Document:

Exhibit

Exhibit 10.4

TRANSITION AGREEMENT AND RELEASE

This Transition Agreement and Release (“Agreement”) is made by and between Terence E. Winters (“Executive”) and Vital Therapies, Inc. (the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).

RECITALS

WHEREAS, Executive signed an employment letter with the Company on October 31, 2013 (the “Offer Letter”) and a Change of Control and Severance Agreement on October 31, 2013 (the “Severance Agreement”);

WHEREAS, Executive previously signed an Employee Innovations and Proprietary Rights Assignment Agreement with the Company (the “Confidentiality Agreement”);
WHEREAS, Executive previously was granted and continues to hold outstanding stock options to purchase shares of the Company’s common stock (each, an “Option”) that are subject to the terms and conditions of the applicable Company stock plan and the applicable Option agreement (collectively the “Stock Agreements”);

WHEREAS, Executive and the Company have mutually agreed that Executive will separate from employment with the Company effective December 31, 2017 (the “Separation Date”); 

WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that the Executive may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Executive’s employment with or separation from the Company; and

WHEREAS, Executive has been the Chief Executive Officer of the Company for over 14 years, it is the intent of all Parties to ensure a smooth transition to the new Chief Executive Officer on Executive’s retirement from the Company and to make available the legacy knowledge of Executive under the Consulting Agreement (as defined below), and it being the further intent of the Parties to make the transition amicable and for all parties to act in the best interests of the Company.

NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:

COVENANTS

1.Consideration.  In consideration of Executive’s execution and non-revocation of this Agreement and Executive’s fulfillment of all of its terms and conditions the Company agrees as follows:

a.Payment.  The Company agrees to pay Executive a total of $504,700.00 Dollars, at the rate of $42,508.33 per month, less applicable withholdings, for twelve (12) months beginning on the first regular Company payroll date in accordance with the Company’s regular payroll practices on or following the later of the Effective Date or the Separation Date.  For the avoidance of doubt, if the Effective Date is after the Separation Date the first payment made to Executive pursuant to this Section 1.a will include any severance payments that would have otherwise been paid to Executive if the Effective Date was on or before the Separation Date.

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b.Health Insurance.  The Company shall also pay or otherwise reimburse Executive for the cost of his health insurance premiums (including, but not limited to premiums for the coverage for which the Company has been providing reimbursement) for up to $1,700 per month for twelve (12) months beginning on the first month following the Effective Date in accordance with the Company’s current practices and procedures.  

c.Payment of 2017 Bonus. The Company shall pay to Executive 100% of his achieved 2017 performance bonus (if any) based on the achievement of the relevant performance conditions as determined by the Board of Directors pursuant to the Company’s 2017 Bonus Program.  Such bonus amount will be paid to Executive at the same time that other executives of the Company receive their 2017 bonuses, which is expected to be immediately after the Company’s January 2018 Board of Directors’ meeting. For the avoidance of doubt, as detailed in the Company’s 2017 Bonus Program, participants are required to be employed by the Company at the time bonuses are paid, but this requirement will be waived for Executive pursuant to the terms of this Agreement. 

d.Extension of the Post-Termination Option Exercise Period.  The Company shall extend the exercise period for each Option to the earlier of: (i) the end of such Option’s maximum term or (ii) in connection with a “change in control” (or similar transaction) in accordance with the terms of the applicable Company stock plan governing such Option.

e.Post-Employment Consulting Services.  Contingent upon the signing of this Agreement and effective as of the Separation Date, the Company agrees to retain Executive to perform transition services for the Company as a Consultant, in which role Executive shall provide ad hoc consulting services (the “Consulting Services”) to the Company as an independent contractor pursuant to the terms of the Consulting Agreement attached hereto as Exhibit A (the “Consulting Agreement”) for the period of time set forth in the Consulting Agreement (such period the “Consulting Period”).  Nothing in this Agreement or the Consulting Agreement pertaining to Executive’s anticipated role as a Consultant shall in any way be construed to constitute Executive as a continuing agent, employee, officer, executive, or representative of the Company after the Separation Date, but Executive shall perform the services under the Consulting Agreement solely as an independent contractor. There will be no break in Executive’s service to the Company between the Separation Date and the commencement of the Consulting Period.
 
f.Supplemental Release. The Parties agree to execute the release attached hereto as Exhibit B, covering the period of time from the Effective Date through the Consulting Period and the termination of the Consulting Agreement (the “Supplemental Release”).  If Executive refuses to sign the Supplemental Release, Executive will not receive the additional consideration described in Paragraph 2 of the Supplemental Release.

2.Resignation from Board.  Effective as of the Separation Date, Executive hereby resigns from his seat on the Company’s Board of Directors (the “Board”) and any position he holds as an officer and director of any subsidiary of the Company.  Executive also agrees to execute any necessary forms or other documents required to effect such resignation(s) as a matter of state, federal, or foreign law (and a resignation letter that may be required in the event the Company identifies any additional subsidiaries not listed here).

3.Stock.  The Parties agree that the Options will continue to vest and remain exercisable in accordance with the terms of the Consulting Agreement (except as amended therein and by Section 1(d) of this Agreement) and the Stock Agreements (except as amended by Section 1(d) of this Agreement). 

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4.Benefits; Payment of Salary and Receipt of All Benefits.  Executive’s participation in all benefits and incidents of employment, including, but not limited to, vacation, and paid time off, will cease as of the Separation Date.  Executive acknowledges and represents that as of the date Executive signs this Agreement, other than the consideration set forth in this Agreement, the Company has paid or provided all benefits and compensation due to Executive as a result of his employment with the Company that was due or payable on or before the date of signature.  For the avoidance of doubt, Executive will be entitled to salary, benefits and expense reimbursement accrued or payable prior to the Separation Date the same as if this Agreement did not exist.

5.Release of Claims.  Executive agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company and its current and former officers, directors, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, professional employer organization or co-employer, insurers, trustees, divisions, and subsidiaries, and predecessor and successor corporations and assigns, (collectively, the “Releasees”). Executive, on Executive’s own behalf and on behalf of Executive’s respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, demand, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement, including, without limitation:

a.    any and all claims relating to or arising from Executive’s employment relationship with the Company and the termination of that relationship; 

b.    any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

c.    any and all claims for wrongful discharge of employment, termination in violation of public policy, discrimination, harassment, retaliation, breach of contract (both express and implied), breach of covenant of good faith and fair dealing (both express and implied), promissory estoppel, negligent or intentional infliction of emotional distress, fraud, negligent or intentional misrepresentation, negligent or intentional interference with contract or prospective economic advantage, unfair business practices, defamation, libel, slander, negligence, personal injury, assault, battery, invasion of privacy, false imprisonment, conversion, and disability benefits;

d.    any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the Equal Pay Act, the Fair Labor Standards Act, the Fair Credit Reporting Act, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, the Family and Medical Leave Act, the Sarbanes-Oxley Act of 2002, Immigration Reform and Control Act, the California Family Rights Act, the California Labor Code, the California Workers’ Compensation Act, the California Fair Employment and Housing Act, the Arizona Civil Rights Act, the Arizona Employment Protection Act, the Arizona Wage Payment Law, the Arizona Equal Wages Act, the Arizona Workplace Harassment Law, and the Arizonians with Disabilities Act; 

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e.    any and all claims for violation of the federal or any state constitution;

f.    any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

g.    any claim for any loss, cost, damage, or expense arising out of any dispute over the nonwithholding or other tax treatment of any of the proceeds received by Executive as a result of this Agreement; and

h.    any and all claims for attorneys’ fees and costs.

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred under this Agreement. This release does not extend to any right Executive may have to unemployment compensation benefits.  This release does not release claims that cannot be released as a matter of law, including any Protected Activity (as defined below) or any indemnification rights available under any indemnification agreement or other agreement between Executive and the Company, Company Bylaws, or under applicable law. Any and all disputed wage claims that are released herein shall be subject to binding arbitration as noted herein, except as required by applicable law. 

6.Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that Executive is waiving and releasing any rights Executive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary.  Executive agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement.  Executive acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Executive was already entitled.  Executive further acknowledges that Executive has been advised by this writing that: (a) Executive should consult with an attorney prior to executing this Agreement; (b) Executive has twenty-one (21) days within which to consider this Agreement; (c) Executive has seven (7) days following Executive’s execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law.  In the event Executive signs this Agreement and returns it to the Company in less than the 21-day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted for considering this Agreement.  Executive acknowledges and understands that revocation must be accomplished by a written notification to the person executing this Agreement on the Company’s behalf that is received prior to the Effective Date.  The Parties agree that changes, whether material or immaterial, do not restart the running of the 21-day period.

