Alto Neuroscience Inc

Our named executive officers for the year ended December 31, 2023, consisting of our principal executive officer and the next two most highly compensated executive officers who were serving in such capacity as of December 31, 2023, were:

•Amit Etkin, M.D., Ph.D., our President, Chief Executive Officer, and Chair of our board of directors;

•Nicholas Smith, our Chief Financial Officer; and

•Adam Savitz, M.D., Ph.D., our Chief Medical Officer.

Summary Compensation Table

The following table sets forth information regarding all of the compensation awarded to or earned by or paid to our named executive officers during the fiscal year ended December 31, 2023.

(1)Amounts reported represent (i) the aggregate grant date fair value of the stock options granted to our named executive officers during 2023 under the 2019 Plan, and (ii) for Mr. Smith and Dr. Savitz, the incremental fair value received by Mr. Smith and Dr. Savitz in the amounts of $4,672 and $1,500, respectively, in connection with the April 2023 repricing of stock options originally granted in 2022, as further described under “—Narrative to the Summary Compensation Table—April 2023 Option Repricing” below. Amounts reported in this column have been computed in accordance with Financial Accounting Standard Board Accounting Standards Codification, Topic 718. The assumptions we use in calculating the grant date fair value of stock options are set forth in Note 10 to our consolidated financial statements included elsewhere in this Annual Report. This amount does not reflect dollar amounts actually received by the executive officer or the economic value that may be received by the executive officer upon stock option exercise or any sale of the underlying shares of common stock.

(2)Amounts reported include $9,900 in company matching contributions under our 401(k) plan for each of Dr. Etkin, Mr. Smith, and Dr. Savitz and $8,677, $330, and $707 in life insurance premiums paid for the benefit of Dr. Etkin, Mr. Smith, and Dr. Savitz, respectively.

Narrative to the Summary Compensation Table

Annual Base Salary

Our named executive officers receive a base salary to compensate them for services rendered to us. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role, and responsibilities. The base salary of our named executive officers is generally determined and approved by our board of directors in connection with the commencement of employment of the named executive officer and may be adjusted from time to time thereafter as the board of directors determines appropriate. The 2023 base salaries for our named executive officers were as follows: (1) $392,700 for Dr. Etkin, (2) $383,775 for Mr. Smith, and (3) $374,410 for Dr. Savitz. Effective immediately following the effectiveness of the IPO Registration Statement, the base salaries for our named executive officers were increased as follows: (i) $626,000 for Dr. Etkin, (ii) $475,000 for Mr. Smith, and (iii) $495,000 for Dr. Savitz.

Annual Bonus

In addition to base salaries, each of our named executive officers is eligible to receive a discretionary annual bonus of up to a percentage of the executive’s gross base salary based on individual performance, company performance or as otherwise determined appropriate, as determined by our board of directors. For the year ended December 31, 2023, cash bonus targets were 50% for Dr. Etkin and 40% for each of Mr. Smith and Dr. Savitz. Effective immediately following the effectiveness of the IPO Registration Statement, the cash bonus targets are 55% for Dr. Etkin and 40% for each of Mr. Smith and Dr. Savitz.

Equity-Based Incentive Awards

Our equity-based incentive awards are designed to align our named executive officers’ interests with those of our stockholders and to retain and incentivize our named executive officers over the long-term. Our board of directors is responsible for approving equity grants. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Our named executive officers generally are awarded an initial new hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize our named executive officers with respect to achieving certain corporate goals or to reward our named executive officers for exceptional performance.

Prior to the IPO, we granted all equity awards pursuant to our 2019 Plan. Following the IPO, we grant equity incentive awards under the terms of our 2024 Equity Incentive Plan, or the 2024 Plan. All options are granted with a per share exercise price equal to no less than the fair market value of a share of our common stock on the date of the grant of such award. Generally, our option awards vest over a four-year period subject to the holder’s continuous service to us, as further described under “—Outstanding Equity Awards as of December 31, 2023” below.

In April 2023, our board of directors granted Dr. Etkin, Mr. Smith, and Dr. Savitz options to purchase 34,620, 33,833, and 33,008 shares of our common stock, respectively. In December 2023, our board of directors granted Dr. Etkin, Mr. Smith, and Dr. Savitz options to purchase 247,290, 202,329, and 123,645 shares of our common stock, respectively. The terms of these awards are described under “—Outstanding Equity Awards as of December 31, 2023” below.

