Document:

Exhibit 4.2

 

Execution Version

 

KALA PHARMACEUTICALS, INC.

 

THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

 

April 6, 2016

 

 

TABLE OF CONTENTS

 

	
1.
    	
Certain Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Demand Registration
    	
3
    
	
 
    	
 
    	
 
    
	
3.
    	
Form S-3
    	
4
    
	
 
    	
 
    	
 
    
	
4.
    	
Piggyback Registration
    	
4
    
	
 
    	
 
    	
 
    
	
5.
    	
Registration Procedures
    	
5
    
	
 
    	
 
    	
 
    
	
6.
    	
Expenses
    	
7
    
	
 
    	
 
    	
 
    
	
7.
    	
Indemnification
    	
8
    
	
 
    	
 
    	
 
    
	
8.
    	
Compliance with Rule 144
    	
11
    
	
 
    	
 
    	
 
    
	
9.
    	
Rule 144A Information
    	
11
    
	
 
    	
 
    	
 
    
	
10.
    	
Amendments and Waivers
    	
11
    
	
 
    	
 
    	
 
    
	
11.
    	
Postponement
    	
12
    
	
 
    	
 
    	
 
    
	
12.
    	
Market Stand-Off
    	
12
    
	
 
    	
 
    	
 
    
	
13.
    	
Transferability of   Registration Rights
    	
12
    
	
 
    	
 
    	
 
    
	
14.
    	
Rights Which May Be   Granted to Subsequent Stockholders
    	
13
    
	
 
    	
 
    	
 
    
	
15.
    	
Termination of   Registration Rights
    	
13
    
	
 
    	
 
    	
 
    
	
16.
    	
Damages
    	
13
    
	
 
    	
 
    	
 
    
	
17.
    	
Miscellaneous
    	
13
    

 

 

THIRD AMENDED AND RESTATED

REGISTRATION RIGHTS AGREEMENT

 

This Third Amended and Restated Registration Rights Agreement, dated as of April 6, 2016 (this “Agreement”), is entered into by and among Kala Pharmaceuticals, Inc., a Delaware corporation (the “Company”), the individuals and entities listed on Schedule A attached hereto (collectively, the “Investors” and each individually, an “Investor”) and the individual listed on Schedule B attached hereto (the “Key Holder,” and together with the Investors, the “Stockholders”).

 

RECITALS:

 

WHEREAS, the Company and certain of the Stockholders are parties to that certain Second Amended and Restated Registration Rights Agreement, dated as of April 16, 2014, as amended by Amendment No. 1 and Amendment No. 2 thereto (the “Existing Registration Rights Agreement”);

 

WHEREAS, the Company and certain of the Investors (the “Series C Purchasers”) have entered into a Series C Preferred Stock Purchase Agreement on or prior to the date hereof (as amended and/or restated from time to time, the “Series C Purchase Agreement”) in connection with the issuance and sale by the Company to such Series C Purchasers of shares of the Company’s Series C Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”);

 

WHEREAS, as a condition precedent to the sale and purchase of the Series C Preferred Stock pursuant to the Series C Purchase Agreement, the Series C Purchasers have required that the Existing Registration Rights Agreement be amended and restated to, among other things, make the Series C Purchasers parties thereto;

 

WHEREAS, pursuant to Section 10 of the Existing Registration Rights Agreement, the amendment and restatement of the Existing Registration Rights Agreements requires the written consent of the holders of at least fifty percent (50%) of the Registrable Securities (as defined in the Existing Registration Rights Agreement);

 

WHEREAS, pursuant to Section 14 of the Existing Registration Rights Agreement, the Company shall not, without the written consent of the holders of at least fifty percent (50%) of the Registrable Securities, allow purchasers of the Company’s securities to become a party to the Existing Registration Rights Agreement; and

 

WHEREAS, the signatories to this Agreement hold the requisite number of Registrable Securities to effect the amendment and restatement of the Existing Registration Rights Agreement and desire to amend and restate the Existing Registration Rights Agreement in its entirety in the manner set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:

 

1.                                      Certain Definitions.  As used in this Agreement, the following terms shall have the following respective meanings:

 

 

“Charter” shall mean the Company’s Amended and Restated Certificate of Incorporation, as amended and/or restated from time to time.

 

“Commission” shall mean the United States Securities and Exchange Commission, or any other federal agency administering the Securities Act and the Exchange Act at the time.

 

“Common Stock” shall mean the Company’s common stock, par value $0.001 per share.

 

“Damages” shall mean any loss, claim, damage, expense or liability, joint or several, to which a party hereto may become subject under the Securities Act, the Exchange Act or any other statute or at common law.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

“Indemnified Person” shall mean a Company Indemnified Person and/or a Stockholder Indemnified Person, as applicable.

 

“Joinder Agreement” shall mean a joinder agreement in substantially the form attached hereto as Exhibit I.

 

“Key Holder Registrable Securities” shall mean the shares of Common Stock held, or hereafter acquired, by the Key Holder from the Company, including without limitation any shares of Common Stock issued to the Key Holder upon the exercise of stock options.”

 

“Person” shall mean an individual, a corporation, a partnership, a joint venture, a trust, an unincorporated organization, a limited liability company or partnership, a government and any agency or political subdivision thereof.

 

“Preferred Stock” shall mean, collectively, the Seed Preferred Stock, the Series A Preferred Stock, the Series B Preferred Stock, the Series B-1 Preferred Stock and the Series C Preferred Stock.

 

“Registrable Securities” shall mean (i) the shares of Common Stock issued or issuable upon conversion of the Preferred Stock held, or hereafter acquired, by the Investors (the “Investor Registrable Securities”), (ii) Key Holder Registrable Securities and (iii) any other shares of Common Stock issued or issuable in respect of such Investor Registrable Securities or Key Holder Registrable Securities (because of stock splits, stock dividends, reclassifications, recapitalizations or similar events).

 

“Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

 

“Seed Preferred Stock” shall mean the Company’s Seed Preferred Stock, par value $0.001 per share.

 

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“Series A Preferred Stock” shall mean the Company’s Series A Preferred Stock, par value $0.001 per share.

 

“Series B Preferred Stock” shall mean the Company’s Series B Preferred Stock, par value $0.001 per share.

 

“Series B-1 Preferred Stock” shall mean the Company’s Series B-1 Preferred Stock, par value $0.001 per share.”

 

2.                                      Demand Registration

 

(a)                                 At any time after the earlier of (i) five (5) years from the date of this Agreement and (ii) one hundred eighty (180) days after the initial public offering of the Company’s Common Stock pursuant to an effective registration under the Securities Act, the holders (excluding the Key Holder) of at least fifty percent (50%) of the Registrable Securities then outstanding (excluding Key Holder Registrable Securities) may notify the Company that they intend to offer or cause to be offered for public sale at least fifty percent (50%) of the Registrable Securities then outstanding (excluding Key Holder Registrable Securities) or any lesser number of Registrable Securities (excluding Key Holder Registrable Securities) if the anticipated aggregate sale price, net of underwriting discounts and commissions, if any, would exceed $10,000,000.  Upon receipt of such request, the Company shall promptly deliver notice of such request to all Stockholders holding Registrable Securities who shall then have thirty (30) days to notify the Company in writing of their desire to be included in such registration.  If the request for registration contemplates an underwritten public offering, the Company shall state such in the written notice and in such event the right of any Person to participate in such registration shall be conditioned upon such Person’s participation in such underwritten public offering and the inclusion of such Person’s Registrable Securities in the underwritten public offering to the extent provided herein.  The Company will use its reasonable best efforts to expeditiously effect (but in any event no later than thirty (30) days after such request) the registration of all Registrable Securities whose holders request participation in such registration under the Securities Act, but only to the extent provided for in this Agreement; provided, however, that the Company shall not be required to effect registration pursuant to a request under this Section 2(a) more than two (2) times for the holders of the Registrable Securities as a group.  Notwithstanding anything to the contrary contained herein, no request may be made under this Section 2(a) within ninety (90) days after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which the holders of Registrable Securities shall have been entitled to join pursuant to Section 4 and in which there shall have been effectively registered all Registrable Securities as to which registration shall have been requested.  A registration will not count as a requested registration under this Section 2(a) unless and until the registration statement relating to such registration has been declared effective by the Commission; provided, however, that a majority in interest of the participating holders of Registrable Securities may request, in writing, that the Company withdraw a registration statement which has been filed under this Section 2(a) but has not yet been declared effective, and a majority in interest of such holders may thereafter request the Company to reinstate such registration statement, if permitted under the Securities Act, or to file another registration statement, in accordance with the procedures set forth herein and without reduction in the number of demand registrations permitted under this Section 2(a).

