall accelerate as of immediately prior to such Corporate Transaction and the remaining Time-Based Shares shall vest, so long as you continue to work for the Company, in equal monthly portions over the remainder of the original vesting schedule; (ii) if the Milestone shall have occurred prior to the Corporate Transaction or if the Corporate Transaction results in at least the Threshold Return, then vesting for seventy-five percent (75%) of the then unvested Milestone Shares shall accelerate as of immediately prior to such Corporate Transaction and the remaining Milestone Shares shall vest, so long as you continue to work for the Company, in equal monthly portions over a remainder period that is the lesser of (x) six (6) months or (y) the time otherwise remaining on the original vesting schedule.

 

(c)                                  Termination Without Cause or Constructive Termination following a Corporate Transaction. In the event of any Termination without Cause or any Constructive Termination following any Corporate Transaction, the following shall occur: (i) vesting for one hundred percent (100%) of the then unvested Time-Based Shares shall accelerate as of immediately prior to such Corporate Transaction, and (ii) if the Milestone shall have occurred prior to such Termination without Cause or Constructive Termination or if the Corporate Transaction results in at least the Threshold Return, then vesting for all (100%) of the then unvested Milestone Shares shall accelerate as of such Termination without Cause or Constructive Termination.

 

(d)                                 Definitions. For purposes of the foregoing:

 

(i)                                     A “Corporate Transaction” is defined as any of the following: (x) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation) unless, following the consummation thereof, the Company’s stockholders of record immediately prior thereto hold more than fifty percent (50%) of the voting power of the surviving or acquiring entity or any direct or indirect parent entity of any such entity; (y) the sale, transfer or other disposition of all or substantially all of the assets of the Company by means of any transaction or series of related transactions unless, following the

 

 

consummation thereof, the Company’s stockholders of record immediately prior thereto hold more than fifty percent (50%) of the voting power of the acquiring entity or any direct or indirect parent entity of any such entity; or (z) a sale of all or substantially all of the capital stock of the Company unless, following the consummation thereof, the Company’s stockholders of record immediately prior thereto hold more than fifty percent (50%) of the voting power of the acquiring entity or any direct or indirect parent entity of any such entity; provided, however, that notwithstanding the foregoing, a Corporate Transaction shall not include (A) any sale of securities by the Company the primary purpose of which is to generate financing for the Company or (B) any transaction effected exclusively for the purpose of changing the domicile of the Company.

 

(ii)                                  A “Termination without Cause” means the termination, by the Company or one or more of its parent or subsidiary corporations, of any employment or consulting relationship between you and the Company or one or more of its parent or subsidiary corporations for any reason other than: (i) commission by you of any act of fraud or embezzlement; (ii) any intentional, unauthorized use or disclosure of material confidential information or trade secrets of the Company or one or more of its parent or subsidiary corporations by you; (iii) any other intentional misconduct by you (including severe absenteeism) which adversely affects the business or affairs of the Company or one or more of its parent or subsidiary corporations in a material manner; or (iv) your failure to attempt in good faith to either perform duties consistent with your position with the Company or to follow the reasonable requests of the CEO or the Board, so long as you have been provided with an opportunity for a period of at least ten (10) business days following written notice to you to cure such failure; provided, however, that clause (iv) shall no longer apply following a Corporate Transaction.

 

(iii)                               A “Constructive Termination” means your election in a written notice to the Company or one or more of its parent or subsidiary corporations to terminate any employment or consulting relationship where such notice is delivered within thirty (30) days after any of the following: (i) a material reduction in your level of duties or responsibilities or the nature of your functions; (ii) a material reduction in your base salary or potential total cash compensation (consisting of base salary and target bonus); or (iii) a relocation of your principal place of employment by more than fifty (50) miles, if the new location is both (A) more than fifty (50) miles from your principal residence and (B) farther from your principal residence than your principal place of employment immediately before such relocation.

 

(iv)                              The “Threshold Return” means that: (i) on or before May 11, 2012, the investors in the Company’s shares of preferred stock actually receive, from a Corporate Transaction, an aggregate amount of distributions, payments or other consideration in respect of their shares of Company preferred stock which is equal to three (3) times the amount of their collective investment in such shares of Company preferred stock; (ii) after May 11, 2012, the investors in the Company’s shares of preferred stock actually receive, from a Corporate Transaction, an aggregate amount of distributions, payments or other consideration in respect of their shares of Company preferred stock which is equal to five (5) times the amount of their collective investment in such shares of Company preferred stock. Determinations with respect to the value of any payments, distributions or other consideration (where other than in cash or marketable securities) shall be made in good faith by the Board.

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