7.Unknown Claims; California Civil Code Section 1542.  Executive acknowledges that Executive has been advised to consult with legal counsel and is familiar with the principle that a general release does not extend to claims that the releaser does not know or suspect to exist in Executive’s favor at the time of executing the release, which, if known by Executive, must have materially affected Executive’s settlement with the release and the provisions of California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR 

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AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Executive, being aware of said code section, agrees to expressly waive any rights Executive may have thereunder, as well as under any other statute or common law principles of similar effect.

8.No Cooperation.  Subject to paragraph 9 governing Protected Activity, Executive agrees that Executive will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, in all cases, unless under a subpoena or other court order to do so or as related directly to the ADEA waiver in this Agreement.  Executive agrees both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or other court order.  If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Executive shall state no more than that Executive cannot provide counsel or assistance.  For the avoidance doubt, the restrictions in this paragraph shall not prevent Executive from serving as an employment reference to any existing or former employee of the Company.

9.Protected Activity Not Prohibited.  Executive understands that nothing in this Agreement shall in any way limit or prohibit Executive from engaging in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall mean filing a charge, complaint, or report with, or otherwise communicating, cooperating, or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board (“Government Agencies”). Executive understands that in connection with such Protected Activity, Executive is permitted to disclose documents or other information as permitted by law, and without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, Executive agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Company confidential information under the Confidentiality Agreement to any parties other than the Government Agencies. Executive further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications. Any language in the Confidentiality Agreement regarding Executive’s right to engage in Protected Activity that conflicts with, or is contrary to, this paragraph is superseded by this Agreement. In addition, pursuant to the Defend Trade Secrets Act of 2016, Executive is notified that an individual will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made in confidence to a federal, state, or local government official (directly or indirectly) or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if (and only if) such filing is made under seal. In addition, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the individual’s attorney and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. 
 
10.Mutual Nondisparagement.  Subject to paragraph 9 governing Protected Activity, Executive agrees to refrain from any disparagement, defamation, libel, or slander of any of the Releasees, and agrees to refrain from any tortious interference with the contracts and relationships of any of the Releasees.  Executive shall direct any inquiries by potential future employers to the Company’s human resources department.  The Company agrees to refrain from any disparaging statements about Executive. The Company’s obligations 

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under this paragraph extend only to the Company’s current executive officers and members of its Board of Directors and only for so long as each officer or member is an employee or Director of the Company.

11.Breach.  In addition to the rights provided in the “Attorneys’ Fees” section below, Executive acknowledges and agrees that any material breach of this Agreement by Executive, unless such breach constitutes a legal action by Executive challenging or seeking a determination in good faith of the validity of the waiver herein under the ADEA, or of any provision of the Confidentiality Agreement shall entitle the Company to cease providing the consideration provided to Executive under this Agreement, including the Consulting Agreement, and to obtain damages, except as provided by law.  

12.ARBITRATION.  THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN RELEASED, SHALL BE SUBJECT TO ARBITRATION IN THE COUNTY IN WHICH EMPLOYEE RESIDES, BEFORE THE JUDICIAL ARBITRATION AND MEDIATION SERVICE (“JAMS”) UNDER ITS COMPREHENSIVE ARBITRATION RULES (“JAMS RULES”) AND ARIZONA LAW.  THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES.  THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH ARIZONA LAW, AND THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL ARIZONA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION.  TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH ARIZONA LAW, ARIZONA LAW SHALL TAKE PRECEDENCE.  THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE ARBITRATION.  THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION SHALL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD.  THE PARTIES TO THE ARBITRATION SHALL EACH PAY HALF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH PARTY SHALL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW.  THE PARTIES AGREE THAT PUNITIVE DAMAGES SHALL BE UNAVAILABLE IN ARBITRATION.  THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY.  NOTWITHSTANDING THE FOREGOING, THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE. SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS ARBITRATION AGREEMENT SHALL GOVERN.

13.Tax Consequences.  The Company makes no representations or warranties with respect to the tax consequences of the payments and any other consideration provided to Executive or made on Executive’s behalf under the terms of this Agreement.  Executive agrees and understands that Executive is responsible for payment, if any, of local, state, and/or federal taxes on the payments and any other consideration provided hereunder by the Company and any penalties or assessments thereon.  Executive further agrees to indemnify and hold the Releasees harmless from any claims, demands, deficiencies, penalties, interest, assessments, executions, judgments, or recoveries by any government agency against the Company for any amounts claimed due on account of (a) Executive’s failure to pay or delayed payment of federal or state taxes, or (b) damages sustained by the Company by reason of any such claims, including 

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attorneys’ fees and costs.  It is intended that this Agreement comply with, or be exempt from, Code Section 409A and the final regulations and official guidance thereunder (“Section 409A”) and any ambiguities herein will be interpreted to so comply and/or be exempt from Section 409A.  Each payment and benefit to be paid or provided under this Agreement is intended to constitute a series of separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.  The Company and Executive will work together in good faith to consider either (i) amendments to this Agreement; or (ii) revisions to this Agreement with respect to the payment of any awards, which are necessary or appropriate to avoid imposition of any additional tax or income recognition prior to the actual payment to Executive under Section 409A.  

14.Attorneys’ Fees.  Except with regard to a legal action challenging or seeking a determination in good faith of the validity of the waiver herein under the ADEA, in the event that either Party brings an action to enforce or effect its rights under this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including the costs of mediation, arbitration, litigation, court fees, and reasonable attorneys’ fees incurred in connection with such an action.  The Company agrees to pay or otherwise reimburse Executive for the costs of negotiating the Agreement, Consulting Agreement, and Supplemental Release, in accordance with the Company’s expense policy. 

15.Entire Agreement; No Oral Modification.  This Agreement represents the entire agreement and understanding between the Company and Executive concerning the subject matter of this Agreement and Executive’s employment with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Agreement and Executive’s relationship with the Company, with the exception of the Confidentiality Agreement (to which the Executive reaffirms and agrees to observe and abide by the terms) and the Stock Agreements (except as otherwise modified or superseded herein), or any indemnification rights available under any indemnification agreement or other agreement between Executive and the Company, Company Bylaws, or under applicable law (in all cases, except as modified by Section 18 of this Agreement).  This Agreement may only be amended in a writing signed by Executive and the Company’s Chair of the Board of Directors.

16.Governing Law.  This Agreement shall be governed by the laws of the State of Arizona, without regard for choice-of-law provisions.  Executive and the Company each consents to personal and exclusive jurisdiction and venue in the State of Arizona. 

17.Effective Date.  Executive understands that this Agreement shall be null and void if not executed by Executive within twenty one (21) days.  Each Party has seven (7) days after that Party signs this Agreement to revoke it.  This Agreement will become effective on the eighth (8th) day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).

18.Indemnification and D&O Insurance.  The Company agrees to indemnify Executive to the maximum extent permitted by the Company’s Bylaws or under any indemnification agreement or other agreement between Executive and the Company as in effect on the Separation Date..  The Company will maintain a Directors or Officers Insurance Policy covering Executive on terms no less favorable than provided to any of the Company’s current officers or directors, and, in any event, on terms no less favorable than the terms in effect as of the Separation Date, and subject further to the terms of any indemnification agreement or other agreement between Executive and the Company as in effect on the Separation Date.

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19.Executive’s Artwork.  The Company acknowledges that Executive is entitled to the artwork listed on Schedule 1, but Executive agrees to leave such artwork on display at the Company until he decides to remove it in his discretion.  

20.Voluntary Execution of Agreement.  Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executive’s claims against the Company and any of the other Releasees.  Executive acknowledges that:

(a)    Executive has read this Agreement;

		
	(b)
	Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel;

		
	(c)
	Executive understands the terms and consequences of this Agreement and of the releases it contains; 

(d)    Executive is fully aware of the legal and binding effect of this Agreement; and

		
	(e)
	Executive has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

TERENCE E. WINTERS, an individual

Dated:  December 4, 2017    /s/ Terence E. Winters                            
Terence E. Winters

VITAL THERAPIES, INC.