 

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(b)                                 If a requested registration involves an underwritten public offering and the managing underwriter of such offering determines in good faith that the number of securities sought to be offered should be limited due to market conditions, then the number of securities to be included in such underwritten public offering shall be reduced to a number deemed satisfactory by such managing underwriter; provided, that the securities to be excluded shall be determined in the following order of priority: (i) first, persons not having any contractual or other right to include such securities in the registration statement, (ii) second, securities held by any other Persons (other than the holders of Registrable Securities) having a contractual, incidental “piggy back” right to include such securities in the registration statement, (iii) third, securities to be registered by the Company pursuant to such registration statement, (iv) fourth, Registrable Securities of holders who did not make the original request for registration and, if necessary, (v) fifth, Registrable Securities of holders who requested such registration pursuant to Section 2(a).  If there is a reduction of the number of Registrable Securities pursuant to clauses (iv) or (v), such reduction shall be made on a pro rata basis (based upon the aggregate number of Registrable Securities held by such holders).

 

(c)                                  With respect to a request for registration pursuant to Section 2(a) which is for an underwritten public offering, the managing underwriter shall be chosen by the holders of a majority of the Registrable Securities to be sold in such offering, subject only to the consent of the Company, which consent shall not be unreasonably withheld.  The Company may not cause any other registration of securities for sale for its own account (other than a registration effected solely to implement an employee benefit plan) to become effective within one hundred twenty (120) days following the effective date of any registration required pursuant to this Section 2.

 

3.                                      Form S-3.  An Investor or Investors holding Registrable Securities (excluding any Key Holder Registrable Securities) anticipated to have an aggregate sale price (net of underwriting discounts and commissions, if any) in excess of $1,000,000 shall have the right to request any number of registrations on Form S-3 (or any successor form) for the Registrable Securities held by such requesting holder or holders; provided, however, that the Company (i) is then eligible to use such Form S-3 (or successor form) and (ii) shall not be required to file more than two (2) such registration statements on Form S-3 (or any successor form) in any twelve (12) month period. Such requests shall be in writing and shall state the number of shares of Registrable Securities to be disposed of and the intended method of disposition of such shares by such holder or holders.  The Company shall give notice to all other holders of the Registrable Securities of the receipt of a request for registration pursuant to this Section 3 and such holders of Registrable Securities shall then have thirty (30) days to notify the Company in writing of their desire to participate in the registration.  The Company shall use its reasonable best efforts to effect promptly the registration of all shares on Form S-3 (or any successor form) to the extent requested by such holders.  The Company shall use its reasonable best efforts to keep such registration statement effective until the earlier of ninety (90) days or until such holders have completed the distribution described in such registration statement.

 

4.                                      Piggyback Registration.  If the Company at any time proposes to register any of its securities under the Securities Act for sale to the public (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable Securities for sale to the public), each such time it will give written notice at the applicable address of record to each holder of Registrable Securities of its intention to do so.  Upon the written request

 

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of any of such holders of the Registrable Securities, given within twenty (20) days after receipt by such Person of such notice, the Company will, subject to the limits contained in this Section 4, use its reasonable best efforts to cause all such Registrable Securities of said requesting holders to be registered under the Securities Act and qualified for sale under any state blue sky law, all to the extent required to permit such sale or other disposition of said Registrable Securities; provided, however, that if the Company is advised in writing in good faith by any managing underwriter of the Company’s securities being offered in a public offering pursuant to such registration statement that the amount to be sold by persons other than the Company (collectively, “Selling Stockholders”) is greater than the amount which can be offered without adversely affecting the offering, the Company may reduce the amount offered for the accounts of Selling Stockholders (including such holders of shares of Registrable Securities) to a number deemed satisfactory by such managing underwriter; provided, further, that (a) in no event shall the amount of Registrable Securities of Selling Stockholders be reduced below twenty-five percent (25%) of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company’s securities; and (b) any shares to be excluded shall be determined in the following order of priority: (i) securities held by any Persons not having any such contractual, incidental registration rights, (ii) securities held by any Persons having contractual, incidental registration rights pursuant to an agreement which is not this Agreement, and (iii) the Registrable Securities sought to be included by the holders thereof as determined on a pro rata basis (based upon the aggregate number of Registrable Securities held by such holders).

 

5.                                      Registration Procedures.  If and whenever the Company is required by the provisions of this Agreement to use its reasonable best efforts to promptly effect the registration of any of its securities under the Securities Act, the Company will:

 

(a)                                 use its reasonable best efforts to diligently prepare and file with the Commission a registration statement on the appropriate form under the Securities Act with respect to such securities, which form shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith, and use its reasonable best efforts to cause such registration statement to become and remain effective for, except as specified in Section 3 above, a period of up to one hundred eighty (180) days or, if earlier, until completion of the proposed offering;

 

(b)                                 use its reasonable best efforts to diligently prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the selling Stockholder(s) have completed the distribution described in such registration statement, unless otherwise set forth herein, and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller or sellers of such securities shall desire to sell or otherwise dispose of the same, but only to the extent provided in this Agreement;

 

(c)                                  furnish to each selling Stockholder and the underwriters, if any, such number of copies of such registration statement, any amendments thereto, any documents incorporated by reference therein, the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such selling

 

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Stockholder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such selling Stockholder;

 

(d)                                 use its reasonable best efforts to register or qualify the securities covered by such registration statement under such other securities or state blue sky laws of such jurisdictions as each selling Stockholder shall reasonably request, and do any and all other acts and things which may be necessary under such securities or blue sky laws to enable such selling Stockholder to consummate the public sale or other disposition in such jurisdictions of the securities owned by such selling Stockholder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation or to file a general consent to service of process in any such states or jurisdictions wherein it is not already so qualified;

 

(e)                                  within a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the Commission, furnish to counsel selected by the selling Stockholders copies of such documents proposed to be filed, having considered in good faith any comments to such documents from such counsel;

 

(f)                                   immediately notify each selling Stockholder, such selling Stockholder’s counsel and any underwriter (and if requested by any such Person, confirm such notice in writing) of the happening of any event that makes any statement made in the registration statement or related prospectus untrue or which requires the making of any changes in such registration statement or prospectus so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading; and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(g)                                  use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement, and if one is issued, use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment;

 

(h)                                 if requested by the managing underwriter or underwriters (if any), any selling Stockholder, or such selling Stockholder’s counsel, promptly incorporate in a prospectus supplement or post-effective amendment such information as such Person reasonably and appropriately requests to be included therein and promptly make all required filings of such prospectus supplement or post-effective amendment;

 

(i)                                     make available to each selling Stockholder, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent or representative retained by any such selling Stockholder or underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and

 

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employees to supply all information reasonably requested by any such Inspector in connection with such registration statement as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

(j)                                    in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering and use its reasonable best efforts to facilitate the public offering of the securities;

 

(k)                                 furnish to each prospective selling Stockholder a signed counterpart, addressed to the prospective selling Stockholder, of (A) an opinion of counsel for the Company, dated the effective date of the registration statement, and (B) a “comfort” letter signed by the independent public accountants who have certified the Company’s financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants’ letter) with respect to events subsequent to the date of the financial statements, as are customarily covered (at the time of such registration) in opinions of the Company’s counsel and in accountants’ letters delivered to the underwriters in underwritten public offerings of securities;

 

(l)                                     cause the securities covered by such registration statement to be listed on the securities exchange or quoted on the quotation system on which the Common Stock of the Company is then listed or quoted (or if the Common Stock is not yet listed or quoted, then on such exchange or quotation system as the Company shall determine);

 

(m)                             otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its security holders, in each case as soon as practicable, but not later than thirty (30) days after the close of the period covered thereby, an earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any comparable successor provisions);

 

(n)                                 otherwise cooperate with the underwriter(s), the Commission and other regulatory agencies and take all actions and execute and deliver or cause to be executed and delivered all documents necessary to effect the registration of any securities under this Agreement; and

 

(o)                                 during the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act.

