Exhibit 99.1
R
EGULUS
T
HERAPEUTICS
I
NC
.
I
NDUCEMENT
P
LAN
A
DOPTED
BY
THE
B
OARD
OF
D
IRECTORS
:
J
ULY
17, 2015
1. G
ENERAL
.
(a) Eligible Award Recipients.
Options under the Plan may only be granted to Employees who satisfy the standards for
inducement grants under Rule 5635(c)(4) of the NASDAQ Listing Rules. A person who previously served as an Employee or Director shall not be eligible to receive Options under the Plan, other than following a
bona fide
period of non-employment.
(b) Available Awards.
The Plan provides solely for the grant of Options. All Options shall be Nonstatutory Stock
Options.
(c) Purpose.
This Plan, through the granting of Options, is intended to help the Company secure and
retain the services of eligible award recipients, provide an inducement material for such persons to enter into employment with the Company within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules, to provide incentives for such persons to
exert maximum efforts for the success of the Company and any Affiliate, and provide a means by which the eligible recipients may benefit from increases in value of the Common Stock.
2. A
DMINISTRATION
.
(a) Administration by Board.
The Board will administer the Plan. The Board may delegate administration of the Plan to a
Committee or Committees, as provided in Section 2(c). However, the grant of Options shall be approved by the Company’s independent compensation committee or a majority of the Company’s independent directors (as defined in Rule
5605(a)(2) of the NASDAQ Listing Rules) in order to comply with the exemption from the stockholder approval requirement for “inducement grants” provided under Rule 5635(c)(4) of the NASDAQ Listing Rules.
(b) Powers of Board.
The Board will have the power, subject to, and within the limitations of, the express provisions
of the Plan:
(i)
To determine: (A) who will be granted Options; (B) when and how each Option will be
granted; (C) the provisions of each Option (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Option; (D) the number of shares of Common Stock subject
to, or the cash value of, an Option; and (E) the Fair Market Value applicable to an Option.
(ii)
To construe
and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Options. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency
in
the Plan or in any Option Agreement, in a manner and to the extent it will deem necessary or expedient to make the Plan or Option fully effective.
(iii)
To settle all controversies regarding the Plan and Options granted under it.
(iv)
To accelerate, in whole or in part, the time at which an Option may be exercised or vest.
(v)
To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Option Agreement,
suspension or termination of the Plan will not materially impair a Participant’s rights under his or her then-outstanding Option without his or her written consent except as provided in subsection (viii) below.
(vi)
To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by
adopting amendments relating to certain nonqualified deferred compensation under Section 409A of the Code and/or to bring the Plan or Options granted under the Plan compliant with or exempt from the requirements for nonqualified deferred
compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. If required by applicable law or listing requirements, and except as provided in Section 8(a) relating to Capitalization Adjustments, the
Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to
receive Options under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially
extends the term of the Plan, or (F) materially expands the types of stock awards available for issuance under the Plan. Except as otherwise provided in the Plan or an Option Agreement, no amendment of the Plan will materially impair a
Participant’s rights under an outstanding Option without the Participant’s written consent.
(vii)
To
submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Rule 16b-3 or to comply with other applicable laws or listing requirements.
(viii)
To approve forms of Option Agreements for use under the Plan and to amend the terms of any one or more Options,
including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Option Agreement, subject to any specified limits in the Plan that are not subject to Board discretion;
provided
however,
that a Participant’s rights under any Option will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing.
Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the
Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Options without the affected Participant’s consent (A) to clarify the manner of exemption from,
or to bring the Option into compliance with, Section 409A of the Code; or (B) to comply with other applicable laws or listing requirements.
(ix)
Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Options.
(x)
To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by
eligible Employees who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Option Agreement that are required for compliance with the laws of
the relevant foreign jurisdiction).
(xi)
To effect, with the consent of any adversely affected Participant,
(A) the reduction of the exercise price of any outstanding Option; (B) the cancellation of any outstanding Option and the grant in substitution therefor of a new (1) Option, (2) cash award and/or (3) award of other valuable
consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Option and (y) granted under the Plan or another equity
or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.
(c) Delegation to Committee.
(i) General.
The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If
administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to
delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee, as applicable). Any delegation of
administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Board may retain the authority to concurrently administer the Plan
with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii) Rule
16b-3 Compliance.
The Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.
(d) Effect of Board’s Decision.
All determinations, interpretations and constructions made by the Board in good
faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
3. S
HARES
S
UBJECT
TO
THE
P
LAN
.
(a) Share Reserve.