Dated:  December 4, 2017    By  /s/ Michael V. Swanson                     
Michael V. Swanson
Chief Financial Officer, Executive Vice President

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Schedule 1

The artwork includes the following:  

		
	•
	Oriental painting in the foyer of 15222 Avenue of Science

		
	•
	All the Chinese works displayed in the chief executive’s office

		
	•
	Three modern paintings of a meandering river in the corridor outside the chief executive’s office

		
	•
	Photo of the Durango train outside the chief executive’s office

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EXHIBIT A

VITAL THERAPIES, INC. 
CONSULTING AGREEMENT
This Consulting Agreement (this “Agreement”) is made and entered into as of January 1, 2018 (the “Effective Date”) by and between Vital Therapies, Inc. (the “Company”), and Terence E. Winters, an individual (“Consultant”) (each herein referred to individually as a “Party,” or collectively as the “Parties”). The Company desires to retain Consultant as an independent contractor to perform consulting services for the Company, and Consultant is willing to perform such services, on the terms described below. In consideration of the mutual promises contained herein, the Parties agree as follows:
1.Services and Compensation
Consultant shall perform the services described in Exhibit A-1 (the “Services”) for the Company (or its designee), and the Company agrees to pay Consultant the compensation described in Exhibit A for Consultant’s performance of the Services.
2.    Confidentiality
A.    Definition of Confidential Information. “Confidential Information” means any information (including any and all combinations of individual items of information) that relates to the actual or anticipated business and/or products, research or development of the Company, its affiliates or subsidiaries, or to the Company’s, its affiliates’ or subsidiaries’ technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s, its affiliates’ or subsidiaries’ products or services and markets therefor, customer lists and customers (including, but not limited to, customers of the Company on whom Consultant called or with whom Consultant became acquainted during the term of this Agreement), software, developments, inventions, discoveries, ideas, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other business information disclosed by the Company, its affiliates or subsidiaries, either directly or indirectly, in writing, orally or by drawings or inspection of premises, parts, equipment, or other property of Company, its affiliates or subsidiaries. Notwithstanding the foregoing, Confidential Information shall not include any such information which (i) was publicly known or made generally available prior to the time of disclosure to Consultant; (ii) becomes publicly known or made generally available after disclosure to Consultant through no wrongful action or inaction of Consultant; or (iii) is in the rightful possession of Consultant, without confidentiality obligations, at the time of disclosure as shown by Consultant’s then-contemporaneous written records; provided that any combination of individual items of information shall not be deemed to be within any of the foregoing exceptions merely because one or more of the individual items are within such exception, unless the combination as a whole is within such exception.
B.    Nonuse and Nondisclosure. During and after the term of this Agreement, Consultant will hold in the strictest confidence, and take all reasonable precautions to prevent any unauthorized use or disclosure of Confidential Information, and Consultant will not (i) use the Confidential Information for any purpose whatsoever other than as necessary for the performance of the Services on behalf of the Company, or (ii) subject to Consultant’s right to engage in Protected Activity (as defined below), disclose the Confidential Information to any third party without the prior written consent of an authorized representative of the Company, except that Consultant may disclose Confidential Information to  the extent compelled by applicable law; provided however, prior to such disclosure, Consultant shall provide prior written notice to Company and will cooperate with the Company if it seeks a protective order or such similar confidential 

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protection as may be available under applicable law. Consultant agrees that no ownership of Confidential Information is conveyed to the Consultant. Without limiting the foregoing, Consultant shall not use or disclose any Company property, intellectual property rights, trade secrets or other proprietary know-how of the Company to invent, author, make, develop, design, or otherwise enable others to invent, author, make, develop, or design identical or substantially similar designs as those developed under this Agreement for any third party. Consultant agrees that Consultant’s obligations under this Section 2.B shall continue after the termination of this Agreement. 
C.    Other Client Confidential Information. Consultant agrees that Consultant will not improperly use, disclose, or induce the Company to use any proprietary information or trade secrets of any former or current employer of Consultant or other person or entity with which Consultant has an obligation to keep in confidence. Consultant also agrees that Consultant will not bring onto the Company’s premises or transfer onto the Company’s technology systems any unpublished document, proprietary information, or trade secrets belonging to any third party unless disclosure to, and use by, the Company has been consented to in writing by such third party. 
D.    Third Party Confidential Information. Consultant recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Consultant agrees that at all times during the term of this Agreement and thereafter, Consultant owes the Company and such third parties a duty to hold all such confidential or proprietary information in the strictest confidence and not to use it or to disclose it to any person, firm, corporation, or other third party except as necessary in carrying out the Services for the Company consistent with the Company’s agreement with such third party.
3.    Ownership
A.    Assignment of Inventions. Consultant agrees that all right, title, and interest in and to any copyrightable material, notes, records, drawings, designs, inventions, improvements, developments, discoveries, ideas and trade secrets conceived, discovered, authored, invented, developed or reduced to practice by Consultant, solely or in collaboration with others, during the term of this Agreement and arising out of, or in connection with, performing the Services under this Agreement and any copyrights, patents, trade secrets, mask work rights or other intellectual property rights relating to the foregoing (collectively, “Inventions”), are the sole property of the Company. Consultant also agrees to promptly make full written disclosure to the Company of any Inventions and to deliver and assign (or cause to be assigned) and hereby irrevocably assigns fully to the Company all right, title and interest in and to the Inventions.
B.    Pre-Existing Materials. Subject to Section 3.A, Consultant will provide the Company with prior written notice if, in the course of performing the Services, Consultant incorporates into any Invention or utilizes in the performance of the Services any invention, discovery, idea, original works of authorship, development, improvements, trade secret, concept, or other proprietary information or intellectual property right owned by Consultant or in which Consultant has an interest, prior to, or separate from, performing the Services under this Agreement (“Prior Inventions”), and the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, transferable, worldwide license (with the right to grant and authorize sublicenses) to make, have made, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Inventions, without restriction, including, without limitation, as part of or in connection with such Invention, and to practice any method related thereto. Consultant will not incorporate any invention, discovery, idea, original works of 

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authorship, development, improvements, trade secret, concept, or other proprietary information or intellectual property right owned by any third party into any Invention without Company’s prior written permission. 
C.    Moral Rights. Any assignment to the Company of Inventions includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be assigned under applicable law, Consultant hereby waives and agrees not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law.
D.    Maintenance of Records. Consultant agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by Consultant (solely or jointly with others) during the term of this Agreement, and for a period of three (3) years thereafter. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that is customary in the industry and/or otherwise specified by the Company. Such records are and remain the sole property of the Company at all times and upon Company’s request, Consultant shall deliver (or cause to be delivered) the same.
E.    Further Assurances. Consultant agrees to assist Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in Inventions in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments that the Company may deem necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to deliver, assign and convey to the Company, its successors, assigns and nominees the sole and exclusive right, title, and interest in and to all Inventions and testifying in a suit or other proceeding relating to such Inventions. Consultant further agrees that Consultant’s obligations under this Section 3.E shall continue after the termination of this Agreement. 
F.    Attorney-in-Fact. Consultant agrees that, if the Company is unable because of Consultant’s unavailability, dissolution, mental or physical incapacity, or for any other reason, to secure Consultant’s signature with respect to any Inventions, including, without limitation, for the purpose of applying for or pursuing any application for any United States or foreign patents or mask work or copyright registrations covering the Inventions assigned to the Company in Section 3.A, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact, to act for and on Consultant’s behalf to execute and file any papers and oaths and to do all other lawfully permitted acts with respect to such Inventions to further the prosecution and issuance of patents, copyright and mask work registrations with the same legal force and effect as if executed by Consultant. This power of attorney shall be deemed coupled with an interest, and shall be irrevocable.
4.    Conflicting Obligations
Consultant represents and warrants that Consultant has no agreements, relationships, or commitments to any other person or entity that conflict with the provisions of this Agreement, Consultant’s obligations to the Company under this Agreement, and/or Consultant’s ability to perform the Services. Consultant will not enter into any such conflicting agreement during the term of this Agreement.
5.    Term and Termination
A.    Term. The term of this Agreement will begin on the Effective Date of this Agreement and will continue until the earlier of (i) the one (1) year anniversary of the Effective Date or (ii) termination 

