Document:

Exhibit 10.1

 

INDEMNITY AGREEMENT

 

 

THIS INDEMNITY AGREEMENT (this “Agreement”) dated as of ____________________, is made by and between TRACON PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), and ____________________________ (“Indemnitee”).

 

RECITALS

 

A.        The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.

 

B.        The Company’s Amended and Restated Bylaws (the “Bylaws”) require that the Company indemnify its directors, and empower the Company to indemnify its officers, employees and agents, as authorized by the Delaware General Corporation Law, as amended (the “DGCL”), under which the Company is organized, and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.

 

C.        Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.

 

D.        The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proffered this Agreement to Indemnitee as an additional inducement to serve in such capacity.

 

E.        Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.         Definitions.

 

(a)        Agent.  For purposes of this Agreement, the term “agent” of the Company means any person who:  (i) is or was a director, officer, employee or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee or other fiduciary of a foreign or domestic corporation, partnership,  joint venture, trust or other enterprise.

 

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(b)       Expenses.  For purposes of this Agreement, the term “expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the DGCL or otherwise, and amounts paid in settlement by or on behalf of Indemnitee, but shall not include any judgments, fines or penalties actually levied against Indemnitee for such individual’s violations of law.  The term “expenses” shall also include reasonable compensation for time spent by Indemnitee for which he is not compensated by the Company or any subsidiary or third party (i) for any period during which Indemnitee is not an agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which expenses are incurred, for Indemnitee while an agent of, employed by, or providing services for compensation to, the Company or any subsidiary.

 

(c)        Proceedings.  For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party or otherwise by reason of:  (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) any action taken by Indemnitee or any action on Indemnitee’s part while acting as director, officer, employee or agent of the Company; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses may be provided under this Agreement.

 

(d)       Subsidiary.  For purposes of this Agreement, the term “subsidiary” means any corporation or limited liability company of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary.

 

(e)        Independent Counsel.  For purposes of this Agreement, the term “independent counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “independent counsel” shall not include any person who, under the applicable standards of professional conduct then

 

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prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

2.         Agreement to Serve.  Indemnitee will serve, or continue to serve, as a director, officer, employee or agent of the Company or any subsidiary, as the case may be, faithfully and to the best of his or her ability, at the will of such corporation (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of such corporation, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the bylaws or other applicable charter documents of such corporation, or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity.

 

The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director, officer, employee or agent of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer, employee or agent of the Company.

 

3.         Indemnification.

 

(a)        Indemnification in Third Party Proceedings.  Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the DGCL, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the DGCL permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, for any and all expenses, actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding.

 

(b)       Indemnification in Derivative Actions and Direct Actions by the Company.  Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the DGCL, as the same may be amended from time to time (but, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the DGCL permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings.

 

(c)        Fund Indemnitors.  The Company hereby acknowledges that the Indemnitee has or may have in the future certain rights to indemnification, advancement of expenses and/or insurance provided by entities and/or organizations other than the Company (collectively, the “Fund Indemnitors”).  In the event that the Indemnitee is, or is threatened to be made, a party to or a participant in any proceeding to the extent resulting from any claim

 

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based on the Indemnitee’s service to the Company as a director or other fiduciary of the Company, then the Company shall (i) be an indemnitor of first resort (i.e., its obligations to 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 Indemnitee are secondary), (ii) be required to advance reasonable expenses incurred by Indemnitee, and (iii) be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and any provision of the Bylaws or the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors.  The Company irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  No advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company.  The Fund Indemnitors are third party beneficiaries of the terms of this Section.

 

4.         Indemnification of Expenses of Successful Party.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding.

 

5.         Partial Indemnification.  If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses actually and reasonably incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

6.         Advancement of Expenses.  To the extent not prohibited by law, the Company shall advance  the expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within 20 days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, an undertaking to repay the advancement of expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company.  Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the expenses. Advances shall include any and all expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement, or otherwise and this right of advancement, including expenses incurred preparing

 

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and forwarding statements to the Company to support the advances claimed.  Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company.  The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein.  This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).

 

7.         Notice and Other Indemnification Procedures.

 

(a)        Notification of Proceeding.  Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of expenses covered hereunder.  The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise.

 

(b)       Request for Indemnification and Indemnification Payments.  Indemnitee shall notify the Company promptly in writing upon receiving notice of any demand, judgment or other requirement for payment that Indemnitee reasonably believes to be subject to indemnification under the terms of this Agreement, and shall request payment thereof by the Company.  Indemnification payments requested by Indemnitee under Section 3 hereof shall be made by the Company no later than 60 days after receipt of the written request of Indemnitee.  Claims for advancement of expenses shall be made under the provisions of Section 6 herein.

 

(c)        Application for Enforcement.  In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) above, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of expenses pursuant to this Agreement.  In such an enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of expenses to Indemnitee is not required under this Agreement or permitted by applicable law.  Any determination by the Company (including its Board of Directors, stockholders or independent counsel) that Indemnitee is not entitled to indemnification hereunder, shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of expenses hereunder.

 

(d)       Indemnification of Certain Expenses.  The Company shall indemnify Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.

 

8.         Assumption of Defense.  In the event the Company shall be requested by Indemnitee to pay the expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee.  Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be

 

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liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense.  Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of expenses provisions of this Agreement.

 

9.         Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any subsidiary (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies.  If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies.  The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

10.       Exceptions.

 

(a)        Certain Matters.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company against Indemnitee or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee’s conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or other provisions of any federal, state or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled.  For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification

 

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is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.

 

(b)       Claims Initiated by Indemnitee.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its directors, officers, employees or other agents and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or under any other agreement, provision in the Bylaws or Certificate of Incorporation or applicable law, or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law.  However, indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.

 

(c)        Unauthorized Settlements.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent.  Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.

 

(d)       Securities Act Liabilities.  Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Act”), or in any registration statement filed with the SEC under the Act.  Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue.  Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.

 

11.       Nonexclusivity and Survival of Rights.  The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Certificate of Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an agent of the Company, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee.  The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and

 

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assigns until terminated in accordance with its terms.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal.  To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification or advancement of expenses than would be afforded currently under the Certificate of Incorporation, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.

 

12.       Subrogation.  In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

13.       Interpretation of Agreement.  It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.

 

14.       Severability.  If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof.

 

15.       Amendment and Waiver.  No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

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16.       Notice.  Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by telegram, telecopy or telex, shall be deemed to have been validly served, given or delivered when sent, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice).  If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.

 

17.       Governing Law.  This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

 

18.       Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement.  Only one such counterpart need be produced to evidence the existence of this Agreement.

 

19.       Headings.  The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

20.       Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, Bylaws, the DGCL and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.

 

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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.

 

	
 
    	
TRACON   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
INDEMNITEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature of Indemnitee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Print or Type Name of   IndemniteeExhibit 10.2

 

 

 

TRACON PHARMACEUTICALS, INC.

 

2011 EQUITY INCENTIVE PLAN 

 

EFFECTIVE AS OF AUGUST 10, 2011

 

AMENDED AS OF SEPTEMBER 19, 2014

 

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

EFFECTIVE AS OF AUGUST 10, 2011

 

AMENDED AS OF SEPTEMBER 19, 2014

 

SECTION 1.  INTRODUCTION.

 

The Company’s Board of Directors adopted the Tracon Pharmaceuticals, Inc. 2011 Equity Incentive Plan effective as of the Adoption Date and the Plan was timely approved by the Company’s stockholders. On September 19, 2014, the Board amended the Plan to increase the maximum aggregate number of Shares that may be issued under the Plan (and pursuant to the exercise of Incentive Stock Options) from 3,264,681 to 4,144,681 (the “2014 Amendment”). The 2014 Amendment was also approved by the Company’s stockholders on September 19, 2014.

 

The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by offering Key Employees an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, and to encourage such Key Employees to continue to provide services to the Company and to attract new individuals with outstanding qualifications.

 

The Plan seeks to achieve this purpose by providing for Awards in the form of Options (which may constitute Incentive Stock Options or Nonstatutory Stock Options), Stock Appreciation Rights, Restricted Stock Grants and/or Stock Units.

 

Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or any related Stock Option Agreement, SAR Agreement, Restricted Stock Grant Agreement or Stock Unit Agreement.

 

SECTION 2.  DEFINITIONS.

 

(a)        “Adoption Date” means August 10, 2011.

 

(b)        “Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.

 

(c)        “Award” means any award of an Option, SAR, Restricted Stock Grant or Stock Unit under the Plan.

 

(d)       “Board” means the Board of Directors of the Company, as constituted from time to time.

 

(e)        “California Participant” means a Participant whose Award was issued in reliance on Section 25102(o) of the California Corporations Code.

 

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(f)        “Call Equivalent Position” means the term “call equivalent position” as defined under Rule 16a-1(b) of the Exchange Act.

 

(g)        “Cashless Exercise” means, to the extent that a Stock Option Agreement so provides and as permitted by applicable law and in accordance with any procedures established by the Committee, an arrangement whereby payment of some or all of the aggregate Exercise Price may be made all or in part by delivery of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company. Cashless Exercise may also be utilized to satisfy an Option’s tax withholding obligations as provided in Section 14(b).

 

(h)        “Cause” means, except as may otherwise be provided in a Participant employment agreement or applicable Award agreement (and in such case the employment agreement or Award agreement shall govern as to the definition of Cause), (i) a conviction of a Participant for a felony crime or the failure of a Participant to contest prosecution for a felony crime, or (ii) a Participant’s misconduct, fraud, disloyalty or dishonesty (as such terms may be defined by the Committee in its sole discretion), or (iii) any unauthorized use or disclosure of confidential information or trade secrets by a Participant, or (iv) a Participant’s negligence, malfeasance, breach of fiduciary duties or neglect of duties, or (v) any material violation by a Participant of a written Company or Subsidiary or Affiliate policy or any material breach by a Participant of a written agreement with the Company or Subsidiary or Affiliate, or (vi) any other act or omission by a Participant that, in the opinion of the Committee, could reasonably be expected to adversely affect the Company’s or a Subsidiary’s or an Affiliate’s business, financial condition, prospects and/or reputation. In each of the foregoing subclauses (i) through (vi), whether or not a “Cause” event has occurred will be determined by the Committee in its sole discretion or, in the case of Participants who are Directors or Officers or Section 16 Persons, the Board, each of whose determination shall be final, conclusive and binding. A Participant’s Service shall be deemed to have terminated for Cause if, after the Participant’s Service has terminated, facts and circumstances are discovered that would have justified a termination for Cause, including, without limitation, violation of material Company policies or breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant.

 

(i)         “Change in Control” except as may otherwise be provided in a Participant employment agreement or applicable Award agreement (and in such case the employment agreement or Award agreement shall govern as to the definition of Change in Control), means the occurrence of any of the following:

 

(i)         The consummation of an acquisition, a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if 51% or more of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such acquisition, merger, consolidation or other reorganization is owned by persons who in the aggregate owned less than 20% of the Company’s combined voting power represented by the Company’s outstanding securities immediately prior to such acquisition, merger, consolidation or other reorganization; or

 

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(ii)        The sale, exclusive license, transfer or other disposition of all or substantially all of the Company’s assets.

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transactions. In addition, the following transactions shall not constitute a Change in Control: (i) an initial public offering by the Company of the Shares or (ii) the issuance by the Company of shares of its capital stock in an equity financing transaction in which the Company is the surviving corporation, retains substantially all of the proceeds of such transaction for working capital or other operational purposes, including acquisitions, and does not (directly or through a subsidiary) receive any assets other than cash and rights to receive cash. A series of related transactions shall be deemed to constitute a single transaction, and where such transactions involve securities issuances, they shall be deemed “related” if under applicable securities laws they would be treated as integrated. Further, for purposes of clarity, the consummation of the transactions contemplated under the Series A Preferred Stock Purchase Agreement which was entered into by the Company on or about March 28, 2011 (as may be amended or otherwise modified from time to time) and which contemplates the issuance and sale by the Company of up to $22 million in cash in shares of its Series A Convertible Preferred Stock, par value $0.001 per share, shall not constitute a Change in Control.

 

(j)         “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.

 

(k)        “Committee” means a committee consisting of members of the Board that is appointed by the Board (as described in Section 3) to administer the Plan. If no Committee has been appointed, the full Board shall constitute the Committee.

 

(1)        “Common Stock” means the Company’s common stock, par value $0.001 per Share, and any other securities into which such shares are changed, for which such shares are exchanged or which may be issued in respect thereof.

 

(m)       “Company” means Tracon Pharmaceuticals, Inc., a Delaware corporation.

 

(n)        “Consultant” means an individual (or entity) which performs bona fide services to the Company, a Parent, a Subsidiary or an Affiliate other than as an Employee or Director or Non-Employee Director.

 

(o)        “Director” means a member of the Board who is also an Employee.

 

(p)        “Disability” means, except as may otherwise be provided in a Participant employment agreement or applicable Award agreement (and in such case the employment agreement or Award agreement shall govern as to the definition of Disability), that the Participant is classified as disabled under a long-term disability policy of the Company or, if no such policy applies, the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or 

 

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mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The Disability of a Key Employee shall be determined solely by the Committee on the basis of such medical evidence as the Committee deems warranted under the circumstances.

 

(q)        “Employee” means any individual who is a common-law employee of the Company, or of a Parent, or of a Subsidiary or of an Affiliate.

 

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

 

(s)        “Exercise Price” means, in the case of an Option, the amount for which a Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value in determining the amount payable to a Participant upon exercise of such SAR.

 

(t)        “Fair Market Value” means the market price of a Share, determined by the Committee as follows:

 

(i)         If the Shares were traded on a stock exchange (such as the New York Stock Exchange, NYSE Amex, the NASDAQ Global Market or NASDAQ Capital Market) at the time of determination, then the Fair Market Value shall be equal to the regular session closing price for such stock as reported by such exchange (or the exchange or market with the greatest volume of trading in the Shares) on the date of determination, or if there were no sales on such date, on the last date preceding such date on which a closing price was reported;

 

(ii)        If the Shares were traded on the OTC Bulletin Board at the time of determination, then the Fair Market Value shall be equal to the last-sale price reported by the OTC Bulletin Board for such date, or if there were no sales on such date, on the last date preceding such date on which a sale was reported; and

 

(iii)       If neither of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith using a reasonable application of a reasonable valuation method as the Committee deems appropriate.

 

Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported by the applicable exchange or the OTC Bulletin Board, as applicable, or a nationally recognized publisher of stock prices or quotations (including an electronic on-line publication). Such determination shall be conclusive and binding on all persons.

 

(u)        “Incentive Stock Option” or “ISO” means an incentive stock option described in Code section 422.

