Exhibit 3.1

 

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CITY THERAPEUTICS, INC.

 

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

 

City Therapeutics, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

 

DOES HEREBY CERTIFY:

 

1.           That the name of this corporation is City Therapeutics, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on July 17, 2023.

 

2.           That the Board of Directors of this corporation (the “Board of Directors”) duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

 

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

 

First: The name of this corporation is City Therapeutics, Inc. (the “Corporation”).

 

Second: The address of the registered office of the Corporation in the State of Delaware is 3500 South DuPont Highway in the City of Dover, County of Kent, 19901. The name of its registered agent at such address is Incorporating Services, Ltd.

 

Third: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

 

Fourth: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 41,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”) and (ii) 26,266,656 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

 

A.           COMMON STOCK

 

1.           General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.           Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation or pursuant to the General Corporation Law. There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

B.            PREFERRED STOCK

 

4,544,990 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series Seed Preferred Stock”, 13,996,318 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock”, 924,030 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B-1 Preferred Stock” and 6,801,318 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Preferred Stock”, with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “Sections” in this Part B of this Article Fourth refer to sections of Part B of this Article Fourth. References to “Preferred Stock” mean, collectively, the Series Seed Preferred Stock, Series A Preferred Stock, Series B-1 Preferred Stock and Series B Preferred Stock.

 

1.           Dividends. The holders of then outstanding shares of Preferred Stock shall be entitled to receive, only when, as and if declared by the Board of Directors, out of any funds and assets legally available therefor, dividends at the rate of 8% of the Original Issue Price (as defined below) for each share of Preferred Stock, prior and in preference to any declaration or payment of any other dividend (other than dividends on shares of Common Stock payable in shares of Common Stock). The right to receive dividends on shares of Preferred Stock pursuant to the preceding sentence of this Section 1 shall not be cumulative, and no right to dividends shall accrue to holders of Preferred Stock by reason of the fact that dividends on said shares are not declared. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Amended and Restated Certificate of Incorporation) the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, in addition to the dividends payable pursuant to the first sentence of this Section 1, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Preferred Stock dividend. The “Original Issue Price” shall mean, with respect to the Series Seed Preferred Stock, $1.0000 per share, with respect to the Series A Preferred Stock, $10.0295 per share, with respect to the Series B-1 Preferred Stock, $12.4351 per share and with respect to the Series B Preferred Stock, $14.6295 per share, each subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the applicable Preferred Stock.

 

 

2.            Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

2.1           Preferential Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, on a pari passu basis based on their relative Liquidation Amounts (as defined below) and before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share of each such series of Preferred Stock equal to the applicable Original Issue Price for such series of Preferred Stock, plus any dividends declared but unpaid thereon (the amount payable pursuant to this sentence is hereinafter referred to as the “Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they shall be entitled under this Section 2.1, the holders of shares of Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

 

2.2           Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment in full of all Liquidation Amounts required to be paid to the holders of shares of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Preferred Stock pursuant to Section 2.1 or the remaining Available Proceeds, as the case may be, shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares of Common Stock held by each such holder. Notwithstanding the above, for purposes of determining the amount each holder of shares of Preferred Stock is entitled to receive with respect to a Deemed Liquidation Event, liquidation, dissolution or winding up, each such holder of shares of a series of Preferred Stock shall be deemed to have converted (regardless of whether such holder actually converted) such holder’s shares of such series into shares of Common Stock immediately prior to the Deemed Liquidation Event, liquidation, dissolution or winding up if, as a result of an actual conversion, such holder would receive, in the aggregate, an amount greater than the amount that would be distributed to such holder if such holder did not convert such series of Preferred Stock into shares of Common Stock. If any such holder shall be deemed to have converted shares of Preferred Stock into Common Stock pursuant to this paragraph, then such holder shall not be entitled to receive any distribution that would otherwise be made to holders of Preferred Stock that have not converted (or have not been deemed to have converted) into shares of Common Stock.

 

2.3           Deemed Liquidation Events.

 

2.3.1         Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least a majority of the outstanding shares of Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, which majority must include the Specified Holders (as defined in that certain Amended and Restated Voting Agreement, dated as of May 20, 2026, by and among the Corporation and the other parties thereto, as may be amended from time to time (the “Voting Agreement”)) (the “Requisite Holders”) elect otherwise by written notice sent to the Corporation at least five days prior to the effective date of any such event:

 

(a)           a merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance in which

 

(i)

the Corporation is a constituent party or

 

(ii)

a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance,

 

except any such merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance continue to represent, or are converted into or exchanged for shares of capital stock or other equity interests that represent, immediately following such merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance, a majority, by voting power, of the capital stock or other equity interests of (1) the surviving or resulting corporation or entity; or (2) if the surviving or resulting corporation or entity is a wholly owned subsidiary of another corporation or entity immediately following such merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance, the parent corporation or entity of such surviving or resulting corporation or entity; or

 

 

(b)           (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or (2) the sale, lease, transfer, exclusive license or other disposition (whether by merger, consolidation, statutory conversion, transfer of the Corporation, domestication, or continuance or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

Notwithstanding the foregoing, the sale of shares of Preferred Stock or Common Stock in a bona fide financing transaction shall not be deemed a Deemed Liquidation Event.

 

2.3.2         Effecting a Deemed Liquidation Event.

 

(a)           The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Section 2.3.1(a)(i) unless the agreement or plan with respect to such transaction, or terms of such transaction (any such agreement, plan or terms, the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be allocated to the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2.

 

(b)           In the event of a Deemed Liquidation Event referred to in Section 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within 90 days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the 90^th day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii) to require the redemption of such shares of Preferred Stock, and (ii) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than 120 days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the 150^th day after such Deemed Liquidation Event (such date being the “Redemption Date”), to redeem all outstanding shares of Preferred Stock at a price per share equal to the applicable Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. On or before the applicable Redemption Date, each holder of shares of Preferred Stock to be redeemed on such Redemption Date, unless such holder has previously exercised his, her or its right to convert such shares as provided in Section 4, shall, if such holder’s shares are certificated, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate (the “Lost Certificate Documentation”)) to the Corporation, as requested in writing by the Corporation, and thereupon the applicable Liquidation Amount for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder. Prior to the distribution or redemption provided for in this Section 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.

 

 

2.3.3         Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities to be paid or distributed to such holders pursuant to such Deemed Liquidation Event. The value of such property, rights or securities shall be determined in good faith by the Board of Directors, including a majority of the Preferred Directors (as defined below) then seated.

 

2.3.4         Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Section 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Section 2.3.4, consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

 

3.           Voting.

 

3.1           General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Amended and Restated Certificate of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.

 

3.2           Election of Directors. The holders of record of the shares of Preferred Stock, voting together as a class on an as-converted basis, shall be entitled to elect three directors of the Corporation (each, a “Preferred Director”), and the holders of record of the shares of Common Stock, voting together as a class, shall be entitled to elect two directors of the Corporation. Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Common Stock and Preferred Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Section  3.2, then any directorship not so filled shall remain vacant until such time as such holders elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and voting together as a single class on an as-converted basis, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Section  3.2, a vacancy in any directorship filled by the holders of any class or classes or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or classes or series or by any remaining director or directors elected by the holders of such class or classes or series pursuant to this Section 3.2. Notwithstanding the provisions of Section 223(a)(1) and 223(a)(2) of the General Corporation Law, any vacancy, including newly created directorships resulting from any increase in the authorized number of directors or amendment of the Certificate of Incorporation, and vacancies created by removal or resignation of a director, may be filled by a majority of the directors then in office, though less than a quorum and whether or not elected by the same class or series of stock as is entitled to vote for the election of the directors to fill such vacancy, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; provided, however, that where such vacancy occurs among the directors elected by the holders of a class or series of stock, the holders of shares of such class or series may override the Board’s action to fill such vacancy by removing any person so appointed by the Board at any time and electing their own designee.