-13-

as provided in Section 5.B. This Agreement will automatically renew for another twelve (12) month period unless either Party advises the other Party in writing of intent not to renew at least 30 days prior to the scheduled termination date.
B.    Termination. The Company and Consultant may each terminate this Agreement upon giving the other Party fourteen (14) days prior written notice of such termination pursuant to Section 12.G of this Agreement. The Company may terminate this Agreement immediately and without prior notice if Consultant refuses to or is unable to perform the Services, except for reasonable obligations or health issues, or is in breach of any material provision of this Agreement, provided that Consultant is given written notice of breach and has not cured the breach within 30 days after such notice.
C.    Survival. Upon any termination, all rights and duties of the Company and Consultant toward each other shall cease except:
(1)    The Company will pay, within thirty (30) days after the effective date of termination, all amounts owing to Consultant for Services completed prior to the termination date and related reimbursable expenses, if any, submitted in accordance with the Company’s policies and in accordance with the provisions of Section 1 of this Agreement; and
(2)    Section 2 (Confidentiality), Section 3 (Ownership), Section 4 (Conflicting Obligations), Section 5 (Term and Termination), Section 6 (Independent Contractor; Benefits), Section 7 (Arbitration and Equitable Relief), and Section 8 (Miscellaneous) will survive termination or expiration of this Agreement in accordance with their terms.
6.    Independent Contractor; Benefits
A.    Independent Contractor. It is the express intention of the Company and Consultant that Consultant perform the Services as an independent contractor to the Company. Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company. Without limiting the generality of the foregoing, Consultant is not authorized to bind the Company to any liability or obligation or to represent that Consultant has any such authority. Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement. Consultant agrees to and acknowledges the obligation to pay all self-employment and other taxes on such income.
B.    Benefits. The Company and Consultant agree that Consultant will receive no Company-sponsored benefits from the Company where benefits include, but are not limited to, paid vacation, sick leave, medical insurance and 401k participation. If Consultant is reclassified by a state or federal agency or court as the Company’s employee, Consultant will become a reclassified employee and will receive no benefits from the Company, except those mandated by state or federal law, even if by the terms of the Company’s benefit plans or programs of the Company in effect at the time of such reclassification, Consultant would otherwise be eligible for such benefits.
7.    Arbitration and Equitable Relief.  IN CONSIDERATION OF CONSULTANT’S CONSULTING RELATIONSHIP WITH THE COMPANY, ITS PROMISE TO ARBITRATE ALL DISPUTES RELATED TO CONSULTANT’S CONSULTING RELATIONSHIP WITH THE COMPANY AND CONSULTANT’S RECEIPT OF THE COMPENSATION AND OTHER BENEFITS PAID TO CONSULTANT BY COMPANY, AT PRESENT AND IN THE FUTURE, CONSULTANT AGREES THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER OR BENEFIT PLAN 

-14-

OF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE), ARISING OUT OF, RELATING TO, OR RESULTING FROM CONSULTANT’S CONSULTING OR OTHER RELATIONSHIP WITH THE COMPANY OR THE TERMINATION OF CONSULTANT’S CONSULTING OR OTHER RELATIONSHIP WITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION PURSUANT TO THE ARBITRATION PROVISION AGREED TO IN SECTION 12 OF THE TRANSITION AGREEMENT AND RELEASE, DATED DECEMBER 4, 2017 BY AND BETWEEN CONSULTANT AND THE COMPANY, EXCEPT AS OTHERWISE PROHIBITED BY LAW.
8.    Miscellaneous
A.    Governing Law; Consent to Personal Jurisdiction. This Agreement shall be governed by the laws of the State of Arizona, without regard to the conflicts of law provisions of any jurisdiction. To the extent that any lawsuit is permitted under this Agreement, the Parties hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Arizona.
B.    Assignability. This Agreement will be binding upon Consultant’s heirs, executors, assigns, administrators, and other legal representatives, and will be for the benefit of the Company, its successors, and its assigns. There are no intended third-party beneficiaries to this Agreement, except as expressly stated. Except as may otherwise be provided in this Agreement, Consultant may not sell, assign or delegate any rights or obligations under this Agreement. Notwithstanding anything to the contrary herein, Company may assign this Agreement and its rights and obligations under this Agreement to any successor to all or substantially all of Company’s relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, change of control or otherwise.
C.    Entire Agreement. This Agreement constitutes the entire agreement and understanding between the Parties with respect to the subject matter herein and supersedes all prior written and oral agreements, discussions, or representations between the Parties. Consultant represents and warrants that Consultant is not relying on any statement or representation not contained in this Agreement. To the extent any terms set forth in any exhibit or schedule conflict with the terms set forth in this Agreement, the terms of this Agreement shall control unless otherwise expressly agreed by the Parties in such exhibit or schedule.
D.    Headings. Headings are used in this Agreement for reference only and shall not be considered when interpreting this Agreement.
E.    Severability. If a court or other body of competent jurisdiction finds, or the Parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to effect the intent of the Parties, and the remainder of this Agreement will continue in full force and effect. 
F.    Modification, Waiver. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in a writing signed by the Parties. Waiver by the Company or Consultant of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.
G.    Notices. Any notice or other communication required or permitted by this Agreement to be given to a Party shall be in writing and shall be deemed given (i) if delivered personally or by commercial messenger or courier service, (ii) when sent by confirmed facsimile, or (iii) if mailed by U.S. registered or certified mail (return receipt requested), to the Party at the Party’s address written below or at such other 

-15-

address as the Party may have previously specified by like notice. If by mail, delivery shall be deemed effective three business days after mailing in accordance with this Section 12.G.
(1)If to the Company, to:
15010 Avenue of Science, San Diego, CA 92128
Attention: Chief Executive Officer    
(2)    If to Consultant, to the address for notice on the signature page to this Agreement or, if no such address is provided, to the last address of Consultant provided by Consultant to the Company.
H.    Attorneys’ Fees. In any court action at law or equity that is brought by one of the Parties to this Agreement to enforce or interpret the provisions of this Agreement, the prevailing Party will be entitled to reasonable attorneys’ fees, in addition to any other relief to which that Party may be entitled.
I.    Signatures. This Agreement may be signed in two counterparts, each of which shall be deemed an original, with the same force and effectiveness as though executed in a single document.
J.    Protected Activity Not Prohibited. Consultant understands that nothing in this Agreement shall in any way limit or prohibit Consultant from engaging in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall mean filing a charge, complaint, or report with, or otherwise communicating, cooperating, or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission (“Government Agencies”). Consultant understands that in connection with such Protected Activity, Consultant is permitted to disclose documents or other information as permitted by law, and without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, Consultant agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Company confidential information to any parties other than the Government Agencies. Consultant further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications. Pursuant to the Defend Trade Secrets Act of 2016, Consultant is notified that an individual will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made in confidence to a federal, state, or local government official (directly or indirectly) or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if (and only if) such filing is made under seal. In addition, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the individual’s attorney and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. 
(signature page follows)

-16-

IN WITNESS WHEREOF, the Parties hereto have executed this Consulting Agreement as of the date first written above.
CONSULTANT        VITAL THERAPIES, INC. 
By:    /s/ Terence E. Winters    By: /s/ Michael V. Swanson
Name: Terence E. Winters    Name: Michael V. Swanson
 Title: Chief Financial Officer, EVP 
Address for Notice:
Vital Therapies Inc.    
15010 Avenue of Science    
San Diego, CA 92128    

-17-

EXHIBIT A-1
SERVICES AND COMPENSATION
1.Contact. Consultant’s principal Company contact:
Name: Russ Cox
Title: Chief Executive Officer
2.    Services. The Services will include, but will not be limited to, the following: 

Consultant will provide services to the Company as a Special Advisor on an ad hoc basis assisting with the transition of duties by providing support and input with respect to VTL-308 phase clinical trial, and engaging in other related services as requested by the Company’s Board of Directors (the “Board”) and/or the Company’s Chief Executive Officer.  Consultant will provide Services only upon request, but in no event will Consultant be expected to perform more than 20 hours of Services per month.  
3.    Compensation.  
A.    Cash Compensation.  During the Term of this Agreement, the Company will pay Consultant $250.00 per hour as a consulting fee.  The Company will reimburse Consultant, in accordance with Company policy, for all reasonable expenses incurred by Consultant in performing the Services pursuant to this Agreement, if Consultant receives consent from an authorized agent of the Company prior to incurring such expenses and submits receipts for such expenses to the Company in accordance with Company policy.
B.    Equity Compensation.  During the Term of this Agreement, Consultant’s stock options to purchase shares of the Company’s common stock that are outstanding as of the Effective Date will continue to vest and become exercisable in accordance with the terms of the applicable Company equity plan and the applicable Option agreement governing such Option (the “Stock Agreements”); provided, however, that if the Company terminates this Agreement before the end of the twelve (12)-month term or declines to renew it at the end of the initial 12 month term, each of Consultant’s Options will immediately vest and each Option will become exercisable until the earlier of: (i) the end of such Option’s maximum term or (ii) in connection with a “change in control” (or similar transaction) in accordance with the terms of the applicable Company stock plan governing such Option.
All payments provided for under this Agreement are intended to be exempt from or otherwise comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance thereunder (together, “Section 409A”), so that none of the payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. In no event will the Company reimburse Consultant for any taxes that may be imposed on Consultant as a result of Section 409A.