 

(v)        “Key Employee” means an Employee, Director, Non-Employee Director or Consultant who has been selected by the Committee to receive an Award under the Plan.

 

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(w)       “Net Exercise” means, to the extent that a Stock Option Agreement so provides and as permitted by applicable law, an arrangement pursuant to which the number of Shares issued to the Optionee in connection with the Optionee’s exercise of the Option will be reduced by the Company’s retention of a portion of such Shares. Upon such a net exercise of an Option, the Optionee will receive a net number of Shares that is equal to (i) the number of Shares as to which the Option is being exercised minus (ii) the quotient (rounded down to the nearest whole number) of the aggregate Exercise Price of the Shares being exercised divided by the Fair Market Value of a Share on the Option exercise date. The number of Shares covered by clause (ii) will be retained by the Company and not delivered to the Optionee. No fractional Shares will be created as a result of a Net Exercise and the Optionee must contemporaneously pay for any portion of the aggregate Exercise Price that is not covered by the Shares retained by the Company under clause (ii).  The number of Shares delivered to the Optionee may be further reduced if Net Exercise is utilized under Section 14(b) to satisfy applicable tax withholding obligations.

 

(x)        “Non-Employee Director” means a member of the Board who is not an Employee.

 

(y)        “Nonstatutory Stock Option” or “NSO” means a stock option that is not an ISO.

 

(z)        “Officer” means an individual who is an officer of the Company within the meaning of Rule 16a-1(f) of the Exchange Act.

 

(aa)      “Option” means an ISO or NSO granted under the Plan entitling the Optionee to purchase Shares under the Plan as provided in Section 6.

 

(bb)      “Optionee” means an individual, estate or other entity that holds an Option.

 

(cc)      “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the Adoption Date shall be considered a Parent commencing as of such date.

 

(dd)     “Participant” means an individual or estate or other entity that holds an Award.

 

(ee)      “Plan” means this Tracon Pharmaceuticals, Inc. 2011 Equity Incentive Plan as it may be amended from time to time.

 

(ff)       “Put Equivalent Position” means the term “put equivalent position” as defined under Rule 16a-1(h) of the Exchange Act.

 

(gg)      “Re-Price” means that the Company has lowered or reduced the Exercise Price of outstanding Options and/or outstanding SARs for any Participant(s) in a manner described by SEC Regulation S-K Item 402(d)(2)(viii) (or as described in any successor provision(s) or definition(s)).

 

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(hh)      “Restricted Stock Grant” means Shares awarded under the Plan as provided in Section 9.

 

(ii)        “Restricted Stock Grant Agreement” means the agreement described in Section 9 evidencing each Award of a Restricted Stock Grant.

 

(jj)        “SAR Agreement” means the agreement described in Section 8 evidencing each Award of a Stock Appreciation Right.

 

(kk)      “SEC” means the Securities and Exchange Commission.

 

(11)      “Section 16 Persons” means those Officers or Directors or Non-Employee Directors or other persons who are subject to Section 16 of the Exchange Act.

 

(mm)    “Section 280G Approval” means the separate approval by stockholders owning more than 75% of the voting power of all outstanding stock of the Company entitled to vote immediately before a Change in Control which approval shall be obtained in compliance with the requirements of Code Section 280G(b)(5)(B), as amended, including any successor thereof, and the regulations promulgated thereunder, as determined by the Committee in its sole discretion.

 

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

 

(oo)      “Separation From Service” means a Participant’s separation from service with the Company within the meaning of Code Section 409A.

 

(pp)      “Service” means service as an Employee, Director, Non-Employee Director or Consultant. Service will be deemed terminated as soon as the entity to which Service is being provided is no longer either (i) the Company, (ii) a Parent, (iii) a Subsidiary or (iv) an Affiliate. The Committee determines when Service commences and when Service terminates. The Committee may determine whether any Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in termination of Service for purposes of any affected Awards, and the Committee’s decision shall be final, conclusive and binding.

 

(qq)      “Share” means one share of Common Stock.

 

(rr)       “Stock Appreciation Right or SAR” means a stock appreciation right awarded under the Plan as provided in Section 8.

 

(ss)       “Stock Option Agreement” means the agreement described in Section 6 evidencing each Award of an Option.

 

(tt)       “Stock Unit” means a bookkeeping entry representing the equivalent of one Share awarded under the Plan as provided in Section 10.

 

(uu)      “Stock Unit Agreement” means the agreement described in Section 10 evidencing each Award of Stock Units.

 

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(vv)      “Stockholders Agreement” means any applicable agreement between the Company’s stockholders and/or investors that provides certain rights and obligations for stockholders.

 

(ww)    “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the Adoption Date shall be considered a Subsidiary commencing as of such date.

 

(xx)      “Termination Date” means the date on which a Participant’s Service terminates as determined by the Committee.

 

(yy)      “10-Percent Shareholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of section 424(d) of the Code shall be applied.

 

SECTION 3.  ADMINISTRATION.

 

(a)        Committee Composition.  A Committee appointed by the Board shall administer the Plan.  The Board shall designate one of the members of the Committee as chairperson. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.

 

Effective with the Shares being publicly traded or the Company being subject to the reporting requirements of the Exchange Act, with respect to Awards to Section 16 Persons, the Committee shall consist either (i) solely of two or more individuals who satisfy the requirements of Rule 16b-3 (or its successor) under the Exchange Act or (ii) of the full Board. The Board may also appoint one or more separate committees of the Board, each composed of directors of the Company who need not qualify under Rule 16b-3, who may administer the Plan with respect to Key Employees who are not Section 16 Persons, may grant Awards under the Plan to such Key Employees and may determine all terms of such Awards. To the extent permitted by applicable law, the Board may also appoint a committee, composed of one or more officers of the Company, that may authorize Awards to Employees (who are not Section 16 Persons) within parameters specified by the Board and consistent with any limitations imposed by applicable law.

 

(b)        Authority of the Committee.  Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Such actions shall include without limitation:

 

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(i)         selecting Key Employees who are to receive Awards under the Plan;

 

(ii)        determining the type, number, vesting requirements, performance conditions (if any) and their degree of satisfaction, and other features and conditions of such Awards and amending such Awards;

 

(iii)       correcting any defect, supplying any omission, or reconciling or clarifying any inconsistency in the Plan or any Award agreement;

 

(iv)       accelerating the vesting, or extending the post-termination exercise term, or waiving restrictions, of Awards at any time and under such terms and conditions as it deems appropriate;

 

(v)        Re-Pricing outstanding Options or SARs, without the approval of Company stockholders;

 

(vi)       interpreting the Plan and any Award agreements;

 

(vii)      making all other decisions relating to the operation of the Plan; and

 

(viii)     granting Awards to Key Employees who are foreign nationals on such terms and conditions different from those specified in the Plan, which may be necessary or desirable to foster and promote achievement of the purposes of the Plan, and adopting such modifications, procedures, and/or subplans (with any such subplans attached as appendices to the Plan) and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions to ensure the    viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, or to meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, and/or comply with applicable foreign laws or regulations.

 

The Committee may adopt such rules or guidelines, as it deems appropriate to implement the Plan. The Committee’s determinations under the Plan shall be final, conclusive and binding on all persons. The Committee’s decisions and determinations need not be uniform and may be made selectively among Participants in the Committee’s sole discretion. The Committee’s decisions and determinations will be afforded the maximum deference provided by applicable law.

 

(c)        Indemnification.  To the maximum extent permitted by applicable law, each member of the Committee, or of the Board, or any persons (including without limitation Employees and Officers) who are delegated by the Board or Committee to perform administrative functions in connection with the Plan, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under 

 

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the Plan or any Award agreement, and (ii) from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Company may have to indemnify them or hold them harmless.

 

SECTION 4.  GENERAL.

 

(a)        Eligibility.  Only Employees, Directors, Non-Employee Directors and Consultants shall be eligible for designation as Key Employees by the Committee.

 

(b)        Incentive Stock Options.  Only Key Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, a Key Employee who is a 10-Percent Shareholder shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(5) of the Code are satisfied. If and to the extent that any Shares are issued under a portion of any Option that exceeds the $100,000 limitation of Section 422 of the Code, such Shares shall not be treated as issued under an ISO notwithstanding any designation otherwise. Certain decisions, amendments, interpretations and actions by the Committee and certain actions by a Participant may cause an Option to cease to qualify as an ISO pursuant to the Code and by accepting an Option the Participant agrees in advance to such disqualifying action taken by either the Participant, the Committee or the Company.

 

(c)        Restrictions on Shares.  Any Shares issued pursuant to an Award shall be subject to such Company policies, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall apply in addition to any restrictions that may apply to holders of Shares generally and shall also comply to the extent necessary with applicable law. In no event shall the Company be required to issue fractional Shares under this Plan. Subject to the following sentence and to the extent applicable, no Option may be exercised by a Participant and no Shares will be issued to a Participant to the extent such exercise or issuance of Shares would cause the termination of the Company’s status as an “S corporation” under the Code. The requirements of the preceding sentence will no longer be applicable on or after the date of a Change in Control.

 

(d)       Beneficiaries.  A Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. If no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant’s death any vested Award(s) shall be transferred or distributed to the Participant’s estate.

 

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(e)        Performance Conditions.  The Committee may, in its discretion, include performance conditions in any Award.

 

(f)        Stockholder Rights.  A Participant, or a transferee of a Participant, shall have no rights as a stockholder (including without limitation voting rights or dividend or distribution rights) with respect to any Common Stock covered by an Award until such person becomes entitled to receive such Common Stock, has satisfied any applicable withholding or tax obligations relating to the Award and the Common Stock has been issued to the Participant. No adjustment shall be made for cash or stock dividends or other rights for which the record date is prior to the date when such Common Stock is issued, except as expressly provided in Section 11. The issuance of an Award may be subject to and conditioned upon the Participant’s agreement to become a party to a Stockholders Agreement and be bound by its terms.

 

(g)        Buyout of Awards.  The Committee may at any time offer to buy out, for a payment in cash or cash equivalents (including without limitation Shares issued at Fair Market Value that may or may not be issued under this Plan), an Award previously granted based upon such terms and conditions as the Committee shall establish.

 

(h)        Termination of Service.  Unless the applicable Award agreement or employment agreement provides otherwise (and in such case, the Award or employment agreement shall govern as to the consequences of a termination of Service for such Awards subject to Section 4(i)), the following rules shall govern the vesting, exercisability and term of outstanding Awards held by a Participant in the event of termination of such Participant’s Service (in all cases subject to the term of the Option or SAR as applicable):

 

(i)   if the Service of a Participant is terminated for Cause, then all Options, SARs, unvested portions of Stock Units and unvested portions of Restricted Stock Grants shall terminate and be forfeited immediately without consideration as of the Termination Date (except for repayment of any amounts the Participant had paid to the Company to acquire unvested Shares underlying the forfeited Awards);

 

(ii)  if the Service of Participant is terminated due to the Participant’s death or Disability, then the vested portion of his/her then-outstanding Options/SARs may be exercised by such Participant or his or her personal representative within six months after the Termination Date and all unvested portions of any outstanding Awards shall be forfeited without consideration as of the Termination Date (except for repayment of any amounts the Participant had paid to the Company to acquire unvested Shares underlying the forfeited Awards); and

 

(iii) if the Service of Participant is terminated for any reason other than for Cause or other than due to death or Disability, then the vested portion of his/her then-outstanding Options/SARs may be exercised by such Participant within three months after the Termination Date and all unvested portions of any outstanding Awards shall be forfeited without consideration as of the 

 

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Termination Date (except for repayment of any amounts the Participant had paid to the Company to acquire unvested Shares underlying the forfeited Awards).

 

(i)         California Participants.  Awards to California Participants shall also be subject to the following terms regarding the time period to exercise vested Options or SARs after termination of Service. These additional terms shall apply until such time that the Shares are publicly traded and/or the Company is subject to the reporting requirements of the Exchange Act: In the event of termination of a Participant’s Service, (i) if such termination was for reasons other than death or Disability or Cause, the Participant shall have at least 30 days after the date of such termination to exercise any of his/her vested outstanding Options or SARs (but in no event later than the expiration of the term of such Options or SARs established by the Committee as of the Award date) or (ii) if such termination was due to death or Disability, the Participant shall have at least six months after the date of such termination to exercise any of his/her vested outstanding Options or SARs (but in no event later than the expiration of the term of such Options or SARs established by the Committee as of the Award date).

 

6)         Suspension or Termination of Awards.  If at any time (including after a notice of exercise has been delivered) the Committee (or the Board), reasonably believes that a Participant has committed an act of Cause (which includes a failure to act), the Committee (or Board) may suspend the Participant’s right to exercise any Option or SAR (or vesting of Restricted Stock Grants or Stock Units) pending a determination of whether there was in fact an act of Cause. If the Committee (or the Board) determines a Participant has committed an act of Cause, neither the Participant nor his or her estate shall be entitled to exercise any outstanding Option or SAR whatsoever and all of Participant’s outstanding Awards shall then terminate without consideration. Any determination by the Committee (or the Board) with respect to the foregoing shall be final, conclusive and binding on all interested parties.

 

(k)        Code Section 409A.  Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to comply with the requirements of Code Section 409A and shall be interpreted in a manner consistent with such intention. In the event that any provision of the Plan or an Award agreement is determined by the Committee to not comply with the applicable requirements of Code Section 409A or the Treasury Regulations or other guidance issued thereunder, the Committee shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements. Each payment to a Participant made pursuant to this Plan shall be considered a separate payment and not one of a series of payments for purposes of Code Section 409A.  Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if upon a Participant’s Separation From Service he/she is then a “specified employee” (as defined in Code Section 409A), then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall defer payment of “nonqualified deferred compensation” subject to Code Section 409A payable as a result of and within six (6) months following such Separation From Service under this Plan until the earlier of (i) the 

 

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first business day of the seventh month following the Participant’s Separation From Service, or (ii) ten (10) days after the Company receives written confirmation of the Participant’s death. Any such delayed payments shall be made without interest. In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on a Participant by Code Section 409A or any damages for failing to comply with Code Section 409A.

 

(1)        Electronic Communications.  Subject to compliance with applicable law and/or regulations, an Award agreement or other documentation or notices relating to the Plan and/or Awards may be communicated to Participants by electronic media.

 

(m)       Unfunded Plan.  Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company or the Committee be deemed to be a trustee of stock or cash to be awarded under the Plan.

 

(n)        Liability of Company Plan.  The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to: (i) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder; and (ii) any unexpected or adverse tax consequence or any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise or settlement of any Award granted under this Plan.