April 2023 Option Repricing

In April 2023, we amended certain outstanding options, including options held by Mr. Smith and Dr. Savitz, which were “underwater”, meaning the exercise price per share of these options was greater than the current fair market value of our common stock. The amendment reduced the exercise price per share of such options to $6.23, the fair market value of our common stock as determined by our board of directors on the date of the repricing. We believe that repricing these options was in our best interest, in order to motivate the optionholder to continue to provide services to our company and to work towards our success.

Outstanding Equity Awards as of December 31, 2023

The following table sets forth certain information regarding equity awards granted to our named executive officers that remain outstanding as of December 31, 2023.

(1) All of the equity awards listed in the table above were granted under the 2019 Plan.

(2) The market price for our common stock is based on the IPO price of our common stock of $16.00 per share.

(3) This restricted stock award vests over a period of four years, with 25% of the shares vesting on the one year anniversary of the May 27, 2020 vesting commencement date, and 1/48 of the shares vesting on a monthly basis thereafter, subject to continued service through each vesting date.

(4) This stock option vests over a period of four years, with 25% of the shares underlying the option vesting on the one year anniversary of the January 1, 2023 vesting commencement date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to continued service through each vesting date.

(5) This stock option vests as follows: 1/3 of the shares underlying the option vested upon completion of the IPO and 2/3 of the shares underlying the option will vest over a period of four years, with 25% of the shares underlying the time-based portion vesting on the one year anniversary of the December 20, 2023 vesting commencement date, and 1/48 of the shares underlying the time-based portion vesting on a monthly basis thereafter, subject to continued service through each vesting date.

(6) This stock option vests over a period of four years, with 25% of the shares underlying the option vesting on the one year anniversary of the September 8, 2021 vesting commencement date and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to continued service through each vesting date.

(7) This stock option vests over a period of four years, with 1/48 of the shares underlying the option vesting monthly beginning on the one-month anniversary of the September 21, 2022 vesting commencement date, subject to continued service through each vesting date.

(8) This stock option was originally granted at an exercise price of $7.06 per share (the fair market value of our common stock as of the date of grant), which exercise price was amended by our board of directors in April 2023 to reflect an exercise price of $6.23 per share (the then current fair market value of our common stock).

(9) This stock option vests over a period of four years, with 25% of the shares underlying the option vesting on the one year anniversary of the July 6, 2021 vesting commencement date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to continued service through each vesting date.

(10) This stock option vests over a period of four years, with 25% of the shares underlying the option vesting on the one year anniversary of the December 20, 2023 vesting commencement date, and 1/48 of the shares underlying the option vesting on a monthly basis thereafter, subject to continued service through each vesting date.

Employment Arrangements

We are party to employment offer letters with each of our named executive officers. The agreements generally provide for at-will employment without any specific term and set forth the named executive officer’s base salary, eligibility for employee benefits, and severance benefits upon a qualifying termination of employment or change in control of our company. Each of our named executive officers has executed our standard at-will employment, confidential information, inventions assignment, and arbitration agreement. The key terms of the employment offer letters with our named executive officers, including potential payments upon termination or change in control, are described below.

Amit Etkin, M.D., Ph.D.

In November 2023, we entered into an employment offer letter with Dr. Etkin, our President and Chief Executive Officer and a member of our board of directors, which was amended in January 2024 (as amended, the “Etkin Offer Letter”). The Etkin Offer Letter provides for an annual base salary of $392,700 per year, as adjusted from time to time. Pursuant to the Etkin Offer Letter, Dr. Etkin is eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 50% of his base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Dr. Etkin is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Nicholas Smith

In November 2023, we entered into an employment offer letter with Mr. Smith, our Chief Financial Officer, which was amended in January 2024 (as amended, the “Smith Offer Letter”). The Smith Offer Letter continued to provide for an annual base salary of $383,775 per year, as adjusted from time to time. Pursuant to the Smith Offer Letter, Mr. Smith is eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 40% of his base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Mr. Smith is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Adam Savitz, M.D., Ph.D.

In November 2023, we entered into an employment offer letter with Dr. Savitz, our Chief Medical Officer, which was amended in January 2024 (as amended, the “Savitz Offer Letter” and, together with the Etkin Offer Letter and the Smith Offer Letter, the “Employment Offer Letters”). The Savitz Offer Letter continued to provide for an annual base salary of $374,410 per year, as adjusted from time to time. Pursuant to the Savitz Offer Letter, Dr. Savitz is eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 40% of his base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Dr. Savitz is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Potential Payments Upon Termination or Change in Control

Regardless of the manner in which a named executive officer’s service terminates, each of our named executive officers is entitled to receive amounts earned during his term of service, including unpaid salary and unused vacation.