 

6.                                      Expenses.  All expenses incurred by the Company or the selling Stockholders in effecting the registrations provided for in Sections 2, 3 and 4 of this Agreement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, the reasonable fees and disbursements of one counsel (the “Selling Stockholder Counsel”) for the selling Stockholders (selected by at least fifty percent (50%) in interest of Registrable Securities being registered and held by the selling Stockholders participating in such registration), underwriting expenses (other than fees, commissions or discounts), expenses of any audits incident to or required by any such registration and expenses of complying with the

 

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securities or blue sky laws of any jurisdictions (all of such expenses referred to as “Registration Expenses”), shall be paid by the Company; provided, however, that the Company shall not be required to pay for any Registration Expenses of any registration proceeding begun pursuant to Section 2 if the registration request is subsequently withdrawn at the request of the selling Stockholders holding at least fifty percent (50%) in interest of the Registrable Securities requested to be registered pursuant to Section 2 (in which case, all such selling Stockholders shall bear such Registration Expenses pro rata based upon the number of Registrable Securities held by each such selling Stockholder that were to be included in the withdrawn registration), unless the selling Stockholders holding at least fifty percent (50%) in interest of the Registrable Securities requested to be registered pursuant to Section 2 forfeit their right to one registration pursuant to Section 2; provided that if, at the time of such withdrawal, the selling Stockholders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the selling Stockholders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the selling Stockholders shall not be required to pay any of such Registration Expenses and shall not forfeit their right to one registration pursuant to Section 2.  All Selling Expenses (as defined below) relating to Registrable Securities registered pursuant to this Agreement shall be borne and paid by the selling Stockholders pro rata on the basis of the number of Registrable Securities registered on their behalf. “Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any selling Stockholder, except for the fees and disbursements of the Selling Stockholder Counsel borne and paid by the Company as provided in this Section 6.

 

7.                                      Indemnification.

 

(a)                                 The Company shall indemnify and hold harmless each selling Stockholder (including its partners (including partners of partners and shareholders of such partners)), the directors, officers, employees and agents of each such selling Stockholder, legal counsel, accountants and investment advisers for each such selling Stockholder, any underwriter (as defined in the Securities Act) of an offering of Registrable Securities of such Stockholder, and each Person, if any, who controls (within the meaning of the Securities Act) such selling Stockholder or underwriter (each, a “Company Indemnified Person”) against any Damages, insofar as such Damages (or action in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement of the Company under which securities held by such party were registered under the Securities Act, including any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, (ii) any omission or alleged omission by the Company to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, the Exchange Act, any state securities or “blue sky” laws or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities or “blue sky” laws.  Except as otherwise provided in Section 7(d), the Company shall reimburse each such Company Indemnified Person in connection with investigating or defending any claim or proceeding from which Damages may result.  Notwithstanding the foregoing, the Company shall not be liable to any Company Indemnified Person in any such case to the extent that any such Damages arise out of or are based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary or final prospectus, or amendment or supplement

 

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thereto, in reliance upon and in conformity with information furnished in writing to the Company by such Company Indemnified Person specifically for use therein.  The Company shall not be required to indemnify any Company Indemnified Person against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any Company Indemnified Person to deliver a prospectus as required by the Securities Act regardless of any investigation made by or on behalf of such Company Indemnified Person; and the provisions of this sentence shall survive any transfer of such securities by such selling Stockholder.

 

(b)                                 Each selling Stockholder shall indemnify and hold harmless each other selling Stockholder of any securities, the Company, its directors and officers, any underwriter (as defined in the Securities Act), legal counsel and accountants for the Company, and each other Person, if any, who controls (within the meaning of the Securities Act) the Company or such underwriter (each, a “Stockholder Indemnified Person”), against any Damages, insofar as such Damages (or action in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement of the Company under which securities held by such party were registered under the Securities Act, including any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto or (ii) any omission or alleged omission by such selling Stockholder to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of clauses (i) and (ii) of this sentence to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus, amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such selling Stockholder specifically for use therein.  Such selling Stockholder shall reimburse any Stockholder Indemnified Person for any legal fees incurred in investigating or defending any claim or proceeding from which Damages may result.  Notwithstanding the foregoing, except in the case of fraud or willful misconduct by a selling Stockholder, in no event shall the liability of any selling Stockholder for indemnification under this Section 7 exceed the lesser of (i) that proportion of the total of such Damages equal to the proportion of the total Registrable Securities sold under such registration statement by such selling Stockholder compared to the total Registrable Securities sold under such registration statement by the Selling Stockholders, or (ii) the amount equal to the net proceeds from the offering received by such selling Stockholder.  No selling Stockholder shall be required to indemnify any Stockholder Indemnified Person against any Damages arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in the final prospectus or for any Damages which arise out of the failure of any Stockholder Indemnified Person to deliver a prospectus as required by the Securities Act.

 

(c)                                  Indemnification similar to that specified in Sections 7(a) and (b) shall be given by the Company and each selling Stockholder (with such modifications as may be appropriate) with respect to any required registration or other qualification of their securities under any federal or state law or regulation of governmental authority other than the Securities Act.

 

(d)                                 In the event the Company, any selling Stockholder or other Person receives a complaint, claim or other notice of any liability or action, giving rise to a claim for

 

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indemnification under Section 7(a), (b) or (c) above, the Person claiming indemnification under such paragraphs shall promptly notify the Person against whom indemnification is sought of such complaint, notice, claim or action, and such indemnifying Person shall have the right to investigate and defend any such complaint, notice, claim or action.

 

(e)                                  If the indemnification provided for in this Section 7 for any reason is held by a court of competent jurisdiction to be unavailable to an Indemnified Person in respect of any Damages, then each indemnifying party under this Section 7, in lieu of indemnifying such Indemnified Person under this Section 7, shall contribute to the amount paid or payable by such Indemnified Person as a result of such Damages (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the selling Stockholder(s) and the underwriters from the offering of Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the selling Stockholder(s) and the underwriters in connection with the statements or omissions which resulted in such Damages, as well as any other relevant equitable considerations.  The relative benefits received by the Company, the selling Stockholder(s) and the underwriters shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company, the selling Stockholder(s), and the underwriting discount received by the underwriters, in each case, as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the Registrable Securities.  The relative fault of the Company, the selling Stockholder(s) and the underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the selling Stockholder(s), or the underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Company and the selling Stockholders agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata or per capita allocation or by any other method of allocation which does not take account the equitable considerations referred to in the immediately preceding paragraph.  Except in the case of fraud or willful misconduct by a selling Stockholder, in no event shall a selling Stockholder be required to contribute under this Section 7(e), when combined with the amounts paid or payable by such Stockholder pursuant to Section 7(b), in excess of the lesser of (i) that proportion of the total of such Damages equal to the proportion of the total Registrable Securities sold under such registration statement by such selling Stockholder compared to the total Registrable Securities sold under such registration statement by the Selling Stockholders, or (ii) the amount equal to the net proceeds from the offering received by such selling Stockholder.  No Person found guilty of fraudulent representation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.