 

(o)        Reformation.  In the event any provision of this Plan shall be held illegal or invalid for any reason, such provisions will be reformed by the Board if possible and to the extent needed in order to be held legal and valid. If it is not possible to reform the illegal or invalid provisions then the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

(p)        Successor Provision.  Any reference to a statute, rule or regulation, or to a section of a statute, rule or regulation, is a reference to that statute, rule, regulation, or section as amended from time to time, both before and after the Adoption Date and including any successor provisions.

 

(q)        Governing Law.  This Plan, and (unless otherwise provided in the Award Agreement) all Awards, shall be construed in accordance with and governed by the laws of the State of Delaware, but without regard to its conflict of law provisions.  The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal 

 

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or state courts of Delaware to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.

 

SECTION 5.  SHARES SUBJECT TO PLAN AND SHARE LIMITS.

 

(a)        Basic Limitations.  The Common Stock issuable under the Plan shall be authorized but unissued Shares or treasury Shares. Subject to adjustment as provided in Section 11, the maximum aggregate number of Shares that may be issued:

 

(i)   under the Plan shall not exceed 4,144,681 Shares (the “Share Limit”); and

 

(ii)  pursuant to the exercise of ISOs granted under this Plan shall not exceed 4,144,681 Shares (the “ISO Limit”).

 

(b)        Share Utilization.  If Awards are forfeited or are terminated for any reason (including the repurchase of unvested Shares from either an Option that was early exercised or from a Restricted Stock Grant), then the forfeited/terminated/repurchased Shares underlying such Awards shall not be counted against the Share Limit.  If exercised SARs or Stock Units are settled in Shares, then only the number of Shares (if any) actually issued in settlement of such SARs or Stock Units shall be counted against the Share Limit. If a Participant pays the Exercise Price by Net Exercise or by surrendering previously owned Shares (or by stock attestation) and/or, as permitted by the Committee, pays any withholding tax obligation with respect to an Award by Net Exercise or by electing to have Shares withheld or surrendering previously owned Shares (or by stock attestation), the surrendered Shares and the Shares withheld to pay taxes shall not count toward the Share Limit. Any Shares that are delivered and any Awards that are granted by, or become obligations of, the Company, as a result of the assumption by the Company of, or in substitution for, outstanding awards previously granted by another entity (as provided in Sections 6(e), 8(f), 9(e) or 10(e)) shall not be counted against the Share Limit or ISO Limit.

 

(c)        Dividend Equivalents.  Any dividend equivalents distributed under the Plan shall not be counted against the Share Limit.

 

SECTION 6.  TERMS AND CONDITIONS OF OPTIONS.

 

(a)        Stock Option Agreement.  Each Award of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan (including without limitation any performance conditions). The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.  The Stock Option Agreement shall also specify whether the Option is an ISO and if not specified then the Option shall be an NSO.

 

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(b)        Number of Shares.  Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 11.

 

(c)        Exercise Price.  An Option’s Exercise Price shall be established by the Committee and set forth in a Stock Option Agreement.  Except with respect to outstanding stock options being assumed or Options being granted in exchange for cancellation of options granted by another issuer as provided under Section 6(e), the Exercise Price of an Option shall not be less than 100% of the Fair Market Value (110% for 10-Percent Shareholders in the case of ISOs) of a Share on the date of Award.

 

(d)       Exercisability and Term.  Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become vested and/or exercisable.  The Stock Option Agreement shall also specify the term of the Option; provided, however that the term of an Option shall in no event exceed ten (10) years from the date of Award. An ISO that is granted to a 10-Percent Shareholder shall have a maximum term of five (5) years. No Option can be exercised after the expiration date specified in the applicable Stock Option Agreement.  A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, Disability or retirement or other events. A Stock Option Agreement may permit an Optionee to exercise an Option before it is vested (an “early exercise”), subject to the Company’s right of repurchase at the original Exercise Price of any Shares acquired under the unvested portion of the Option which right of repurchase shall lapse at the same rate the Option would have vested had there been no early exercise. In no event shall the Company be required to issue fractional Shares upon the exercise of an Option and the Committee may specify a minimum number of Shares that must be purchased in any one Option exercise.

 

(e)        Modifications or Assumption of Options.  Within the limitations of the Plan, the Committee may modify, extend or assume outstanding Options or may accept the cancellation of outstanding stock options (whether granted by the Company or by another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price. For the avoidance of doubt, the Committee may in its discretion Re-Price outstanding Options. No modification of an Option shall, without the consent of the Optionee, impair his or her rights or increase his or her obligations under such Option.

 

(f)        Assignment or Transfer of Options.  Except as otherwise provided in the applicable Stock Option Agreement and then only to the extent permitted by applicable law, no Option shall be transferable by the Optionee other than by will or by the laws of descent and distribution.  Except as otherwise provided in the applicable Stock Option Agreement, an Option may be exercised during the lifetime of the Optionee only by Optionee or by the guardian or legal representative of the Optionee. Except as otherwise provided in the applicable Stock Option Agreement, no Option or interest therein may be subject to a short position or a Call Equivalent Position or Put Equivalent Position, nor may any Option or interest therein be gifted, transferred, assigned, alienated, pledged, hypothecated, attached, sold, or encumbered by the Optionee during his/her lifetime, 

 

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whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.

 

(g)        Additional Disclosure.  Solely to the extent that the Company is relying on the exemption from registration under Section 12(g) of the Exchange Act, as provided by Rule 12h-l(f) of the Exchange Act, the Company shall provide (or make available to) Optionees with the additional disclosures required by Rule 12h-1(f)(1)(vi) of the Exchange Act. As a condition to receiving these additional disclosures, an Optionee shall agree in writing to keep the information provided in these additional disclosures confidential. If an Optionee does not agree in writing to keep this information confidential, then the Company shall not be required to provide the additional disclosures required by this Section 6(g).

 

SECTION 7.  PAYMENT FOR OPTION SHARES.

 

(a)        General Rule.  The entire Exercise Price of Shares issued upon exercise of Options shall be payable in cash (or check) at the time when such Shares are purchased by the Optionee, except as follows and if so provided for in an applicable Stock Option Agreement:

 

(i)         In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option Agreement.  The Stock Option Agreement may specify that payment may be made in any form(s) described in this Section 7.

 

(ii)        In the case of an NSO granted under the Plan, the Committee may in its discretion, at any time accept payment in any form(s) described in this Section 7.

 

(b)        Surrender of Stock.  To the extent that the Committee makes this Section 7(b) applicable to an Option in a Stock Option Agreement, payment for all or any part of the Exercise Price may be made with Shares which have already been owned by the Optionee for such duration as shall be specified by the Committee. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan.

 

(c)        Cashless Exercise.  To the extent that the Committee makes this Section 7(c) applicable to an Option in a Stock Option Agreement, payment for all or a part of the Exercise Price may be made through Cashless Exercise.

 

(d)       Net Exercise.  To the extent that the Committee makes this Section 7(d) applicable to an Option in a Stock Option Agreement, payment for all or a part of the Exercise Price may be made through Net Exercise.

 

(e)        Other Forms of Payment.  To the extent that the Committee makes this Section 7(e) applicable to an Option in a Stock Option Agreement, payment may be made in any other form that is consistent with applicable laws, regulations and rules and approved by the Committee.

 

15

 

SECTION 8.  TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

 

(a)        SAR Agreement.  Each Award of a SAR under the Plan shall be evidenced by a SAR Agreement between the Participant and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any performance conditions). A SAR Agreement may provide for a maximum limit on the amount of any payout notwithstanding the Fair Market Value on the date of exercise of the SAR. The provisions of the various SAR Agreements entered into under the Plan need not be identical.  SARs may be granted in consideration of a reduction in the Participant’s other compensation.

 

(b)        Number of Shares.  Each SAR Agreement shall specify the number of Shares to which the SAR pertains and is subject to adjustment of such number in accordance with Section 11.

 

(c)        Exercise Price.  Each SAR Agreement shall specify the Exercise Price. A SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. Except with respect to outstanding stock appreciation rights being assumed or SARs being granted in exchange for cancellation of stock appreciation rights granted by another issuer as provided under Section 8(f), the Exercise Price of a SAR shall not be less than 100% of the Fair Market Value on the date of Award.

 

(d)       Exercisability and Term.  Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR which shall not exceed ten years from the date of Award. No SAR can be exercised after the expiration date specified in the applicable SAR Agreement. A SAR Agreement may provide for accelerated exercisability in the event of the Participant’s death, or Disability or other events. SARs may be awarded in combination with Options or other Awards, and such an Award may provide that the SARs will not be exercisable unless the related Options or other Awards are forfeited. A SAR may be included in an ISO only at the time of Award but may be included in an NSO at the time of Award or at any subsequent time, but not later than six months before the expiration of such NSO. A SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.

 

(e)        Exercise of SARs.  If, on the date when a SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR may automatically be deemed to be exercised as of such date with respect to such portion to the extent so provided in the applicable SAR agreement. Upon exercise of a SAR, the Participant (or any person having the right to exercise the SAR after Participant’s death) shall receive from the Company (i) Shares, (ii) cash or (iii) any combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which 

 

16

 

the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price of the Shares.

 

(f)        Modification or Assumption of SARs.  Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (including stock appreciation rights granted by another issuer) in return for the grant of new SARs for the same or a different number of Shares and at the same or a different Exercise Price. For the avoidance of doubt, the Committee may in its discretion Re-Price outstanding SARs. No modification of a SAR shall, without the consent of the Participant, impair his or her rights or increase his or her obligations under such SAR.

 

(g)        Assignment or Transfer of SARs.  Except as otherwise provided in the applicable SAR Agreement and then only to the extent permitted by applicable law, no SAR shall be transferable by the Participant other than by will or by the laws of descent and distribution. Except as otherwise provided in the applicable SAR Agreement, a SAR may be exercised during the lifetime of the Participant only by the Participant or by the guardian or legal representative of the Participant. No SAR or interest therein may be transferred, assigned, alienated, pledged, hypothecated, attached, sold, or encumbered by the Participant during his or her lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.

 

SECTION 9.  TERMS AND CONDITIONS FOR RESTRICTED STOCK GRANTS.

 

(a)        Restricted Stock Grant Agreement.  Each Restricted Stock Grant awarded under the Plan shall be evidenced by a Restricted Stock Grant Agreement between the Participant and the Company. Each Restricted Stock Grant shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan (including without limitation any performance conditions). The provisions of the Restricted Stock Grant Agreements entered into under the Plan need not be identical.

 

(b)        Number of Shares and Payment.  Each Restricted Stock Grant Agreement shall specify the number of Shares to which the Restricted Stock Grant pertains and is subject to adjustment of such number in accordance with Section 11. Restricted Stock Grants may be issued with or without cash consideration under the Plan.

 

(c)        Vesting Conditions.  Each Restricted Stock Grant may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Grant Agreement. A Restricted Stock Grant Agreement may provide for accelerated vesting in the event of the Participant’s death, or Disability or other events.

 

(d)       Voting and Dividend Rights.  The holder of a Restricted Stock Grant (irrespective of whether the Shares subject to the Restricted Stock Grant are vested or unvested) awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. However, any dividends received on Shares that 

 

17

 

 

are unvested (whether such dividends are in the form of cash or Shares) may be subject to the same vesting conditions and restrictions as the Restricted Stock Grant with respect to which the dividends were paid. Such additional Shares issued as dividends that are subject to the Restricted Stock Grant shall not reduce the number of Shares available for issuance under Section 5.

 

(e)        Modification or Assumption of Restricted Stock Grants.  Within the limitations of the Plan, the Committee may modify or assume outstanding Restricted Stock Grants or may accept the cancellation of outstanding Restricted Stock Grants (including stock granted by another issuer) in return for the grant of new Restricted Stock Grants for the same or a different number of Shares. No modification of a Restricted Stock Grant shall, without the consent of the Participant, impair his or her rights or increase his or her obligations under such Restricted Stock Grant.

 

(f)        Assignment or Transfer of Restricted Stock Grants.  Except as provided in Section 14, or in a Restricted Stock Grant Agreement, or as required by applicable law, a Restricted Stock Grant awarded under the Plan shall not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor’s process, whether voluntarily, involuntarily or by operation of law. Any act in violation of this Section 9(f) shall be void. However, this Section 9(f) shall not preclude a Participant from designating a beneficiary pursuant to Section 4(d) nor shall it preclude a transfer of Restricted Stock Grant Awards by will or pursuant to Section 4(d).

 

SECTION 10.  TERMS AND CONDITIONS FOR STOCK UNITS.

 

(a)        Stock Unit Agreement.  Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the Participant and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan (including without limitation any performance conditions). The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the Participant’s other compensation.

 

(b)        Number of Shares and Payment.  Each Stock Unit Agreement shall specify the number of Shares to which the Stock Unit Award pertains and is subject to adjustment of such number in accordance with Section 11. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.

 

(c)        Vesting Conditions.  Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, or Disability or other events.

 

(d)       Voting and Dividend Rights.  The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash or Common Stock 

 

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dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to vesting of the Stock Units, any dividend equivalents accrued on such unvested Stock Units may be subject to the same vesting conditions and restrictions as the Stock Units to which they attach.

 

(e)        Modification or Assumption of Stock Units.  Within the limitations of the Plan, the Committee may modify or assume outstanding Stock Units or may accept the cancellation of outstanding Stock Units (including stock units granted by another issuer) in return for the grant of new Stock Units for the same or a different number of Shares. No modification of a Stock Unit shall, without the consent of the Participant, impair his or her rights or increase his or her obligations under such Stock Unit.

 

(f)        Assignment or Transfer of Stock Units.  Except as provided in Section 14, or in a Stock Unit Agreement, or as required by applicable law, Stock Units shall not be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any creditor’s process, whether voluntarily, involuntarily or by operation of law. Any act in violation of this Section 10(f) shall be void. However, this Section 10(f) shall not preclude a Participant from designating a beneficiary pursuant to Section 4(d) nor shall it preclude a transfer of Stock Units pursuant to Section 4(d).

 

(g)        Form and Time of Settlement of Stock Units.  Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. Except as otherwise provided in a Stock Unit Agreement or a timely completed deferral election, vested Stock Units shall be settled within thirty days after vesting. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred, in accordance with applicable law, to a later specified date. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 11.

 

(h)        Creditors’ Rights.  A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.

 

SECTION 11.  ADJUSTMENTS.

 

(a)        Adjustments.  In the event of a subdivision of the outstanding Shares, a declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a 

 

19

 

combination or consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, a stock split, a reverse stock split, a reclassification or other distribution of the Shares without the receipt of consideration by the Company, of or on the Common Stock, a recapitalization, a combination, a spin-off or a similar occurrence, the Committee shall make equitable and proportionate adjustments to:

 

(i)         the Share Limit and ISO Limit specified in Section 5(a);

 

(ii)        the number and kind of securities available for Awards (and which can be issued as ISOs) under Section 5;

 

(iii)       the number and kind of securities covered by each outstanding Award;

 

(iv)       the Exercise Price under each outstanding Option and SAR; and

 

(v)        the number and kind of outstanding securities issued under the Plan.