 

 

3.3           Preferred Stock Protective Provisions. At any time when at least 5,253,332 shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, domestication, transfer, continuance, recapitalization, reclassification, waiver, statutory conversion or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the Requisite Holders given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect; provided, however, that a consent or resolution of the Board of Directors approving any of the following items that is contingent upon receipt of the stockholder consent required pursuant to this Section 3.3 shall not, solely by reason thereof, be deemed to be an action or transaction entered into in violation hereof.

 

3.3.1          liquidate, dissolve or wind-up the business and affairs of the Corporation or effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

 

3.3.2          amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or Bylaws of the Corporation;

 

3.3.3          (i) create, or authorize the creation of, or issue or obligate itself to issue shares of, or reclassify, any capital stock, or create or issue or obligate itself to issue any other security convertible into or exercisable for any equity security, unless the same ranks junior to the Preferred Stock with respect to its rights, preferences and privileges, or (ii) increase the authorized number of shares of Preferred Stock or any additional class or series of capital stock of the Corporation;

 

3.3.4          purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary upon the occurrence of certain events, such as (i) in connection with the cessation of such employment or service at no greater than the original purchase price thereof or (ii) pursuant to a right of first refusal or (iii) as approved by the Board of Directors;

 

3.3.5          create, adopt, amend, terminate or repeal any equity (or equity-linked) compensation plan;

 

3.3.6          create, or authorize the creation of, or issue, or authorize the issuance of any debt security or create any lien or security interest (except for purchase money liens or statutory liens of landlords, mechanics, materialmen, workmen, warehousemen and other similar persons arising or incurred in the ordinary course of business) or incur other indebtedness for borrowed money, including but not limited to obligations and contingent obligations under guarantees, or permit any subsidiary to take any such action with respect to any debt security lien, security interest or other indebtedness for borrowed money, other than equipment leases, bank lines of credit or trade payables incurred in the ordinary course or unless approved by the Board of Directors, including a majority of the Preferred Directors then seated; or

 

 

3.3.7          increase or decrease the size of the Board of Directors;

 

3.3.8          create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one (1) or more other subsidiaries) by the Corporation, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary.

 

3.4           Series B Preferred Stock Protective Provisions. At any time when at least 1,545,070 shares of Series B Preferred Stock and Series B-1 Preferred Stock in the aggregate (in each case subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, domestication, transfer, continuance, recapitalization, reclassification, waiver, statutory conversion or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of at least 56% of the outstanding shares of Series B Preferred Stock and Series B-1 Preferred Stock, voting together as a separate class on an as-converted basis, which must include the written consent or affirmative vote of at least one of the Lead Purchasers (as defined in the Voting Agreement) (the “Series B Requisite Holders”), given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect; provided, however, that a consent or resolution of the Board of Directors approving any of the following items that is contingent upon receipt of the stockholder consent required pursuant to this Section 3.4 shall not, solely by reason thereof, be deemed to be an action or transaction entered into in violation hereof.

 

3.4.1          modify, amend or waive the rights, preferences or privileges of the Preferred Stock, the Series B Preferred Stock or the Series B-1 Preferred Stock so as to affect adversely any rights, preferences or privileges expressly and uniquely granted to the Series B Preferred Stock or Series B-1 Preferred Stock; provided, however, that the authorization of one or more additional series of Preferred Stock with a liquidation preference and/or other rights, preferences or privileges on parity with or senior to the Series B Preferred Stock or Series B-1 Preferred Stock, as the case may be, pursuant to a bona fide financing transaction shall not be deemed to affect adversely the rights, preferences or privileges of the Series B Preferred Stock or Series B-1 Preferred Stock;

 

 

3.4.2          increase or decrease the number of authorized shares of Series B Preferred Stock or Series B-1 Preferred Stock; or

 

3.4.3         purchase or redeem or pay any dividend on any capital stock other than stock repurchased from former employees and consultants in connection with the cessation of their service at the lower of fair market value or the original purchase price thereof.

 

3.5           Series A Preferred Stock Protective Provisions. At any time when at least 3,524,006 shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) are outstanding the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, domestication, transfer, continuance, recapitalization, reclassification, waiver, statutory conversion or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred Stock given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect; provided, however, that a consent or resolution of the Board of Directors approving any of the following items that is contingent upon receipt of the stockholder consent required pursuant to this Section 3.4 shall not, solely by reason thereof, be deemed to be an action or transaction entered into in violation hereof.

 

3.5.1          modify, amend or waive the rights, preferences or privileges of the Preferred Stock or the Series A Preferred Stock so as to affect adversely any rights, preferences or privileges expressly and uniquely granted to the Series A Preferred Stock; provided, however, that the authorization of one or more additional series of Preferred Stock with a liquidation preference and/or other rights, preferences or privileges on parity with or senior to the Series A Preferred Stock pursuant to a bona fide financing transaction shall not be deemed to affect adversely the rights, preferences or privileges of the Series A Preferred Stock;

 

3.5.2          increase or decrease the number of authorized shares of Series A Preferred Stock; or

 

3.5.3         purchase or redeem or pay any dividend on any capital stock other than stock repurchased from former employees and consultants in connection with the cessation of their service at the lower of fair market value or the original purchase price thereof.

 

4.            Optional Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1           Right to Convert.

 

4.1.1          Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (as defined below) in effect at the time of conversion. The “Conversion Price” (i) applicable to the Series Seed Preferred Stock shall initially be equal to $1.0000, (ii) applicable to the Series A Preferred Stock shall initially be equal to $10.0295, (iii) applicable to the Series B-1 Preferred Stock shall initially be equal to $12.4351 and (iv) applicable to the Series B Preferred Stock shall initially be equal to $14.6295. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

 

4.1.2          Termination of Conversion Rights. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock; provided that the foregoing termination of Conversion Rights shall not affect the amount(s) otherwise paid or payable in accordance with Section 2.1 to holders of Preferred Stock pursuant to such liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event.

 

4.2           Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the number of shares of Common Stock to be issued upon conversion of the Preferred Stock shall be rounded to the nearest whole share.

 

4.3           Mechanics of Conversion.

 

4.3.1          Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, the Lost Certificate Documentation), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or the Lost Certificate Documentation) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a notice of issuance of uncertificated shares and may, upon written request, issue and deliver a certificate for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and, may, if applicable and upon written request, issue and deliver a certificate for the number (if any) of the shares of Preferred Stock represented by any surrendered certificate that were not converted into Common Stock and (ii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

 

 

4.3.2           Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.

 

4.3.3           Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

4.3.4           No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5           Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

 

4.4           Adjustments to Conversion Price for Diluting Issues.

 

4.4.1         Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a)           “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 4.4.3 below, deemed to be issued) by the Corporation after the date upon which the first share of Series B Preferred Stock is issued (the “Original Issue Date”), other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options (as defined below) and Convertible Securities (as defined below) (clauses (1) and (2), collectively, “Exempted Securities”):

 

(i)

as to any series of Preferred Stock shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of Preferred Stock;

 

(ii)

shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 4.5, 4.6, 4.7 or 4.8;

 

(iii)

shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors;

 

(iv)

shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

(v)

shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors;

 

(vi)

shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors;

 

 

(vii)

shares of Common Stock, Options or Convertible Securities issued as acquisition consideration pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors;

 

(viii)

shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors; or

 

(ix)

shares of Common Stock issued in connection with a Qualified IPO (as defined below).

 

(b)          “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(c)          “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

4.4.2        No Adjustment of Conversion Price. No adjustment in the Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. In addition, (i) no adjustment in the Conversion Price applicable to the Series A Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the outstanding shares of Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock and (ii) no adjustment in the Conversion Price applicable to the Series B Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Series B Requisite Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

 

4.4.3        Deemed Issue of Additional Shares of Common Stock.

 

(a)          If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

 

(b)           If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Section 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)           If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Section 4.4.4 (either because the consideration per share (determined pursuant to Section 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Original Issue Date), are revised after the Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective).