Termination Without Cause

Pursuant to the terms of their Employment Offer Letters, if we terminate any of our named executive officer’s employment without cause (as defined in the employment offer letter), then he will be entitled to a cash payment equal to his then-current base salary for nine months (or 12 months for Dr. Etkin) in the form of salary continuation. In addition, we are required to pay the employer portion of the premiums for the named executive officer and his dependents of group health insurance COBRA continuation coverage for nine months (or 12 months for Dr. Etkin) in a lump sum.

Change in Control

If we terminate a named executive officer’s employment without cause or he resigns for good reason (as defined in the applicable Employment Offer Letter) within the 60 days prior to or twelve months following a change in control, the named executive officer will be entitled to a cash payment equal to his then-current base salary for 12 months (or 18 months for Dr. Etkin) in the form of salary continuation. In addition, the named executive officer will be entitled to receive a cash payment equal to 12 months (or 18 months for Dr. Etkin) of annual bonus that he would be entitled to receive if corporate and/or individual objectives and milestones were fully achieved for the calendar year in which the separation occurs. He will also receive accelerated vesting of all outstanding equity awards, including acceleration of performance awards at the higher of target or actual achievement. We also are required to pay the employer portion of the premiums for the named executive officer and his dependents of group health insurance COBRA continuation coverage for 12 months (or 18 months for Dr. Etkin) in a lump sum.

Stock Options

Each of our named executive officers’ stock options are subject to the terms of the 2019 Plan. A description of the termination and change in control provisions in the 2019 Plan and stock options granted thereunder is provided below under “—Equity Benefit Plans.”

Other Compensation and Benefits

Each of our named executive officers is eligible to participate in our employee benefit plans, including our medical, dental, vision, life, and long term disability plans, in each case on the same basis as all of our other employees. We pay the premiums for the medical, dental, vision, and life insurance for all of our employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances. In addition, we provide the opportunity to participate in a 401(k) plan to our employees, including each of our named executive officers, as discussed in the section below entitled “—401(k) plan.”

401(k) Plan

Our named executive officers are eligible to participate in a defined contribution retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees may defer eligible compensation on a pre-tax or after-tax (Roth) basis, up to the statutorily prescribed annual limits on contributions under the Internal Revenue Code of 1986, as amended, or the Code. Individual contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan (except for Roth contributions) and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. We may elect, at our discretion, to make matching employee contributions.

Non-Employee Director Compensation

Prior to the IPO, we did not have a formal compensation policy with respect to service on our board of directors. We have reimbursed and will continue to reimburse all of our non-employee directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings.

Director Compensation Table

The following table sets forth information regarding the compensation of our non-employee directors earned for service on our board of directors during the year ended December 31, 2023.

(1) The amounts reported in this column represent (i) the aggregate grant date fair value of the stock options granted to the non-employee director during 2023 under the 2019 Plan and (ii) for Ms. York, the incremental fair value received by Ms. York in the amount of $838 in connection with the acceleration of stock options originally granted in 2021 from a 48-month vesting period to a 36-month vesting period. Amounts reported in this column have been computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The assumptions we use in calculating the grant date fair value of stock options are set forth in Note 10 to our consolidated financial statements included elsewhere in this Annual Report. The amounts do not reflect dollar amounts actually received by the non-employee director or the economic value that may be received by the non-employee director upon stock option exercise or any sale of the underlying shares of common stock.

(2) The following table provides information regarding the number of shares of common stock underlying options held by our non-employee directors that were outstanding as of December 31, 2023:

• Mr. Dimitropoulos, Dr. Liang, and Mr. Weaver served as members of our board of directors until their respective resignations in connection with the IPO.

In October 2023, upon his appointment to our board of directors, our board of directors granted Mr. Dreyfus an option to purchase 22,481 shares of our common stock. The shares subject to the option award vest in 36 equal monthly amounts over a three-year period, subject to Mr. Dreyfus’s continuous service with us as of each monthly vesting date.

Additionally, in October 2023, our board of directors granted Ms. York an option to purchase 11,240 shares of our common stock. The shares subject to the option award vest in full on the one-year anniversary of the vesting commencement date, subject to Ms. York’s continuous service with us as of such vesting date.

Dr. Etkin, our Chief Executive Officer, who is also the Chair of our board of directors, did not receive any additional compensation for service as a director. Dr. Etkin’s compensation as a named executive officer is set forth above under “Executive Compensation—Summary Compensation Table.”

