Document:

EX-10.4

 Exhibit 10.4 

ENTEROMEDICS INC. 

INDUCEMENT OPTION PLAN 

Adopted: December 22, 2015 

Effective Date: January 18, 2016 

Section 1. Purpose. 
 The purpose of the Plan is to
aid in attracting employees, management personnel and Non-Employee Directors capable of assuring the future success of the Company, to induce such personnel and Non-Employee Directors to accept employment with the Company, and to offer such
personnel incentives to put forth maximum efforts for the success of the Company’s business and to afford such personnel and Non-Employee Directors an opportunity to acquire a proprietary interest in the Company. 

Section 2. Definitions. 
 As used in the Plan, the
following terms shall have the meanings set forth below: 
  

	 	(a).	“Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant
equity interest, in each case as determined by the Committee. 

  

	 	(b).	“Award” shall mean any Option granted under the Plan and in compliance with NASDAQ Listing Rule 5635(c)(4). 

  

	 	(c).	“Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. 

 

	 	(d).	“Board” shall mean the Board of Directors of the Company. 

  

	 	(e).	“Change in Control” shall have the meaning ascribed to such term in an Award Agreement, or any other applicable employment or change in control agreement between the Participant and the Company;
provided, however, that no Award Agreement shall contain a definition of change in control that has the effect of accelerating the exercisability of any Award or the lapse of restrictions relating to any Award upon only the announcement or
stockholder approval of (rather than consummation of) any reorganization, merger or consolidation of, or sale or other disposition of all or substantially all of the assets of, the Company. 

 

	 	(f).	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. 

 

	 	(g).	“Committee” shall mean either the Board or the independent compensation committee of the Board appointed by the Board to administer the Plan. 

 

	 	(h).	“Company” shall mean EnteroMedics Inc., a Delaware corporation, and any successor corporation. 

  

	 	(i).	“Director” shall mean a member of the Board. 

  

	 	(j).	“Eligible Person” shall mean any potential employee, officer or Non-Employee Director that the Company desires to induce into entering employment with the Company or any Affiliate whom the Committee
determines to be an Eligible Person in compliance with NASDAQ Listing Rule 5635(c)(4). 

  

	 	(k).	“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 

  

	 	(l).	 “Fair Market Value” shall mean, with respect to any property (including, without limitation, any Shares or other securities), the
fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Fair Market Value of Shares on a
given date for purposes of the Plan shall not be less than (i) the closing price as reported for composite transactions, if the Shares are then 

	 	
listed on a national securities exchange, (ii) the last sale price, if the Shares are then quoted on the NASDAQ Stock Market or (iii) the average of the closing representative bid and
asked prices of the Shares in all other cases, on the date as of which fair market value is being determined. If on a given date the Shares are not traded in an established securities market, the Committee shall make a good faith attempt to satisfy
the requirements of this clause and in connection therewith shall take such action as it deems necessary or advisable. 

  

	 	(m).	“Incentive Stock Option” shall mean an option intended to meet the requirements of Section 422 of the Code or any successor provision. 

 

	 	(n).	“Non-Employee Directors” shall mean members of the Board who are also not employees of the Company. 

  

	 	(o).	“Non-Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. 

 

	 	(p).	“Option” shall mean a Non-Qualified Stock Option. 

  

	 	(q).	“Participant” shall mean an Eligible Person designated to be granted an Award under the Plan. 

  

	 	(r).	“Person” shall mean any individual or entity, including a corporation, partnership, limited liability company, association, joint venture or trust. 

 

	 	(s).	“Plan” shall mean the EnteroMedics Inc. Inducement Option Plan, as amended from time to time. 

  

	 	(t).	“Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation. 

 

	 	(u).	“Section 162(m)” shall mean Section 162(m) of the Code, or any successor provision, and the applicable Treasury Regulations promulgated thereunder. 

 

	 	(v).	“Section 409A” shall mean Section 409A of the Code, or any successor provision and the applicable Treasury Regulations and other applicable guidance thereunder. 

 

	 	(w).	“Securities Act” shall mean the Securities Act of 1933, as amended. 

  

	 	(x).	“Share” or “Shares” shall mean shares of Common Stock, $0.01 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment
made under Section 4(c) of the Plan. 