 

 

(d)           Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of Section 4.4.4, the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)           If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price provided for in this Section 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Section 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price that would result under the terms of this Section 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4         Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4.4.3), without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issuance or deemed issuance, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

 

CP₂ = CP₁* (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(a)            “CP₂” shall mean the Conversion Price in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock

 

(b)            “CP₁” shall mean the Conversion Price in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;

 

(c)            “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or deemed issuance or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

 

 

(d)           “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP₁ (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP₁); and

 

(e)           “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5        Determination of Consideration. For purposes of this Section 4.4, the consideration received by the Corporation for the issuance or deemed issuance of any Additional Shares of Common Stock shall be computed as follows:

 

(a)           Cash and Property. Such consideration shall:

 

(i)

insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)

insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors, including a majority of the Preferred Directors then seated; and

 

(iii)

in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors, including a majority of the Preferred Directors (as defined below) then seated.

 

(b)          Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:

 

(i)

The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

 

(ii)

the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6        Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price pursuant to the terms of Section 4.4.4, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5           Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding shares of Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Section shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

 

4.6           Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:

 

(1)           the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this Section as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7           Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

 

4.8           Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

 

 

4.9           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than ten days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock.

 

4.10          Notice of Record Date. In the event:

 

(a)            the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)            of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)            of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten days prior to the record date or effective date for the event specified in such notice.

 

 

5.           Mandatory Conversion.

 

5.1           Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $75,000,000 of gross proceeds to the Corporation and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market’s National Market, the New York Stock Exchange or another exchange or marketplace approved by the Board of Directors (a “Qualified IPO”), or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Holders (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Section 4.1.1 and (ii) such shares may not be reissued by the Corporation.

 

5.2           Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, the Lost Certificate Documentation) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or the Lost Certificate Documentation) therefor, to receive the items provided for in the next sentence of this Section 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or the Lost Certificate Documentation) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a notice of issuance of uncertificated shares and may, upon written request, issue and deliver a certificate for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and (b) pay any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

6.           Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed, converted or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption, conversion or acquisition.

 

 

7.           Waiver. Except as otherwise set forth herein, (a) any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the holders that would otherwise be required to amend such right, powers, preferences, and other terms and (b) at any time more than one series of Preferred Stock is issued and outstanding, any of the rights, powers, preferences and other terms of any series of Preferred Stock set forth herein may be waived on behalf of all holders of such series of Preferred Stock by the affirmative written consent or vote of the holders of such series that would otherwise be required to amend such right, power, preference, or other term.

 

8.           Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

Fifth: Subject to any additional vote required by this Amended and Restated Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

Sixth: Subject to any additional vote required by this Amended and Restated Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation. Each director shall be entitled to one vote on each matter presented to the Board of Directors.

 

Seventh: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

Eighth: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

 

Ninth: To the fullest extent permitted by law, a director or officer of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended. Solely for the purposes of this Article NINTH, “officer” shall have the meaning provided in Section 102(b)(7) of the General Corporation Law as amended from time to time.

 

Any amendment, repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of, or increase the liability of any director or officer of the Corporation with respect to any acts or omissions of such director or officer occurring prior to, such amendment, repeal or modification.

 

 

Tenth: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not (a) adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification or (b) increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal or modification.

 

Eleventh: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation while such Covered Person is performing services in such capacity. Any repeal or modification of this Article Eleventh will only be prospective and will not affect the rights under this Article Eleventh in effect at the time of the occurrence of any actions or omissions to act giving rise to liability. Notwithstanding anything to the contrary contained elsewhere in this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of a majority of the shares of Preferred Stock then outstanding, will be required to amend or repeal, or to adopt any provisions inconsistent with this Article Eleventh.

 

Twelfth: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Twelfth shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Twelfth (including, without limitation, each portion of any sentence of this Article Twelfth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

 

Thirteenth: For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Amended and Restated Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under this Amended and Restated Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero.

 

* * *

 

3.           That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

 

4.           That this Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 20th day of May, 2026.

 

	By:	/s/ Andrew Orth
		Andrew Orth, President and CEO

  

 

CERTIFICATE OF AMENDMENT TO THE 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

CITY THERAPEUTICS, INC.

 

(Pursuant to Section 242 of the

General Corporation Law of the State of Delaware)

 

City Therapeutics, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

 

DOES HEREBY CERTIFY:

 

FIRST: That the name of this corporation is City Therapeutics, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on July 17, 2023.

 

SECOND: Pursuant to Section 242 of the General Corporation Law, this Certificate of Amendment to the Amended and Restated Certificate of Incorporation of this corporation (the “Certificate of Amendment”) amends the Amended and Restated Certificate of Incorporation of this corporation (the “Restated Certificate of Incorporation”) as follows:

 

1.     The first paragraph of Article Fourth of the Restated Certificate of Incorporation be deleted and replaced in full with the following:

 

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 42,350,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”) and (ii) 26,266,656 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).”

 

THIRD: That the Board of Directors of the Corporation duly approved the Certificate of Amendment in accordance with the provisions of Sections 141 and 242 of the General Corporation Law.

 

FOURTH: The holders of the requisite number of shares of the Corporation approved and adopted the Certificate of Amendment in accordance with Sections 228 and 242 of the General Corporation Law.

 

FIFTH: Other than as set forth in this Certificate of Amendment, the Restated Certificate of Incorporation, as amended, shall remain in full force and effect, without modification, amendment or change.

 

*      *      *

 

 

IN WITNESS WHEREOF, this Certificate of Amendment to the Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on June 4, 2026.

 

	/s/ Andrew Orth
	Andrew Orth, President and CEO

 

 

 

Exhibit 3.3

 

BYLAWS OF

 

CITY THERAPEUTICS, INC.

 

(A DELAWARE CORPORATION)

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I OFFICES			1
	1.1	Registered Office	1
	1.2	Offices	1
ARTICLE II MEETINGS OF STOCKHOLDERS			1
	2.1	Location	1
	2.2	Timing	1
	2.3	Notice of Meeting	1
	2.4	Stockholders’ Records	1
	2.5	Special Meetings	2
	2.6	Notice of Meeting	2
	2.7	Business Transacted at Special Meeting	2
	2.8	Quorum; Meeting Adjournment; Presence by Remote Means	2
	2.9	Voting Thresholds	3
	2.10	Number of Votes Per Share	3
	2.11	Action by Written Consent of Stockholders; Electronic Consent; Notice of Action	3
ARTICLE III DIRECTORS			4
	3.1	Authorized Directors	4
	3.2	Vacancies	4
	3.3	Board Authority	5
	3.4	Location of Meetings	5
	3.5	First Meeting	5
	3.6	Regular Meetings	5
	3.7	Special Meetings	5
	3.8	Quorum	6
	3.9	Action Without a Meeting	6
	3.10	Telephonic Meetings	6
	3.11	Committees	6
	3.12	Minutes of Meetings	6
	3.13	Compensation of Directors	7
	3.14	Removal of Directors	7
ARTICLE IV NOTICES			7
	4.1	Notice	7
	4.2	Waiver of Notice	7
	4.3	Electronic Notice	7
ARTICLE V OFFICERS			8
	5.1	Required and Permitted Officers	8
	5.2	Appointment of Required Officers	8
	5.3	Appointment of Permitted Officers	8

 

 

	5.4	Officer Compensation	8
	5.5	Term of Office; Vacancies	8
	5.6	Chairman Presides	8
	5.7	Absence of Chairman	9
	5.8	Powers of Chief Executive Officer	9
	5.9	Chief Executive Officer’s Signature Authority	9
	5.10	Absence of Chief Executive Officer	9
	5.11	Powers of President	9
	5.12	Absence of President	9
	5.13	Duties of Secretary	9
	5.14	Duties of Assistant Secretary	10
	5.15	Duties of Treasurer	10
	5.16	Disbursements and Financial Reports	10
	5.17	Treasurer’s Bond	10
	5.18	Duties of Assistant Treasurer	10
ARTICLE VI CERTIFICATE OF STOCK			11
	6.1	Stock Certificates	11
	6.2	Facsimile Signatures	11
	6.3	Lost Certificates	11
	6.4	Transfer of Stock	11
	6.5	Fixing a Record Date	12
	6.6	Registered Stockholders	12
ARTICLE VII GENERAL PROVISIONS			12
	7.1	Dividends	12
	7.2	Reserve for Dividends	12
	7.3	Checks	12
	7.4	Fiscal Year	12
	7.5	Corporate Seal	12
	7.6	Indemnification	13
	7.7	Conflicts with Certificate of Incorporation	14
ARTICLE VIII AMENDMENTS			14
ARTICLE IX LOANS TO OFFICERS			14
ARTICLE X STOCK TRANSFERS			14

 

 

BYLAWS
OF
CITY THERAPEUTICS, INC.