Subject to
Section 8(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Options will not exceed 1,000,000 shares (the “
Share Reserve
”). For clarity, the Share
Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Options except as provided in Section 6(a).
Shares may be issued in connection with a merger or acquisition as
permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will
not reduce the number of shares available for issuance under the Plan.
(b) Reversion of Shares to the Share Reserve.
If an Option or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Option having been issued or (ii) is settled in cash (
i.e.
, the Participant receives cash rather than stock), such
expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan. If any shares of Common Stock issued pursuant to an Option are forfeited back to or
repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the
Plan. Any shares reacquired by the Company in satisfaction of tax withholding obligations on an Option or as consideration for the exercise price of an Option will again become available for issuance under the Plan.
(c) Source of Shares.
The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common
Stock, including shares repurchased by the Company on the open market or otherwise.
4. E
LIGIBILITY
.
(a) Eligibility
. Options may only be granted to persons who are Employees described in Section 1(a) of the Plan,
where the Option is an inducement material to the individual’s entering into employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules. For clarity, Options may not be granted to
(1) Consultants or Directors, for service in such capacities, or (2) any individual who was previously an Employee or Director of the Company, other than following a
bona fide
period of non-employment. Notwithstanding the foregoing,
Options may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 of the Securities Act, unless (i) the stock
underlying such Options is treated as “service recipient stock” under Section 409A of the Code (for example, because the Options are granted pursuant to a corporate transaction such as a spin off transaction), (ii) the Company,
in consultation with its legal counsel, has determined that such Options are otherwise exempt from Section 409A of the Code, or (iii) the Company, in consultation with its legal counsel, has determined that such Options comply with the
distribution requirements of Section 409A of the Code.
(b) Approval Requirements
. All Options must be granted
either by a majority of the Company’s independent directors or by the Company’s compensation committee comprised of independent directors within the meaning of Rule 5605(a)(2) of the NASDAQ Listing Rules.
5. P
ROVISIONS
R
ELATING
TO
O
PTIONS
.
Each Option will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be
Nonstatutory Stock Options. The provisions of separate Options need not be identical;
provided, however
, that each Option Agreement will conform to
(through incorporation of provisions hereof by reference in the applicable Option Agreement or otherwise) the substance of each of the following provisions:
(a) Term.
No Option will be exercisable after the expiration of ten years from the date of its grant or such shorter
period specified in the Option Agreement.
(b) Exercise Price.
The exercise or strike price of each Option will be
not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than 100% of the Fair Market Value of the
Common Stock subject to the Option if such Option is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of
Section 409A of the Code.
(c) Purchase Price for Options.
The purchase price of Common Stock acquired
pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board will have the authority to
grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. The permitted
methods of payment are as follows:
(i)
by cash, check, bank draft or money order payable to the Company;
(ii)
pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the
issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;
(iii)
by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
(iv)
by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common
Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price;
provided, however
, that the Company will accept a cash or other payment from the Participant to the
extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the
extent that (A) shares issuable upon exercise are reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to
satisfy tax withholding obligations; or
(v)
in any other form of legal consideration that may be acceptable to the
Board and specified in the applicable Option Agreement.
(d) Transferability of Options.
The Board may, in its sole
discretion, impose such limitations on the transferability of Options as the Board will determine. In the absence of such a
determination by the Board to the contrary, the following restrictions on the transferability of Options will apply:
(i) Restrictions on Transfer.
An Option will not be transferable except by will or by the laws of descent and
distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option in a manner that is not prohibited by
applicable tax and securities laws. Except as explicitly provided herein, an Option may not be transferred for consideration.
(ii) Domestic Relations Orders.
Subject to the approval of the Board or a duly authorized Officer, an Option may be
transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulations Section 1.421-1(b)(2).
(iii) Beneficiary Designation.
Subject to the approval of the Board or a duly authorized Officer, a Participant may, by
delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option and receive the Common Stock or
other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise the Option and receive the Common Stock or other consideration
resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
(e) Vesting Generally.
The total number of shares of Common Stock subject to an Option may vest and therefore become
exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or
other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to
which an Option may be exercised.
(f) Termination of Continuous Service.
Except as otherwise provided in the
applicable Option Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may
exercise his or her Option (to the extent that the Participant was entitled to exercise such Option as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three months following the
termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Option Agreement), and (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after
termination of Continuous Service, the Participant does not exercise his or her Option within the applicable time frame, the Option will terminate.
(g) Extension of Termination Date.