-18-

This Exhibit A-1 is accepted and agreed upon as of date first written above.
CONSULTANT        VITAL THERAPIES, INC. 
By:    /s/ Terence E. Winters        By:    /s/ Michael V. Swanson    
Name: Terence E. Winters        Name: Michael V. Swanson    
Title: Chief Financial Officer, EVP    

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EXHIBIT B
(Supplemental Release)

1.    General Release.  In consideration of the mutual promises, and consideration provided in the Transition Agreement and Release, dated December 4, 2017 (the “Agreement”), Terence E. Winters (“Consultant”) hereby verifies and confirms his renewed agreement to the terms of that Agreement, including but not limited to the release and waiver of any and all claims relating to the services provided to the Company, and further extends such release and waiver to any claims that may have arisen during the Consulting Period as defined therein, including but not limited to claims under any local ordinance or state or federal employment law, including laws prohibiting discrimination in employment on the basis of race, sex, age, disability, national origin, or religion, as well as any claims for misclassification, wrongful discharge, breach of contract, attorneys’ fees, costs, or any claims of amounts due for fees, commissions, expenses, salary, bonuses, profit sharing or fringe benefits (the “Supplemental Release”). Consultant acknowledges that Consultant is waiving and releasing any rights Consultant may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary. Consultant agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Supplemental Release. Consultant acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Consultant was already entitled. Consultant further acknowledges that Consultant has been advised by this writing that: (a) Consultant should consult with an attorney prior to executing this Supplemental Release; (b) Consultant has twenty-one (21) days within which to consider this Supplemental Release; (c) Consultant has seven (7) days following Consultant’s execution of this Supplemental Release to revoke this Supplemental Release; (d) this Supplemental Release shall not be effective until after the revocation period has expired; and (e) nothing in this Supplemental Release prevents or precludes Consultant from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event Consultant signs this Supplemental Release and returns it to the Company in less than the 21-day period identified above, Consultant hereby acknowledges that Consultant has freely and voluntarily chosen to waive the time period allotted for considering this Supplemental Release. Consultant acknowledges and understands that revocation must be accomplished by a written notification to the person executing this Supplemental Release on the Company’s behalf that is received prior to the Effective Date. The Parties agree that changes, whether material or immaterial, do not restart the running of the 21-day period.
2.    Supplemental Consideration.  Contingent on Consultant’s execution and non-revocation of this Supplemental Release, the Company agrees that Consultant may retain Consultant’s laptop and mobile device (together the “Transferred Devices”) provided that all contents on such devices constituting proprietary and Confidential  Information (as defined in the Confidentiality Agreement) remains subject to the Confidentiality Agreement. Consultant agrees that the Company retains the right to review and remove any Confidential Information from the Transferred Devices at any time after the Separation Date, and Consultant agrees to use best efforts to permit the Company to ensure the return of any Company information residing on the Transferred Devices in a manner satisfactory to the Company and that he will not delete that information without the Company’s permission.  In addition, Consultant will cooperate with the Company to remove from the Transferred Devices any Company-licensed software the Company deems necessary to remove to comply with its licensing obligations.  
3.    Payment of All Compensation and Fees.  Consultant acknowledges and represents that, other than the consideration set forth in this Supplemental Release, the Company has paid or provided all payments, fees,  severance, reimbursable expenses, stock, stock options, vesting, and any and all other compensation due to Consultant.
4.    ARBITRATION.  THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THE AGREEMENT, THE CONFIDENTIALITY AGREEMENT, OR THIS SUPPLEMENTAL RELEASE, THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN 

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RELEASED, SHALL BE SUBJECT TO ARBITRATION PURSUANT TO THE ARBITRATION PROVISION AGREED TO IN SECTION 14 OF AGREEMENT, EXCEPT AS OTHERWISE PROHIBITED BY LAW.
5.    Entire Agreement.  The Agreement and this Supplemental Release represent the entire agreement and understanding between the Company and Consultant concerning the subject matter of this Agreement and Consultant’s relationship with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Supplemental Release and Consultant’s relationship with the Company, with the exception of the Confidentiality Agreement, the Stock Agreements, any indemnification rights available under any indemnification or other agreement between Consultant and the Company, Company Bylaws, or under applicable law, and the surviving provisions of the Consulting Agreement, except, in all cases, as amended by the Agreement.  For purposes of clarity, the arbitration provision of this Supplemental Release (as set forth herein) supersedes and replaces the arbitration provisions in the Agreement.
6.    Expiration of Supplemental Release.  Consultant understands that this Supplemental Release shall be null and void if not executed by him within twenty-one (21) days following the termination of the Consulting Agreement.  This Supplemental Release will become effective on the date it has been signed by both Parties (the “Effective Date”).
7.     Voluntary Execution of Agreement.  Consultant understands and agrees that Consultant executed this Supplemental Release voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Consultant’s claims against the Company and any of the other Releasees (as defined in the Agreement).  Consultant further acknowledges that: (a) Consultant has read this Supplemental Release; (b) Consultant has been represented in the preparation, negotiation, and execution of this Supplemental Release by legal counsel of Consultant’s own choice or has elected not to retain legal counsel; (c) Consultant understands the terms and consequences of this Supplemental Release and of the releases it contains; and (d) Consultant is fully aware of the legal and binding effect of this Supplemental Release.

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IN WITNESS WHEREOF, the Parties have executed this Supplemental Release on the respective dates set forth below.
TERENCE E. WINTERS, an individual

Dated:  ________________, 201_                    
Terence E. Winters

VITAL THERAPIES, INC.

Dated:  ________________, 201_    By             
            
            

-22-Exhibit

Exhibit 10.10

November 7, 2017

Russell Cox
Re: Employment Offer Letter
Dear Russ:
I am pleased to offer you the position of Chief Executive Officer with Vital Therapies, Inc. (“Company” or “we”).  If you accept our offer, your first day of employment is anticipated to be January 3, 2018 (such date, or the date you actually commence employment, your “Start Date”).  
In this position, you will report to the Company’s board of directors (the “Board”) and your responsibilities will be consistent with your title and position as CEO, and as otherwise reasonably assigned to you by the Board.  You also will be appointed to serve as a member of the Board as soon as reasonably practicable following your Start Date and during the period in which you are serving as Chief Executive Officer, the Company shall nominate you to continue such service on the Board.  During your employment with the Company, you will perform your duties faithfully and to the best of your ability and will devote your full business efforts and time to the Company.  You agree not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board; provided, however, that the Company agrees and acknowledges that after you cease to be employed by your current employer that you will provide consulting services for your current employer for up to four months after your employment ceases to help transition your duties and responsibilities to your successor.  The Company agrees to you providing such consulting services provided that doing so does not materially interfere with you providing services to the Company under this letter agreement and does not present any material conflict of interest to the Company.
The terms and your compensation are as follows:

		
	1.
	Base Salary: Your base salary will be $22,500 per semi-monthly pay period (equivalent to $540,000 annually), less applicable withholdings and deductions.  Your base salary will be paid periodically in accordance with the Company’s normal payroll practices and be subject to the usual, required withholdings.  Your base salary will be subject to review and may be increased (but not reduced) as determined by the Board in accordance with the Company’s annual review process.

		
	2.
	Signing Bonus:  The Company will pay you a cash signing bonus of $330,000, less applicable withholdings and deduction (the “Signing Bonus”).  The Signing Bonus will be paid to you within 30 days of your Start Date.  

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Russ Cox

		
	3.
	Target Bonus: You are eligible to earn an annual cash bonus of 50% of your base salary (as then in effect) at target, based on achieving performance goals to be mutually agreed upon between you and the Board, subject to continued employment through the date bonuses are paid to Company executives generally.  Your annual bonus for 2017 will be pro-rated for the portion of the calendar year that you are actually employed with the Company.  Any achieved bonus, or any portion thereof, will be paid, less applicable withholdings and deductions, as soon as practicable after the Board has determined that it has been achieved, but in no event shall it be paid after the later of (i) the fifteenth (15th) day of the third (3rd) month following the close of the Company’s fiscal year in which such bonus is earned or (ii) March 15 following the calendar year in which such bonus is earned.

		
	4.
	Equity Awards.  On the Start Date and after you have actually commenced providing services to the Company on that date, the Board or its authorized committee (the “Committee”) will grant you an option to purchase 3.75% of the Company’s outstanding common stock (as determined as of the date of grant), at the fair market value of the Company’s common stock as determined on the date of grant (the “Option Grant”).  The Option Grant will vest over four (4) years, with 25% of the total shares subject to the Option Grant vesting one (1) year from your Start Date, and thereafter, 1/48th of the total shares subject to the Option Grant vesting monthly for the next three (3) years on the same day of the month as the Start Date, subject to your continued service to the Company or its subsidiaries through each such date.  The Option Grant will be subject to the terms, definitions and provisions of the Company’s equity compensation plan and approved form of option agreement thereunder as then in-effect (collectively, the “Stock Agreements”).  No right to any stock is earned or accrued until such time that vesting occurs, nor does this grant confer any right to continue employment with the Company.  

After the Start Date, you will be eligible to receive additional equity awards pursuant to any plans or arrangements the Company may have in effect from time to time; provided, however, that you acknowledge that you will not receive an annual equity award at the beginning of 2018 when such grants are typically made to the Company’s executives generally.  The Committee will determine in its discretion whether you will be granted any future equity awards and the terms of any such award.
		