 

ARTICLE I
OFFICES

 

1.1           Registered Office. The registered office shall be in the City of Dover, County of Kent, State of Delaware.

 

1.2           Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II
MEETINGS OF STOCKHOLDERS

 

2.1           Location. All meetings of the stockholders for the election of directors shall be held in Seattle, Washington, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting; provided, however, that the Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 of the Delaware General Corporations Law (“DGCL”). Meetings of stockholders for any other purpose may be held at such time and place, if any, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof, or a waiver by electronic transmission by the person entitled to notice.

 

2.2           Timing. Annual meetings of stockholders, commencing with the year 2024, shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting.

 

2.3           Notice of Meeting. Written notice of any stockholder meeting stating the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given to each stockholder entitled to vote at such meeting not fewer than ten (10) nor more than sixty (60) days before the date of the meeting.

 

2.4           Stockholders’ Records. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address (but not the electronic address or other electronic contact information) of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

 

 

2.5           Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the Chief Executive Officer and shall be called by the Chief Executive Officer or secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning at least fifty percent (50%) in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

 

2.6           Notice of Meeting. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. The means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting shall also be provided in the notice.

 

2.7           Business Transacted at Special Meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

 

2.8           Quorum; Meeting Adjournment; Presence by Remote Means.

 

(a)            Quorum; Meeting Adjournment. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

 

(b)            Presence by Remote Means. If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication:

 

(i)            participate in a meeting of stockholders; and

 

(ii)            be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.

 

2.9           Voting Thresholds. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question.

 

2.10         Number of Votes Per Share. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote by such stockholder or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

 

2.11         Action by Written Consent of Stockholders; Electronic Consent; Notice of Action.

 

(a)            Action by Written Consent of Stockholders. Unless otherwise provided by the certificate of incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, is signed in a manner permitted by law by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent in the manner permitted by law and shall be delivered to the corporation as provided in subsection (b) below. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner provided above, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the corporation in the manner provided above.

 

 

(b)            Electronic Consent. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (1) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (2) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board of Directors of the corporation.

 

(c)            Notice of Action. Prompt notice of any action taken pursuant to this Section 2.11 shall be provided to the stockholders in accordance with Section 228(e) of the DGCL.

 

ARTICLE III
DIRECTORS

 

3.1           Authorized Directors. The number of directors that shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting of the stockholders, except as provided in Section 3.2 of this Article, and each director elected shall hold office until his or her successor is elected and qualified. Directors need not be stockholders.

 

3.2           Vacancies. Unless otherwise provided in the corporation’s certificate of incorporation, as it may be amended, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

 

 

3.3           Board Authority. The business of the corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

 

3.4           Location of Meetings. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.

 

3.5           First Meeting. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order to legally constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

 

3.6           Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

 

3.7           Special Meetings. Special meetings of the Board of Directors may be called by the Chief Executive Officer upon notice to each director; special meetings shall be called by the Chief Executive Officer or secretary in like manner and on like notice on the written request of two (2) directors unless the Board of Directors consists of only one director, in which case special meetings shall be called by the Chief Executive Officer or secretary in like manner and on like notice on the written request of the sole director. Notice of any special meeting shall be given to each director at his or her business or residence in writing, or by telegram, facsimile transmission, telephone communication or electronic transmission (provided, with respect to electronic transmission, that the director has consented to receive the form of transmission at the address to which it is directed). If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company at least twenty-four (24) hours before such meeting. If by facsimile transmission or other electronic transmission, such notice shall be transmitted at least twenty-four (24) hours before such meeting. If by telephone, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be held at any time without notice if all the directors are present (except as otherwise provided by law) or if those not present waive notice of the meeting in writing, either before or after such meeting.

 

 

3.8           Quorum. At all meetings of the Board of Directors, the greater of (a) a majority of the directors at any time in office, and (b) one-third of the number of directors fixed by the Board of Directors or by the stockholders pursuant to Section 3.1 of Article III hereof shall constitute a quorum for the transaction of business and any act of a majority of the directors present at any meeting at which there is a quorum shall be an act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

 

3.9           Action Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing, writings, electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.

 

3.10         Telephonic Meetings. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or any committee, by means of conference telephone or other means of communication by which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting.

 

3.11         Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

 

In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it, but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any provision of these bylaws.

 

3.12         Minutes of Meetings. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

 

 

3.13         Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

 

 

3.14          Removal of Directors. Unless otherwise provided by the certificate of incorporation or these bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

 

ARTICLE IV
NOTICES

 

4.1           Notice. Unless otherwise provided in these bylaws, whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his or her address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.

 

4.2           Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

 

4.3           Electronic Notice.

 

(a)            Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders and directors, any notice to stockholders or directors given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder or director to whom the notice is given. Any such consent shall be revocable by the stockholder or director by written notice to the corporation. Any such consent shall be deemed revoked if (1) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

(b)            Effective Date of Notice. Notice given pursuant to subsection (a) of this section shall be deemed given: (1) if by facsimile telecommunication, when directed to a number at which the stockholder or director has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder or director has consented to receive notice; (3) if by a posting on an electronic network together with separate notice to the stockholder or director of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder or director. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

 

(c)            Form of Electronic Transmission. For purposes of these bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

 

ARTICLE V
OFFICERS

 

5.1           Required and Permitted Officers. The officers of the corporation shall be chosen by the Board of Directors and shall be a Chief Executive Officer and/or a president, a treasurer and a secretary. The Board of Directors may elect from among its members a Chairman of the Board and a Vice-Chairman of the Board. The Board of Directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide.

 

5.2           Appointment of Required Officers. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chief Executive Officer and/or a president, a treasurer, and a secretary and may choose vice-presidents.

 

5.3           Appointment of Permitted Officers. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.

 

5.4           Officer Compensation. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors.

 

5.5           Term of Office; Vacancies. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

 

THE CHAIRMAN OF THE BOARD

 

5.6           Chairman Presides. Unless the Board of Directors appoints a Chairman of the Board, the Chief Executive Officer shall be the Chairman of the Board, so long as the Chief Executive Officer is a director of the corporation. The Chairman of the Board shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him or her by the Board of Directors and as may be provided by law.

 

 

5.7           Absence of Chairman. In the absence of the Chairman of the Board, the Vice-Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. He or she shall have and may exercise such powers as are, from time to time, assigned to him or her by the Board of Directors and as may be provided by law.

 

THE CHIEF EXECUTIVE OFFICER

 

5.8           Powers of Chief Executive Officer. The Chief Executive Officer shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.

 

5.9           Chief Executive Officer’s Signature Authority. The Chief Executive Officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chief Executive Officer may sign certificates for shares of stock of the corporation.

 

5.10          Absence of Chief Executive Officer. In the absence of the Chief Executive Officer or in the event of his or her inability or refusal to act, the president shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.

 

THE PRESIDENT AND VICE-PRESIDENTS

 

5.11         Powers of President. Unless the Board of Directors appoints a president of the corporation, the Chief Executive Officer shall be the president of the corporation. The president of the corporation shall have such powers as required by law and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

5.12         Absence of President. In the absence of the president or in the event of his or her inability or refusal to act, the vice-president, if any, (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

THE SECRETARY AND ASSISTANT SECRETARY

 

5.13         Duties of Secretary. The secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision he or she shall be. He or she shall have custody of the corporate seal of the corporation and he or she, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature.

 

 

5.14         Duties of Assistant Secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

THE TREASURER AND ASSISTANT TREASURERS

 

5.15         Duties of Treasurer. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.

 

5.16         Disbursements and Financial Reports. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings or when the Board of Directors so requires, an account of all his or her transactions as treasurer and of the financial condition of the corporation.