Non-Employee Director Compensation Policy

Our board of directors adopted a non-employee director compensation policy in January 2024 that became effective upon the execution and delivery of the underwriting agreement related to the IPO and is applicable to all of our non-employee directors. This compensation policy provides that each such non-employee director will receive the following compensation for service on our board of directors:

•an annual cash retainer of $40,000 (plus an additional $30,000 for the non-executive chair of our board of directors, if any, and an additional $20,000 for the lead independent director);

•an additional annual cash retainer of $8,000, $6,000, and $5,000 for service as a member of the audit committee, compensation and management development committee, and the nominating and corporate governance committee, respectively;

•an additional annual cash retainer of $16,000, $12,000, and $10,000 for service as chair of the audit committee, compensation and management development committee, and the nominating and corporate governance committee, respectively;

•an initial option grant to purchase 30,574 shares of our common stock on the date of each such nonemployee director’s appointment to our board of directors; and

•an annual option grant to purchase 15,287 shares of our common stock on the date of each of our annual stockholder meetings.

Under the non-employee director compensation policy, directors may elect to receive some or all of their eligible cash compensation in the form of stock options.

In connection with the IPO, we granted to each of our then-current non-employee directors an option to purchase 30,574 shares of our common stock under our 2024 Plan at an exercise price per share equal to the IPO price of $16.00. Further, upon appointment of Dr. Radhakrishnan to the board of directors on March 8, 2024, pursuant to the non-employee director compensation policy described above, Dr. Radhakrishnan received an option to purchase 30,574 shares of our common stock under our 2024 Plan at an exercise price per share equal to $13.76.

Each of the option grants described above under the non-employee director compensation policy was granted under our 2024 Plan, the terms of which are described in more detail below under the section titled “Equity Benefit Plans—2024 Equity Incentive Plan.” Each initial option grant, including the grants made in connection with the IPO, will vest and become exercisable in equal monthly installments over a three year period, subject to the director’s continuous service to us through each vesting date. Each annual option grant will vest and become exercisable subject to the director’s continuous service to us through the earlier of the first anniversary of the date of grant or the next annual stockholder meeting. The term of each option will be ten years, subject to earlier termination as provided in the 2024 Plan.

Equity Benefit Plans

2024 Equity Incentive Plan

Our board of directors adopted our 2024 Plan in January 2024 and our stockholders approved our 2024 Plan in January 2024. Our 2024 Plan is a successor to and continuation of our 2019 Plan (referred to in the 2024 Plan as our Prior Plan) and became effective on the execution of the underwriting agreement related to the IPO. Our 2024 Plan provides for the grant of incentive stock options, or ISOs, to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other forms of stock awards to employees, directors, and consultants, including employees and consultants of our affiliates. The maximum number of shares of our common stock that may be issued under our 2024 Plan was initially 2,000,000 shares. In addition, the number of shares of our common stock reserved for issuance under our 2024 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2025 through January 1, 2034, in an amount equal to 5% of the total number of shares of our capital stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by our board of directors.

Shares subject to stock awards granted under our 2024 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, do not reduce the number of shares available for issuance under our 2024 Plan. Additionally, shares become available for future grant under our 2024 Plan if they were issued under stock awards under our 2024 Plan if we repurchase them or they are forfeited. This includes shares used to pay the exercise price of a stock award or to satisfy the tax withholding obligations related to a stock award.

Corporate Transactions. The following applies to stock awards under the 2024 Plan in the event of a corporate transaction, unless otherwise provided in a participant’s stock award agreement or other written agreement with us or one of our affiliates or unless otherwise expressly provided by the plan administrator at the time of grant.

In the event of a corporate transaction, any stock awards outstanding under the 2024 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the transaction, or current participants, the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the transaction (contingent upon the effectiveness of the transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the transaction). With respect to performance awards with multiple vesting levels depending on performance level, unless otherwise provided by an award agreement or by the administrator, the award will accelerate at 100% of target. If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then with respect to any such stock awards that are held by persons other than current participants, such awards will terminate if not exercised (if applicable) prior to the effective time of the transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the transaction. The plan administrator is not obligated to treat all stock awards or portions of stock awards in the same manner and is not obligated to take the same actions with respect to all participants.

In the event a stock award will terminate if not exercised prior to the effective time of a transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award may not exercise such stock award but instead will receive a payment equal in value to the excess (if any) of (i) the value of the property the participant would have received upon the exercise of the stock award over (ii) any exercise price payable by such holder in connection with such exercise.