 

(f)                                   The amount paid by an indemnifying party or payable to an Indemnified Person as a result of any Damages referred to in this Section 7 shall be deemed to include, subject to limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Person in connection with investigating or defending any such action or claim, payable as the same are incurred.  The indemnification and contribution provided for in this Section 7 will remain in

 

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full force and effect regardless of any investigation made by or on behalf of the indemnified parties or any other officer, director, employee, agent or controlling person of the indemnified parties.

 

(g)                                  No indemnifying party, in the defense of any complaint, notice, claim or action, shall enter into a consent or entry of any judgment or enter into a settlement without the consent of the Indemnified Person, which consent shall not be unreasonably withheld or delayed.  Notwithstanding anything to the contrary set forth herein, (i) the indemnity agreement contained in Section 7(a) shall not apply to amounts paid in settlement of any complaint, notice, claim or action if such settlement is effected without the consent of the Company, which consent will not be unreasonably withheld or delayed, and (ii) the indemnity agreement contained in Section 7(b) shall not apply to amounts paid in settlement of any complaint, notice, claim or action if such settlement is effected without the consent of the selling Stockholders, which consent will not be unreasonably withheld or delayed.

 

8.                                      Compliance with Rule 144.  In the event that the Company (i) registers a class of securities under Section 12 of the Exchange Act or (ii) shall commence to file reports under Section 13 or 15(d) of the Exchange Act, the Company will use its reasonable best efforts thereafter to file with the Commission such information as is required under the Exchange Act for so long as there are holders of Registrable Securities; and in such event, the Company shall use its reasonable best efforts to take all action as may be required as a condition to the availability of Rule 144 under the Securities Act (or any comparable successor rules).  After the occurrence of the first underwritten public offering of Common Stock pursuant to an offering registered under the Securities Act on Form S-l (or any comparable successor forms), subject to the limitations on transfers imposed by this Agreement, the Company shall use its reasonable best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Securities.

 

9.                                      Rule 144A Information.  The Company shall, upon written request of any Investor, provide to such Investor and to any prospective institutional transferee of the Common Stock designated by such Investor, such financial and other information as is available to the Company or can be obtained by the Company without material expense and as such Investor may reasonably determine is required to permit such transfer to comply with the requirements of Rule 144A promulgated under the Securities Act.

 

10.                               Amendments and Waivers.  Subject to the last sentence of Section 12, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of at least sixty-seven percent (67%) of the Registrable Securities issued or issuable upon conversion of Preferred Stock then outstanding, provided that any amendment that would materially and adversely affect any Stockholder in a disproportionate manner than any other Stockholder shall not be effective against such Stockholder without such Stockholder’s written consent with respect thereto.  For the purposes of this Agreement, no course of dealing between or among any of the parties hereto and no delay on the part of any party hereto in exercising any rights hereunder shall operate as a waiver of the rights hereof.

 

11

 

11.                               Postponement.  The Company may postpone the filing of any registration statement required hereunder for a reasonable period of time, not to exceed ninety (90) days in the aggregate during any twelve-month period, if the Company has been advised by legal counsel that such filing would require a special audit or the disclosure of a material impending transaction or other matter and the Company’s Board of Directors determines reasonably and in good faith that such disclosure would have a material adverse effect on the Company (a “Black-Out Period”). Upon notice of the existence of a Black-Out Period from the Company to any Stockholder or Stockholders with respect to any registration statement already effective, such Stockholder or Stockholders shall refrain from selling their Registrable Securities under such registration statement until such Black-Out Period has ended; provided, however, that the Company shall not have the right to impose a Black-Out Period with respect to any registration statement that is already effective more than once during any period of twelve (12) consecutive months and in no event shall such Black-Out Period exceed sixty (60) days.

 

12.                               Market Stand-Off.  Each Stockholder agrees, that if requested by the Company and an underwriter in connection with the initial public offering of the Company of Common Stock under the Securities Act on a registration statement on Form S-1(the “IPO”), not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any securities of the Company held by it immediately prior to the effectiveness of the registration statement relating to the IPO for such period, not to exceed one hundred eighty (180) days (plus any additional period of time as may be requested by the Company or such underwriter for the purpose of complying with FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto) following the effective date of the registration statement for the IPO, as such underwriter shall specify reasonably and in good faith; provided, however, that all officers and directors of the Company and all 1% or greater stockholders of the Company enter into similar agreements; provided, further, however, that in the event the Company or such underwriter, as applicable, releases any securities of the Company from the restrictions set forth in this Section 12 or similar restrictions (in any such case, the “Released Securities”), the foregoing provisions shall be waived or terminated, as applicable, to the same extent and with respect to the same percentage of securities of each Stockholder as the percentage of Released Securities represent with respect to the securities held by the holder of such Released Securities. For purposes of clarity, the restrictions set forth herein shall not apply to shares acquired in the IPO or in the open market following the IPO.  Notwithstanding anything to the contrary contained herein, any amendment to this Section 12 that would adversely affect the holders of the Series B Preferred Stock or the Series B-1 Preferred Stock or the Series C Preferred Stock, as the case may be, shall require the written consent of (i) the holders of at least a majority of the Series B Preferred Stock and Series B-1 Preferred Stock then outstanding, in the case of an amendment that adversely affects the holders of the Series B Preferred Stock or the Series B-1 Preferred Stock and (ii) the holders of at least a majority of the Series C Preferred Stock then outstanding in the case of an amendment that adversely affects the holders of the Series C Preferred Stock.

 

13.                               Transferability of Registration Rights.  The registration rights set forth in this Agreement are transferable to each transferee of Registrable Securities. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of this Agreement in order to acquire the rights granted pursuant to this Agreement.

 

12

 

14.                               Rights Which May Be Granted to Subsequent Stockholders.  Other than permitted transferees of Registrable Securities under Section 13, the Company shall not, without the prior written consent of holders of at least fifty percent (50%) in interest of the Registrable Securities then outstanding, (a) allow purchasers of the Company’s securities to become a party to this Agreement (except as permitted by Section 17(e) of this Agreement) or (b) grant any other registration rights, other than any incidental or so called piggyback registration rights to any third parties that are not inconsistent with the terms of this Agreement.

 

15.                               Termination of Registration Rights.  The right of any Stockholder to request registration or inclusion of Registrable Securities in any registration pursuant to Sections 2, 3, or 4 of this Agreement shall terminate on the seventh (7th) anniversary of the Company’s initial public offering.

 

16.                               Damages.  The Company recognizes and agrees that each holder of Registrable Securities may not have an adequate remedy if the Company fails to comply with the terms and provisions of this Agreement and that damages may not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, the holder of Registrable Securities or any other Person entitled to the benefits of this Agreement shall be entitled to seek specific performance of any and all provisions hereof or to seek injunctive relief against the Company from continuing to commit any such breach of this Agreement.

 

17.                               Miscellaneous.

 

(a)                                 Notices.  All notices, requests, demands and other communications provided for herein shall be in writing and shall be deemed to have been duly given, delivered and received upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) one (1) business day after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery.  All notices, requests, demands and other communications provided for herein shall be given to the applicable party at the addresses indicated below:

 

To the Company:

 

Kala Pharmaceuticals, Inc.
 100 Beaver Street
 Suite 201
 Waltham, MA 02453
 Attention: Chief Executive Officer
 Facsimile: 781-642-0399
 Email: mark.iwicki@kalarx.com

 

With a copy to:

 

Wilmer Cutler Pickering Hale and Dorr LLP
 60 State Street
 Boston, MA 02109

 

13

 

Attention: Lia Der Marderosian, Esq.
 Facsimile: 617-526-5000
 Email: Lia.DerMarderosian@wilmerhale.com

 

If to the Investors, only at their respective addresses as set forth on the signature pages or Schedule A attached hereto, with a copy to Proskauer Rose LLP, One International Place, Boston, Massachusetts 02110-2600, Attn: Ori Solomon, Esq., osolomon@proskauer.com, Facsimile: 617-526-9899, a copy to Greenberg Traurig, LLP, One International Place, Boston, Massachusetts 02110, Attn: Bradley A. Jacobson, Esq., jacobsonb@gtlaw.com, Facsimile: 617-279-8402, a copy to Morrison, Foerster LLP, 755 Page Mill Road, Palo Alto, CA 94304, Attn: Paul “Chip” Lion III, PLion@mofo.com.