 

5.17         Treasurer’s Bond. If required by the Board of Directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the corporation.

 

5.18         Duties of Assistant Treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of the treasurer’s inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

 

 

ARTICLE VI
CERTIFICATE OF STOCK

 

6.1           Stock Certificates. Every holder of stock in the corporation shall be entitled to have a certificate, signed by or in the name of the corporation by any two authorized officers of the corporation, certifying the number of shares owned by him or her in the corporation.

 

Certificates may be issued for partly paid shares and in such case upon the face or back of the certificates issued to represent any such partly paid shares, the total amount of the consideration to be paid therefor, and the amount paid thereon shall be specified.

 

If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

6.2            Facsimile Signatures. Any or all of the signatures on the certificate may be facsimile. In the event that any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the corporation with the same effect as if such officer, transfer agent or registrar were still acting as such at the date of issue.

 

6.3            Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

 

6.4           Transfer of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

 

 

6.5            Fixing a Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

6.6            Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner, to hold liable for calls and assessments a person registered on its books as the owner of shares and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

ARTICLE VII
GENERAL PROVISIONS

 

7.1            Dividends. Dividends upon the capital stock of the corporation, if any, subject to the provisions of the certificate of incorporation, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

 

7.2            Reserve for Dividends. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their sole discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purposes as the directors think conducive to the interests of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

 

7.3            Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

7.4            Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

7.5            Corporate Seal. The Board of Directors may adopt a corporate seal having inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

 

 

7.6            Indemnification. The corporation shall, to the fullest extent authorized under the laws of the State of Delaware, as those laws may be amended and supplemented from time to time, indemnify any director made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of being a director of the corporation or a predecessor corporation or a director or officer of another corporation, if such person served in such position at the request of the corporation; provided, however, that the corporation shall indemnify any such director or officer in connection with a proceeding initiated by such director or officer only if such proceeding was authorized by the Board of Directors of the corporation. The indemnification provided for in this Section 7.6 shall: (i) not be deemed exclusive of any other rights to which those indemnified may be entitled under these bylaws, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, (ii) continue as to a person who has ceased to be a director, and (iii) inure to the benefit of the heirs, executors and administrators of a person who has ceased to be a director. The corporation’s obligation to provide indemnification under this Section 7.6 shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by the corporation or any other person.

 

Expenses incurred by a director of the corporation in defending a civil or criminal action, suit or proceeding by reason of the fact that he or she is or was a director of the corporation (or was serving at the corporation’s request as a director or officer of another corporation) shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as authorized by relevant sections of the DGCL. Notwithstanding the foregoing, the corporation shall not be required to advance such expenses to an agent who is a party to an action, suit or proceeding brought by the corporation and approved by a majority of the Board of Directors of the corporation that alleges willful misappropriation of corporate assets by such agent, disclosure of confidential information in violation of such agent’s fiduciary or contractual obligations to the corporation or any other willful and deliberate breach in bad faith of such agent’s duty to the corporation or its stockholders.

 

The foregoing provisions of this Section 7.6 shall be deemed to be a contract between the corporation and each director who serves in such capacity at any time while this bylaw is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

 

The Board of Directors in its sole discretion shall have power on behalf of the corporation to indemnify any person, other than a director, made a party to any action, suit or proceeding by reason of the fact that he or she, his or her testator or intestate, is or was an officer or employee of the corporation.

 

To assure indemnification under this Section 7.6 of all directors, officers and employees who are determined by the corporation or otherwise to be or to have been “fiduciaries” of any employee benefit plan of the corporation that may exist from time to time, Section 145 of the DGCL shall, for the purposes of this Section 7.6, be interpreted as follows: an “other enterprise” shall be deemed to include such an employee benefit plan, including without limitation, any plan of the corporation that is governed by the Act of Congress entitled “Employee Retirement Income Security Act of 1974,” as amended from time to time; the corporation shall be deemed to have requested a person to serve the corporation for purposes of Section 145 of the DGCL, as administrator of an employee benefit plan where the performance by such person of his or her duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed “fines.”

 

 

7.7            Conflicts with Certificate of Incorporation. In the event of any conflict between the provisions of the corporation’s certificate of incorporation and these bylaws, the provisions of the certificate of incorporation shall govern.

 

ARTICLE VIII
AMENDMENTS

 

8.1            These bylaws may be altered, amended or repealed, or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the Board of Directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.

 

ARTICLE IX
LOANS TO OFFICERS

 

9.1            The corporation may lend money to, or guarantee any obligation of or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

 

ARTICLE X
STOCK TRANSFERS

 

10.1           Stock Transfer Agreements. The corporation shall have the power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by DGCL.

 

 

10.2           Restrictions on Transfer.

 

(a)            Restrictions on Transfer. No stockholder of the corporation (a “Stockholder”) may sell, assign, transfer, pledge, encumber, grant an economic or participation interest in, contractually transfer the economic benefits of, or in any manner dispose of (“Transfer”) any share of Common Stock not issued upon the conversion of preferred stock of the corporation (a “Share”), whether voluntarily or by operation of law, or by gift or otherwise, other than by means of a Permitted Transfer (as defined below). If any provision(s) of any agreement(s) currently in effect by and between the corporation and any Stockholder (the “Stockholder Agreement(s)”) conflicts with this Section 10.2 of the Bylaws, this Section 10.2 shall govern, and the remaining provision(s) of the Stockholder Agreement(s) that do not conflict with this Section 10.2 shall continue in full force and effect.

 

(b)            Permitted Transfers. For purposes of this Section 10.2, a “Permitted Transfer” shall mean any of the following:

 

(i)            any Transfer by a Stockholder of any or all of such Stockholder’s Shares to the corporation;

 

(ii)            any Transfer by a Stockholder of any or all of such Stockholder’s Shares to such Stockholder’s Immediate Family (as defined below) or a trust or other entity for the benefit of such Stockholder or such Stockholder’s Immediate Family;

 

(iii)            any Transfer by a Stockholder of any or all of such Stockholder’s Shares effected pursuant to such Stockholder’s beneficiary designation, will or the laws of intestate succession;

 

(iv)            if a Stockholder is a partnership, limited liability company, or corporation, any Transfer by such Stockholder of any or all of such Stockholder’s Shares to the partners, members, retired partners, retired members, stockholders, and/or Affiliates (as defined below) of such Stockholder; provided that no Stockholder may Transfer any of such Stockholder’s Shares to a Special Purpose Entity (as defined below) pursuant to this subsection (iv); and/or

 

(v)            any Transfer of Shares approved by the Board of Directors.

 

Notwithstanding the foregoing, if a Permitted Transfer is approved pursuant to subsection (v) of this Section 10.2(b) and the Shares of the transferring party are subject to rights of first refusal and/or co-sale rights pursuant to these Bylaws or a Stockholder Agreement (the “First Refusal and Co-Sale Rights”), the persons and/or entities entitled to the First Refusal and Co-Sale Rights shall be permitted to exercise their respective First Refusal and Co-Sale Rights in conjunction with that specific Permitted Transfer without any additional approval of the Board of Directors.

 

(c)            Certain Definitions. For purposes of this Section 10.2:

 

(i)            “Affiliate” shall mean any person or entity who or which, directly or indirectly, controls, is controlled by, or is under common control with the relevant Stockholder, including, without limitation, any general partner, managing partner, limited partner, manager, managing member, officer or director of such Stockholder or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, shares the same management or advisory company with, or is otherwise affiliated with, such Stockholder.

 

 

(ii)            “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, or any Spousal Equivalent.