Under our 2024 Plan, a corporate transaction is defined to include: (i) a sale of all or substantially all of our assets; (ii) the sale or disposition of more than 50% of our outstanding securities; (iii) the consummation of a merger or consolidation where we do not survive the transaction; and (iv) the consummation of a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding before such transaction are converted or exchanged into other property by virtue of the transaction, unless otherwise provided in an award agreement or other written agreement between us and the award holder. Under the 2024 Plan, a change in control is defined to include (1) the acquisition by any person or company of more than 50% of the combined voting power of our then outstanding stock; (2) a merger, consolidation or similar transaction in which our stockholders immediately before the transaction do not own, directly or indirectly, more than 50% of the combined voting power of the surviving entity (or the parent of the surviving entity); (3) the approval by the stockholders or the board of directors of a plan of our complete dissolution or liquidation, or the occurrence of our complete dissolution or liquidation, except for a liquidation into a parent corporation; (4) a sale, lease, exclusive license or other disposition of all or substantially all of our assets other than to an entity more than 50% of the combined voting power of which is owned by our stockholders; and (5) an unapproved change in the majority of the board of directors.

Change in Control. In the event of a change in control, as defined under our 2024 Plan, awards granted under our 2024 Plan will not receive automatic acceleration of vesting and exercisability, although this treatment may be provided for in an award agreement.

Clawback. All awards granted under the 2024 Plan are subject to recoupment in accordance with any clawback policy that we adopted pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, our board of directors may impose such other clawback, recovery or recoupment provisions in a stock award agreement as our board of directors determines necessary or appropriate.

As of March 8, 2024, we had 830,579 shares of common stock reserved for issuance pursuant to the 2024 Plan.

2019 Equity Incentive Plan

Our board of directors adopted, and our stockholders approved, the 2019 Plan in March 2019. The 2019 Plan was most recently amended in April 2022. The 2019 Plan terminated on the date the 2024 Plan became effective, and thereafter no further stock awards will be granted under the 2019 Plan. However, any outstanding stock awards granted under the 2019 Plan will remain outstanding, subject to the terms of our 2019 Plan and award agreements, until such outstanding options are exercised or until any stock awards terminate or expire by their terms.

The 2019 Plan allowed for the grant of ISOs to our employees and to any of our subsidiary corporations’ employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, and restricted stock units awards to our employees, officers, directors and consultants and those of our subsidiary corporations.

Merger or Change in Control. The 2019 Plan provides that in the event of our merger with or into another corporation or entity or a change in control (as defined in the 2019 Plan), each outstanding award will be treated as the plan administrator determines without participant’s consent, including, without limitation, that (i) awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices, (ii) upon written notice to a participant, that the participant’s awards will terminate upon or immediately prior to the consummation of such merger or change in control, (iii) outstanding awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon consummation of such merger or change in control and, to the extent the plan administrator determines, terminate upon or immediately prior to the effectiveness of such merger or change in control, (iv) (A) the termination of an award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, If as of the date of the occurrence of the transaction the plan administrator determines in good faith that no amount would have been attained upon the exercise of such award or realization of the participant’s rights, then such award may be terminated by us without payment), or (B) the replacement of such award with other rights or property selected by the plan administrator in its sole discretion, or (v) any combination of the foregoing. The plan administrator will not be obligated to treat similarly all awards, all awards a participant holds, all awards of the same type, or all portions of awards.

Limitation of Liability and Indemnification

Our amended and restated certificate of incorporation limits the liability of our current and former directors and officers for monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors and officers of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors or officers, except liability for:

•any breach of the director’s or officer’s duty of loyalty to the corporation or its stockholders;

•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•as a director, unlawful payments of dividends or unlawful stock repurchases or redemptions;

•as an officer, derivative claims brought on behalf of the corporation by a stockholder; or

•any transaction from which the director or officer derived an improper personal benefit.

This limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or recission.

Our amended and restated certificate of incorporation authorizes us to indemnify our directors, officers, employees, and other agents to the fullest extent permitted by Delaware law. Our amended and restated bylaws provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee, or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers, and other employees as determined by the board of directors. With certain exceptions, these agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines, and settlement amounts incurred by any of these individuals in any action or proceeding.

We believe that these amended and restated certificate of incorporation and amended and restated bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain customary directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, executive officers, or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

At present, there is no pending litigation or proceeding involving any of our directors, executive officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a Rule 10b5-1 plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our insider trading policy and any applicable 10b5-1 guidelines.