  

	 	(y).	“Specified Employee” shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable proposed or final regulations under Section 409A, determined in accordance
with procedures established by the Company and applied uniformly with respect to all plans maintained by the Company that are subject to Section 409A. 

Section 3. Administration. 
  

	 	(a).	 Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to
applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in
connection with) each Award; (iii) determine the terms and conditions of any Award or Award Agreement; (iv) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options; (iv) determine
whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (v) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee;
(vi) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (vii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; 

	 	
and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in
the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding
upon any Participant, any holder or beneficiary of any Award. 

  

	 	(b).	Delegation. The Committee may delegate its powers and duties under the Plan to one or more officers or Directors of the Company or any Affiliate or a committee of such officers or Directors, subject to such
terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate such authority (i) with regard to grants of Awards to be made to officers or Directors of
the Company or any Affiliate who are subject to Section 16 of the Exchange Act, (ii) in such a manner as would cause the Plan not to comply with the requirements of Section 162(m) or (iii) in such a manner as would contravene
Section 157 of the Delaware General Corporation Law. 

 Section 4. Shares Available for Awards. 

 

	 	(a).	Shares Available. Subject to adjustment as provided in Section 4(c), the aggregate number of Shares that may be issued under all Awards under the Plan as of the Effective Date shall be 380,001. If any
Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under
the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. 

  

	 	(b).	Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall
be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. 

  

	 	(c).	Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the
Company or other similar corporate transaction or event affects the Shares such that an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award relates shall
always be a whole number. 

  

	 	(d).	(d) Award Limitations under the Plan. 

  

	 	(i)	Section 162(m) Limitation for Certain Types of Awards. No Eligible Person that may be a “covered person” within the meaning of Section 162(m) may be granted Options or any other Awards under
the Plan, the value of which is based solely on an increase in the value of the Shares after the date of grant of such Award or Awards, and which is intended to represent “qualified performance-based compensation” within the meaning of
Section 162(m), for more than 190,000 Shares or, if such Award is payable in cash, for an amount greater than the Fair Market Value of 190,000 Shares at the time of payment (subject, in each case, to adjustment as provided for in
Section 4(c) of the Plan) in the aggregate in any calendar year. 

  

	 	(ii)	The limitations contained in this Section 4(d) shall apply only with respect to Awards granted under this Plan, and limitations on awards granted under any other stockholder approved executive incentive plan
maintained by the Company will be governed solely by the terms of such other plan. 

 Section 5. Eligibility. 

Any Eligible Person of the Company or any Affiliate, shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an
Award and the terms of any Award, the Committee may take into account the nature of the services to be rendered by the respective Eligible Persons, their potential contributions to the success of the Company or such other factors as the Committee,
in its discretion, shall deem relevant. 
 Section 6. Awards. 
  

	 	(a).	Options. The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan
as the Committee shall determine: 

  

	 	(i)	Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such
Option; provided, however, that the Committee may designate a purchase price below Fair Market Value on the date of grant (A) to the extent necessary or appropriate, as determined by the Committee, to satisfy applicable legal or
regulatory requirements of a foreign jurisdiction or (B) if the Option is granted in substitution for a stock option previously granted by an entity that is acquired by or merged with the Company or an Affiliate. 

 

	 	(ii)	Option Term. The term of each Option shall be fixed by the Committee. 

  

	 	(iii)	Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the applicable exercise price) in which, payment of the exercise price with respect
thereto may be made or deemed to have been made. Alternatively, the Committee may, in its discretion, permit an Option to be exercised by delivering to the Participant a number of Shares having an aggregate Fair Market Value (determined as of the
date of exercise) equal to the excess, if positive, of the Fair Market Value of the Shares underlying the Option being exercised, on the date of exercise, over the exercise price of the Option for such Shares. 

 

	 	(b).	General. 

  

	 	(i)	No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. 

 

	 	(ii)	Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to or in tandem with any other award granted under any plan of the Company or
any Affiliate other than the Plan. Awards granted in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other
awards. 

  

	 	(iii)	Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an
Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. 