 

(iii)            “Liquidation Event” shall mean any transaction defined as a “Liquidation Event” in the certificate of incorporation or, if such term is not defined in the certificate of incorporation, shall mean (A) the closing of the sale, transfer or other disposition of all or substantially all of the corporation’s assets, (B) the consummation of the merger or consolidation of the corporation with or into another entity (except a merger or consolidation in which the holders of capital stock of the corporation immediately prior to such merger or consolidation continue to hold at least 50% of the voting power of the capital stock of the corporation or the surviving or acquiring entity in substantially identical proportions and with substantially identical rights, preferences, privileges and restrictions as existed immediately prior to such transaction), (C) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of the corporation’s securities), of the corporation’s securities if, after such closing, such person or group of affiliated persons would hold 50% or more of the outstanding voting stock of the corporation (or the surviving or acquiring entity) or (D) a liquidation, dissolution or winding up of the corporation; provided, however, that a transaction shall not constitute a Liquidation Event if its sole purpose is to change the state of the corporation’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the corporation’s securities immediately prior to such transaction.

 

(iv)            “Special Purpose Entity” shall mean an entity that holds or would hold only Shares or has or would have a class or series of security holders with beneficial interests primarily in Shares (including for such purpose an entity that holds cash and/or cash equivalents intended to purchase Shares).

 

(v)            “Spousal Equivalent” shall mean an individual who: (A) is in an exclusive, continuous, committed relationship with the relevant Stockholder, has been in that relationship for the twelve (12) months prior to the relevant date and intends to be in that relationship indefinitely; (B) has no such relationship with any other person and is not married to any other person; (C) shares a principal residence with the relevant Stockholder; (D) is at least 18 years of age and legally and mentally competent to consent to contract; (E) is not related by blood to the relevant stockholder to a degree of kinship that would prevent marriage from being recognized under the law of the state in which the individual and the relevant Stockholder reside; and (F) is jointly responsible with the relevant Stockholder for each other’s common welfare and financial obligations.

 

(d)            Void Transfers. Any Transfer of Shares shall be null and void unless the terms, conditions and provisions of this Section 10.2 are strictly observed and followed.

 

 

(e)            Termination of Restriction on Transfer. The foregoing restriction on Transfer shall lapse upon the earlier of (i) immediately prior to the consummation of a Liquidation Event, or (ii) immediately prior to the corporation’s first firm commitment underwritten public offering of its securities pursuant to a registration statement under the Securities Act of 1933, as amended, or (iii) the corporation’s initial listing of its common stock on a national securities exchange by means of an effective registration statement on Form S-1 filed by this corporation with the Securities and Exchange Commission.

 

(f)            Legends. The certificates representing Shares shall bear on their face the following legend so long as the foregoing restriction on Transfer remains in effect:

 

“The SHARES represented by this certificate may not be sold, assigned, transferred, PLEDGED, encumbered or in any manner disposed of, except in compliance with the bylaws of the corporation. COPIES OF THE BYLAWS OF THE CORPORATION MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.”

 

[Remainder of page intentionally left blank]

 

 

CERTIFICATE OF SECRETARY OF

 

CITY THERAPEUTICS, INC.

 

The undersigned, Kirt Shuldberg, hereby certifies that he or she is the duly elected and acting Secretary of City THERAPEUTICS, Inc., a Delaware corporation (the “Corporation”), and that the Bylaws attached hereto constitute the Bylaws of said Corporation as duly adopted by Action by Written Consent in Lieu of Organizational Meeting by the Directors on July 17, 2023.

 

IN WITNESS WHEREOF, the undersigned has hereunto subscribed his or her name this 17^th day of July, 2023.

 

	/s/ Kirt Shuldberg
	Kirt Shuldberg, Secretary

 

 

 

Exhibit 4.2

 

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), is made as of May 20, 2026, by and among City Therapeutics, Inc., a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor”.

 

RECITALS

 

WHEREAS, certain of the Investors (the “Existing Investors”) hold shares of Series A Preferred Stock, Series Seed Preferred Stock and/or shares of Common Stock issued upon conversion thereof and possess registration rights, information rights, rights of first offer, and other rights pursuant to that certain Investors’ Rights Agreement dated as of April 17, 2024, by and among the Company and such Existing Investors (the “Prior Agreement”); and

 

WHEREAS, the undersigned Existing Investors are holders of a sufficient number of the securities of the Company as are required to amend the Prior Agreement, and desire to amend and restate the Prior Agreement in its entirety and to accept the rights created pursuant to this Agreement in lieu of the rights granted to them under the Prior Agreement; and

 

WHEREAS, certain of the Investors are parties to that certain Series B Preferred Stock Purchase Agreement of even date herewith by and among the Company and such Investors (the “Purchase Agreement”), under which certain of the Company’s and such Investors’ obligations are conditioned upon the execution and delivery of this Agreement by the undersigned parties;

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.

Definitions. For purposes of this Agreement:

 

1.1            “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, limited partner, member, managing member, manager, officer, employee or director or trustee of such Person, or any trust fund for the benefit of any of the foregoing or any Affiliate of any of the foregoing, or any venture capital fund or other investment fund now or hereafter existing that is controlled by one (1) or more general partners, managing members or investment advisers of, or shares the same management company or investment adviser with, such Person. For purposes of this definition, the terms “control”, “controlling”, “controlled by” and “under common control with,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct the management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by agreement, as trustee or executor or otherwise.

 

1.2            “Board of Directors” means the board of directors of the Company.

 

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

 

1.4            “Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

 

 

1.5            “Competitor” means a Person engaged, directly or indirectly (including through any partnership, limited liability company, corporation, joint venture or similar arrangement (whether now existing or formed hereafter)), in the business of the Company in the reasonable determination by the Board of Directors, but shall not include (i) any financial investment firm or collective investment vehicle that, together with its Affiliates, holds less than twenty percent (20%) of the outstanding equity of any Competitor and does not, nor do any of its Affiliates, have a right to designate any members of the board of directors of any Competitor, (ii) ARCH Venture Fund XII, L.P. or any of its Affiliates (together, “ARCH”), (iii) Fidelity Mt. Vernon Street Trust: Fidelity Series Growth Company Fund, Fidelity Mt. Vernon Street Trust: Fidelity Growth Company Fund, Fidelity Growth Company Commingled Pool, Fidelity Mt. Vernon Street Trust: Fidelity Growth Company K6 Fund, Fidelity Select Portfolios: Biotechnology Portfolio, Fidelity Advisor Series VII: Fidelity Advisor Biotechnology Fund or any of their Affiliates (together, “Fidelity”), (iv) Invus Public Equities, L.P. or any of its Affiliates (together, “Invus”), (v) Slate Path or any of its Affiliates (together, “Slate Path”) or (vi) either of Rock Springs Capital Master Fund LP or Four Pines Master Fund LP or any of their Affiliates (together, “Rock Springs”), (vi) Sofinnova Venture Partners XII, L.P. or any of its Affiliates (together, “Sofinnova”) and (vii) Viking Global Opportunities Illiquid Investments Sub-Master LP, Viking Global Opportunities Vintage IV (Aggregator) LP and any of their respective Affiliates (together, “Viking”) .

 

1.6            “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

1.7            “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

 

1.8            “Director” means any director of the Company that the holders of record of Common Stock and/or Preferred Stock are entitled to elect, pursuant to the Certificate of Incorporation.

 

1.9            “DPA” means Section 721 of the Defense Production Act, as amended, including all implementing regulations thereof.

 

1.10           “DPA Triggering Rights” means (i) “control” (as defined in the DPA); (ii) access to any “material non-public technical information” (as defined in the DPA) in the possession of the Company; (iii) membership or observer rights on the Board of Directors or equivalent governing body of the Company or the right to nominate an individual to a position on the Board of Directors or equivalent governing body of the Company; (iv) any involvement, other than through the voting of shares, in substantive decision-making of the Company regarding (x) the use, development, acquisition or release of any Company “critical technology” (as defined in the DPA); (y) the use, development, acquisition, safekeeping, or release of “sensitive personal data” (as defined in the DPA) of U.S. citizens maintained or collected by the Company, or (z) the management, operation, manufacture, or supply of “covered investment critical infrastructure” (as defined in the DPA).