 

(b)        Participant Rights.  Except as provided in this Section 11, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. If by reason of an adjustment pursuant to this Section 11, a Participant’s Award covers additional or different shares of stock or securities, then such additional or different shares and the Award in respect thereof shall be subject to all of the terms, conditions and restrictions which were applicable to the Award and the Shares subject to the Award prior to such adjustment.

 

(c)        Fractional Shares.  Any adjustment of Shares pursuant to this Section 11 shall be rounded down to the nearest whole number of Shares. Under no circumstances shall the Company be required to authorize or issue fractional shares. To the extent permitted by applicable law, no consideration shall be provided as a result of any fractional shares not being issued or authorized.

 

SECTION 12.  EFFECT OF A CHANGE IN CONTROL.

 

(a)        Merger or Reorganization.  In the event that there is a Change in Control and/or the Company is a party to a merger or acquisition or reorganization or similar transaction, outstanding Awards shall be subject to the merger agreement or other applicable transaction agreement, except as may otherwise be provided in a Participant employment agreement or applicable Award agreement (and in such case the employment agreement or Award agreement shall govern). Such agreement may provide, without limitation, that subject to the consummation of the applicable transaction, for the assumption (or substitution) of outstanding Awards by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for accelerated vesting or for their cancellation with or without consideration, in all cases without the consent of the Participant.

 

20

 

(b)        Acceleration of Vesting.  In the event that a Change in Control occurs and there is no assumption, substitution or continuation of Awards pursuant to Section 12(a), the Committee in its discretion may provide that all Awards shall vest and become exercisable as of immediately before such Change in Control. For avoidance of doubt, “substitution” includes, without limitation, an Award being replaced by a cash award that provides an equivalent intrinsic value (wherein intrinsic value equals the difference between the market value of a share and any exercise price). The Committee may also in its discretion include in an Award agreement a requirement that unless Section 280G Approval has been obtained, no acceleration of vesting shall occur with respect to an Award to the extent that such acceleration would, after taking into account any other payments in the nature of compensation to which the Participant would have a right to receive from the Company and any other person contingent upon the occurrence of such Change in Control, result in a “parachute payment” as defined under Code Section 280G.

 

SECTION 13.  LIMITATIONS ON RIGHTS.

 

(a)        Retention Rights.  Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain in Service as an Employee, Consultant, Director or Non-Employee Director of the Company, a Parent, a Subsidiary or an Affiliate or to receive any future Awards under the Plan. The Company and its Parents and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any time, and for any reason, subject to applicable laws, the Company’s Certificate of Incorporation and Bylaws and a written employment agreement (if any).

 

(b)        Regulatory Requirements.  Any other provision of the Plan notwithstanding, the obligation of the Company to issue Shares or other securities under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of Shares or other securities pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Shares or other securities, to their registration, qualification or listing or to an exemption from registration, qualification or listing.

 

(c)        Dissolution.  To the extent not previously exercised or settled, all Options, SARs, Stock Units and unvested Restricted Stock Grants shall terminate immediately prior to the dissolution or liquidation of the Company and shall be forfeited to the Company without consideration (except for repayment of any amounts a Participant had paid to the Company to acquire unvested Shares underlying the forfeited Awards).

 

(d)       Clawback Policy.  The Company may (i) cause the cancellation of any Award, (ii) require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with Company policies and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Company certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with the Clawback Policy.

 

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SECTION 14.  WITHHOLDING TAXES.

 

(a)        General.  A Participant shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with his or her Award. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.

 

(b)        Share Withholding.  The Committee in its discretion may permit or require a Participant to satisfy all or part of his or her withholding tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired (or by stock attestation). Such Shares shall be valued based on the value of the actual trade or, if there is none, the Fair Market Value as of the previous day. Any payment of taxes by assigning Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the SEC. The Committee may also, in its discretion, permit or require a Participant to satisfy withholding tax obligations related to an Award through a sale of Shares underlying the Award or, in the case of Options, through Net Exercise or Cashless Exercise. The number of Shares that are withheld from an Award pursuant to this section may also be limited by the Committee, to the extent necessary, to avoid liability-classification of the Award (or other adverse accounting treatment) under applicable financial accounting rules including without limitation by requiring that no amount may be withheld which is in excess of minimum statutory withholding rates.

 

SECTION 15.  DURATION AND AMENDMENTS.

 

(a)        Term of the Plan.  The Plan, as set forth herein, is effective on the Adoption Date. The Plan shall terminate on the day before the tenth anniversary of the Adoption Date and may be terminated on any earlier date pursuant to this Section 15. This Plan will not in any way affect outstanding awards that were issued under any other Company equity compensation plans.

 

(b)        Right to Amend or Terminate the Plan.  The Board may amend or terminate the Plan at any time and for any reason. No Awards shall be granted under the Plan after the Plan’s termination. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules. In addition, no such amendment or termination shall be made which would materially impair the rights of any Participant, without such Participant’s written consent, under any then-outstanding Award. In the event of any conflict in terms between the Plan and any Award agreement, the terms of the Plan shall prevail and govern.

 

SECTION 16.  EXECUTION.

 

To record the adoption of the Plan by the Board, the Company has caused its duly authorized Officer to execute this Plan on behalf of the Company.

 

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TRACON   PHARMACEUTICALS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles P. Theuer
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
Charles P. Theuer
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
President and Chief Executive Officer
    

 

23

 

 

GRANT NO. ________

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

INCENTIVE STOCK OPTION AGREEMENT

 

The Company hereby grants an Option to purchase Shares to the Optionee named below.  The terms and conditions of the Option are set forth in this cover sheet, in the attached Incentive Stock Option Agreement and in the Tracon Pharmaceuticals, Inc. 2011 Equity Incentive Plan.  This cover sheet is incorporated into and a part of the attached Incentive Stock Option Agreement (together, the “Agreement”).

 

Date of Option Grant:  __________________

 

Name of Optionee:  _________________________________________________

 

Number of Shares Covered by Option:  ______________

 

Exercise Price per Share:  $_____.___

 

Fair Market Value of a Share on Date of Option Grant:  $_____.___

 

Expiration Date:  _____________

 

Vesting Calculation Date:  _____________

 

Vesting Schedule:

 

Subject to all the terms of the Agreement and your continued Service, your right to purchase Shares under this Option shall vest as to one-fourth (1/4) of the total number of Shares covered by this Option, as shown above, on the first anniversary of the Vesting Calculation Date.  Thereafter, the number of Shares which you may purchase under this Option shall vest at the rate of one-forty-eighth (1/48) of the total number of Shares covered by this Option per calendar month on the last day of each of the thirty-five (35) months following the month of the first anniversary of the Vesting Calculation Date and the final one-forty-eighth (1/48) of the total number of Shares covered by this Option shall vest on the fourth anniversary of the Vesting Calculation Date.  In all cases, the resulting aggregate number of vested Shares will be rounded down to the nearest whole number.  No Shares subject to this Option will vest after your Service has terminated for any reason.

 

By signing this cover sheet, you agree to all of the terms and conditions described in the Agreement and in the Plan.  You are also acknowledging receipt of this Agreement and a copy of the Plan, a copy of which is also enclosed.

 

	
Optionee:
    	
 
    
	
 
    	
(Signature)
    
	
 
    
	
Company:
    	
 
    
	
 
    	
(Signature)
    

 

 

	
Title:
    	
 
    

 

Attachment

 

2

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

INCENTIVE STOCK OPTION AGREEMENT

 

	
1.
    	
The   Plan and
   Other Agreements
    	
 
    	
The text of the Plan is incorporated in this Agreement by   reference.  Certain capitalized terms   used in this Agreement are defined in the Plan.

 

This Agreement and the Plan constitute the entire understanding   between you and the Company regarding this Option.  Any prior agreements, commitments or   negotiations concerning this Option are superseded.
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Incentive   Stock Option
    	
 
    	
This Option is intended to be an Incentive Stock Option under section   422 of the Code and will be interpreted accordingly.

 

If you cease to be an employee of the Company, a Subsidiary or of a   Parent but continue to provide Service, this Option will be treated as a   Nonstatutory Stock Option on the day after the date that is three   (3) months after you cease to be an employee of the Company (and any   Subsidiary or any Parent): (i) even if you continue to provide Service   after your employment has terminated or (ii) if your termination of   employment was for any reason other than due to your death or   Disability.  In addition, to the extent   that all or part of this Option exceeds the $100,000 limitation rule of   section 422(d) of the Code, this Option or the lesser excess part will   be treated as a Nonstatutory Stock Option.

 

This Option is not intended to be deferred compensation under section   409A of the Code and will be interpreted accordingly.
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Vesting
    	
 
    	
This Option is only exercisable before it expires and only with   respect to the vested portion of the Option.    This Option will vest according to the Vesting Schedule described in   the cover sheet of this Agreement.
    
	
4.
    	
Term
    	
 
    	
Your Option will expire in all cases no later than the close of   business at Company headquarters on the Expiration Date, as shown on the   cover sheet.  Your Option may expire   earlier if your Service terminates, as described in Sections 5, 6 and 7 below   or on the date on which the Option is cancelled (and not substituted   or assumed) pursuant to a Change in Control or merger or acquisition or   reorganization or similar transaction involving the Company.
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Termination   of Service - General
    	
 
    	
If, while the Option is outstanding, your Service terminates for any   reason, other than being terminated by the Company for Cause or due to your   death or Disability, then the unvested 
    

 

3

 

	
 
    	
 
    	
 
    	
portion of your Option shall be forfeited without consideration and   shall immediately expire on your Termination Date and the vested portion of   your Option will expire at the earlier of (i) the close of   business at Company headquarters on the date that is ninety (90) days after your Termination   Date, (ii) the Expiration Date set forth in the attached cover sheet and   further described in Section 4 above, or (iii) the date on which   the Option is cancelled (and not substituted or assumed) pursuant to a Change   in Control or merger or acquisition or reorganization or similar transaction   involving the Company.  In no event is the Option exercisable   after the Expiration Date.
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Termination   of Service for Cause
    	
 
    	
If your Service is terminated by the Company for Cause or if you   commit an act(s) of Cause while this Option is outstanding, as   determined by the Committee in its sole discretion, then you shall   immediately forfeit all rights to your Option without consideration,   including any vested portion of the Option, and the entire Option shall   immediately expire, and any rights, payments and benefits with respect to the   Option shall be subject to reduction or recoupment in accordance with the   Clawback Policy and the Plan.  For   avoidance of doubt, your Service shall also be deemed to have been   terminated for Cause by the Company if, after your Service has otherwise   terminated, facts and circumstances are discovered that would have justified   a termination for Cause, including, without limitation, your violation of   Company policies or breach of confidentiality or other restrictive covenants   or conditions that may apply to you prior to or after your Termination Date.
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Termination   of Service due to Death or Disability
    	
 
    	
If your Service terminates because of your death or Disability, then   the unvested portion of your Option shall be forfeited without consideration   and shall immediately expire on your Termination Date and the vested portion   of your Option will expire at the earlier of (i) the close of   business at Company headquarters on the date that is six (6) months after your Termination   Date, (ii) the Expiration Date set forth in the attached cover sheet and   further described in Section 4 above, or (iii) the date on which   the Option is cancelled (and not substituted or assumed) pursuant to a Change   in Control or merger or acquisition or similar transaction involving the   Company.  In no event is the Option exercisable after the Expiration Date.  If your Service terminated due to your   death, then your estate may exercise the vested portion of your Option during   the foregoing post-Service exercise period.
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
Leaves   of Absence
    	
 
    	
For purposes of this Option, your Service does not terminate when you   go on a bona fide leave of absence that was   approved by the Company in writing, if the terms of the leave provide for 
    

 

4

 

	
 
    	
 
    	
 
    	
continued Service crediting, or when continued Service crediting is   required by applicable law.  For income   tax purposes, if the period of leave exceeds three (3) months and your   right to reemployment is not provided either by statute or by contract, then   this Option will be treated as a Nonstatutory Stock Option if the exercise of   this Option occurs after the expiration of six (6) months from the   commencement of such leave of absence.    Your Service terminates in any event when the approved leave ends   unless you immediately return to active work.

 

The Company determines which leaves count for this purpose (along   with determining the effect of a leave of absence on vesting of the Option),   and when your Service terminates for all purposes under the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
Notice   of Exercise
    	
 
    	
When you wish to exercise this Option, you must notify the Company by   filing a “Notice of Exercise” form at the address given on the form.  Your notice must specify how many Shares   you wish to purchase.  Your notice must   also specify how your Shares should be registered (in your name only or in   your and your spouse’s names as community property or as joint tenants with   right of survivorship).  The notice   will be effective when it is received by the Company.

 

If someone else wants to exercise this Option after your death, that   person must prove to the Company’s satisfaction that he or she is entitled to   do so.
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Form of   Payment
    	
 
    	
When you submit your notice of exercise, you must include payment of   the Exercise Price for the Shares you are purchasing.  Payment may be made in one (or a   combination) of the following forms:

 

·                Cash, your personal check, a cashier’s   check or a money order.

 

·                Shares which have already been owned   by you for more than six (6) months and which are surrendered to the   Company.  The Fair Market Value of the   Shares, determined as of the effective date of the Option exercise, will be   applied to the Exercise Price.

 

·                 To the   extent a public market for the Shares exists as determined by the Company, by   Cashless Exercise through delivery (on a form prescribed by the Company) of   an irrevocable direction to a securities broker to sell Shares and to deliver   all or part of the sale proceeds to the Company in 
    

 

5

 

	
 
    	
 
    	
 
    	
payment of the aggregate Exercise Price.
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
Withholding   Taxes
    	
 
    	
You will be solely responsible for payment of any and all applicable   taxes associated with this Option.