 

If to the Key Holder, at his address as set forth on Schedule B attached hereto.

 

If to any other holder of Registrable Securities:

 

At such Person’s address for notice as set forth in the books and records of the Company or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to other parties complying as to delivery with the terms of this Section 17(a).

 

(b)                                 Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the state of Delaware, without giving effect to conflict of laws principles thereof.

 

(c)                                  Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Counterparts may be delivered via facsimile, electronic mail or other transmission method, and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

(d)                                 Severability.  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

 

(e)                                  Additional Investors.  Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s Preferred Stock after the date hereof, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering to the Company a Joinder Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder.  No action or consent by the Stockholders shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

 

(f)                                   Entire Agreement.  This Agreement, including any schedules and exhibits hereto, constitutes the entire agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.  For the avoidance of doubt, upon the effectiveness of this

 

14

 

Agreement, the Existing Registration Rights Agreement shall be deemed amended and restated and superseded and replaced in its entirety by this Agreement, and shall be of no further force or effect.

 

[Signature pages follow.]

 

15

 

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

 

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
KALA   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark Iwicki
    
	
 
    	
Name:
    	
Mark   Iwicki
    
	
 
    	
Title:
    	
Chief   Executive Officer
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS:
    
	
 
    	
 
    
	
 
    	
LUX   VENTURES II, L.P.
    
	
 
    	
By:
    	
Lux   Venture Partners II, L.P., its General Partner
    
	
 
    	
By:
    	
Lux   Venture Associates II, LLC, its General Partner
    
	
 
    	
By:
    	
Lux   Capital Management, LLC, its Sole Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Peter Hébert
    
	
 
    	
Name:
    	
Peter   Hébert
    
	
 
    	
Title:
    	
Managing   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LUX   VENTURES II SIDECAR, L.P.
    
	
 
    	
By:
    	
Lux   Venture Partners II, L.P., its General Partner
    
	
 
    	
By:
    	
Lux   Venture Associates II, LLC, its General Partner
    
	
 
    	
By:
    	
Lux   Capital Management, LLC, its Sole Member
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Peter Hébert
    
	
 
    	
Name:
    	
Peter   Hébert
    
	
 
    	
Title:
    	
Managing   Partner
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
HOLLY   SMITH-NORMAN 2007 TRUST, DATED NOVEMBER 24, 2007, AS AMENDED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Burr R. Smith
    
	
 
    	
Name:
    	
Burr   R. Smith
    
	
 
    	
Title:
    	
Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
2012   TRUST AGREEMENT OF VICTORIA SMITH TRAUSCHT, DATED SEPTEMBER 18, 2012
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Victoria Smith Trauscht
    
	
 
    	
Name:
    	
Victoria   Smith Trauscht
    
	
 
    	
Title:
    	
Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BRISCO-DAVIS   GROUP, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Burr R. Smith
    
	
 
    	
Name:
    	
Burr   R. Smith
    
	
 
    	
Title:
    	
Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
DAVIS   CLEARING HOUSE, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Burr R. Smith
    
	
 
    	
Name:
    	
Burr   R. Smith
    
	
 
    	
Title:
    	
Manager
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
2011   TRUST AGREEMENT OF KAREN CHASE SMITH, DATED FEBRUARY 22, 2012
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Karen Chase Smith
    
	
 
    	
Name:
    	
Karen   Chase Smith
    
	
 
    	
Title:
    	
Trustee
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
THIRD   ROCK VENTURES, L.P.
    
	
 
    	
By:
    	
Third   Rock Ventures GP, L.P., its General Partner
    
	
 
    	
By:
    	
TRV   GP, LLC, its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kevin Gillis
    
	
 
    	
Name:
    	
Kevin   Gillis
    
	
 
    	
Title:
    	
CFO
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
POLARIS   VENTURE PARTNERS V, L.P.
    
	
 
    	
By:
    	
Polaris   Venture Management Co. V, L.L.C., its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   William E. Bilodeau
    
	
 
    	
Name:
    	
William   E. Bilodeau
    
	
 
    	
Title:
    	
Attorney-in-fact
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
POLARIS   VENTURE PARTNERS ENTREPRENEURS’ FUND V, L.P.
    
	
 
    	
By:
    	
Polaris   Venture Management Co. V, L.L.C., its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   William E. Bilodeau
    
	
 
    	
Name:
    	
William   E. Bilodeau
    
	
 
    	
Title:
    	
Attorney-in-fact
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
POLARIS   VENTURE PARTNERS FOUNDERS’ FUND V, L.P.
    
	
 
    	
By:
    	
Polaris   Venture Management Co. V, L.L.C., its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   William E. Bilodeau
    
	
 
    	
Name:
    	
William   E. Bilodeau
    
	
 
    	
Title:
    	
Attorney-in-fact
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
POLARIS   VENTURE PARTNERS SPECIAL FOUNDERS’ FUND V, L.P.
    
	
 
    	
By:
    	
Polaris   Venture Management Co. V, L.L.C., its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   William E. Bilodeau
    
	
 
    	
Name:
    	
William   E. Bilodeau
    
	
 
    	
Title:
    	
Attorney-in-fact
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
LIGHTHOUSE   CAPITAL PARTNERS VI, L.P.
    
	
 
    	
By:
    	
Lighthouse   Management Partners VI, L.L.C., its General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christy Barnes
    
	
 
    	
Name:
    	
Christy   Barnes
    
	
 
    	
Title:
    	
Managing   Director
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
CVF,   LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Richard H. Robb
    
	
 
    	
Name:
    	
Richard   H. Robb
    
	
 
    	
Title:
    	
Manager
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
BENON   GROUP LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Pierre Valla
    
	
 
    	
Name:
    	
Pierre   Valla
    
	
 
    	
Title:
    	
Director
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
RA   CAPITAL HEALTHCARE FUND, L.P.
    
	
 
    	
 
    
	
 
    	
BY:   RA CAPITAL MANAGEMENT, LLC
    
	
 
    	
ITS:   GENERAL PARTNER
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Rajeev Shah
    
	
 
    	
Name:
    	
Rajeev   Shah
    
	
 
    	
Title:
    	
Authorized   Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BLACKWELL   PARTNERS LLC—SERIES A
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Justin B. Nixon
    
	
 
    	
Name:
    	
Justin   B. Nixon
    
	
 
    	
Title:
    	
DUMAC,   Inc.
    
	
 
    	
 
    	
Authorized   Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jannine M. Lall
    
	
 
    	
Name:
    	
Jannine   M. Lail
    
	
 
    	
Title:
    	
Controller
    
	
 
    	
 
    	
DUMAC,   Inc.
    
	
 
    	
 
    	
Authorized   Agent
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
YSIOS   BIOFUND I FCR
    
	
 
    	
By:
    	
Ysios   Capital Partners SGEIC, SA, its General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Karen Wagner
    
	
 
    	
Name:
    	
Karen   Wagner
    
	
 
    	
Title:
    	
General   Partner
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
HADLEY   HARBOR MASTER INVESTORS (CAYMAN) L.P.
    