  

	 	(iv)	 Limits on Transfer of Awards. Except as provided by the Committee or by this Plan, any Award and any right under any such Award shall not be
transferable by a Participant other than by will or by the laws of descent and distribution or by transfer of an Award back to the Company. The Committee may establish procedures as it deems appropriate for a Participant to designate a Person or
Persons, as beneficiary or beneficiaries, to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participant’s death. The Committee, in its discretion and subject to such
additional terms and conditions as it determines, may permit a Participant to transfer an Option to any “family member” (as defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the
Securities Act) at any time that such Participant holds such Option, provided that such transfers may not be for “value” (as defined in the General Instructions to Form S-8 (or any successor to such Instructions or such Form) under the

	 	
Securities Act) and the family member may not make any subsequent transfers other than by will or by the laws of descent and distribution. Each Award under the Plan or right under any such Award
shall be exercisable during the Participant’s lifetime only by the Participant (except as provided herein or in an Award Agreement or amendment thereto relating to an Option) or, if permissible under applicable law, by the Participant’s
guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the
Company or any Affiliate. 

  

	 	(v)	Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. 

  

	 	(vi)	Restrictions; Securities Exchange Listing. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem
advisable under the Plan, and to any applicable federal or state securities laws and regulatory requirements. The Committee may cause appropriate entries to be made or legends to be affixed to reflect such restrictions. If the Shares or other
securities are listed on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award until such Shares or other securities have been listed on such securities exchange. 

 

	 	(vii)	Section 409A Provisions. Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or benefit that constitutes “deferred compensation” to a
Participant under Section 409A and applicable guidance thereunder is otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of a Change in Control or due to the
Participant’s disability or “separation from service” (as defined under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the Committee determines
in good faith that (i) the circumstances giving rise to such Change in Control, disability or separation from service meet the definition of a change in ownership or control, disability or separation from service, as the case may be, in
Section 409A(a)(2)(A) of the Code and applicable proposed or final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral
exemption or otherwise. Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee in good faith) on account of separation from service may not be made before the date which
is six months after the date of the Specified Employee’s separation from service (or if earlier, upon the Specified Employee’s death) unless the payment or distribution is exempt from the application of Section 409A by reason of the
short-term deferral exemption or otherwise. 

 Section 7. Amendment and Termination; Adjustments. 

Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: 

 

	 	(a).	Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the
approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: 

  

	 	(i)	if a class of the Company’s securities is then listed on a securities exchange, would cause Rule 16b-3 or the provisions of Section 162(m)(4)(c) of the Code to become unavailable with respect to the Plan;
or 

  

	 	(ii)	would violate the rules or regulations of the NASDAQ Stock Market, any other securities exchange or the Financial Industry Regulatory Authority, Inc. that are applicable to the Company. 

 

	 	(b).	 Amendments to Awards. Except as otherwise expressly provided in the Plan, the Committee may waive any conditions of or rights of the Company
under any outstanding Award, prospectively or retroactively. Except as otherwise expressly provided in the Plan (specifically including the next two sentences hereof), the Committee may amend, alter, suspend, discontinue or terminate any outstanding
Award, prospectively 

	 	
or retroactively, but no such action may adversely affect the rights of the holder of such Award without the consent of the Participant or holder or beneficiary thereof. If any provision of the
Plan or an Award Agreement would result in adverse tax consequences under Section 409A, the Committee may amend that provision (or take any other action reasonably necessary) to avoid any adverse tax results and no action taken to comply with
Section 409A shall be deemed to impair or otherwise adversely affect the rights of any holder of an Award or beneficiary thereof. In the event of any reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange
of Shares or other securities of the Company or any other similar corporate transaction or event involving the Company (or the Company shall enter into a written agreement to undergo such a transaction or event), the Committee or the Board may, in
its sole discretion, provide for any of the following to be effective upon the consummation of the event (or effective immediately prior to the consummation of the event, provided that the consummation of the event subsequently occurs):

  

	 	(i)	either (A) termination of any such Award, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of such Award or
realization of the Participant’s rights (and, for the avoidance of doubt, if, as of the date of the occurrence of the transaction or event described in this Section 7(b)(i)(A), the Committee or the Board determines in good faith that no
amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without any payment) or (B) the replacement of such Award with other rights or
property selected by the Committee or the Board, in its sole discretion; 

  

	 	(ii)	that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; 

  

	 	(iii)	that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the applicable Award Agreement; or 

 

	 	(iv)	(iv) that the Award cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of such event. 