If the exercise of an Option following
the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate
the registration requirements under the Securities Act, then the Option will terminate on the earlier of (i) the expiration of a total period of time (that need not be consecutive) equal to the applicable post termination exercise period after
the termination of the Participant’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option as set forth in the applicable
Option Agreement. In addition, unless otherwise provided in a Participant’s Option Agreement, if the sale of any Common Stock received on exercise of an Option following the termination of the Participant’s Continuous Service (other than
for Cause) would violate the Company’s insider trading policy, then the Option will terminate on the earlier of (i) the expiration of a period of months (that need not be consecutive) equal to the applicable post-termination exercise
period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option would not be in violation of the Company’s insider trading policy, or (ii) the
expiration of the term of the Option as set forth in the applicable Option Agreement.
(h) Disability of
Participant.
Except as otherwise provided in the applicable Option Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the
Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date
12 months following such termination of Continuous Service (or such longer or shorter period specified in the Option Agreement), and (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of
Continuous Service, the Participant does not exercise his or her Option within the applicable time frame, the Option will terminate.
(i) Death of Participant.
Except as otherwise provided in the applicable Option Agreement or other agreement between
the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Option Agreement for
exercisability after the termination of the Participant’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Participant was entitled to exercise such Option as of the date of death) by the
Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Participant’s death, but only within the period ending on the earlier of
(i) the date 18 months following the date of death (or such longer or shorter period specified in the Option Agreement), and (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the
Participant’s death, the Option is not exercised within the applicable time frame, the Option will terminate.
(j)
Termination for Cause.
Except as explicitly provided otherwise in a Participant’s Option Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is
terminated for Cause, the Option will terminate immediately upon such Participant’s termination of Continuous
Service, and the Participant will be prohibited from exercising his or her Option from and after the date of such termination of Continuous Service).
(k) Non-Exempt Employees
. If an Option is granted to an Employee who is a non-exempt employee for purposes of the Fair
Labor Standards Act of 1938, as amended, the Option will not be first exercisable for any shares of Common Stock until at least six (6) months following the date of grant of the Option (although the Option may vest prior to such date).
Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option is not assumed, continued, or substituted,
(iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Option Agreement in another agreement between the Participant and the Company, or, if no such definition,
in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that
any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act
to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Option will be exempt from the employee’s regular rate of pay, the provisions of this
Section 5(k) will apply to all Options and are hereby incorporated by reference into such Option Agreements.
6. C
OVENANTS
OF
THE
C
OMPANY
.
(a) Availability of Shares.
The Company will keep
available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Options.
(b) Securities Law Compliance.
The Company will seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options;
provided, however
, that this undertaking will not require the Company to register under
the Securities Act the Plan, any Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Options unless
and until such authority is obtained. A Participant will not be eligible for the grant of an Option or the subsequent issuance of cash or Common Stock pursuant to the Option if such grant or issuance would be in violation of any applicable
securities law.
(c) No Obligation to Notify or Minimize Taxes.
The Company will have no duty or obligation to any
Participant to advise such holder as to the time or manner of exercising such Option. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Option or a possible
period in which the Option may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Option to the holder of such Option.
7. M
ISCELLANEOUS
.
(a) Use of Proceeds from Sales of Common Stock.
Proceeds from the sale of shares of Common Stock pursuant to Options
will constitute general funds of the Company.
(b) Corporate Action Constituting Grant of Options.
Corporate action
constituting a grant by the Company of an Option to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the
Option is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g.,
exercise price, vesting schedule or number of shares) that are inconsistent with those in the Option Agreement as a result of a clerical error in the papering of the Option Agreement, the corporate records will control and the Participant will have
no legally binding right to the incorrect term in the Option Agreement.
(c) Stockholder Rights.
No Participant
will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Option unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance
of shares under, the Option pursuant to its terms, and (ii) the issuance of the Common Stock subject to such Option has been entered into the books and records of the Company.
(d) No Employment or Other Service Rights.
Nothing in the Plan, any Option Agreement or any other instrument executed
thereunder or in connection with any Option granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Option was granted or will affect the right of
the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an
Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
(e) Change in Time Commitment.
In the event a Participant’s regular level of time commitment in the performance of
his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or
takes an extended leave of absence) after the date of grant of any Option to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of
such Option that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Option. In the event
of any such reduction, the Participant will have no right with respect to any portion of the Option that is so reduced.
(f) Investment Assurances.
The Company may require a Participant, as a condition of exercising or acquiring Common
Stock under any Option, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give
written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Option for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common
Stock. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Option has been registered under a then
currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common Stock.