	5.
	Benefits: You will be eligible to participate in all Company benefit plans as available to similarly-situated Company executives, including group health insurance and paid time off, based on policies in effect during your employment.  The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

		
	6.
	Relocation Expenses; Commuting Expenses: In order to assist with your relocation to the San Diego area, the Company will pay or otherwise reimburse you for: (i) temporary housing expenses that you incur for you and your family up to a total of $6,000 per month for the 

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Russ Cox

Transition Period, (ii) bi-monthly airfare travel for you between the San Diego area and the Bay Area and back during the Transition Period, and (iii) reasonable moving expenses you incur in connection with such relocation for the moving and shipping of furnishings up to a maximum of $100,000.  The payments or reimbursements provided for in this paragraph shall be subject to applicable tax withholding and any reimbursements shall be made within 30 days of the Company’s receipt of documentation of such expenses in a form satisfactory to the Company; provided, however, that you must be employed with the Company on the date reimbursements are made.  For purposes of this paragraph, the “Transition Period” will mean the earlier of (1) the later of (A) nine (9) months after your Start Date, or (B) the date the VTL-308 phase 3 clinical study is completed, as determined by the Board, and (2) the date you relocate to the San Diego area.
		
	7.
	Severance: You will be permitted to enter into the Change of Control and Severance Agreement (the “Severance Agreement”) attached hereto as Exhibit A.  The Severance Agreement sets forth the severance payments and benefits to which you would be entitled in connection with certain terminations of employment, which would be in lieu of any other severance or other benefits you would otherwise be entitled to under any plan, program or policy that the Company may have in effect from time to time.

		
	8.
	Attorneys’ Fees:  The Company will reimburse you for reasonable attorneys’ fees incurred in the negotiation, preparation, and execution of this letter in an amount not to exceed $20,000.  Such reimbursement will be made within sixty (60) days of your submission of proper documentation of the fees to be reimbursed, but in no event later than March 15, 2018.  

Your employment with the Company will be “at will.” It is for no specified term, and may be terminated by you or the Company at any time, with or without cause or advance notice.  Although the Company may change the terms and conditions of your employment from time-to-time, (including, but not limited to, changes in your position, compensation, and/or benefits), nothing will change the at-will employment relationship between you and the Company, but any such action may give you the opportunity to receive severance payments or benefits under (and subject to the terms and conditions of) the Severance Agreement.  In addition, the compensation terms described herein will not affect your at-will employment status.  
As an employee of the Company, you will have access to certain confidential information of the Company and you may, during the course of your employment, develop certain information or inventions that will be the property of the Company.  To protect the interests of the Company, your acceptance of this letter confirms that the terms of the Company’s Employee Innovations and Proprietary Rights Assignment Agreement (the “Confidentiality Agreement”) and other compliance agreements that the Company reasonably requests that you enter into.  

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Russ Cox

In the event of any dispute or claim relating to or arising out of your employment relationship with the Company, this offer letter, or the termination of your employment with the Company for any reason (including, but not limited to, any claims of breach of contract, wrongful termination or age, sex, race, national origin, disability or other discrimination or harassment), you and the Company agree to be bound by the arbitration terms set forth in the Arbitration Agreement attached hereto as Exhibit B. 
This offer letter, along with the Confidentiality Agreement, the Stock Agreements, Severance Agreement, and Arbitration Agreement constitute the entire agreement between you and the Company regarding the subject matters discussed herein, and they supersede all prior negotiations, representations or agreements between you and the Company.  This offer letter may only be modified by a written agreement signed by you and the chairman of the Company’s compensation committee.
To accept the offer, please sign in the space indicated and return it to the Company.  Your signature will acknowledge that you have read and understood and agreed to the terms and conditions of this letter agreement, Exhibit A and Exhibit B.
Sincerely,
VITAL THERAPIES, INC.

By /s/ Faheem Hasnain             
Faheem Hasnain
Chairman

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Russ Cox

I have read and understood this letter agreement, Exhibit A and Exhibit B and hereby acknowledge, accept and agree to the terms as set forth herein and in Appendix B and further acknowledge that no other commitments were made to me as part of my employment offer except as specifically set forth herein.
Date: November 30, 2017                /s/ Russell Cox            
Russell Cox

Exhibit A

CHANGE OF CONTROL AND SEVERANCE AGREEMENT
VITAL THERAPIES, INC.
CHANGE OF CONTROL AND SEVERANCE AGREEMENT
This Change of Control and Severance Agreement (the “Agreement”) is made and entered into by and between Russell Cox (“Executive”) and Vital Therapies, Inc., a Delaware corporation (the “Company”), effective as of Executive’s Start Date.
RECITALS
1.The Company has extended an offer of employment to Executive pursuant to the terms of the offer letter dated November 7, 2017 (the “Offer Letter”), which is incorporated herein by reference.
2.The Board of Directors of the Company (the “Board”), in consultation with the Compensation Committee of the Board of Directors (the “Committee”) believes that it is in the best interests of the Company and its stockholders (i) to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control and (ii) to provide Executive with an incentive to continue Executive’s employment prior to a Change of Control and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.
3.The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment under certain circumstances.  These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.
4.Certain capitalized terms used in the Agreement are defined in Section 6 below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:
1.    Term of Agreement.  If Executive becomes entitled to benefits under Section 3 during the term of this Agreement, the Agreement will not terminate until all of the obligations of the parties hereto with respect to this Agreement have been satisfied.
2.    At-Will Employment.  The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will, as defined under applicable law.  As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause.  Upon any termination of employment, the Company will pay Executive 

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all accrued but unpaid vacation, expense reimbursements, wages and other benefits due to Executive under any Company-provided plans, policies and arrangements, including the Offer Letter (“Accrued Compensation”).  In the event Executive resigns for Good Reason as a result clause (ii) of that definition, as set forth in Section 6(g), then “Accrued Compensation” will include any base salary that would have otherwise been paid to Executive had the Company not materially reduced his annual base salary in the manner that gave rise to Executive’s ability to resign for Good Reason.
3.    Severance Benefits.
(a)    Termination without Cause or Resignation for Good Reason Unrelated to a Change of Control.  If the Company terminates Executive’s employment with the Company without Cause (excluding death or Disability) or if Executive resigns from such employment for Good Reason, and, in each case, such termination occurs outside of the Change of Control Period, then subject to Section 4, Executive will receive the following: 
(i)    Accrued Compensation.  The Company will pay Executive all Accrued Compensation.  
(ii)    Continuing Severance Payments.  Executive will be paid continuing payments of severance pay at a rate equal to Executive’s base salary rate, as then in effect, for a period of twelve (12) months.  The severance will be paid, less applicable withholdings, in installments over the severance period with the first payment to commence on the sixty-first (61st) day following Executive’s termination of employment (and include any severance payments that otherwise would have been paid to Executive within the sixty (60) days following Executive’s termination date), with any remaining payments paid in accordance with the Company’s normal payroll practices for the remainder of the severance period following Executive’s termination of employment (subject to any delay as may be required by Section 4(c)).
(iii)    Prior Fiscal Year Bonus Payment.  If Executive’s termination occurs after the end of a fiscal year but prior to the date annual bonuses are paid to Company executives (including Executive), then Executive will remain eligible to receive his bonus relating to such fiscal year, subject to achievement of any corporate objectives relating to the payment of bonuses as determined by the Board (or Committee) in its discretion.  The bonus payment will be paid, less applicable withholdings, at the same time as bonuses relating to such year are paid to other Company executives (subject to any delay as may be required by Section 4(c)).  
(iv)    Continuation Coverage.  If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of twelve (12) months from the date of termination or (B) the date upon which Executive and/or Executive’s eligible dependents are no longer eligible for COBRA continuation coverage.  The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.  Notwithstanding the first sentence of 