 

You will not be allowed to exercise this Option unless you make   acceptable arrangements to pay any withholding or other taxes that may be due   as a result of the Option exercise or sale of Shares acquired under this   Option.
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Restrictions   on Exercise and Resale
    	
 
    	
By signing this   Agreement, you agree not to (i) exercise this Option (“Exercise   Prohibition”), or (ii) sell, transfer, dispose of, pledge, hypothecate,   make any short sale of, or otherwise effect a similar transaction of any   Shares acquired under this Option (each a “Sale Prohibition”) at a time when   applicable laws, regulations or Company or underwriter trading policies   prohibit the exercise or disposition of Shares.  The Company will not permit you to exercise this Option if the   issuance of Shares at that time would violate any law or regulation.  The Company shall have the right to   designate one or more periods of time, each of which generally will not   exceed one hundred eighty (180) days in length (provided however, that   such period may be extended in connection with the Company’s release (or   announcement of release) of earnings results or other material news or   events), and to impose an Exercise Prohibition and/or Sale Prohibition, if   the Company determines (in its sole discretion) that such   limitation(s) is needed in connection with a public offering of Shares   or to comply with an underwriter’s request or trading policy, or could in any   way facilitate a lessening of any restriction on transfer pursuant to the   Securities Act or any state securities laws with respect to any issuance of   securities by the Company, facilitate the registration or qualification of   any securities by the Company under the Securities Act or any state   securities laws, or facilitate the perfection of any exemption from the   registration or qualification requirements of the Securities Act or any   applicable state securities laws for the issuance or transfer of any   securities.  The Company may issue   stop/transfer instructions and/or appropriately legend any stock certificates   issued pursuant to this Option in order to ensure compliance with the   foregoing.  Any such Exercise   Prohibition shall not alter the vesting schedule set forth in this Agreement   other than to limit the periods during which this Option shall be   exercisable.

 

If the sale of Shares   under the Plan is not registered under the Securities Act, but an exemption   is available which requires an investment or other representation, you shall   represent and agree at the time of exercise that the Shares being acquired   upon 
    

 

6

 

	
 
    	
 
    	
 
    	
exercise of this Option   are being acquired for investment, and not with a view to the sale or   distribution thereof, and shall make such other representations as are deemed   necessary or appropriate by the Company and its counsel.

 

You may also be   required, as a condition of exercise of this Option, to enter into any   Stockholders Agreement or other agreements that are applicable to   stockholders.

 

If you sell or otherwise dispose of any of the Shares acquired   pursuant to the exercise of this Option on or before the later of   (i) the date that is two years after the Date of Option Grant or   (ii) the date that is one year after the applicable exercise of this   Option, then you shall within ten days of any and all such sales or   dispositions provide the Company with written notice of such transactions   including without limitation the date of each disposition, the number of   Shares that you disposed of in each transaction and their original Date of   Option Grant, and the amount of proceeds you received from each disposition.
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
The   Company’s Right of First Refusal
    	
 
    	
In the event that you propose to sell, pledge or otherwise transfer   to a third party any Shares acquired under this Agreement, or any interest in   such Shares, the Company shall have the “Right of First Refusal” with respect   to all (and not less than all) of such Shares.  If you desire to transfer Shares acquired   under this Agreement, you must give a written “Transfer Notice” to the   Company describing fully the proposed transfer, including the number of   Shares proposed to be transferred, the proposed transfer price and the name   and address of the proposed transferee.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
The Transfer Notice shall be signed both by you and by the proposed   new transferee and must constitute a binding commitment of both parties to   the transfer of the Shares.  The   Company shall have the right to purchase all, and not less than all, of the   Shares on the terms of the proposal described in the Transfer Notice   (subject, however, to any change in such terms permitted in the next   paragraph) by delivery of a notice of exercise of the Right of First Refusal   within thirty (30) days after the date when the Transfer Notice was received   by the Company.  The Company’s rights   under this subsection shall be freely assignable, in whole or in part.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
If the Company fails to exercise its Right of First Refusal within   thirty (30) days after the date when it received the Transfer Notice, you   may, not later than ninety (90) days following receipt of the Transfer Notice   by the Company, conclude a transfer of the Shares subject to the Transfer   Notice on the terms 
    

 

7

 

	
 
    	
 
    	
 
    	
and conditions described in the Transfer Notice.  Any proposed transfer on terms and   conditions different from those described in the Transfer Notice, as well as   any subsequent proposed transfer by you, shall again be subject to the Right   of First Refusal and shall require compliance with the procedure described in   the paragraph above.  If the Company   exercises its Right of First Refusal, the parties shall consummate the sale   of the Shares on the terms set forth in the Transfer Notice within sixty   (60) days after the date when the Company received the Transfer Notice   (or within such longer period as may have been specified in the Transfer   Notice); provided, however, that in the event the Transfer Notice provided   that payment for the Shares was to be made in a form other than lawful money   paid at the time of transfer, the Company shall have the option of paying for   the Shares with lawful money equal to the present value of the consideration   described in the Transfer Notice.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
The Company’s Right of First Refusal shall inure to the benefit of   its successors and assigns and shall be binding upon any transferee of the   Shares.

 

The Company’s Right of First Refusal shall terminate in the event   that Shares are listed on an established stock exchange or are quoted   regularly on the OTC Bulletin Board.
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Right   of Repurchase
    	
 
    	
Following your Termination Date after   termination of your Service for any reason, the Company shall have the right   to purchase all of those Shares that you have or will acquire under this   Option.  If the Company exercises its   right to purchase such Shares, the purchase price shall be the Fair Market Value   of those Shares on the date of purchase as determined by the Board of   Directors and shall be paid in cash.    The Company will notify you of its intention to purchase such Shares,   and will consummate the purchase within any time period established by applicable   law.  The Company’s right of repurchase shall inure to the   benefit of its successors and assigns and shall be binding upon any   transferee of the Shares.  The   Company’s rights under this subsection shall be freely assignable, in whole   or in part. The Company’s right of   repurchase shall terminate in the event that the Shares are listed on an   established stock exchange or are quoted regularly on the OTC Bulletin   Board.
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
Transfer   of Option
    	
 
    	
Prior to your death, only you may exercise this Option.  You cannot gift, transfer, assign, alienate,   pledge, hypothecate, attach, sell, or encumber this Option or subject it to   any short position, Call Equivalent Position or Put Equivalent Position.  If you attempt to do any of these things,   this Option will immediately become invalid.    You may, however, dispose of this 
    

 

8

 

	
 
    	
 
    	
 
    	
Option in your will or it may be transferred by the laws of descent   and distribution.  Regardless of any   marital property settlement agreement, the Company is not obligated to honor   a notice of exercise from your spouse, nor is the Company obligated to   recognize your spouse’s interest in your Option in any other way.
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Retention   Rights
    	
 
    	
Your Option or this Agreement does not give you the right to be   retained by the Company (or any Parent or any Subsidiaries or Affiliates) in   any capacity.  The Company (or any   Parent and any Subsidiaries or Affiliates) reserves the right to terminate   your Service at any time and for any reason.

 

This Option and the Shares subject to the Option are not intended to   constitute or replace any pension rights or compensation and are not to be   considered compensation of a continuing or recurring nature, or part of your   normal or expected compensation, and in no way represent any portion of your   salary, compensation or other remuneration for any purpose, including but not   limited to, calculating any severance, resignation, termination, redundancy,   dismissal, end of service payments, bonuses, long-service awards, pension or   retirement benefits or similar payments.
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
Stockholder   Rights
    	
 
    	
You, or your estate, shall have no rights as a stockholder of the   Company with regard to the Option until you have been issued the applicable   Shares by the Company and have satisfied all other conditions specified in   Section 4(f) of the Plan.  No   adjustment shall be made for cash or stock dividends or other rights for   which the record date is prior to the date when such applicable Shares are   issued, except as provided in the Plan.

    
	
 
    	
 
    	
 
    	
 
    
	
18.
    	
Adjustments
    	
 
    	
In the event of a stock split, a stock dividend or a similar change   in the Company stock, the number of Shares covered by this Option (rounded   down to the nearest whole number) and the Exercise Price per Share may be   adjusted pursuant to the Plan.  Your   Option shall be subject to the terms of the agreement of merger, liquidation   or reorganization in the event the Company is subject to such corporate   activity.
    
	
 
    	
 
    	
 
    	
 
    
	
19.
    	
Legends
    	
 
    	
All certificates representing the Shares issued upon exercise of this   Option may, where applicable, have endorsed thereon the following   legends and any other legend the Company determines appropriate:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“THE SHARES REPRESENTED BY THIS CERTIFICATE 
    

 

9

 

	
 
    	
 
    	
 
    	
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO   PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE   REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH   AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED   UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD   OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE   SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR   OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH   ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,   THAT SUCH REGISTRATION IS NOT REQUIRED.”
    
	
 
    	
 
    	
 
    	
 
    
	
20.
    	
Applicable   Law
    	
 
    	
This Agreement will be interpreted and enforced under the laws of the   State of Delaware without reference to the conflicts of law provisions   thereof.
    
	
 
    	
 
    	
 
    	
 
    
	
21.
    	
Voluntary   Participant
    	
 
    	
You acknowledge that you are voluntarily participating in the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
22.
    	
No   Rights to Future Awards
    	
 
    	
Your rights, if any, in respect of or in connection with this Option   or any other Awards are derived solely from the discretionary decision of the   Company to permit you to participate in the Plan and to benefit from a   discretionary future Award.  By   accepting this Option, you expressly acknowledge that there is no obligation   on the part of the Company to continue the Plan and/or grant any additional   Awards to you or benefits in lieu of Options or any other Awards even if   Awards have been granted repeatedly in the past.  All decisions with respect to future   Awards, if any, will be at the sole discretion of the Committee.
    
	
 
    	
 
    	
 
    	
 
    
	
23.
    	
Future   Value
    	
 
    	
The future value of the underlying Shares is unknown and cannot be   predicted with certainty.  If the underlying   Shares do not increase in value after the Date of Option Grant, the Option   will have little or no value.  If you   exercise the Option and obtain Shares, the value of the Shares acquired upon   exercise may increase or decrease in value, even below the Exercise Price. 
    

 

10

 

	
24.
    	
No   Advice Regarding Grant
    	
 
    	
The Company has not provided any tax, legal or financial advice, nor   has the Company made any recommendations regarding your participation in the   Plan, or your acquisition or sale of the underlying Shares.  You are hereby advised to consult with your   own personal tax, legal and financial advisors regarding your participation   in the Plan before taking any action related to the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
25.
    	
No   Right to Damages
    	
 
    	
You will have no right to bring a claim or to receive damages if any   portion of the Option is cancelled or expires unexercised.  The loss of existing or potential profit in   the Option will not constitute an element of damages in the event of the termination   of your Service for any reason, even if the termination is in violation of an   obligation of the Company or a Parent or a Subsidiary or an Affiliate to you.

 

Additionally, you understand and agree that the Company will not be   responsible for any adverse or unexpected tax consequences imposed by Code   Sections 409A, 422 or 280G or any other law or regulation and that you will   be solely responsible for any tax liability imposed on you as a result of   this Agreement.  Moreover, the Company   makes no representation or covenant to ensure that this Option is exempt from   Code Section 409A and will have no liability to you or any other party   if this Option, as amended, is not so exempt from or compliant with Code   Section 409A.
    

 

11

 

	
26.
    	
Data   Privacy
    	
 
    	
You hereby explicitly   and unambiguously consent to the collection, use and transfer, in electronic   or other form, of your personal data as described in this document by the   Company for the exclusive purpose of implementing, administering and managing   your participation in the Plan.  You   understand that the Company holds certain personal information about you,   including, but not limited to, name, home address and telephone number, date   of birth, social security or insurance number or other identification number,   salary, nationality, job title, any shares of stock or directorships held in   the Company, details of all Awards or any other entitlement to Shares   awarded, cancelled, purchased, exercised, vested, unvested or outstanding in   your favor for the purpose of implementing, managing and administering the   Plan (“Data”).  You understand that the   Data may be transferred to any third parties assisting in the implementation,   administration and management of the Plan, that these recipients may be   located in your country or elsewhere and that the recipient country may have   different data privacy laws and protections than your country.  You authorize the recipients to receive,   possess, use, retain and transfer the Data, in electronic or other form, for   the purposes of implementing, administering and managing your participation   in the Plan, including any requisite transfer of such Data, as may be   required to a broker or other third party with whom you may elect to deposit   any Shares acquired under the Plan.
    

 

By signing the cover sheet of this Agreement, you agree to all of the terms and
 conditions described above and in the Plan.

 

12

 

GRANT NO. ________

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

INCENTIVE STOCK OPTION AGREEMENT

 

The Company hereby grants an Option to purchase Shares to the Optionee named below.  The terms and conditions of the Option are set forth in this cover sheet, in the attached Incentive Stock Option Agreement and in the Tracon Pharmaceuticals, Inc. 2011 Equity Incentive Plan.  This cover sheet is incorporated into and a part of the attached Incentive Stock Option Agreement (together, the “Agreement”).

 

Date of Option Grant:  __________________

 

Name of Optionee:  _________________________________________________

 

Number of Shares Covered by Option:  ______________

 

Exercise Price per Share:  $_____.___

 

Fair Market Value of a Share on Date of Option Grant:  $_____.___

 

Expiration Date:  _____________

 

Vesting Calculation Date:  _____________

 

Vesting Schedule:

 

Subject to all the terms of the Agreement and your continued Service, your right to purchase Shares under this Option shall vest as to one-fourth (1/4) of the total number of Shares covered by this Option, as shown above, on the first anniversary of the Vesting Calculation Date.  Thereafter, the number of Shares which you may purchase under this Option shall vest at the rate of one-forty-eighth (1/48) of the total number of Shares covered by this Option per calendar month on the last day of each of the thirty-five (35) months following the month of the first anniversary of the Vesting Calculation Date and the final one-forty-eighth (1/48) of the total number of Shares covered by this Option shall vest on the fourth anniversary of the Vesting Calculation Date.  In all cases, the resulting aggregate number of vested Shares will be rounded down to the nearest whole number.  No Shares subject to this Option will vest after your Service has terminated for any reason.

 

By signing this cover sheet, you agree to all of the terms and conditions described in the Agreement and in the Plan.  You are also acknowledging receipt of this Agreement and a copy of the Plan, a copy of which is also enclosed.

 

	
Optionee:
    	
 
    
	
 
    	
(Signature)
    
	
 
    
	
Company:
    	
 
    
	
 
    	
(Signature)
    

 

 

	
Title:
    	
 
    

 

Attachment

 

2

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

INCENTIVE STOCK OPTION AGREEMENT

 

	
1.
    	
The   Plan and Other Agreements
    	
 
    	
The text of the Plan is incorporated in this Agreement by   reference.  Certain capitalized terms   used in this Agreement are defined in the Plan.

 

This Agreement and the Plan constitute the entire understanding between   you and the Company regarding this Option.    Any prior agreements, commitments or negotiations concerning this   Option are superseded.
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Incentive   Stock Option
    	
 
    	
This Option is intended to be an Incentive Stock Option under section   422 of the Code and will be interpreted accordingly.

 

If you cease to be an employee of the Company, a Subsidiary or of a   Parent but continue to provide Service, this Option will be treated as a   Nonstatutory Stock Option on the day after the date that is three   (3) months after you cease to be an employee of the Company (and any   Subsidiary or any Parent): (i) even if you continue to provide Service   after your employment has terminated or (ii) if your termination of   employment was for any reason other than due to your death or   Disability.  In addition, to the extent   that all or part of this Option exceeds the $100,000 limitation rule of   section 422(d) of the Code, this Option or the lesser excess part will   be treated as a Nonstatutory Stock Option.