(g) Withholding Obligations.
Unless prohibited by the terms of an Option Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Option by any of the following means or by a combination of such means:
(i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Option;
provided, however,
that no
shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Option as a liability for financial accounting purposes);
(iii) withholding cash from an Option settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Option Agreement.
(h) Electronic Delivery
. Any reference herein to a “written” agreement or document will include any agreement
or document delivered electronically, filed publicly at
www.sec.gov
(or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
(i) Deferrals.
To the extent permitted by applicable law, the Board, in its sole discretion, may determine that
the delivery of Common Stock or the payment of cash, upon the exercise or vesting of all or a portion of any Option may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by
Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the
Company. The Board is authorized to make deferrals of Options and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and
implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
(j) Compliance with Section 409A.
Unless otherwise expressly provided
for in an Option Agreement, the Plan and Option Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Options granted hereunder exempt from Section 409A of the Code, and, to the extent not so
exempt, in compliance with Section 409A of the Code. If the Board determines that any Option granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Option Agreement evidencing such Option will
incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Option Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by
reference into the Option Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Option Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Option
that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a
“separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six (6) months following the date of such Participant’s
“separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a
lump sum on the day after such six (6) month period elapses, with the balance paid thereafter on the original schedule.
(k) Clawback/Recovery
. All Options granted under the Plan will be subject to recoupment in accordance with any clawback
policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Option Agreement as the Board determines necessary or appropriate, including but not limited to a
reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of Cause. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for
“good reason” or “constructive termination” (or similar term) under any agreement with the Company.
8. A
DJUSTMENTS
UPON
C
HANGES
IN
C
OMMON
S
TOCK
; O
THER
C
ORPORATE
E
VENTS
.
(a) Capitalization Adjustments
. In the event of a Capitalization Adjustment, the Board will appropriately and
proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a) and (ii) the class(es) and number of securities and price per share of stock subject to outstanding Options. The
Board will make such adjustments, and its determination will be final, binding and conclusive.
(b) Dissolution or
Liquidation
. Except as otherwise provided in the Option Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Options will terminate immediately prior to the completion of such dissolution or liquidation, and
the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Option is providing Continuous Service;
provided, however
, that the Board may,
in its sole discretion, cause some or all Options to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Options have not previously expired
or terminated) before the dissolution or liquidation is completed but contingent on its completion.
(c) Corporate
Transaction.
The following provisions will apply to Options in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Option or any other written agreement between the Company or any Affiliate and the
Participant or unless otherwise expressly provided by the Board at the time of grant of an Option. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following
actions with respect to Options, contingent upon the closing or completion of the Corporate Transaction:
(i)
arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Option or to substitute a similar stock award for the Option (including, but not limited
to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
(ii)
arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to the Option to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(iii)
accelerate the vesting, in whole or in part, of the Option (and, if applicable, the time at which the Option may
be exercised) to a date prior to the effective time of such Corporate Transaction as the Board will determine (or, if the Board will not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction),
with such Option terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;
(iv)
arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with
respect to the Option;
(v)
cancel or arrange for the cancellation of the Option, to the extent not vested or not
exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
(vi)
make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value
of the property the Participant would have received upon the exercise of the Option immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise.
The Board need not take the same action or actions with respect to all Options or portions thereof or with respect to all
Participants. The Board may take different actions with respect to the vested and unvested portions of an Option.
(d) Change in Control.
An Option may be subject to additional acceleration
of vesting and exercisability upon or after a Change in Control as may be provided in the Option Agreement for such Option or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the
absence of such provision, no such acceleration will occur.
9. P
LAN
T
ERM
; E
ARLIER
T
ERMINATION
OR
S
USPENSION
OF
THE
P
LAN
.
The Board may suspend or terminate the Plan at any time. No Options may be granted under the Plan while the Plan is suspended
or after it is terminated.
10. E
XISTENCE
OF
THE
P
LAN
; T
IMING
OF
F
IRST
G
RANT
OR
E
XERCISE
.
The Plan will
come into existence on the Effective Date. No Option may be granted prior to the Effective Date.
11. C
HOICE
OF
L
AW
.
The law of the State of California will govern all questions concerning the construction, validity
and interpretation of this Plan, without regard to that state’s conflict of laws rules.
12. D
EFINITIONS
.
As
used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a)
“
Affiliate
” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority to determine
the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
(b)
“
Option Agreement
” means a written agreement between the Company and a Participant
evidencing the terms and conditions of an Option.
(c)
“
Board
” means the Board of Directors
of the Company.