	
 
    	
 
    
	
 
    	
By:   Wellington Management Company LLP, as investment adviser
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Emily Babalas
    
	
 
    	
Name:
    	
Emily   Babalas
    
	
 
    	
Title:
    	
Managing   Director and Counsel
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
LONGITUDE   VENTURE PARTNERS II, L.P.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   Longitude Capital Partners II, LLC
    
	
 
    	
 
    
	
 
    	
Its:   General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Juliet Tammenoms Bakker
    
	
 
    	
Name:
    	
Juliet   Tammenoms Bakker
    
	
 
    	
Title:
    	
Managing   Director
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
CDK   ASSOCIATES, L.L.C.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Karen Cross
    
	
 
    	
Name:
    	
Karen   Cross
    
	
 
    	
Title:
    	
Treasurer
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
SCOTT   MORENSTEIN
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Scott Morenstein
    
	
 
    	
Name:
    	
Scott   Morenstein
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
ORBIMED   PRIVATE INVESTMENTS VI, LP
    
	
 
    	
 
    
	
 
    	
By:   OrbiMed Capital GP VI LLC
    
	
 
    	
Its:   General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
By:   OrbiMed Advisors LLC
    
	
 
    	
 
    	
Its:   Managing Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jonathan Silverstein
    
	
 
    	
Name:
    	
Jonathan   Silverstein
    
	
 
    	
Title:
    	
Member
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
VIVO   CAPITAL FUND VIII, L.P.
    
	
 
    	
 
    
	
 
    	
By:   Vivo Capital VIII, LLC
    
	
 
    	
Its:   General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Chen Yu
    
	
 
    	
Name:
    	
Chen   Yu
    
	
 
    	
Title:
    	
Managing   Member
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
VIVO   CAPITAL SURPLUS FUND VIII, L.P.
    
	
 
    	
 
    
	
 
    	
By:   Vivo Capital VIII, LLC
    
	
 
    	
Its:   General Partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Chen Yu
    
	
 
    	
Name:
    	
Chen   Yu
    
	
 
    	
Title:
    	
Managing   Member
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
INVESTORS   (cont.):
    
	
 
    	
 
    
	
 
    	
ALEXANDRIA   EQUITIES, LLC,
    
	
 
    	
a   Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
By:
    	
Alexandria   Real Estate Equities, Inc., a Maryland corporation, its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jennifer Banks
    
	
 
    	
Name:
    	
Jennifer   Banks
    
	
 
    	
Title:
    	
EVP,   General Counsel
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

	
 
    	
KEY HOLDER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Mark Iwicki
    
	
 
    	
Mark   Iwicki
    

 

[Signature Page to Third Amended and Restated Registration Rights Agreement]

 

 

Schedule A

 

Investors

 

Lux Ventures II, L.P.

Lux Ventures II Sidecar, L.P.

c/o Lux Capital Management, LLC

295 Madison Avenue, 24th floor

New York, NY 10017

Attn: Robert Paull

 

Brisco-Davis Group, LLC

Davis Clearing House, LLC

2012 Trust Agreement of Victoria Smith Trauscht, dated September 18, 2012

Holly Smith-Norman 2007 Trust, dated November 24, 2007, as amended

2011 Trust Agreement of Karen Chase Smith, dated February 22, 2012

453 N. Lindbergh Blvd., 2nd Floor

St. Louis, MO 63141

Attn: Kate Smith

 

CVF, LLC

222 N. La Salle St.

Suite 2000

Chicago, IL 60601

Attn: Richard H. Robb

 

Polaris Venture Partners V, L.P.

Polaris Venture Partners Entrepreneurs’ Fund V, L.P.

Polaris Venture Partners Founders’ Fund V, L.P.

Polaris Venture Partners Special Founders’ Fund V, L.P.

Polaris Venture Partners

One Marina Park Drive, 10th Floor

Boston, MA 02210

Attn: Kevin Bitterman

 

A-1

 

Schedule A

 

Investors

 

Third Rock Ventures, L.P.

Third Rock Ventures

29 Newbury Street #301

Boston, MA 02116

Attn:  Robert I. Tepper, M.D.

 

William Wachtel

c/o Wachtel Missry LLP

One Dag Hammarskjold Plaza

885 Second Avenue

New York, NY 10017

Attn: William Wachtel

 

Larry Fritz

P.O. Box 676150

Rancho Santa Fe, CA 92067

 

Adam Kalish

Lux Capital Management

295 Madison Avenue, 24th Floor

New York, NY 10017

Attn: Adam Kalish

 

Lighthouse Capital Partners VI, L.P.

3555 Alameda de las Pulgas, Suite 200

Menlo Park, California 94025

Attn: Contracts Administration

 

A-2

 

Schedule A

 

Investors

 

Benon Group Ltd.

Address For Notice:

Benon Group Ltd.

c/o Nathaniel de Rothschild Holdings, Ltd.

152 West 57th Street

37th Floor

New York, NY 10019

 

With a copy to:

 

Ellen S. Brody

Roberts & Holland LLP

825 8th Avenue, 37th Fl

New York, NY 10019

 

Ysios BioFund I FCR

c/o Ysios Capital Partners SGEIC, SA

Travessera de Gracia 11, 8th Floor

08021 Barcelona, Spain

Attn:  Karen Wagner, General Partner

 

Alexandria Equities, LLC

385 E. Colorado Blvd., Suite 299

Pasadena, California 91101

Attn:                    Chief Financial Officer

 

RA Capital Healthcare Fund, L.P.

Blackwell Partners LLC — Series A

20 Park Plaza

Suite 1200

Boston, Massachusetts 02116

Attn: Nicholas McGrath

 

A-3

 

Schedule A

 

Investors

 

Hadley Harbor Master Investors (Cayman) L.P.

c/o Wellington Management Company LLP

Attention:  Legal and Compliance Department

280 Congress Street

Boston, Massachusetts 02210

Facsimile Number: 617-289-5699

 

Longitude Venture Partners II, L.P.

800 El Camino Real, Suite 220

Menlo Park, CA 94025

Attention: Greg Grunberg

 

Vivo Capital Fund VIII, L.P.

575 High Street, Suite 201

Palo Alto, CA 94301

Attention: Chen Yu, Managing Partner

 

Vivo Capital Surplus Fund VIII, L.P.

575 High Street, Suite 201

Palo Alto, CA 94301

Attention: Chen Yu, Managing Partner

 

OrbiMed Private Investments VI, LP

c/o OrbiMed Advisors LLC

601 Lexington Avenue, 45th Floor

New York, NY 10022

Attn: Jonathan Silverstein

 

CDK Associates, L.L.C.

Attn: Heath Weisberg

CAM Capital

731 Alexander Road, Building 2

Princeton, NJ 08540

 

Scott Morenstein

635 West 42nd Street, Apt 45E

NY, NY 10036

 

A-4

 

Schedule B

Key Holder

 

Mark Iwicki

120 Dover Rd.

Wellesley, MA 02482

 

B-1

 

Exhibit I

 

Form of Joinder Agreement

 

The undersigned hereby agrees, effective as of the date hereof, to become a party to that certain Third Amended and Restated Registration Rights Agreement, dated as of April 6, 2016 (as amended and/or restated from time to time, the “Agreement”), by and among Kala Pharmaceuticals, Inc., a Delaware corporation, and the parties named therein, and for all purposes of the Agreement, the undersigned shall be included within the term “Investor” (as defined in the Agreement).

 

	
 
    	
 
    	
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Email:  [              ]Exhibit 10.1

 

HANES NEWCO, INC.

 

2009 EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN

 

1.                                      DEFINITIONS.

 

Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Hanes Newco, Inc. 2009 Employee, Director and Consultant Equity Incentive Plan, have the following meanings:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Common Stock means shares of the Company’s common stock, $0.001 par value per share.

 

Company means Hanes Newco, Inc., a Delaware corporation.