 

 

1.11            “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

1.12            “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

1.13            “FOIA Party” means a Person that, in the reasonable determination of the Board of Directors, may be subject to, and thereby required to disclose non-public information furnished by or relating to the Company under, the Freedom of Information Act, 5 U.S.C. 552 (“FOIA”), any state public records access law, any state or other jurisdiction’s laws similar in intent or effect to FOIA, or any other similar statutory or regulatory requirement.

 

1.14            “Foreign Person” means either (i) a Person or government that is a “foreign person” within the meaning of the DPA or (ii) a Person through whose investment a “foreign person” within the meaning of the DPA would obtain any DPA Triggering Rights.

 

1.15            “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

1.16            “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits forward incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

1.17            “GAAP” means generally accepted accounting principles in the United States as in effect from time to time.

 

1.18            “Holder” means any holder of Registrable Securities who is a party to this Agreement.

 

1.19            “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partner or similar statutorily-recognized domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships of a natural person referred to herein.

 

 

1.20            “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

1.21            “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

 

1.22            “Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 500,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).

 

1.23            “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

 

1.24            “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

1.25            “Preferred Director” has the meaning given to it in the Certificate of Incorporation.

 

1.26            “Preferred Stock” means, collectively, shares of the Series Seed Preferred Stock, shares of the Series A Preferred Stock, Shares of the Series B-1 Preferred Stock and shares of the Series B Preferred Stock.

 

1.27            “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clause (i) above; excluding in all cases (other than the restrictions on transfer legend requirements in Section 2.12), however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13 of this Agreement.

 

1.28            “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

1.29            “Requisite Holders” means (a) prior to the IPO, the holders of a majority of the outstanding shares of Preferred Stock (calculated together as a single class on an as-converted basis), which majority must include the Specified Holders, and (b) following the IPO, the Investors holding a majority of the then outstanding shares of Registrable Securities.

 

1.30            “Restricted Securities” means the securities of the Company required to be notated with the legend set forth in Section 2.12(b) hereof.

 

 

1.31            “SEC” means the Securities and Exchange Commission.

 

1.32            “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

1.33            “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

1.34            “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1.35            “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6.

 

1.36            “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, par value $0.0001 per share.

 

1.37            “Series B Preferred Stock” means shares of the Company’s Series B Preferred Stock, par value $0.0001 per share.

 

1.38            “Series B-1 Preferred Stock” means shares of the Company’s Series B-1 Preferred Stock, par value $0.0001 per share.

 

1.39            “Series Seed Preferred Stock” means shares of the Company’s Series Seed Preferred Stock, par value $0.0001 per share.

 

1.40            “Specified Holders” means (i) ARCH and (ii) at least one of Sofinnova and Viking.

 

2.

Registration Rights. The Company covenants and agrees as follows:

 

2.1            Demand Registration.

 

(a)            Form S-1 Demand. If at any time after the earlier of (i) five (5) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of a majority of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to at least forty percent (40%) of the Registrable Securities then outstanding, then the Company shall: (x) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3; provided, however, that this right to request the filing of a Form S-1 registration statement shall in no event be made available to any Holder that is a Foreign Person.

 

 

(b)            Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least twenty percent (20%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $5 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.

 

(c)            Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period other than an Excluded Registration.

 

(d)            The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a), (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two (2) registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b), (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two (2) registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d); provided, that if such withdrawal is during a period the Company has deferred taking action pursuant to Section 2.1(c), then the Initiating Holders may withdraw their request for registration and such registration will not be counted as “effected” for purposes of this Section 2.1(d).

 

 

2.2            Company Registration. If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

 

2.3            Underwriting Requirements.

 

(a)            If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Board of Directors and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting; provided, however, that no Holder (or any of their assignees) shall be required to make any representations, warranties or indemnities except as they relate to such Holder’s ownership of shares and authority to enter into the underwriting agreement and to such Holder’s intended method of distribution, and the liability of such Holder shall be several and not joint, and limited to an amount equal to the net proceeds from the offering received by such Holder. Notwithstanding any other provision of this Section 2.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

 

 

(b)            In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)            For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

 

2.4            Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)            prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

 

(b)            prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)            furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)            use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)            in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f)            use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)            provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)            promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

 

(i)            notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j)            after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

 

2.5            Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6            Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $30,000 of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 (other than fees and disbursements of counsel to any Holder, other than the Selling Holder Counsel, which shall be borne solely by the Holder engaging such counsel) shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

 

2.7            Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.8            Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)            To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)            To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

 

(c)            Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

 

(d)            To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)            Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control; provided, however, that any matter expressly provided for or addressed by the foregoing provisions that is not expressly provided for or addressed by the underwriting agreement shall be controlled by the foregoing provisions.

 

 

(f)            Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement or any provision(s) of this Agreement.

 

2.9            Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)            make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)            use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)            furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10            Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would (i) provide to such holder or prospective holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include; or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to Registrable Securities acquired by any additional Investor that becomes a party to this Agreement in accordance with Section 6.9.

 

 

2.11            “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall apply only to the IPO, (A) shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement in an IPO or to the establishment of a trading plan pursuant to Rule 10b5-1, provided that such plan does not permit transfers during the restricted period, or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, (B) shall not apply to any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock acquired in such offering or after the effective date of the registration statement for such offering and (C) shall be applicable to the Holders only if all officers and directors of the Company are subject to the same restrictions and the Company obtains a similar agreement from (or has entered into an agreement containing a similar market stand-off with) all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Company stockholders that are subject to such agreements, based on the number of shares subject to such agreements.

 

2.12            Restrictions on Transfer.

 

(a)            The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. Notwithstanding the foregoing, the Company shall not require any transferee of shares pursuant to an effective registration statement or, following the IPO, SEC Rule 144, in each case, to be bound by the terms of this Section 2.12.

 

 

(b)            Each certificate, instrument, or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be notated with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.

 

(c)            The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction or following the IPO, the transfer is made pursuant to SEC Rule 144, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer, provided that no such notice shall be required in connection if the intended sale, pledge or transfer complies with SEC Rule 144. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a notice, legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

 

2.13            Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Sections 2.1 or 2.2 shall terminate upon the earliest to occur of:

 

(a)            the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation;

 

(b)            such time after consummation of the IPO as SEC Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation, during a three (3)-month period without registration and without the requirement for the Company to be in compliance with the current public information requirements of SEC Rule 144;

 

(c)            the fifth (5th) anniversary of the IPO.

 

3.

Information and Observer Rights.

 

3.1            Delivery of Financial Statements. The Company shall deliver to each Major Investor, provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor:

 

(a)            as soon as practicable, but in any event within 120 days after the end of each fiscal year, (i) an balance sheet as of the end of such year, (ii) an statements of income and of cash flows for such year, and (iii) an statement of stockholders’ equity as of the end of such year, all such financial statements prepared in accordance with GAAP and audited and certified by independent public accountants of nationally recognized standing selected by the Company;

 

(b)            as soon as practicable, but in any event within 45 days after the end of each quarter of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(c)            as soon as practicable, but in any event 30 days before the end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company (such budget and business plan that is approved by the Board of Directors is collectively referred to herein as the “Budget”);

 

(d)            as soon as practicable, but in any event within 45 days after the end of each quarter of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company; and

 

 

(e)            such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Section 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in a form acceptable to the Company); or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

 

3.2            Inspection. The Company shall permit each Major Investor (provided that the Board of Directors has not reasonably determined that such Major Investor is a competitor of the Company), at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

3.3            Observer Rights.

 

(a)            As long as Sofinnova owns not less than 136,710 shares of Preferred Stock (as adjusted for stock splits, stock combinations, stock dividends and the like), the Company shall invite a representative of Sofinnova to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to the Board of Directors concurrently with such provision to the directors; provided, however, that such representative shall agree to hold in confidence all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if (x) access to such information or attendance at such meeting would be reasonably likely to adversely affect the attorney-client privilege between the Company and its counsel, result in disclosure of trade secrets or highly confidential information, or create a competitive harm or competitive disadvantage, or (y) the portion as to which such representative is excluded relates solely to subject matter in which the Investor or such representative may have a conflict of interest, or (z) if such Investor or its representative is a Competitor.