(d)
“
Capitalization Adjustment
” means any change that is made in, or other
events that occur with respect to, the Common Stock subject to the Plan or subject to any Option after the Effective Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar
equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible
securities of the Company will not be treated as a Capitalization Adjustment.
(e)
“
Cause
”
will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the
following
events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof;
(ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant
and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The
determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was
terminated with or without Cause for the purposes of outstanding Options held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.
(f)
“
Change in Control
” means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:
(i)
any Exchange Act Person becomes the Owner, directly
or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the
foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any
affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity
securities, (C) on account of the acquisition of securities of the Company by any individual who is, on the IPO Date, either an executive officer or a Director (either, an “
IPO Investor
”) and/or any entity in which an
IPO Investor has a direct or indirect interest (whether in the form of voting rights or participation in profits or capital contributions) of more than 50% (collectively, the “
IPO Entities
” ) or on account of the IPO Entities
continuing to hold shares that come to represent more than 50% of the combined voting power of the Company’s then outstanding securities as a result of the conversion of any class of the Company’s securities into another class of the
Company’s securities having a different number of votes per share pursuant to the conversion provisions set forth in the Company’s Amended and Restated Certificate of Incorporation; or (D) solely because the level of Ownership held by
any Exchange Act Person (the “
Subject Person
”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the
number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes
the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage
threshold, then a Change in Control will be deemed to occur;
(ii)
there is consummated a merger, consolidation or
similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such
merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same
proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
provided, however
, that a merger, consolidation or similar transaction will not constitute a Change in Control under
this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the surviving Entity or its parent are owned by the IPO Entities;
(iii)
there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent
(50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such
sale, lease, license or other disposition;
provided, however
, that a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries will not constitute a Change
in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the acquiring Entity or its parent are owned by the IPO Entities; or
(iv)
individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “
Incumbent
Board
”) cease for any reason to constitute at least a majority of the members of the Board;
provided, however
, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended
by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.
Notwithstanding the foregoing definition or any other provision of this Plan, the term Change in Control will not include a
sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company and the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any
Affiliate and the Participant will supersede the foregoing definition with respect to Options subject to such agreement;
provided, however
, that if no definition of Change in Control or any analogous term is set forth in such an individual
written agreement, the foregoing definition will apply.
(g)
“
Code
” means the Internal
Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(h)
“
Committee
” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c) and which is comprised of a majority of independent directors within the
meaning of Rule 5606(a)(2) of the NASDAQ Listing Rules.
(i)
“
Common Stock
” means, as of the Effective
Date, the common stock of the Company, having 1 vote per share.
(j)
“
Company
” means
Regulus Therapeutics Inc., a Delaware corporation.
(k)
“
Consultant
” means any person,
including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is
compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is
treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person. Consultants are not eligible to receive
Options under the Plan with respect to their service in such capacity.
(l)
“
Continuous
Service
” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to
the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or
an Affiliate, will not terminate a Participant’s Continuous Service ;
provided, however
, that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole
discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that
party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other
personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Option only to such extent as may be
provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
(m)
“
Corporate Transaction
” means the consummation, in a single transaction or in a series of
related transactions, of any one or more of the following events:
(i)
a sale or other disposition of all or
substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii)
a sale or other disposition of at least 90% of the outstanding securities of the Company;
(iii)
a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv)
a merger, consolidation or similar transaction following which the Company is the surviving corporation but
the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.
(n)
“
Director
” means a member of the Board. Directors are
not eligible to receive Options under the Plan with respect to their service in such capacity.
(o)
“
Disability
” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical
evidence as the Board deems warranted under the circumstances.
(p)
“
Effective Date
” means
the date the Plan is approved by the Board.
(q)
“
Employee
” means any person employed by
the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
(r)
“
Entity
” means a corporation, partnership, limited liability company or other entity.
(s)
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(t)
“
Exchange Act Person
” means any natural person,
Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit
plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities
pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any
natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company’s then outstanding securities.
(u)
“
Fair Market
Value
” means, as of any date, the value of the Common Stock determined as follows:
(i)
If the Common
Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board,
the closing sales price
for such stock as quoted
on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock)
on the date of determination
, as reported in a source the Board deems reliable.
(ii)
Unless otherwise provided by the Board, if there is no closing sales
price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(iii)
In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in
good faith and in a manner that complies with Sections 409A and 422 of the Code.
(v)
“
IPO
Date
” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.