 

Consultant means any natural person who is an advisor or consultant that provides bona fide services to the Company or its Affiliates, provided that such services are

 

 

not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s or its Affiliates’ securities.

 

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

 

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

 

Fair Market Value of a Share of Common Stock means:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Plan means this Hanes Newco, Inc. 2009 Employee, Director and Consultant Equity Incentive Plan.

 

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

 

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

 

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

 

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

 

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

 

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

 

2.                                      PURPOSES OF THE PLAN.

 

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

 

3.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                 The number of Shares which may be issued from time to time pursuant to this Plan shall be 1,415,000, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any future stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of the Plan.

 

(b)                                 If an Option ceases to be “outstanding”, in whole or in part (other than by exercise), or if the Company shall reacquire (at not more than its original issuance price) any Shares issued pursuant to a Stock Grant or Stock-Based Award, or if any Stock Right expires or is forfeited, cancelled, or otherwise terminated or results in any Shares not being issued, the unissued or reacquired Shares which were subject to such Stock Right shall again be available for issuance from time to time pursuant to this Plan.  Notwithstanding the foregoing, if a Stock Right is exercised, in whole or in part, by tender of Shares or if the Company or an Affiliate’s tax withholding obligation is satisfied by withholding Shares, the number of Shares deemed to have

 

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been issued under the Plan for purposes of the limitation set forth in Paragraph 3(a) above shall be the number of Shares that were subject to the Stock Right or portion thereof, and not the net number of Shares actually issued.  However, in the case of ISOs, the foregoing provisions shall be subject to any limitations under the Code.

 

4.                                      ADMINISTRATION OF THE PLAN.

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Make changes to any outstanding Stock Right, including, without limitation, to reduce or increase the exercise price or purchase price, accelerate the vesting schedule or extend the expiration date, provided that no such change shall impair the rights of a Participant under any grant previously made without such Participant’s consent;

 

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

 

(g)                                  Adopt any sub-plans applicable to residents of any specified jurisdiction as it deems necessary or appropriate in order to comply with or take advantage of any tax or other laws applicable to the Company, any Affiliate or to Participants or to otherwise facilitate the administration of the Plan, which sub-plans may include additional restrictions or conditions applicable to Stock Rights or Shares issuable pursuant to a Stock Right;

 

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

 

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addition, if the Administrator is the Committee, the Board of Directors may take any action under the Plan that would otherwise be the responsibility of the Committee.

 

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

 

5.                                      ELIGIBILITY FOR PARTICIPATION.

 

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

 

6.                                      TERMS AND CONDITIONS OF OPTIONS.

 

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

 

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

 

(i)                                     Exercise Price: Each Option Agreement shall state the exercise price (per share) of the Shares covered by each Option, which exercise price shall be determined by the Administrator and shall be at least equal to the Fair Market Value per share of Common Stock on the date of grant of the Option.

 

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

 

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(iii)                               Option Periods: Each Option Agreement shall state the date or dates on which it first is exercisable and the date after which it may no longer be exercised, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the occurrence of certain conditions or the attainment of stated goals or events.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.                                      TERMS AND CONDITIONS OF STOCK GRANTS.

 

Each Stock Grant to a Participant shall state the principal terms in an Agreement duly executed by the Company and, to the extent required by law or requested by the Company, by the Participant.  The Agreement shall be in a form approved by the Administrator and shall contain terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company, subject to the following minimum standards:

 

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

 

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

 

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

 

8.                                      TERMS AND CONDITIONS OF OTHER STOCK-BASED AWARDS

 

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

 

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terms and conditions which the Administrator determines to be appropriate and in the best interest of the Company.

 

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

 

9.                                      EXERCISE OF OPTIONS AND ISSUE OF SHARES.

 

An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company or its designee (in a form acceptable to the Administrator, which may include electronic notice), together with provision for payment of the aggregate exercise price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement.  Such notice shall be signed by the person exercising the Option (which signature may be provided electronically in a form acceptable to the Administrator), shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement.  Payment of the exercise price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months having a Fair Market Value equal as of the date of the exercise to the aggregate cash exercise price for the number of Shares as to which the Option is being exercised, or (c) at the discretion of the Administrator, by having the Company retain from the Shares otherwise issuable upon exercise of the Option, a number of Shares having a Fair Market Value equal as of the date of exercise to the aggregate exercise price for the number of Shares as to which the Option is being exercised, or (d) at the discretion of the Administrator (after consideration of applicable securities, tax and accounting implications), by delivery of the grantee’s personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (e) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (f) at the discretion of the Administrator, by any combination of (a), (b), (c), (d) and (e) above or (g) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine.  Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.

 

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

 

8

 

Company to take any action with respect to the Shares prior to their issuance.  The Shares shall, upon delivery, be fully paid, non-assessable Shares.

 

The Administrator shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Administrator shall not accelerate the exercise date of any installment of any Option granted to an Employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to Paragraph 27) without the prior approval of the Employee if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in Paragraph 6(b)(iv).

 

The Administrator may, in its discretion, amend any term or condition of an outstanding Option provided (i) such term or condition as amended is permitted by the Plan, (ii) any such amendment shall be made only with the consent of the Participant to whom the Option was granted, or in the event of the death of the Participant, the Participant’s Survivors, if the amendment is adverse to the Participant, and (iii) any such amendment of any Option shall be made only after the Administrator determines whether such amendment would constitute a “modification” of any Option which is an ISO (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holder of any Option including, but not limited to, pursuant to Section 409A of the Code.

 

10.                               ACCEPTANCE OF STOCK GRANTS AND STOCK-BASED AWARDS AND ISSUE OF SHARES.

 

A Stock Grant or Stock-Based Award (or any part or installment thereof) shall be accepted by executing the applicable Agreement and delivering it to the Company or its designee, together with provision for payment of the aggregate exercise price, if any, in accordance with this Paragraph for the Shares as to which such Stock Grant or Stock-Based Award is being accepted, and upon compliance with any other conditions set forth in the applicable Agreement.  Payment of the purchase price for the Shares as to which such Stock Grant or Stock-Based Award is being accepted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock held for at least six months (if required to avoid negative accounting treatment) and having a Fair Market Value equal as of the date of acceptance of the Stock Grant or Stock Based-Award to the purchase price of the Stock Grant or Stock-Based Award, or (c) at the discretion of the Administrator (after consideration of applicable securities, tax and accounting implications), by delivery of the grantee’s personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the Administrator, by any combination of (a), (b) and (c) above; or (e) at the discretion of the Administrator, by payment of such other lawful consideration as the Administrator may determine.

 

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

 

9

 

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

 

The Administrator may, in its discretion, amend any term or condition of an outstanding Stock Grant, Stock-Based Award or applicable Agreement provided (i) such term or condition as amended is permitted by the Plan, (ii) any such amendment shall be made only with the consent of the Participant to whom the Stock Grant or Stock-Based Award was made, if the amendment is adverse to the Participant, and (iii) any such amendment shall be made only after the Administrator determines whether such amendment would cause any adverse tax consequences to the Participant, including, but not limited to, pursuant to Section 409A of the Code.

 

11.                               RIGHTS AS A SHAREHOLDER.

 

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

 

12.                               ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.

 

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

 

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

 

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

 

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

 

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service, but only within such term as the Administrator has designated in a Participant’s Option Agreement.

 

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

 

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

 

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

 

(e)                                  A Participant to whom an Option has been granted under the Plan who is absent from the Company or an Affiliate because of temporary disability (any disability other than a Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide; provided, however, that, for ISOs, any leave of absence granted by the Administrator of greater than ninety days, unless pursuant to a contract or statute that guarantees the right to reemployment, shall cause such ISO to become a Non-Qualified Option on the 181st day following such leave of absence.