 

This Option is not intended to be deferred compensation under section   409A of the Code and will be interpreted accordingly.
    

 

3

 

	
3.
    	
Vesting
    	
 
    	
This Option is only exercisable before it expires and only with   respect to the vested portion of the Option.    This Option will vest according to the Vesting Schedule described in   the cover sheet of this Agreement and in the following paragraphs of this   Section 3.

 

In accordance with Plan Section 12, if a Change in Control   occurs during your Service and there is no assumption, substitution or   continuation of this Option pursuant to Plan Section 12, then the   outstanding unvested portion of this Option shall fully vest on an   accelerated basis and become exercisable as of immediately before such Change   in Control.

 

If your Service is terminated without Cause by the Company (or its   successor) either on the date of a Change in Control or during the 18 month   period following a Change in Control, then the outstanding unvested portion   of this Option shall fully vest on an accelerated basis and become   exercisable on your Termination Date.

 

Notwithstanding the foregoing paragraphs, in accordance with Plan   Section 12, unless Section 280G Approval has been obtained or   unless the Committee in its sole discretion waives this requirement to obtain   Section 280G Approval, no acceleration of vesting shall occur with   respect to this Option to the extent that such acceleration would, after   taking into account any other payments in the nature of compensation to which   you would have a right to receive from the Company and any other person   contingent upon the occurrence of a Change in Control, result in a “parachute   payment” as defined under Code Section 280G.  You agree to cooperate and execute   any waivers of compensation as may be necessary to enable the   Section 280G Approval vote to comply with the requirements specified   under Code Section 280G and the regulations promulgated thereunder.
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Term
    	
 
    	
Your Option will expire in all cases no later than the close of business   at Company headquarters on the Expiration Date, as shown on the cover   sheet.  Your Option may expire earlier   if your Service terminates, as described in Sections 5, 6 and 7 below or on the   date on which the Option is cancelled (and not substituted or assumed)   pursuant to a Change in Control or merger or acquisition or reorganization or   similar transaction involving the Company.
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Termination   of Service - General
    	
 
    	
If, while the Option is outstanding, your Service terminates for any   reason, other than being terminated by the Company for Cause or due to your   death or Disability, then the unvested portion of your Option shall be forfeited without   consideration 
    

 

4

 

	
 
    	
 
    	
 
    	
and shall immediately expire on your Termination Date and the vested   portion of your Option will expire at the earlier of (i) the   close of business at Company headquarters on the date that is ninety (90) days after your Termination   Date, (ii) the Expiration Date set forth in the attached cover sheet and   further described in Section 4 above, or (iii) the date on which   the Option is cancelled (and not substituted or assumed) pursuant to a Change   in Control or merger or acquisition or reorganization or similar transaction   involving the Company.  In no event is the Option exercisable   after the Expiration Date.
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Termination   of Service for Cause
    	
 
    	
If your Service is terminated by the Company for Cause or if you   commit an act(s) of Cause while this Option is outstanding, as   determined by the Committee in its sole discretion, then you shall   immediately forfeit all rights to your Option without consideration,   including any vested portion of the Option, and the entire Option shall   immediately expire, and any rights, payments and benefits with respect to the   Option shall be subject to reduction or recoupment in accordance with the   Clawback Policy and the Plan.  For   avoidance of doubt, your Service shall also be deemed to have been   terminated for Cause by the Company if, after your Service has otherwise   terminated, facts and circumstances are discovered that would have justified   a termination for Cause, including, without limitation, your violation of   Company policies or breach of confidentiality or other restrictive covenants   or conditions that may apply to you prior to or after your Termination Date.
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Termination   of Service due to Death or Disability
    	
 
    	
If your Service terminates because of your death or Disability, then   the unvested portion of your Option shall be forfeited without consideration   and shall immediately expire on your Termination Date and the vested portion   of your Option will expire at the earlier of (i) the close of   business at Company headquarters on the date that is six (6) months after your Termination   Date, (ii) the Expiration Date set forth in the attached cover sheet and   further described in Section 4 above, or (iii) the date on which   the Option is cancelled (and not substituted or assumed) pursuant to a Change   in Control or merger or acquisition or similar transaction involving the   Company.  In no event is the Option exercisable after the Expiration Date.  If your Service terminated due to your   death, then your estate may exercise the vested portion of your Option during   the foregoing post-Service exercise period.
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
Leaves   of Absence
    	
 
    	
For purposes of this Option, your Service does not terminate when you   go on a bona fide leave of absence that was   approved by the Company in writing, if the terms of the leave provide for   continued Service crediting, or when continued Service crediting 
    

 

5

 

	
 
    	
 
    	
 
    	
is required by applicable law.    For income tax purposes, if the period of leave exceeds three   (3) months and your right to reemployment is not provided either by   statute or by contract, then this Option will be treated as a Nonstatutory   Stock Option if the exercise of this Option occurs after the expiration of   six (6) months from the commencement of such leave of absence.  Your Service terminates in any event when   the approved leave ends unless you immediately return to active work.

 

The Company determines which leaves count for this purpose (along   with determining the effect of a leave of absence on vesting of the Option),   and when your Service terminates for all purposes under the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
Notice   of Exercise
    	
 
    	
When you wish to exercise this Option, you must notify the Company by   filing a “Notice of Exercise” form at the address given on the form.  Your notice must specify how many Shares   you wish to purchase.  Your notice must   also specify how your Shares should be registered (in your name only or in   your and your spouse’s names as community property or as joint tenants with   right of survivorship).  The notice   will be effective when it is received by the Company.

 

If someone else wants to exercise this Option after your death, that   person must prove to the Company’s satisfaction that he or she is entitled to   do so.
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Form of   Payment
    	
 
    	
When you submit your notice of exercise, you must include payment of   the Exercise Price for the Shares you are purchasing.  Payment may be made in one (or a   combination) of the following forms:

 

·    Cash, your personal check, a cashier’s   check or a money order.

 

·    Shares which have already been owned by   you for more than six (6) months and which are surrendered to the   Company.  The Fair Market Value of the   Shares, determined as of the effective date of the Option exercise, will be   applied to the Exercise Price.

 

·    To the extent a public market for the   Shares exists as determined by the Company, by Cashless Exercise through   delivery (on a form prescribed by the Company) of an irrevocable direction to   a securities broker to sell Shares and to deliver all or part of the sale   proceeds to the Company in payment of the aggregate Exercise Price.
    

 

6

 

	
11.
    	
Withholding   Taxes
    	
 
    	
You will be solely responsible for payment of any and all applicable   taxes associated with this Option.

 

You will not be allowed to exercise this Option unless you make   acceptable arrangements to pay any withholding or other taxes that may be due   as a result of the Option exercise or sale of Shares acquired under this   Option.
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Restrictions   on Exercise and Resale
    	
 
    	
By signing this   Agreement, you agree not to (i) exercise this Option (“Exercise   Prohibition”), or (ii) sell, transfer, dispose of, pledge, hypothecate,   make any short sale of, or otherwise effect a similar transaction of any   Shares acquired under this Option (each a “Sale Prohibition”) at a time when   applicable laws, regulations or Company or underwriter trading policies   prohibit the exercise or disposition of Shares.  The Company will not permit you to exercise this Option if the   issuance of Shares at that time would violate any law or regulation.  The Company shall have the right to   designate one or more periods of time, each of which generally will not   exceed one hundred eighty (180) days in length (provided however, that   such period may be extended in connection with the Company’s release (or   announcement of release) of earnings results or other material news or   events), and to impose an Exercise Prohibition and/or Sale Prohibition, if   the Company determines (in its sole discretion) that such   limitation(s) is needed in connection with a public offering of Shares   or to comply with an underwriter’s request or trading policy, or could in any   way facilitate a lessening of any restriction on transfer pursuant to the   Securities Act or any state securities laws with respect to any issuance of   securities by the Company, facilitate the registration or qualification of   any securities by the Company under the Securities Act or any state   securities laws, or facilitate the perfection of any exemption from the   registration or qualification requirements of the Securities Act or any   applicable state securities laws for the issuance or transfer of any   securities.  The Company may issue   stop/transfer instructions and/or appropriately legend any stock certificates   issued pursuant to this Option in order to ensure compliance with the   foregoing.  Any such Exercise   Prohibition shall not alter the vesting schedule set forth in this Agreement   other than to limit the periods during which this Option shall be exercisable.

 

If the sale of Shares   under the Plan is not registered under the Securities Act, but an exemption   is available which requires an investment or other representation, you shall   represent and agree at the time of exercise that the Shares being acquired upon   exercise of this Option are being acquired for investment, and not with a   view to the sale or distribution thereof, and shall make 
    

 

7

 

	
 
    	
 
    	
 
    	
such other   representations as are deemed necessary or appropriate by the Company and its   counsel.

 

You may also be   required, as a condition of exercise of this Option, to enter into any   Stockholders Agreement or other agreements that are applicable to   stockholders.

 

If you sell or otherwise dispose of any of the Shares acquired   pursuant to the exercise of this Option on or before the later of   (i) the date that is two years after the Date of Option Grant or   (ii) the date that is one year after the applicable exercise of this   Option, then you shall within ten days of any and all such sales or   dispositions provide the Company with written notice of such transactions   including without limitation the date of each disposition, the number of   Shares that you disposed of in each transaction and their original Date of   Option Grant, and the amount of proceeds you received from each disposition.
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
The   Company’s Right of First Refusal
    	
 
    	
In the event that you propose to sell, pledge or otherwise transfer   to a third party any Shares acquired under this Agreement, or any interest in   such Shares, the Company shall have the “Right of First Refusal” with respect   to all (and not less than all) of such Shares.  If you desire to transfer Shares acquired   under this Agreement, you must give a written “Transfer Notice” to the   Company describing fully the proposed transfer, including the number of   Shares proposed to be transferred, the proposed transfer price and the name   and address of the proposed transferee.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
The Transfer Notice shall be signed both by you and by the proposed   new transferee and must constitute a binding commitment of both parties to   the transfer of the Shares.  The   Company shall have the right to purchase all, and not less than all, of the   Shares on the terms of the proposal described in the Transfer Notice (subject,   however, to any change in such terms permitted in the next paragraph) by   delivery of a notice of exercise of the Right of First Refusal within thirty   (30) days after the date when the Transfer Notice was received by the   Company.  The Company’s rights under   this subsection shall be freely assignable, in whole or in part.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
If the Company fails to exercise its Right of First Refusal within   thirty (30) days after the date when it received the Transfer Notice, you   may, not later than ninety (90) days following receipt of the Transfer Notice   by the Company, conclude a transfer of the Shares subject to the Transfer   Notice on the terms and conditions described in the Transfer Notice.  Any proposed transfer on terms and   conditions different from those described 
    

 

8

 

	
 
    	
 
    	
 
    	
in the Transfer Notice, as well as any subsequent proposed transfer   by you, shall again be subject to the Right of First Refusal and shall   require compliance with the procedure described in the paragraph above.  If the Company exercises its Right of First   Refusal, the parties shall consummate the sale of the Shares on the terms set   forth in the Transfer Notice within sixty (60) days after the date when   the Company received the Transfer Notice (or within such longer period as may   have been specified in the Transfer Notice); provided, however, that in the   event the Transfer Notice provided that payment for the Shares was to be made   in a form other than lawful money paid at the time of transfer, the Company   shall have the option of paying for the Shares with lawful money equal to the   present value of the consideration described in the Transfer Notice.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
The Company’s Right of First Refusal shall inure to the benefit of   its successors and assigns and shall be binding upon any transferee of the   Shares.

 

The Company’s Right of First Refusal shall terminate in the event   that Shares are listed on an established stock exchange or are quoted   regularly on the OTC Bulletin Board.
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Right   of Repurchase
    	
 
    	
Following your Termination Date after   termination of your Service for any reason, the Company shall have the right   to purchase all of those Shares that you have or will acquire under this   Option.  If the Company exercises its   right to purchase such Shares, the purchase price shall be the Fair Market   Value of those Shares on the date of purchase as determined by the Board of   Directors and shall be paid in cash.    The Company will notify you of its intention to purchase such Shares,   and will consummate the purchase within any time period established by   applicable law.  The Company’s right of repurchase shall inure to the   benefit of its successors and assigns and shall be binding upon any   transferee of the Shares.  The   Company’s rights under this subsection shall be freely assignable, in whole   or in part. The Company’s right of   repurchase shall terminate in the event that the Shares are listed on an   established stock exchange or are quoted regularly on the OTC Bulletin   Board.
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
Transfer   of Option
    	
 
    	
Prior to your death, only you may exercise this Option.  You cannot gift, transfer, assign,   alienate, pledge, hypothecate, attach, sell, or encumber this Option or   subject it to any short position, Call Equivalent Position or Put Equivalent   Position.  If you attempt to do any of   these things, this Option will immediately become invalid.  You may, however, dispose of this Option in   your will or it may be transferred by the laws of descent and distribution.  Regardless of any marital property 
    

 

9

 

	
 
    	
 
    	
 
    	
settlement agreement, the Company is not obligated to honor a notice   of exercise from your spouse, nor is the Company obligated to recognize your   spouse’s interest in your Option in any other way.
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Retention   Rights
    	
 
    	
Your Option or this Agreement does not give you the right to be   retained by the Company (or any Parent or any Subsidiaries or Affiliates) in   any capacity.  The Company (or any   Parent and any Subsidiaries or Affiliates) reserves the right to terminate   your Service at any time and for any reason.

 

This Option and the Shares subject to the Option are not intended to   constitute or replace any pension rights or compensation and are not to be   considered compensation of a continuing or recurring nature, or part of your   normal or expected compensation, and in no way represent any portion of your   salary, compensation or other remuneration for any purpose, including but not   limited to, calculating any severance, resignation, termination, redundancy,   dismissal, end of service payments, bonuses, long-service awards, pension or   retirement benefits or similar payments.
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
Stockholder   Rights
    	
 
    	
You, or your estate, shall have no rights as a stockholder of the   Company with regard to the Option until you have been issued the applicable   Shares by the Company and have satisfied all other conditions specified in   Section 4(f) of the Plan.  No   adjustment shall be made for cash or stock dividends or other rights for which   the record date is prior to the date when such applicable Shares are issued,   except as provided in the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
18.
    	
Adjustments
    	
 
    	
In the event of a stock split, a stock dividend or a similar change   in the Company stock, the number of Shares covered by this Option (rounded   down to the nearest whole number) and the Exercise Price per Share may be   adjusted pursuant to the Plan.  Your   Option shall be subject to the terms of the agreement of merger, liquidation   or reorganization in the event the Company is subject to such corporate   activity.
    