(w)
“
Non-Employee Director
” means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to
which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“
Regulation S-K
”)), does not possess an interest in any other transaction for which disclosure would
be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee
director” for purposes of Rule 16b-3.
(x)
“
Nonstatutory Stock Option
” means any
option granted pursuant to Section 5 of the Plan that does not qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
(y)
“
Officer
” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act.
(z)
“
Option
” means a Nonstatutory Stock Option to
purchase shares of Common Stock granted pursuant to the Plan.
(aa)
“
Option Agreement
”
means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.
(bb)
“
Optionholder
” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.
(cc)
“
Own,
”
“
Owned,
” “
Owner,
” “
Ownership
” means a person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired
“Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.
(dd)
“
Participant
” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(ee)
“
Plan
” means this Regulus Therapeutics Inc.
Inducement Plan.
(ff)
“
Rule 16b-3
” means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(gg)
“
Securities Act
” means
the Securities Act of 1933, as amended.
(hh)
“
Subsidiary
” means, with respect to the
Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class
or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity
in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
R
EGULUS
T
HERAPEUTICS
I
NC
.
S
TOCK
O
PTION
G
RANT
N
OTICE
(I
NDUCEMENT
P
LAN
)
Regulus Therapeutics Inc. (the “
Company
”), pursuant to its Inducement Plan (the “
Plan
”),
hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth in this notice, in the Option Agreement, the Plan and
the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined herein but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the
Option Agreement. If there is any conflict between the terms in this notice and the Plan, the terms of the Plan will control.
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Optionholder:
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Date of Grant:
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Vesting Commencement Date:
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Number of Shares Subject to Option:
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Exercise Price (Per Share):
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Total Exercise Price:
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Expiration Date:
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Type of Grant:
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Nonstatutory Stock Option
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Exercise Schedule:
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¨
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Same as Vesting Schedule
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¨
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Early Exercise Permitted
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Vesting Schedule:
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[One-fourth (1/4
th
) of the shares vest one year after the Vesting Commencement Date; the
balance of the shares vest in a series of thirty-six (36) successive equal monthly installments measured from the first anniversary of the Vesting Commencement Date, subject to Optionholder’s Continuous Service as of each such date.] [As
determined by the Company’s Compensation Committee or Board of Directors].
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Payment:
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By one or a combination of the following items (described in the Option Agreement):
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x
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By cash, check, bank draft or money order payable to the Company
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x
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Pursuant to a Regulation T Program if the shares are publicly traded
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x
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By delivery of already-owned shares if the shares are publicly traded
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x
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Subject to the Company’s consent at the time of exercise, by a “net exercise” arrangement
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Additional Terms/Acknowledgements:
Optionholder acknowledges receipt of, and understands
and agrees to, this Stock Option Grant Notice, the Option Agreement and the Plan. Optionholder acknowledges and agrees that this Stock Option Grant Notice and the Option Agreement may not be modified, amended or revised except as provided in the
Plan. Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding this option award and
supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) options previously granted and delivered to Optionholder, (ii) any compensation recovery policy that is adopted by
the Company or is otherwise required by applicable law and (iii) any written employment or severance arrangement that would provide for vesting acceleration of this option upon the terms and conditions set forth therein. By accepting this
option, Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
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R
EGULUS
T
HERAPEUTICS
I
NC
.
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O
PTIONHOLDER
:
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By:
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Signature
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Signature
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Title:
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Date:
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Date:
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A
TTACHMENTS
: Option Agreement, Inducement Plan and Notice of Exercise
R
EGULUS
T
HERAPEUTICS
I
NC
.
I
NDUCEMENT
P
LAN
O
PTION
A
GREEMENT
(N
ONSTATUTORY
S
TOCK
O
PTION
)
Pursuant to your Stock Option Grant Notice (“
Grant Notice
”) and this Option Agreement, Regulus
Therapeutics Inc. (the “
Company
”) has granted you an option under its Inducement Plan (the “
Plan
”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at
the exercise price indicated in your Grant Notice. The option is granted to you effective as of the date of grant set forth in the Grant Notice (the “
Date of Grant
”). If there is any conflict between the terms in this Option
Agreement and the Plan, the terms of the Plan will control. Capitalized terms not explicitly defined in this Option Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.
The details of your option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
1. V
ESTING
.
Subject to the provisions contained herein, your option will vest as provided in your Grant
Notice. Vesting will cease upon the termination of your Continuous Service.
2. N
UMBER
OF
S
HARES
AND
E
XERCISE
P
RICE
.