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

Except as otherwise provided in a Participant’s Option Agreement:

 

(a)                                 A Participant who ceases to be an Employee, director or Consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant:

 

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

 

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

 

(b)                                 A Disabled Participant may exercise the Option only within the period ending one year after the date of the Participant’s termination due to Disability, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not become Disabled and had continued to be an Employee, director or Consultant or, if earlier, within the originally prescribed term of the Option.

 

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

 

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

 

Except as otherwise provided in a Participant’s Option Agreement:

 

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

 

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

 

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

 

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

 

17.                               EFFECT OF TERMINATION OF SERVICE ON UNACCEPTED STOCK GRANTS.

 

In the event of a termination of service (whether as an Employee, director or Consultant) with the Company or an Affiliate for any reason before the Participant has accepted a Stock Grant, such offer shall terminate.

 

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

 

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

 

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

 

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

 

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

 

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

 

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(a)                                 All Shares subject to any Stock Grant whether or not then subject to forfeiture or repurchase shall be immediately subject to repurchase by the Company at the lesser of Fair Market Value or the purchase price, thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

22.                               PURCHASE FOR INVESTMENT.

 

Unless the offering and sale of the Shares to be issued upon the particular exercise or acceptance of a Stock Right shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

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

 

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

 

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

 

23.                               DISSOLUTION OR LIQUIDATION OF THE COMPANY.

 

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

 

24.                               ADJUSTMENTS.

 

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

 

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

 

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subject to the limitations in Paragraph 3(a) shall also be proportionately adjusted upon the occurrence of such events.

 

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

 

With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall make appropriate provision for the continuation of such Stock Grants on the same terms and conditions by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the outstanding Shares of Common Stock in connection with the Corporate Transaction or securities of any successor or acquiring entity.  In lieu of the foregoing, in connection with any Corporate Transaction, the Administrator may provide that, upon consummation of the Corporate Transaction, each outstanding Stock Grant shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of such Corporate Transaction to a holder of the number of shares of Common Stock comprising such Stock Grant (to the extent such Stock Grant is no longer subject to any forfeiture or repurchase rights then in effect or, at the discretion of the Administrator, all forfeiture and repurchase rights being waived upon such Corporate Transaction).

 

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

 

(c)                                  Recapitalization or Reorganization.  In the event of a recapitalization or reorganization of the Company other than a Corporate Transaction pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising an Option or accepting a Stock Grant after the 

 

16

 

recapitalization or reorganization shall be entitled to receive for the price paid upon such exercise or acceptance if any, the number of replacement securities which would have been received if such Option had been exercised or Stock Grant accepted prior to such recapitalization or reorganization.

 

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

 

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

 

25.                               ISSUANCES OF SECURITIES.

 

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

 

26.                               FRACTIONAL SHARES.

 

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

 

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

 

The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an Employee of the Company or an Affiliate at the time of such conversion.  At the time of such conversion, the Administrator (with the 

 

17

 

consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Administrator takes appropriate action.  The Administrator, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion.

 

28.                               WITHHOLDING.

 

In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.I.C.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the exercise or acceptance of a Stock Right or in connection with a Disqualifying Disposition (as defined in Paragraph 29) or upon the lapsing of any forfeiture provision or right of repurchase or for any other reason required by law, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law).  For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner set forth under the definition of Fair Market Value provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise.  If the Fair Market Value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer.  The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.

 

29.                               NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

 

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

 

30.                               TERMINATION OF THE PLAN.

 

The Plan will terminate on December   , 2019, the date which is ten years from the earlier of the date of its adoption by the Board of Directors and the date of its approval by the shareholders of the Company.  The Plan may be terminated at an earlier date by vote of the shareholders or the Board of Directors of the Company; provided, however, that any such earlier termination shall not 

 

18

 

affect any Agreements executed prior to the effective date of such termination.  Termination of the Plan shall not affect any Stock Rights theretofore granted.

 

31.                               AMENDMENT OF THE PLAN AND AGREEMENTS.

 

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

 

32.                               EMPLOYMENT OR OTHER RELATIONSHIP.

 

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

 

33.                               GOVERNING LAW.

 

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

 

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KALA PHARMACEUTICALS, INC.

 

AMENDMENT

TO

2009 EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN

 

Pursuant to Section 31 of the 2009 Employee, Director and Consultant Equity Incentive Plan (the “Plan”) of Kala Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), the 2009 Plan be, and hereby is, amended as set forth below.  Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Plan.

 

1.                                      All references to “Hanes Newco, Inc.” within the Plan shall be replaced with “Kala Pharmaceuticals, Inc.”

 

2.                                      Section 3(a) of the Plan is hereby deleted in its entirety and replaced with the following:

 

“(a)                           The number of Shares which may be issued from time to time pursuant to this Plan shall be 2,250,000, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any future stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of the Plan.”

 

Adopted by the Board of Directors on February 28, 2012

 

Approved by Stockholders on February 28, 2012

 

 

KALA PHARMACEUTICALS, INC.

 

AMENDMENT NO. 2

TO

2009 EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN

 

Pursuant to Section 31 of the 2009 Employee, Director and Consultant Equity Incentive Plan (as amended to date, the “2009 Plan”) of Kala Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), the 2009 Plan be, and hereby is, amended as set forth below.  Capitalized terms used and not defined herein shall have the meanings ascribed to them in the 2009 Plan.

 

1.                                      Section 3(a) of the Plan is hereby deleted in its entirety and replaced with the following:

 

“(a)                           The number of Shares which may be issued from time to time pursuant to this Plan shall be 3,210,205, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any future stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of this Plan.”

 

Adopted by the Board of Directors on February 13, 2013

 

Approved by Stockholders on February 13, 2013

 

 

KALA PHARMACEUTICALS, INC.

 

AMENDMENT

TO

2009 EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN

 

Pursuant to Section 31 of the 2009 Employee, Director and Consultant Equity Incentive Plan (as amended to date, the “2009 Plan”) of Kala Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), the 2009 Plan be, and hereby is, amended as set forth below.  Capitalized terms used and not defined herein shall have the meanings ascribed to them in the 2009 Plan.

 

1.                                      Section 3(a) of the Plan is hereby deleted in its entirety and replaced with the following:

 

“(a)                           The number of Shares which may be issued from time to time pursuant to this Plan shall be 5,788,784, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any future stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of this Plan.”

 

Adopted by the Board of Directors on April 14, 2014

 

Approved by Stockholders on April 15, 2014

 

 

KALA PHARMACEUTICALS, INC.

 

AMENDMENT

TO

2009 EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN

 

Pursuant to Section 31 of the 2009 Employee, Director and Consultant Equity Incentive Plan (as amended to date, the “2009 Plan”) of Kala Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), the 2009 Plan be, and hereby is, amended as set forth below.  Capitalized terms used and not defined herein shall have the meanings ascribed to them in the 2009 Plan.

 

1.                                      Section 3(a) of the 2009 Plan is hereby deleted in its entirety and replaced with the following:

 

“(a)                           The number of Shares which may be issued from time to time pursuant to this Plan shall be 7,208,027, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any future stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of this Plan.”

 

Adopted by the Board of Directors on March 24, 2015

 

Approved by Stockholders on May 8, 2015

 

 

KALA PHARMACEUTICALS, INC.

 

AMENDMENT

TO

2009 EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN

 

Pursuant to Section 31 of the 2009 Employee, Director and Consultant Equity Incentive Plan (as amended to date, the “2009 Plan”) of Kala Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), the 2009 Plan be, and hereby is, amended as set forth below.  Capitalized terms used and not defined herein shall have the meanings ascribed to them in the 2009 Plan.

 

1.                                      Section 3(a) of the 2009 Plan is hereby deleted in its entirety and replaced with the following:

 

“(a)                           The number of Shares which may be issued from time to time pursuant to this Plan shall be 9,181,163, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any future stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 24 of this Plan.”

 

Adopted by the Board of Directors on September 11, 2015

 

Approved by Stockholders on September 15, 2015

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