 

	 	(c).	Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect. 

 Section 8. Income Tax Withholding; Tax Bonuses. 

 

	 	(a).	Withholding. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state
payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the federal and state taxes
to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy
such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of
such taxes or (ii) electing to deliver to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election,
if any, must be made on or before the date that the amount of tax to be withheld is determined. 

  

	 	(b).	Tax Bonuses. The Committee, in its discretion, shall have the authority, at the time of grant of any Award under this Plan or at any time thereafter, to approve cash bonuses to designated Participants to be paid
upon their exercise or receipt of (or the lapse of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result of such exercise or receipt (or the lapse of such restrictions). The
Committee shall have full authority in its discretion to determine the amount of any such tax bonus. 

 Section 9. General Provisions. 

 

	 	(a).	No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons,
Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants. 

 

	 	(b).	Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company and, if requested by the
Company, signed by the Participant. 

  

	 	(c).	No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific cases. 

  

	 	(d).	No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate, nor will it affect in any way the right of the
Company or an Affiliate to terminate such employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement. 

  

	 	(e).	Governing Law. The validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award, shall be determined in accordance with the laws of the State of
Minnesota. 

  

	 	(f).	Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or
intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. 

 

	 	(g).	No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a
Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate. 

  

	 	(h).	No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. 

  

	 	(i).	Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof. 

  

	 	(j).	Other Benefits. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose of computing such Participant’s compensation under any compensation-based
retirement, disability, or similar plan of the Company unless required by law or otherwise provided by such other plan. 

 Section 10.
Effective Date of the Plan. 
 The Plan shall be effective as of the date of the first Award under the Plan. 

 Section 11. Term of the Plan. 

Awards shall only be granted under the Plan during a 10-year period beginning on December 22, 2015. However, unless otherwise expressly provided in the
Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the end of such 10-year period, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the
Board to amend the Plan and to waive any conditions or rights of the Company under any Award pursuant to 7(b) hereof, shall extend beyond the termination of the Plan.EX-10.5

 Exhibit 10.5 

ENTEROMEDICS INC. 

NON-INCENTIVE STOCK OPTION AGREEMENT 
  

									
	 GRANTED TO
	  	GRANT
DATE	  	NUMBER OF
SHARES SUBJECT
TO OPTION	  	EXERCISE PRICE
PER SHARE	  	EXPIRATION
DATE
		  		  		  		  	

  

	1.	This Agreement. This agreement, together with Exhibit A (collectively, the “Agreement”), sets forth the terms and conditions of a non-incentive stock option award representing the right to
purchase shares of common stock (“Common Stock”) of EnteroMedics Inc., a Delaware corporation (the “Company”). 

  

	2.	The Grant. Pursuant to the Inducement Option Plan adopted December [    ], 2015 (the “Plan”), the Company hereby grants to the individual named above (the
“Optionee”), as of the above grant date (the “Grant Date”), an option (the “Option”) to purchase the number of shares of Common Stock of the Company set forth above (the “Shares”)
at the price per share set forth above (the “Exercise Price”) with the expiration date set forth above (the “Expiration Date”). The Option constitutes an employment inducement grant under NASDAQ Rule 5635(c)(4) and
is being granted pursuant to the terms of the Employment Agreement, entered into as of                     , between the Company and the Optionee
(the “Employment Agreement”). The Option is not intended to qualify as an incentive stock option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”)

  

	3.	Exercise of Option. The exercise of the Option is subject to the following terms and conditions: 

  

	 	(a)	During the lifetime of Optionee, the Option shall be exercisable only by Optionee. The Option shall not be assignable or transferable by Optionee, other than by will or the laws of descent and distribution. The Option
may be exercised only by the Optionee (or by the Optionee’s appropriate legal representatives or guardian in the event of the Optionee’s death or if the Optionee becomes Disabled, as defined in the Employment Agreement), in whole or in
part from time to time as provided in paragraph 3(b) below, during the period commencing on the date set forth in paragraph 3(b) below and ending on the earlier of (i) the Expiration Date or (ii) the expiration of the applicable period
following the date of the Optionee’s termination of employment with the Company, as provided in paragraph 5 below. In no event, however, may the Option be exercised to any extent after the Expiration Date. 