The number of shares of Common Stock subject to your option and your exercise price per share in your Grant Notice will be adjusted for Capitalization
Adjustments.
3. E
XERCISE
R
ESTRICTION
FOR
N
ON
-E
XEMPT
E
MPLOYEES
.
If you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (that is, a “
Non-Exempt Employee
”), and
except as otherwise provided in the Plan, you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant, even if you have already been an employee for more than six
(6) months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your option as to any vested portion prior to such six (6) month anniversary in the case of (i) your death or disability, (ii) a
Corporate Transaction in which your option is not assumed, continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your “retirement” (as defined in the Company’s benefit plans).
4. E
XERCISE
PRIOR
TO
V
ESTING
(“E
ARLY
E
XERCISE
”).
If permitted in your Grant Notice (
i.e.
, the “Exercise Schedule” indicates “Early Exercise Permitted”) and subject to the provisions of your option, you may elect at any time that is
both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the unvested portion of your option;
provided, however,
that:
(a)
a partial exercise of your option will be deemed to cover first vested shares of Common Stock and then the earliest
vesting installment of unvested shares of Common Stock;
(b)
any shares of Common Stock so purchased from installments that have
not vested as of the date of exercise will be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement; and
(c)
you will enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that
will result in the same vesting as if no early exercise had occurred.
5. M
ETHOD
OF
P
AYMENT
.
You must pay the full amount of the exercise price for the shares you wish to exercise. You may pay the exercise price in cash or by check, bank draft or money order payable to the Company or in any other manner
permitted by your Grant Notice,
which may include one or more of the following:
(a)
Provided that at
the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. This manner of payment is also known as a “broker-assisted exercise”, “same day sale”, or
“sell to cover”.
(b)
Provided that at the time of exercise the Common Stock is publicly traded, by
delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date
of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, will include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved
by the Company. You may not exercise your option by delivery to the Company of Common Stock if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
(c)
Subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant
to which the Company will reduce the number of shares of Common Stock issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price. You must pay any remaining
balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment. Shares of Common Stock will no longer be outstanding under your option and will not be exercisable thereafter if those
shares (i) are used to pay the exercise price pursuant to the “net exercise,” (ii) are delivered to you as a result of such exercise, and (iii) are withheld to satisfy your tax withholding obligations.
6. W
HOLE
S
HARES
.
You may exercise your option only for whole shares of Common Stock.
7. S
ECURITIES
L
AW
C
OMPLIANCE
.
In no event may you exercise your option
unless the shares of Common Stock issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the registration
requirements of the Securities Act.
The exercise of your option also must comply with all other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such
exercise would not be in material compliance with such laws and regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).
8. T
ERM
.
You may not exercise your option before the Date of Grant or after the expiration of the
option’s term. The term of your option expires, subject to the provisions of Section 5(g) of the Plan, upon the earliest of the following:
(a)
immediately upon the termination of your Continuous Service for Cause;
(b)
three (3) months after the termination of your Continuous Service for any reason other than Cause, your
Disability or your death (except as otherwise provided in Section 8(d) below);
provided, however,
that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in the
section above relating to “Securities Law Compliance,” your option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of three (3) months after the termination of your
Continuous Service;
provided further,
if during any part of such three (3) month period, the sale of any Common Stock received upon exercise of your option would violate the Company’s insider trading policy, then your option will
not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service during which the sale of the Common Stock received upon exercise
of your option would not be in violation of the Company’s insider trading policy. Notwithstanding the foregoing, if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six (6) months after the Date
of Grant, and (iii) you have vested in a portion of your option at the time of your termination of Continuous Service, your option will not expire until the earlier of (x) the later of (A) the date that is seven (7) months after
the Date of Grant, and (B) the date that is three (3) months after the termination of your Continuous Service, and (y) the Expiration Date;
(c)
twelve (12) months after the termination of your Continuous Service due to your Disability (except as
otherwise provided in Section 8(d)) below;
(d)
eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;
(e)
the Expiration Date indicated in your Grant Notice; or
(f)
the day before the tenth (10th) anniversary of the Date of Grant.
9. E
XERCISE
.
(a)
You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so
permits) during its term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by the Company for exercise and (ii) paying the exercise price and any
applicable withholding taxes to the Company’s Secretary, stock plan administrator, or such other
person as the Company may designate, together with such additional documents as the Company may then require.
(b)
By exercising your option you agree that, as a condition to any exercise of your option, the Company may require
you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, (ii) the lapse of any substantial risk of forfeiture to
which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.
10. T
RANSFERABILITY
.