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this Section 3(a)(iv), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment, payable on the last day of a given month (except as provided by the following sentence), in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue the group health coverage for Executive and/or Executive’s eligible dependents in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive and/or Executive’s eligible dependents elect COBRA continuation coverage and will commence on the month following Executive’s termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment or (y) the date the Company has paid an amount equal to twelve (12) payments.  Any such taxable monthly payments that otherwise would have been paid to Executive within the sixty (60) days following Executive’s termination date instead will be paid on the sixty-first (61st) day following Executive’s termination of employment, with any remaining payments paid as provided in the prior sentence (subject to any delay as may be required by Section 4(c)).  For the avoidance of doubt, the taxable payments in lieu of COBRA reimbursements may be used for any purpose, including, but not limited to continuation coverage under COBRA, and will be subject to all applicable tax withholdings.  
(v)    Accelerated Vesting of Initial Option.  Executive will vest in and have the right to exercise an additional number of outstanding and unvested shares subject to the Company stock option Executive received in connection with his commencement of employment equal to the number of such shares otherwise scheduled to vest during the twelve (12) month period following the date Executive’s employment with the Company terminates had Executive remained employed with the Company through such date.
(b)    Termination without Cause or Resignation for Good Reason in Connection with a Change of Control.  If the Company terminates Executive’s employment with the Company without Cause (excluding death or Disability) or if Executive resigns from such employment for Good Reason, and, in each case, such termination occurs during the Change of Control Period, then subject to Section 4, Executive will receive the following: 
(i)    Accrued Compensation.  The Company will pay Executive all Accrued Compensation.  
(ii)    Severance Payment.  Executive will receive a lump-sum payment (less applicable withholding taxes) equal to the eighteen (18) months of Executive’s annual base salary as in effect immediately prior to Executive’s termination date or, if greater, at the level in effect immediately prior to the Change of Control.  The severance will be paid, less applicable withholdings, on the sixty-first (61st) day following Executive’s termination of employment (subject to any delay as may be required by Section 4(c)).  For the avoidance of doubt, if (x) Executive incurred a termination prior to a Change of Control that qualifies Executive for severance payments under Section 3(a)(ii); and (y) a Change of Control occurs within two (2) months following Executive’s termination of employment that qualifies Executive for the superior benefits under this 

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Section 3(b)(ii), then Executive shall be entitled to a lump-sum payment of the amount calculated under this Section 3(b)(ii), less amounts already paid under Section 3(a)(ii).
(iii)    Prior Fiscal Year Bonus Payment.  If Executive’s termination occurs after the end of a fiscal year but prior to the date annual bonuses are paid to Company executives (including Executive), then Executive will remain eligible to receive his bonus relating to such fiscal year, subject to achievement of any corporate objectives relating to the payment of bonuses as determined by the Board (or Committee) in its discretion.  The bonus payment will be paid, less applicable withholdings, at the same time as bonuses relating to such year are paid to other Company executives (subject to any delay as may be required by Section 4(c)). For the avoidance of doubt, if (x) Executive incurred a termination prior to a Change of Control that qualifies Executive for severance payments under Section 3(a)(iii); and (y) a Change of Control occurs within the two-month period following Executive’s termination of employment that qualifies Executive for the superior benefits under this Section 3(b)(iii), then Executive shall be entitled to a lump-sum payment of the amount calculated under this Section 3(b)(iii), less amounts already paid under Section 3(a)(iii).
(iv)    Current Fiscal Year Bonus Payment.  Executive will receive a lump-sum payment equal to one hundred and fifty percent (150%) of the Executive’s target bonus as in effect for the fiscal year in which Executive’s termination of employment occurs.  For avoidance of doubt, the amount paid to Executive pursuant to this Section 3(b)(iii) will not be prorated based on the actual amount of time Executive is employed by the Company during the fiscal year (or the relevant performance period if something different than a fiscal year) during which the termination occurs.  The bonus payment will be paid, less applicable withholdings, on the sixty-first (61st) day following Executive’s termination of employment (subject to any delay as may be required by Section 4(c)).  
(v)    Continuation Coverage.  If Executive elects continuation coverage pursuant to COBRA within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of eighteen (18) months from the date of termination or (B) the date upon which Executive and/or Executive’s eligible dependents become covered under similar plans.  The reimbursements will be made by the Company to Executive consistent with the Company’s normal expense reimbursement policy.  Notwithstanding the first sentence of this Section 3(b)(iv), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment, payable on the last day of a given month (except as provided by the following sentence), in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executive’s 

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termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment or (y) the date the Company has paid an amount equal to eighteen (18) payments.  Any such payments that otherwise would have been paid to Executive within the sixty (60) days following Executive’s termination date instead will be paid on the sixty-first (61st) day following Executive’s termination of employment, with any remaining payments paid as provided in the prior sentence (subject to any delay as may be required by Section 4(c)).  For the avoidance of doubt, the taxable payments in lieu of COBRA reimbursements may be used for any purpose, including, but not limited to continuation coverage under COBRA, and will be subject to all applicable tax withholdings.
(vi)    Accelerated Vesting of Equity Awards.  One hundred percent (100%) of Executive’s then-outstanding and unvested Equity Awards will become vested in full.  If, however, an outstanding Equity Award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the Equity Award will vest as to one hundred percent (100%) of the amount of the Equity Award assuming the performance criteria had been achieved at target levels for the relevant performance period(s).  
(c)    Voluntary Resignation; Termination for Cause.  If Executive’s employment with the Company terminates (i) voluntarily by Executive (other than for Good Reason) or (ii) for Cause by the Company, then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans and practices or pursuant to other written agreements with the Company.
(d)    Disability; Death.  If the Company terminates Executive’s employment as a result of Executive’s Disability, or Executive’s employment terminates due to Executive’s death, then Executive will not be entitled to receive any other severance or other benefits, except for those (if any) as may then be established under the Company’s then existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.
(e)    Exclusive Remedy.  In the event of a termination of Executive’s employment as set forth in Section 3(a) or (b) of this Agreement, the provisions of Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company otherwise may be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses).  For the avoidance of doubt, Executive shall in no circumstances be entitled to both the benefits pursuant to Section 3(a) and the benefits pursuant to Section 3(b).  Executive will be entitled to no benefits, compensation or other payments or rights upon a termination of employment other than those benefits expressly set forth in Section 3 of this Agreement.
4.    Conditions to Receipt of Severance
(a)    Release of Claims Agreement.  The receipt of any severance payments or benefits (other than the Accrued Compensation set forth in either Sections 3(a)(i) or 3(b)(i)) pursuant to this Agreement is subject to Executive signing and not revoking the Company’s then-standard separation agreement and release of claims (the “Release”), which, provided that the Company 

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provides such Release within three (3) business days of termination, must become effective and irrevocable no later than the sixtieth (60th) day following Executive’s termination of employment (the “Release Deadline”).  If the Release does not become effective and irrevocable by the Release Deadline, Executive will forfeit any right to severance payments or benefits under this Agreement.  In no event will severance payments or benefits be paid or provided until the Release actually becomes effective and irrevocable.
(b)    Confidential Information and Invention Assignment Agreements.  Executive’s receipt of any payments or benefits under Section 3 (other than the Accrued Compensation set forth in either Sections 3(a)(i) or 3(b)(i)) will be subject to Executive continuing to comply with the terms of the Employee Innovations and Proprietary Rights Assignment Agreement that Executive executed when joining the Company, as such agreement may be amended from time to time. 
(c)    Section 409A.
(i)    Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Code, and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A.  Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A‐1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.
(ii)    Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Payments, if any, that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service.  All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.  Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but before the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit.  Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.
(iii)    It is intended that any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above.

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(iv)    It is intended that any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above. 
(v)    The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.  The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition before actual payment to Executive under Section 409A.  Executive agrees and acknowledges that the Company makes no representations or warranties with respect to the application of Section 409A and other tax consequences to any payments hereunder and, by the acceptance of any such payments, Executive agrees to accept the potential application of Section 409A and the other tax consequences of any payments made hereunder.
5.    Limitation on Payments.  In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s severance benefits will be either:
(a)    delivered in full, or
(b)    delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.  If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments; (ii) cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), (iii) cancellation of accelerated vesting of equity awards; or (iv) reduction of employee benefits.  In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Executive’s equity awards.
A nationally recognized certified professional services firm selected by the Company, the Company’s legal counsel or such other person or entity to which the parties mutually agree (the “Firm”) shall perform the foregoing calculations related to the excise tax.  The Company shall bear all expenses with respect to the determinations by the Firm required to be made hereunder.  For purposes of making the calculations required by this Section, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good 

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faith interpretations concerning the application of Code Sections 280G and 4999.  The Company and Executive will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section.  The Firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen (15) calendar days after the date on which Executive’s right to the severance benefits or other payments is triggered (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive.  Any good faith determinations of the Firm made hereunder shall be final, binding, and conclusive upon the Company and Executive.  
6.    Definition of Terms.  The following terms referred to in this Agreement will have the following meanings:
(a)    Cause.  “Cause” will mean:
(i)    Executive’s material failure to perform Executive’s stated duties, and Executive’s continued failure to cure such failure to the reasonable satisfaction of the Company within ten (10) days following written notice of such failure to Executive from the Board;
(ii)    Executive’s material violation of a written Company policy (including any insider trading policy) or material breach of any written agreement or covenant with the Company, including, but not limited to, any applicable invention assignment and confidentiality agreement or similar agreement between the Company and Executive;
(iii)    Executive’s conviction of, or entry of a plea of guilty or nolo contendere to, a felony (other than motor vehicle offenses the effect of which do not materially impair Executive’s performance of his employment duties);
(iv)    a willful act by Executive that constitutes gross misconduct and which is injurious to the Company;
(v)    Executive’s commission of any act of fraud or embezzlement;
(vi)    Executive’s commission of any act of dishonesty or any other willful misconduct that has caused or is reasonably expected to result in a material injury to the Company; or
(vii)    Executive’s willful failure to cooperate with an investigation authorized by the Board or initiated by a governmental authority, in either case, relating to the Company, its business, or any of its directors, officers or employees.
The determination as to whether Executive is being terminated for Cause will be made in good faith by the Board.  The foregoing definition does not in any way limit the Company’s ability to terminate Executive’s employment relationship at any time as provided in Section 2 above, and the term “Company” will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.