	
 
    	
 
    	
 
    	
 
    
	
19.
    	
Legends
    	
 
    	
All certificates representing the Shares issued upon exercise of this   Option may, where applicable, have endorsed thereon the following   legends and any other legend the Company determines appropriate:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN   RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH 
    

 

10

 

	
 
    	
 
    	
 
    	
SHARES SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE   REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH   AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE   FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER   OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE   SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR   OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH   ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,   THAT SUCH REGISTRATION IS NOT REQUIRED.”
    
	
 
    	
 
    	
 
    	
 
    
	
20.
    	
Applicable   Law
    	
 
    	
This Agreement will be interpreted and enforced under the laws of the   State of Delaware without reference to the conflicts of law provisions   thereof.
    
	
 
    	
 
    	
 
    	
 
    
	
21.
    	
Voluntary   Participant
    	
 
    	
You acknowledge that you are voluntarily participating in the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
22.
    	
No   Rights to Future Awards
    	
 
    	
Your rights, if any, in respect of or in connection with this Option   or any other Awards are derived solely from the discretionary decision of the   Company to permit you to participate in the Plan and to benefit from a   discretionary future Award.  By   accepting this Option, you expressly acknowledge that there is no obligation   on the part of the Company to continue the Plan and/or grant any additional   Awards to you or benefits in lieu of Options or any other Awards even if   Awards have been granted repeatedly in the past.  All decisions with respect to future   Awards, if any, will be at the sole discretion of the Committee.
    
	
 
    	
 
    	
 
    	
 
    
	
23.
    	
Future   Value
    	
 
    	
The future value of the underlying Shares is unknown and cannot be   predicted with certainty.  If the   underlying Shares do not increase in value after the Date of Option Grant,   the Option will have little or no value.    If you exercise the Option and obtain Shares, the value of the Shares   acquired upon exercise may increase or decrease in value, even below the   Exercise Price. 
    

 

11

 

	
24.
    	
No   Advice Regarding Grant
    	
 
    	
The Company has not provided any tax, legal or financial advice, nor   has the Company made any recommendations regarding your participation in the   Plan, or your acquisition or sale of the underlying Shares.  You are hereby advised to consult with your   own personal tax, legal and financial advisors regarding your participation   in the Plan before taking any action related to the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
25.
    	
No   Right to Damages
    	
 
    	
You will have no right to bring a claim or to receive damages if any   portion of the Option is cancelled or expires unexercised.  The loss of existing or potential profit in   the Option will not constitute an element of damages in the event of the   termination of your Service for any reason, even if the termination is in   violation of an obligation of the Company or a Parent or a Subsidiary or an   Affiliate to you.

 

Additionally, you understand and agree that the Company will not be   responsible for any adverse or unexpected tax consequences imposed by Code   Sections 409A, 422 or 280G or any other law or regulation and that you will   be solely responsible for any tax liability imposed on you as a result of   this Agreement.  Moreover, the Company   makes no representation or covenant to ensure that this Option is exempt from   Code Section 409A and will have no liability to you or any other party   if this Option, as amended, is not so exempt from or compliant with Code   Section 409A.
    

 

12

 

	
26.
    	
Data   Privacy
    	
 
    	
You hereby explicitly   and unambiguously consent to the collection, use and transfer, in electronic   or other form, of your personal data as described in this document by the   Company for the exclusive purpose of implementing, administering and managing   your participation in the Plan.  You   understand that the Company holds certain personal information about you,   including, but not limited to, name, home address and telephone number, date   of birth, social security or insurance number or other identification number,   salary, nationality, job title, any shares of stock or directorships held in   the Company, details of all Awards or any other entitlement to Shares   awarded, cancelled, purchased, exercised, vested, unvested or outstanding in   your favor for the purpose of implementing, managing and administering the   Plan (“Data”).  You understand that the   Data may be transferred to any third parties assisting in the implementation,   administration and management of the Plan, that these recipients may be   located in your country or elsewhere and that the recipient country may have   different data privacy laws and protections than your country.  You authorize the recipients to receive,   possess, use, retain and transfer the Data, in electronic or other form, for   the purposes of implementing, administering and managing your participation   in the Plan, including any requisite transfer of such Data, as may be   required to a broker or other third party with whom you may elect to deposit   any Shares acquired under the Plan.
    

 

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan.

 

13

 

GRANT NO. ________

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

NONSTATUTORY STOCK OPTION AGREEMENT

 

The Company hereby grants an Option to purchase Shares to the Optionee named below.  The terms and conditions of the Option are set forth in this cover sheet, in the attached Nonstatutory Stock Option Agreement and in the Tracon Pharmaceuticals, Inc. 2011 Equity Incentive Plan.  This cover sheet is incorporated into and a part of the attached Nonstatutory Stock Option Agreement (together, the “Agreement”).

 

Date of Option Grant:  __________________

 

Name of Optionee:  _________________________________________________

 

Number of Shares Covered by Option:  ______________

 

Exercise Price per Share:  $_____.___

 

Fair Market Value of a Share on Date of Option Grant:  $_____.___

 

Expiration Date:  _____________

 

Vesting Calculation Date:  _____________

 

Vesting Schedule:

 

Subject to all the terms of the Agreement and your continued Service, your right to purchase Shares under this Option shall vest as to one-fourth (1/4) of the total number of Shares covered by this Option, as shown above, on the first anniversary of the Vesting Calculation Date.  Thereafter, the number of Shares which you may purchase under this Option shall vest at the rate of one-forty-eighth (1/48) of the total number of Shares covered by this Option per calendar month on the last day of each of the thirty-five (35) months following the month of the first anniversary of the Vesting Calculation Date and the final one-forty-eighth (1/48) of the total number of Shares covered by this Option shall vest on the fourth anniversary of the Vesting Calculation Date.  In all cases, the resulting aggregate number of vested Shares will be rounded down to the nearest whole number.  No Shares subject to this Option will vest after your Service has terminated for any reason.

 

By signing this cover sheet, you agree to all of the terms and conditions described in the Agreement and in the Plan.  You are also acknowledging receipt of this Agreement and a copy of the Plan, a copy of which is also enclosed.

 

	
Optionee:
    	
 
    	
 
    
	
 
    	
(Signature)
    	
 
    
	
 
    	
 
    	
 
    
	
Company:
    	
 
    	
 
    
	
 
    	
(Signature)
    	
 
    

 

 

	
Title:
    	
 
    	
 
    

 

Attachment

 

2

 

TRACON PHARMACEUTICALS, INC.

2011 EQUITY INCENTIVE PLAN

 

NONSTATUTORY STOCK OPTION AGREEMENT

 

	
1.
    	
The   Plan and Other Agreements
    	
 
    	
The text of the Plan is incorporated in this Agreement by   reference.  Certain capitalized terms   used in this Agreement are defined in the Plan.

 

This Agreement and the Plan constitute the entire understanding   between you and the Company regarding this Option.  Any prior agreements, commitments or   negotiations concerning this Option are superseded.
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
Nonstatutory   Stock Option
    	
 
    	
This Option is not intended to be an Incentive Stock Option under   section 422 of the Code and will be interpreted accordingly.

 

This Option is not intended to be deferred compensation under section   409A of the Code and will be interpreted accordingly.
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
Vesting
    	
 
    	
This Option is only exercisable before it expires and only with   respect to the vested portion of the Option.    This Option will vest according to the Vesting Schedule described in   the cover sheet of this Agreement.
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Term
    	
 
    	
Your Option will expire in all cases no later than the close of   business at Company headquarters on the Expiration Date, as shown on the   cover sheet.  Your Option may expire   earlier if your Service terminates, as described in Sections 5, 6 and 7 below   or on the date on which the Option is cancelled (and not substituted   or assumed) pursuant to a Change in Control or merger or acquisition or   reorganization or similar transaction involving the Company.
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Termination   of Service - General
    	
 
    	
If, while the Option is outstanding, your Service terminates for any   reason, other than being terminated by the Company for Cause or due to your   death or Disability, then the unvested portion of your Option shall be forfeited without   consideration and shall immediately expire on your Termination Date and the   vested portion of your Option will expire at the earlier of   (i) the close of business at Company headquarters on the date that is ninety (90) days   after your Termination Date, (ii) the Expiration Date set forth   in the attached cover sheet and further described in Section 4 above, or   (iii) the date on which the Option is cancelled (and not substituted or   assumed) pursuant to a Change in Control or merger or acquisition or   reorganization or similar transaction involving the Company.  In   no event is the Option exercisable after the Expiration Date.
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Termination   of 
    	
 
    	
If your Service is terminated by the Company for Cause or if you 
    

 

3

 

	
 
    	
Service   for Cause
    	
 
    	
commit an act(s) of Cause while this Option is outstanding, as   determined by the Committee in its sole discretion, then you shall   immediately forfeit all rights to your Option without consideration,   including any vested portion of the Option, and the entire Option shall   immediately expire, and any rights, payments and benefits with respect to the   Option shall be subject to reduction or recoupment in accordance with the   Clawback Policy and the Plan.  For   avoidance of doubt, your Service shall also be deemed to have been   terminated for Cause by the Company if, after your Service has otherwise   terminated, facts and circumstances are discovered that would have justified   a termination for Cause, including, without limitation, your violation of   Company policies or breach of confidentiality or other restrictive covenants   or conditions that may apply to you prior to or after your Termination Date.
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Termination   of Service due to Death or Disability
    	
 
    	
If your Service terminates because of your death or Disability, then   the unvested portion of your Option shall be forfeited without consideration   and shall immediately expire on your Termination Date and the vested portion   of your Option will expire at the earlier of (i) the close of   business at Company headquarters on the date that is six (6) months after your Termination   Date, (ii) the Expiration Date set forth in the attached cover sheet and   further described in Section 4 above, or (iii) the date on which   the Option is cancelled (and not substituted or assumed) pursuant to a Change   in Control or merger or acquisition or similar transaction involving the   Company.  In no event is the Option exercisable after the Expiration Date.  If your Service terminated due to your   death, then your estate may exercise the vested portion of your Option during   the foregoing post-Service exercise period.
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
Leaves   of Absence
    	
 
    	
For purposes of this Option, your Service does not terminate when you   go on a bona fide leave of absence that was   approved by the Company in writing, if the terms of the leave provide for   continued Service crediting, or when continued Service crediting is required   by applicable law.  Your Service   terminates in any event when the approved leave ends unless you immediately   return to active work.

 

The Company determines which leaves count for this purpose (along   with determining the effect of a leave of absence on vesting of the Option),   and when your Service terminates for all purposes under the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
Notice   of Exercise
    	
 
    	
When you wish to exercise this Option, you must notify the Company by   filing a “Notice of Exercise” form at the address given on the form.  Your notice must specify how many Shares   you wish to purchase.  Your notice must   also specify how your 
    

 

4

 

	
 
    	
 
    	
 
    	
Shares should be registered (in your name only or in your and your   spouse’s names as community property or as joint tenants with right of   survivorship).  The notice will be   effective when it is received by the Company.

 

If someone else wants to exercise this Option after your death, that   person must prove to the Company’s satisfaction that he or she is entitled to   do so.
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Form of   Payment
    	
 
    	
When you submit your notice of exercise, you must include payment of   the Exercise Price for the Shares you are purchasing.  Payment may be made in one (or a   combination) of the following forms:

 

·    Cash, your personal check, a cashier’s   check or a money order.

 

·    Shares which have already been owned by   you for more than six (6) months and which are surrendered to the   Company.  The Fair Market Value of the   Shares, determined as of the effective date of the Option exercise, will be   applied to the Exercise Price.

 

·    To the extent a public market for the   Shares exists as determined by the Company, by Cashless Exercise through   delivery (on a form prescribed by the Company) of an irrevocable direction to   a securities broker to sell Shares and to deliver all or part of the sale   proceeds to the Company in payment of the aggregate Exercise Price.
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
Withholding   Taxes
    	
 
    	
You will be solely responsible for payment of any and all applicable   taxes associated with this Option.

 

You will not be allowed to exercise this Option unless you make   acceptable arrangements to pay any withholding or other taxes that may be due   as a result of the Option exercise or sale of Shares acquired under this   Option.
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Restrictions   on Exercise and Resale
    	
 
    	
By signing this   Agreement, you agree not to (i) exercise this Option (“Exercise   Prohibition”), or (ii) sell, transfer, dispose of, pledge, hypothecate,   make any short sale of, or otherwise effect a similar transaction of any   Shares acquired under this Option (each a “Sale Prohibition”) at a time when   applicable laws, regulations or Company or underwriter trading policies   prohibit the exercise or disposition of Shares.  The Company will not permit you to exercise this Option if the   issuance of Shares at that time would violate any law or regulation.  The Company shall have the right to   designate one or more periods of time, each of which generally will not   exceed one hundred eighty (180) days in length (provided 
    

 

5

 

	
 
    	
 
    	
 
    	
however, that such period   may be extended in connection with the Company’s release (or announcement of   release) of earnings results or other material news or events), and to impose   an Exercise Prohibition and/or Sale Prohibition, if the Company determines   (in its sole discretion) that such limitation(s) is needed in connection   with a public offering of Shares or to comply with an underwriter’s request   or trading policy, or could in any way facilitate a lessening of any   restriction on transfer pursuant to the Securities Act or any state   securities laws with respect to any issuance of securities by the Company,   facilitate the registration or qualification of any securities by the Company   under the Securities Act or any state securities laws, or facilitate the   perfection of any exemption from the registration or qualification   requirements of the Securities Act or any applicable state securities laws   for the issuance or transfer of any securities.  The Company may issue stop/transfer   instructions and/or appropriately legend any stock certificates issued   pursuant to this Option in order to ensure compliance with the   foregoing.  Any such Exercise   Prohibition shall not alter the vesting schedule set forth in this Agreement   other than to limit the periods during which this Option shall be   exercisable.

 

If the sale of Shares   under the Plan is not registered under the Securities Act, but an exemption   is available which requires an investment or other representation, you shall   represent and agree at the time of exercise that the Shares being acquired   upon exercise of this Option are being acquired for investment, and not with   a view to the sale or distribution thereof, and shall make such other   representations as are deemed necessary or appropriate by the Company and its   counsel.