 

	 	(b)	The Option shall become exercisable in accordance with the schedule set forth below. Once the Option has become exercisable, the Optionee may exercise it to the extent set forth in the schedule at any time thereafter,
subject to the provisions of this Agreement and the Employment Agreement. 

  

			
	 On or after each of the following dates
	  	Shares as to which the
Option is vested
		  	
		  	  

	 Each subsequent monthly anniversary for     months
	  	

  

	 	(c)	In the event the Optionee’s employment is terminated (i) without Cause (as defined in the Employment Agreement), (ii) by the Optionee for Good Reason (as defined in the Employment Agreement), or
(iii) as a result of the Company giving notice to Employee of Company’s desire to terminate the Employment Agreement (pursuant to Section      of the Employment Agreement), then provided that Optionee has executed,
delivered and not rescinded a written release as described in Section      of the Employment Agreement, the Option shall become fully exercisable on the Separation Date (as defined in the Employment Agreement).

  

	 	(d)	Upon the occurrence of a Change in Control, the Option shall become fully exercisable on the date the Change of Control is completed. In addition, upon a Change in Control, the Committee may, in its sole discretion,
provide that upon the consummation of such Change in Control, the Option shall be cancelled (after its full acceleration) in exchange for a cash payment equal to the difference between (a) the per share amount paid to holders of the Common
Stock in such transaction and (b) the Exercise Price. 

  
 1 

	4.	Manner of Exercise. The Option shall be exercised by the delivery of written notice of exercise (the “Notice”) to the Company at its principal executive office. The Notice shall be in such form
as the Committee may prescribe (including electronic form) and shall specify the number of Shares as to which the Optionee is exercising the Option, and shall be accompanied by payment of the Exercise Price of the Shares either in cash (bank check,
certified check or personal check payable to the Company or by wire transfer to the Company) or by the delivery of Shares owned by the Optionee with a Fair Market Value (as defined in the attached Exhibit A) equal to the amount of the Exercise
Price, or a combination of both. The Notice shall also be accompanied by such other information and documents as the Committee, in its discretion, may request. 

  

	5.	Effect of Termination of Relationship with the Company. 

  

	 	(a)	In the event that Optionee’s relationship with the Company or its Affiliates shall terminate, for any reason other than for Cause or Optionee’s death or Disability, Optionee shall have the right to exercise
the Option at any time within five years after such termination to the extent of the full number of Shares Optionee was entitled to purchase under the Option on the Separation Date, subject to the condition that the Option shall not be exercisable
after the expiration of its term. 

  

	 	(b)	In the event that Optionee’s relationship with the Company or its Affiliates shall terminate for Cause, the Option shall terminate as of the Separation Date and shall not be exercisable thereafter.

  

	 	(c)	If Optionee shall die during its relationship with the Company or its Affiliates, or within three months after termination of such relationship with the Company for any reason other than for Cause, or if Optionee’s
relationship with the Company or its Affiliates is terminated because the Optionee has become Disabled (as defined in Section      of the Employment Agreement), and Optionee shall not have fully exercised the Option, the Option
may be exercised at any time within twelve months after the date of Optionee’s death or termination of Optionee’s relationship because of Disability by the legal representative or, if applicable, guardian of Optionee or by any person to
whom the Option is transferred by will or the applicable laws of descent and distribution to the extent of the full number of Shares Optionee was entitled to purchase under the Option on the date of death (or Separation Date, if earlier) or
termination of Optionee’s relationship because of Disability, and subject to the condition that the Option shall not be exercisable after the Expiration Date. 

 

	6.	Income Taxes. The Optionee is liable for any federal, state and local income or other taxes applicable upon the grant or exercise of the Option or the disposition of the Shares, and the Optionee acknowledges that
he should consult with his own tax advisor regarding the applicable tax consequences. Upon exercise of the Option, the Optionee shall promptly pay to the Company the minimum statutory withholding taxes required to be withheld or collected by the
Company in connection with the exercise of the Option. The Optionee may pay all or a portion of the minimum statutory withholding taxes by (a) having the Company withhold Shares otherwise to be delivered upon the exercise of the Option with a
Fair Market Value equal to the amount of such taxes, (b) delivering to the Company shares of Common Stock other than Shares issuable upon the exercise of the Option with a Fair Market Value equal to the amount of such taxes or (c) paying
cash. For federal income tax purposes, the Option shall not be eligible for treatment as a qualified or incentive stock option. 