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(b)    Change of Control.  “Change of Control” means the occurrence of any of the following events:
(i)    A change in the ownership of the Company which occurs on the date that any one Person, or more than one Person acting as a group (collectively, a “Person” for purposes of this definition), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection, (a) the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company, will not be considered a Change of Control and (b) the acquisition of additional stock of the Company by a Permitted Holder that, together with the stock held by such Person and its affiliates and/or associates, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company, will not be considered a Change of Control so long as such acquisition is not in connection with a transaction that results in the Company ceasing to have any class of securities registered under the Securities and Exchange Act of 1934, as amended (i.e., a “going-private” transaction); or 
(ii)    A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.  For purposes of this clause (ii), (a) if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change of Control and (b) any member of the Board that is nominated by any Permitted Holder shall be considered endorsed by a majority of the members of the Board; or
(iii)    A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3).  For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

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For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change of Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
For purposes of this definition, a “Permitted Holder” shall mean any Person that, individually or together with all of such Person’s affiliates and/or associates, is the owner of fifteen percent (15%) or more of the outstanding voting stock of the Company at the time of the Company’s Initial Public Offering or any of such Person’s affiliates or associates.  All capitalized terms in the immediately preceding sentence that are not otherwise defined in this Agreement shall have the meanings given to such terms in the Company’s Amended and Restated Certificate of Incorporation as in effect immediately following the Company’s initial public offering of its common stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Initial Public Offering”).
Further and for the avoidance of doubt, a transaction will not constitute a Change of Control if: (i) its sole purpose is to change the state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
(c)    Change of Control Period.  “Change of Control Period” will mean the period beginning on the date two (2) months prior to, and ending on the date that is twelve (12) months following, a Change of Control.
(d)    Code. “Code” will mean the Internal Revenue Code of 1986, as amended.
(e)    Disability.  “Disability” will mean that Executive has been unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.  Alternatively, Executive will be deemed disabled if determined to be totally disabled by the Social Security Administration.  Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate Executive’s employment.  In the event that Executive resumes the performance of substantially all of Executive’s duties hereunder before the termination of Executive’s employment becomes effective, the notice of intent to terminate based on Disability will automatically be deemed to have been revoked.
(f)    Equity Awards.  “Equity Awards” will mean Executive’s outstanding stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and any other Company equity compensation awards.

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(g)    Good Reason.  “Good Reason” will mean Executive’s voluntary termination, within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Executive’s consent:
(i)    a material reduction of Executive’s authority, duties or responsibilities, relative to Executive’s authority, duties or responsibilities in effect immediately prior to such reduction, or, following a Change of Control;
(ii)    a material reduction by the Company of Executive’s annual base salary as in effect on the Start Date (or, if lower, as in effect immediately prior to the reduction), except to the extent the base salaries of all other senior executives of the Company are similarly reduced;
(iii)    the failure of the Company to obtain assumption of this Agreement by any successor;
(iv)    a material change in the geographic location of Executive’s principal workplace; provided, that a relocation of less than fifty (50) miles from San Diego, California will not be considered a material change in geographic location; or 
(v)    a material breach by the Company of this Agreement or the Offer Letter.
Executive may not resign for Good Reason without first providing the Company with written notice within ninety (90) days of the initial existence of the condition that he believes constitutes Good Reason specifically identifying the acts or omissions constituting the grounds for Good Reason and a reasonable cure period of not less than thirty (30) days following the date of such notice.
For purposes of the “Good Reason” definition, the term “Company” will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.
(h)    Section 409A Limit.  “Section 409A Limit” will mean two (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of Executive’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment is terminated.
(i)    Start Date.  “Start Date” will mean Start Date as defined in the Offer Letter.
7.    Successors.
(a)    The Company’s Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this 

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Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 7(a) or which becomes bound by the terms of this Agreement by operation of law.  
(b)    Executive’s Successors.  The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
8.    Notice.
(a)    General.  Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when sent electronically or personally delivered when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or when delivered by a private courier service such as UPS, DHL or Federal Express that has tracking capability.  In the case of Executive, notices will be sent to the e-mail address or addressed to Executive at the home address, in either case which Executive most recently communicated to the Company in writing.  In the case of the Company, electronic notices will be sent to the e-mail address of the Chairman of the Committee and mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of the Chairman of the Committee.
(b)    Notice of Termination.  Any termination by the Company for Cause or by Executive for Good Reason will be communicated by a notice of termination to the other party hereto given in accordance with Section 8(a) of this Agreement.  Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than ninety (90) days after the giving of such notice).  
9.    Resignation.  Upon the termination of Executive’s employment for any reason, Executive will be deemed to have resigned from all officer positions held at the Company and its affiliates voluntarily, without any further required action by Executive, as of the end of Executive’s employment and Executive, at the Board’s request, will execute any documents reasonably necessary to reflect Executive’s resignation.  
10.    Miscellaneous Provisions.
(a)    No Duty to Mitigate.  Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

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(b)    Waiver.  No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(c)    Headings.  All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.
(d)    Entire Agreement.  This Agreement, together with the Offer Letter, constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof, including, but not limited to, any rights to extended post-termination exercise period, severance and/or change of control benefits set forth in any prior employment agreement or offer letter, option agreement, or similar agreement (or amendment thereto).  No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.
(e)    Choice of Law.  The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).  Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether or not arising under this Agreement) will be commenced or maintained in any state or federal court located in the jurisdiction where Executive resides, and Executive and the Company hereby submit to the jurisdiction and venue of any such court.
(f)    Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.
(g)    Withholding.  All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.
(h)    Counterparts.  This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

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Russ Cox

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.
COMPANY    VITAL THERAPIES, INC.
By:    /s/ Faheem Hasnain                
Title:    Chairman                    
Date:    November 7, 2017                

EXECUTIVE    By:     /s/ Rusell Cox                    
Title:    C.E.O.                        
Date:    November 30, 2017                

[signature page of the Change of Control and Severance Agreement]

Exhibit B

ARBITRATION AGREEMENT
(a)Arbitration.  In consideration of my employment with the Company, its promise to arbitrate all employment-related disputes, and my receipt of the compensation, pay raises and other benefits paid to me by the Company, at present and in the future, I agree that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from my employment with the Company or termination thereof, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1281.8 (the “Act”), and pursuant to California law.  The Federal Arbitration Act will also apply with full force and effect, notwithstanding the application of procedural rules set forth under the Act.
(b)Dispute Resolution.  Disputes that I agree to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims.  I further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with me.
(c)Procedure.  I agree that any arbitration will be administered by the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), pursuant to its Employment Arbitration Rules & Procedures (the “JAMS Rules”).  The arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing.  The arbitrator will have the power to award any remedies available under applicable law, and the arbitrator will award attorneys’ fees and costs to the prevailing party, except as prohibited by law.  The Company will pay for any administrative or hearing fees charged by the administrator or JAMS, and all arbitrator’s fees, except that I will pay any filing fees associated with any arbitration that I initiate, but only so much of the filing fee as I would have instead paid had I filed a complaint in a court of law.  I agree that the arbitrator will administer and conduct any arbitration in accordance with California law, including the California Code of Civil Procedure and the California Evidence Code, and that the arbitrator will apply substantive and procedural California law to any dispute or claim, without reference to the rules of conflict of law.  To the extent that the JAMS Rules conflict with California law, California law will take precedence.  The decision of the arbitrator will be in writing.  Any arbitration under this Agreement will be conducted in San Diego County, California.
(d)Remedy.  Except as provided by the Act, arbitration will be the sole, exclusive, and final remedy for any dispute between me and the Company.  Accordingly, except as provided 

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Russ Cox

by the Act and this Agreement, neither I nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration.  Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.
(e)Administrative Relief.  I am not prohibited from pursuing an administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers’ Compensation Board.  However, I may not pursue court action regarding any such claim, except as permitted by law.
(f)Voluntary Nature of Agreement.  I acknowledge and agree that I am executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else.  I further acknowledge and agree that I have carefully read this Agreement and that I have asked any questions needed for me to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that I AM WAIVING MY RIGHT TO A JURY TRIAL.  Finally, I agree that I have been provided an opportunity to seek the advice of an attorney of my choice before signing this Agreement.

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