 

You may also be   required, as a condition of exercise of this Option, to enter into any   Stockholders Agreement or other agreements that are applicable to   stockholders.
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
The   Company’s Right of First Refusal
    	
 
    	
In the event that you propose to sell, pledge or otherwise transfer   to a third party any Shares acquired under this Agreement, or any interest in   such Shares, the Company shall have the “Right of First Refusal” with respect   to all (and not less than all) of such Shares.  If you desire to transfer Shares acquired   under this Agreement, you must give a written “Transfer Notice” to the   Company describing fully the proposed transfer, including the number of   Shares proposed to be transferred, the proposed transfer price and the name   and address of the proposed transferee.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
The Transfer Notice shall be signed both by you and by the proposed   new transferee and must constitute a binding commitment of both parties to   the transfer of the Shares.  The 
    

 

6

 

	
 
    	
 
    	
 
    	
Company shall have the right to purchase all, and not less than all,   of the Shares on the terms of the proposal described in the Transfer Notice   (subject, however, to any change in such terms permitted in the next   paragraph) by delivery of a notice of exercise of the Right of First Refusal   within thirty (30) days after the date when the Transfer Notice was received   by the Company.  The Company’s rights   under this subsection shall be freely assignable, in whole or in part.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
If the Company fails to exercise its Right of First Refusal within   thirty (30) days after the date when it received the Transfer Notice, you   may, not later than ninety (90) days following receipt of the Transfer Notice   by the Company, conclude a transfer of the Shares subject to the Transfer   Notice on the terms and conditions described in the Transfer Notice.  Any proposed transfer on terms and   conditions different from those described in the Transfer Notice, as well as   any subsequent proposed transfer by you, shall again be subject to the Right   of First Refusal and shall require compliance with the procedure described in   the paragraph above.  If the Company   exercises its Right of First Refusal, the parties shall consummate the sale   of the Shares on the terms set forth in the Transfer Notice within sixty   (60) days after the date when the Company received the Transfer Notice   (or within such longer period as may have been specified in the Transfer   Notice); provided, however, that in the event the Transfer Notice provided   that payment for the Shares was to be made in a form other than lawful money   paid at the time of transfer, the Company shall have the option of paying for   the Shares with lawful money equal to the present value of the consideration   described in the Transfer Notice.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
The Company’s Right of First Refusal shall inure to the benefit of   its successors and assigns and shall be binding upon any transferee of the   Shares.

 

The Company’s Right of First Refusal shall terminate in the event   that Shares are listed on an established stock exchange or are quoted   regularly on the OTC Bulletin Board.
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Right   of Repurchase
    	
 
    	
Following your Termination Date after   termination of your Service for any reason, the Company shall have the right   to purchase all of those Shares that you have or will acquire under this   Option.  If the Company exercises its   right to purchase such Shares, the purchase price shall be the Fair Market   Value of those Shares on the date of purchase as determined by the Board of   Directors and shall be paid in cash.  The   Company will notify you of its intention to purchase such Shares, and will   consummate the purchase within any time period established by applicable   law.  
    

 

7

 

	
 
    	
 
    	
 
    	
The Company’s right of repurchase   shall inure to the benefit of its successors and assigns and shall be   binding upon any transferee of the Shares.    The Company’s rights under this subsection shall be freely assignable,   in whole or in part. The Company’s   right of repurchase shall terminate in the event that the Shares are listed   on an established stock exchange or are quoted regularly on the OTC   Bulletin Board.
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
Transfer   of Option
    	
 
    	
Prior to your death, only you may exercise this Option.  You cannot gift, transfer, assign,   alienate, pledge, hypothecate, attach, sell, or encumber this Option or   subject it to any short position, Call Equivalent Position or Put Equivalent   Position.  If you attempt to do any of   these things, this Option will immediately become invalid.  You may, however, dispose of this Option in   your will or it may be transferred by the laws of descent and   distribution.  Regardless of any   marital property settlement agreement, the Company is not obligated to honor   a notice of exercise from your spouse, nor is the Company obligated to   recognize your spouse’s interest in your Option in any other way.
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Retention   Rights
    	
 
    	
Your Option or this Agreement does not give you the right to be   retained by the Company (or any Parent or any Subsidiaries or Affiliates) in   any capacity.  The Company (or any   Parent and any Subsidiaries or Affiliates) reserves the right to terminate   your Service at any time and for any reason.

 

This Option and the Shares subject to the Option are not intended to   constitute or replace any pension rights or compensation and are not to be   considered compensation of a continuing or recurring nature, or part of your   normal or expected compensation, and in no way represent any portion of your   salary, compensation or other remuneration for any purpose, including but not   limited to, calculating any severance, resignation, termination, redundancy,   dismissal, end of service payments, bonuses, long-service awards, pension or   retirement benefits or similar payments.
    
	
 
    	
 
    	
 
    	
 
    
	
17.
    	
Stockholder   Rights
    	
 
    	
You, or your estate, shall have no rights as a stockholder of the   Company with regard to the Option until you have been issued the applicable   Shares by the Company and have satisfied all other conditions specified in   Section 4(f) of the Plan.  No   adjustment shall be made for cash or stock dividends or other rights for   which the record date is prior to the date when such applicable Shares are   issued, except as provided in the Plan.
    

 

8

 

	
18.
    	
Adjustments
    	
 
    	
In the event of a stock split, a stock dividend or a similar change   in the Company stock, the number of Shares covered by this Option (rounded   down to the nearest whole number) and the Exercise Price per Share may be   adjusted pursuant to the Plan.  Your   Option shall be subject to the terms of the agreement of merger, liquidation   or reorganization in the event the Company is subject to such corporate   activity.
    
	
 
    	
 
    	
 
    	
 
    
	
19.
    	
Legends
    	
 
    	
All certificates representing the Shares issued upon exercise of this   Option may, where applicable, have endorsed thereon the following   legends and any other legend the Company determines appropriate:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN   RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN   AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER   PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL   OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE   SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY   THIS CERTIFICATE.”
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE   SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR   OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH   ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,   THAT SUCH REGISTRATION IS NOT REQUIRED.”
    
	
 
    	
 
    	
 
    	
 
    
	
20.
    	
Applicable   Law
    	
 
    	
This Agreement will be interpreted and enforced under the laws of the   State of Delaware without reference to the conflicts of law provisions   thereof.
    
	
 
    	
 
    	
 
    	
 
    
	
21.
    	
Voluntary   Participant
    	
 
    	
You acknowledge that you are voluntarily participating in the Plan.
    

 

9

 

	
22.
    	
No   Rights to Future Awards
    	
 
    	
Your rights, if any, in respect of or in connection with this Option   or any other Awards are derived solely from the discretionary decision of the   Company to permit you to participate in the Plan and to benefit from a   discretionary future Award.  By   accepting this Option, you expressly acknowledge that there is no obligation   on the part of the Company to continue the Plan and/or grant any additional   Awards to you or benefits in lieu of Options or any other Awards even if   Awards have been granted repeatedly in the past.  All decisions with respect to future   Awards, if any, will be at the sole discretion of the Committee.
    
	
 
    	
 
    	
 
    	
 
    
	
23.
    	
Future   Value
    	
 
    	
The future value of the underlying Shares is unknown and cannot be   predicted with certainty.  If the   underlying Shares do not increase in value after the Date of Option Grant,   the Option will have little or no value.    If you exercise the Option and obtain Shares, the value of the Shares   acquired upon exercise may increase or decrease in value, even below the   Exercise Price. 
    
	
 
    	
 
    	
 
    	
 
    
	
24.
    	
No   Advice Regarding Grant
    	
 
    	
The Company has not provided any tax, legal or financial advice, nor   has the Company made any recommendations regarding your participation in the   Plan, or your acquisition or sale of the underlying Shares.  You are hereby advised to consult with your   own personal tax, legal and financial advisors regarding your participation   in the Plan before taking any action related to the Plan.
    
	
 
    	
 
    	
 
    	
 
    
	
25.
    	
No   Right to Damages
    	
 
    	
You will have no right to bring a claim or to receive damages if any   portion of the Option is cancelled or expires unexercised.  The loss of existing or potential profit in   the Option will not constitute an element of damages in the event of the   termination of your Service for any reason, even if the termination is in   violation of an obligation of the Company or a Parent or a Subsidiary or an   Affiliate to you.

 

Additionally, you understand and agree that the Company will not be   responsible for any adverse or unexpected tax consequences imposed by Code   Sections 409A, 422 or 280G or any other law or regulation and that you will   be solely responsible for any tax liability imposed on you as a result of   this Agreement.  Moreover, the Company   makes no representation or covenant to ensure that this Option is exempt from   Code Section 409A and will have no liability to you or any other party   if this Option, as amended, is not so exempt from or compliant with Code   Section 409A.
    

 

10

 

	
26.
    	
Data   Privacy
    	
 
    	
You hereby explicitly   and unambiguously consent to the collection, use and transfer, in electronic   or other form, of your personal data as described in this document by the   Company for the exclusive purpose of implementing, administering and managing   your participation in the Plan.  You   understand that the Company holds certain personal information about you,   including, but not limited to, name, home address and telephone number, date   of birth, social security or insurance number or other identification number,   salary, nationality, job title, any shares of stock or directorships held in   the Company, details of all Awards or any other entitlement to Shares   awarded, cancelled, purchased, exercised, vested, unvested or outstanding in   your favor for the purpose of implementing, managing and administering the   Plan (“Data”).  You understand that the   Data may be transferred to any third parties assisting in the implementation,   administration and management of the Plan, that these recipients may be   located in your country or elsewhere and that the recipient country may have   different data privacy laws and protections than your country.  You authorize the recipients to receive,   possess, use, retain and transfer the Data, in electronic or other form, for   the purposes of implementing, administering and managing your participation   in the Plan, including any requisite transfer of such Data, as may be   required to a broker or other third party with whom you may elect to deposit   any Shares acquired under the Plan.
    

 

By signing the cover sheet of this Agreement, you agree to all of the terms and
 conditions described above and in the Plan.

 

11

 

TRACON PHARMACEUTICALS, INC.
 NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION BY OPTIONEE

 

Tracon Pharmaceuticals, Inc.
 8910 University Center Dr., Suite 700

San Diego, CA  92122
 Attention:  Secretary

 

	
Re:
    	
Exercise of Incentive Stock Option to   Purchase Shares of Company Stock
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
[PRINT NAME OF OPTIONEE]
    	
 
    

 

Pursuant to the Incentive Stock Option Agreement dated ___________________, ______ between Tracon Pharmaceuticals, Inc., a Delaware corporation, (the “Company”) and me, made pursuant to the 2011Equity Incentive Plan (the “Plan”), I hereby request to purchase _______ Shares (whole number only and must be not less than twenty-five Shares or the remaining number of vested Shares subject to this Option) of common stock of the Company (the “Shares”), at the exercise price of $__________ per Share.  I am hereby making full payment of the aggregate exercise price by one or more of the following forms of payment in accordance with the whole number percentages that I have provided below.  I further understand and agree that I will timely satisfy any and all applicable tax withholding obligations as a condition of this Option exercise.

 

	
Percentage
    	
 
    	
 
    
	
of Payment
    	
 
    	
Form of Payment As Provided In the   Incentive Stock Option Agreement
    
	
 
    	
 
    	
 
    
	
            %
    	
 
    	
Cash/My Personal Check/Cashier’s Check/Money   Order (payable to “Tracon Pharmaceuticals, Inc.”)
    
	
 
    	
 
    	
 
    
	
            %
    	
 
    	
Surrender of vested Shares (Valued At Their   Fair Market Value) Owned
    
	
  100%
    	
 
    	
By Me For More Than Six (6) Months
    

 

	
Check one:
    	
o The Shares certificate is to be issued and registered in my name   only.
    
	
 
    	
 
    
	
 
    	
o The Shares certificate is to be issued and registered in my name and   my spouse’s name.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[PRINT SPOUSE’S NAME, IF CHECKING SECOND BOX]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Check one (if checked second box above):
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
o Community Property or  o Joint Tenants With Right of Survivorship
    

 

I acknowledge that I have received, understand and continue to be bound by all of the terms and conditions set forth in the Plan and in the Incentive Stock Option Agreement.

 

Dated:  __________________

 

	
 
    	
 
    	
 
    
	
(Optionee’s   Signature)
    	
 
    	
(Spouse’s   Signature)**
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
**Spouse must sign this   Notice of Exercise if listed above.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Full Address)
    	
 
    	
(Full Address)
    

 

*THIS NOTICE OF EXERCISE MAY BE REVISED BY THE COMPANY AT ANY TIME WITHOUT NOTICE.

 

 

TRACON PHARMACEUTICALS, INC.
 NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION BY OPTIONEE

 

Tracon Pharmaceuticals, Inc.
 8910 University Center Dr., Suite 700

San Diego, CA  92122
 Attention:  Secretary

 

	
Re:
    	
Exercise of Nonstatutory Stock Option to   Purchase Shares of Company Stock
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
[PRINT NAME OF OPTIONEE]
    	
 
    

 

Pursuant to the Nonstatutory Stock Option Agreement dated ___________________, ______ between Tracon Pharmaceuticals, Inc., a Delaware corporation, (the “Company”) and me, made pursuant to the 2011 Equity Incentive Plan (the “Plan”), I hereby request to purchase _______ Shares (whole number only and must be not less than twenty-five Shares or the remaining number of vested Shares subject to this Option) of common stock of the Company (the “Shares”), at the exercise price of $__________ per Share.  I am hereby making full payment of the aggregate exercise price by one or more of the following forms of payment in accordance with the whole number percentages that I have provided below.  I further understand and agree that I will timely satisfy any and all applicable tax withholding obligations as a condition of this Option exercise.

 

	
 
    	
Percentage
    	
 
    
	
 
    	
of Payment
    	
Form of Payment As Provided In the Nonstatutory   Stock Option Agreement
    
	
 
    	
 
    	
 
    
	
 
    	
             %
    	
Cash/My Personal Check/Cashier’s Check/Money   Order (payable to “Tracon Pharmaceuticals, Inc.”)
    
	
 
    	
 
    	
 
    
	
 
    	
             %
    	
Surrender of vested Shares (Valued At Their   Fair Market Value) Owned
    
	
 
    	
   100%
    	
By Me For More Than Six (6) Months
    

 

	
Check one:
    	
 ̈ The Shares certificate is to be issued and registered in my name   only.
    
	
 
    	
 
    
	
 
    	
 ̈ The Shares certificate is to be issued and registered in my name and   my spouse’s name.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
[PRINT SPOUSE’S NAME, IF CHECKING SECOND BOX]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Check one (if checked second box above):
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 ̈ Community Property or   ̈ Joint Tenants With Right of Survivorship
    

 

I acknowledge that I have received, understand and continue to be bound by all of the terms and conditions set forth in the Plan and in the Nonstatutory Stock Option Agreement.

 

Dated:  __________________

 

	
 
    	
 
    	
 
    
	
(Optionee’s   Signature)
    	
 
    	
(Spouse’s   Signature)**
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
**Spouse must sign this   Notice of Exercise if listed above.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Full Address)
    	
 
    	
(Full Address)
    

 

*THIS NOTICE OF EXERCISE MAY BE REVISED BY THE COMPANY AT ANY TIME WITHOUT NOTICE.

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