  

	7.	No Right to Employment. The grant of the Option shall not be construed as giving the Optionee the right to be retained as an employee of the Company or any Affiliate, nor will it affect in any way the right of
the Company or an Affiliate to terminate the Optionee’s employment at any time, with or without Cause. 

  

	8.	Plan. The Option is issued pursuant to the Plan and is subject to its terms. In the event that any of the terms of this Option conflict or are inconsistent in any respect with the terms of the Plan, the Plan
terms shall control. Optionee hereby acknowledges receipt of a copy of the Plan. The Plan is also available for inspection during business hours at the principal office of the Company. 

 

	9.	Adjustments. In the event that there is any change in the Common Stock or corporate structure of the Company as a result of any dividend or other distribution (whether in the form of cash, Common Stock, other
securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the Company or other similar corporate transaction or event, then the Committee shall, in such manner as it deems equitable, adjust the number and type of Shares and the
Exercise Price; provided, however, that the number of Shares covered by the Option shall always be a whole number. 

  
 2 

	10.	Governing Law. The validity, construction and effect of the Agreement, and any rules and regulations relating to the Agreement, shall be determined in accordance with the laws of the State of Minnesota.

  

	11.	Acknowledgment. This Option shall not be effective until the Optionee dates and signs the form of Acknowledgment below and returns a signed copy of this Agreement to the Company. By signing the Acknowledgment,
the Optionee agrees to the terms and conditions of this Agreement. 

  

							
	ACKNOWLEDGMENT:	 		 	ENTEROMEDICS INC.
				
	  
	 		 		 	
	OPTIONEE’S SIGNATURE	 		 		 	
				
	  
	 		 		 	
	DATE	 		 		 	
				
		 		 	By:	 	  

		 		 		 	[Name]
		 		 		 	[Title]

  
 3 

 EXHIBIT A 

DEFINED TERMS USED IN THE 

STOCK OPTION AGREEMENT 
 The following
terms used in this Agreement have the following meanings: 
 “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2
promulgated under the Exchange Act. 
 “Associate” shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the
Exchange Act. 
 “Change in Control” shall mean: 

(i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act who did not own shares of
the capital stock of the Company on the date of grant of the Option shall, together with his, her or its Affiliates and Associates (as such terms are defined in Rule 12b-2 promulgated under the Exchange Act), become the “Beneficial Owner”
(as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities (any such person
being hereinafter referred to as an “Acquiring Person”); 
 (ii) the Continuing Directors cease to constitute a
majority of the Company’s Board; 
 (iii) There should occur (A) any consolidation or merger involving the Company
and the Company shall not be the continuing or surviving corporation or the shares of the Company’s capital stock shall be converted into cash, securities or other property; provided, however, that this subclause (A) shall
not apply to a merger or consolidation in which (i) the Company is the surviving corporation and (ii) the stockholders of the Company immediately prior to the transaction have the same proportionate ownership of the capital stock of the
surviving corporation immediately after the transaction; (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (C) any
liquidation or dissolution of the Company; or 
 (iv) The majority of the Continuing Directors determine, in their sole and
absolute discretion, that there has been a Change in Control. 
 “Committee” shall mean the Compensation Committee of the Company’s
Board of Directors. 
 “Continuing Director” shall mean any person who is a member of the Board of Directors of the Company, while such
person is a member of the Board of Directors, who is not an Acquiring Person, an Affiliate or Associate of an Acquiring Person or a representative of an Acquiring Person or of any such Affiliate or Associate and who (i) was a member of the
Company’s Board of Directors on the date of grant of the Option or (ii) subsequently became a member of the Board of Directors, upon the nomination or recommendation, or with the approval of, a majority of the Continuing Directors. 

“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended. 

“Fair Market Value” shall mean the closing sale price of the Common Stock as reported on the NASDAQ Capital Market on such date or, if such
market is not open for trading on such date, on the most recent preceding date when such market is open for trading. 

  
 A-1

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