Except as otherwise provided in this Section 10, your option is not
transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.
(a) Certain Trusts.
Upon receiving written permission from the Board or its duly authorized designee, you may transfer
your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust. You and the trustee must enter into transfer and other
agreements required by the Company.
(b) Domestic Relations Orders.
Upon receiving written permission from the
Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to the terms of a domestic relations order, official
marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2) that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed
terms of any division of this option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is contained within the domestic relations order or marital settlement
agreement.
(c) Beneficiary Designation.
Upon receiving written permission from the Board or its duly authorized
designee, you may, by delivering written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a third party who, on your death, will thereafter be entitled to
exercise this option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this option and receive, on
behalf of your estate, the Common Stock or other consideration resulting from such exercise.
11. O
PTION
NOT
A
S
ERVICE
C
ONTRACT
.
Your option is not an employment or service contract, and nothing in your option will be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, boards of directors,
officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
12. W
ITHHOLDING
O
BLIGATIONS
.
(a)
At the time you exercise your option, in whole or in part, and at any time thereafter as requested by the Company,
you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day sale” pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with
the exercise of your option.
(b)
Upon your request and subject to approval by the Company, and compliance with any
applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined
by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes).
If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely
election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax
withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option
that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
(c)
You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock
from any escrow provided for herein, if applicable, unless such obligations are satisfied.
13. T
AX
C
ONSEQUENCES
. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim
against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the
Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated
with the option.
14. N
OTICES
.
Any notices provided for in your option or the Plan will be given in
writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to
participation in the Plan and this option by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this option, you consent to receive such documents by electronic delivery and to participate in the
Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
15. G
OVERNING
P
LAN
D
OCUMENT
.
Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. If there is
any conflict between the provisions of your option and those of the Plan, the provisions of the Plan will control. In addition, your option (and any compensation paid or shares issued under your option) is subject to recoupment in accordance with
The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law.
16. O
THER
D
OCUMENTS
.
You hereby acknowledge receipt of and the right to receive a
document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares
only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
17. E
FFECT
ON
O
THER
E
MPLOYEE
B
ENEFIT
P
LANS
.
The value of this option will not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except
as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
18. V
OTING
R
IGHTS
.
You will not have voting or any other rights as a stockholder of the
Company with respect to the shares to be issued pursuant to this option until such shares are issued to you. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this option, and no
action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
19. S
EVERABILITY
.
If all or any part of this Option Agreement or the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Option Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Option Agreement (or part of such a
Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
20. M
ISCELLANEOUS
.
(a)
The rights and obligations of the Company under your option will be transferable to any one or more persons or
entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b)
You agree upon request to execute any further documents or instruments necessary or desirable in the sole
determination of the Company to carry out the purposes or intent of your option.
(c)
You acknowledge and agree
that you have reviewed your option in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your option, and fully understand all provisions of your option.
(d)
This Option Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
(e)
All obligations of the Company
under the Plan and this Option Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.
* * *
This Option Agreement will be deemed to be signed by you upon the signing by you of the Stock Option Grant Notice to
which it is attached.
NOTICE OF EXERCISE
|
|
|
|
|
R
EGULUS
T
HERAPEUTICS
I
NC
.
3545 J
OHN
H
OPKINS
C
T
.
S
AN
D
IEGO
, CA 92121
|
|
Date of Exercise:
|
This constitutes notice to Regulus Therapeutics Inc. (the
“
Company
”) under my stock option that I elect to purchase the below number of shares of Common Stock of the Company (the “
Shares
”) for the price set forth below.
|
|
|
|
|
Type of option (check one):
|
|
Nonstatutory
|
|
Stock option dated:
|
|
|
|
Number of Shares as to which option is exercised:
|
|
|
|
Certificates to be issued in name of:
|
|
|
|
Total exercise price:
|
|
$
|
|
Cash payment delivered herewith:
|
|
$
|
|
[Value of Shares delivered herewith
1
:
|
|
$
]
|
|
[Value of Shares pursuant to net exercise
2
:
|
|
$
]
|
|
[Regulation T Program (cashless exercise
3
):
|
|
$
]
|
|
1
|
Shares must meet the public trading requirements set forth in the option. Shares must be valued in accordance with the terms of the option being
exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate.
|
|
2
|
Regulus Therapeutics Inc. must have established net exercise procedures at the time of exercise, in order to utilize this payment method.
|
|
3
|
Shares must meet the public trading requirements set forth in the option.
|
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Regulus Therapeutics Inc. Inducement Plan and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this
option.