 

 

(b)            As long as Viking owns not less than 369,117 shares of Preferred Stock (as adjusted for stock splits, stock combinations, stock dividends and the like), the Company shall invite a representative of Viking to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to the Board of Directors concurrently with such provision to the directors; provided, however, that such representative shall agree to hold in confidence all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if (x) access to such information or attendance at such meeting would be reasonably likely to adversely affect the attorney-client privilege between the Company and its counsel, result in disclosure of trade secrets or highly confidential information, or create a competitive harm or competitive disadvantage, or (y) the portion as to which such representative is excluded relates solely to subject matter in which the Investor or such representative may have a conflict of interest, or (z) if such Investor or its representative is a Competitor.

 

3.4            Termination of Information and Observer Rights. The covenants set forth in Section 3.1, Section 3.2 and Section 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first; provided, that, with respect to clause (iii), the covenants set forth in Section 3.1 shall only terminate if the consideration received by the Investors in such Deemed Liquidation Event is in the form of cash and/or publicly traded securities or if the Investors receive financial information from the acquiring company or other successor to the Company comparable to those set forth in Section 3.1.

 

3.5            Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor or make decisions with respect to its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.5 by such Investor),(b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent reasonably necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any financing sources or prospective purchaser of any Registrable Securities from such Investor, if such financing source or prospective purchaser agrees to be bound by the provisions of this Section 3.5 (or similar confidentiality provisions no less restrictive than those contain therein); (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor (excluding portfolio companies and similar Persons) with a need to know such information, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information (and provided further, in each of the foregoing cases (i)-(iii), that (x) no Investor may disclose confidential information to any Person that is a Competitor of the Company or any Affiliate of any such Person, and (y) if any Investor makes any disclosure of confidential information directly or indirectly to any Person, such Person shall be subject to this Section 3.5 as if it were such Investor); or (iv) as may otherwise be required by law, regulation, rule, court order or subpoena, provided that such Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure and to obtain confidential treatment of the information disclosed.

 

 

3.6            Limitation on Foreign Person Investors. Notwithstanding the covenants set forth in Sections 3.1 and 3.2, the Company shall not provide any Investor that is a Foreign Person access to any “material non-public technical information” within the meaning of the DPA.

 

4.

Rights to Future Stock Issuances.

 

4.1            Right of First Offer. Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor. A Major Investor shall be entitled to apportion the right of first offer hereby granted to it in such proportions as it deems appropriate, among (i) itself, (ii) its Affiliates and (iii) its beneficial interest holders, such as limited partners, members or any other Person having “beneficial ownership,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of such Major Investor (“Investor Beneficial Owners”); provided that each such Affiliate or Investor Beneficial Owner (x) is not a Competitor or FOIA Party, unless such party’s purchase of New Securities is otherwise consented to by the Board of Directors, and (y) agrees to enter into this Agreement and each of the Voting Agreement of even date herewith among the Company, the Investors and the other parties named therein, as an “Investor” under each such agreement (provided that any Competitor or FOIA Party shall not be entitled to any rights as a Major Investor under Sections 3.1, 3.2 and 4.1 hereof).

 

(a)            The Company shall give notice (the “Offer Notice”) to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(b)            By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock then held by such Major Investor (including all shares of Common Stock then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held by such Major Investor) bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock and any other Derivative Securities then outstanding). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Section 4.1(b) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.1(c).

 

 

(c)            If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 4.1(b), the Company may, during the ninety (90) day period following the expiration of the periods provided in Section 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Section 4.1.

 

(d)            The right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Certificate of Incorporation); (ii) shares of Common Stock issued in the IPO; and (iii) the issuance of shares of Preferred Stock to Additional Purchasers pursuant to Section 1.4 of the Purchase Agreement.

 

4.2            Termination. The covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.

 

4.3            Limitation on Foreign Person Investors. Notwithstanding the covenants set forth in Section 4.1, no Investor that is a Foreign Person shall be permitted to obtain greater than nine and nine-tenths percent (9.9%) of the outstanding voting shares of the Company, without the approval of the Board of Directors.

 

5.

Additional Covenants.

 

5.1            Insurance. The Company shall maintain from financially sound and reputable insurers, Directors and Officers liability insurance in an amount and on terms and conditions satisfactory to the Board of Directors, including a majority of the Preferred Directors then seated, and will use commercially reasonable efforts to cause such insurance policies to be maintained until such time as the Board of Directors, including a majority of the Preferred Directors then seated, determines that such insurance should be discontinued. Notwithstanding any other provision of this Section 5.1 to the contrary, during such time(s) as one or more directors elected by holders of one or more series of Preferred Stock is serving on the Board of Directors, the Company shall upon request from any such holder deliver to each such holder a certificate that such a Directors and Officers liability insurance policy remains in effect.

 

 

5.2            Employee Agreements. Unless otherwise approved by the Board of Directors, the Company will cause (i) each Person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure, proprietary rights assignment and, to the extent legally permissible and desirable by the Company, non-solicitation agreement. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the consent of the Board of Directors.

 

5.3            Employee Stock. Unless otherwise approved by the Board of Directors, all future employees of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, and (ii) a market stand-off provision substantially similar to that in Section 2.11. Without the prior approval by the Board of Directors, the Company shall not amend, modify, terminate, waive or otherwise alter, in whole or in part, any stock purchase, stock restriction or option agreement with any existing employee or service provider if such amendment would cause it to be inconsistent with this Section 5.3. In addition, unless otherwise approved by the Board of Directors, the Company (x) shall not offer or allow any acceleration of vesting, and (y) shall retain (and not waive) a “right of first refusal” on employee transfers until the Company’s IPO and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

 

5.4            Board Matters. The Company shall reimburse the directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors.

 

5.5            Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, the Certificate of Incorporation, or elsewhere, as the case may be.

 

 

5.6            Indemnification Matters. The Company hereby acknowledges that one (1) or more of the Directors nominated to serve on the Board of Directors by one (1) or more Investors may have certain rights to indemnification, advancement of expenses and/or insurance provided by one (1) or more of the Investors and certain of their Affiliates (collectively, the “Investor Indemnitors”). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Director are primary and any obligation of the Investor Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Director to the extent legally permitted and as required by the Certificate of Incorporation or Bylaws of the Company (or any agreement between the Company and such Director), without regard to any rights such Director may have against the Investor Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Investor Indemnitors from any and all claims against the Investor Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Investor Indemnitors on behalf of any such Director with respect to any claim for which such Director has sought indemnification from the Company shall affect the foregoing and the Investor Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Director against the Company. The Directors and the Investor Indemnitors are intended third-party beneficiaries of this Section 5.6 and shall have the right, power and authority to enforce the provisions of this Section 5.6 as though they were a party to this Agreement.

 

5.7            Right to Conduct Activities. The Company hereby agrees and acknowledges that each of ARCH, Fidelity, Invus, Slate Path, Alexandria Venture Investments, Rock Springs, Sofinnova and Viking (together with their Affiliates) (each, a “Professional Investment Organization”) is a professional investment organization, and as such reviews the business plans and related proprietary information of many enterprises, some of which may compete directly or indirectly with the Company’s business (as currently conducted or as currently propose to be conducted). Nothing in this Agreement shall preclude or in any way restrict the Professional Investment Organization from evaluating or purchasing securities, including publicly traded securities, of a particular enterprise, or investing or participating in any particular enterprise whether or not such enterprise has products or services that compete with those of the Company; and the Company hereby agrees that, to the extent permitted under applicable law, no Professional Investment Organization shall be liable to the Company for any claim arising out of, or based upon, (i) the investment by such Professional Investment Organization in any entity competitive with the Company, or (ii) actions taken by any partner, officer, employee or other representative of such Professional Investment Organization to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not contravene the confidentiality obligations in Section 3.4 or otherwise in this Agreement or relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with such person’s fiduciary duties to the Company.

 

5.8            Cash Management Policy. The Company shall adopt and maintain a cash management policy approved by the Board and the Company’s Chief Financial Officer (or, if the Company does not have a Chief Financial Officer, the Company’s Chief Executive Officer and/or highest-level finance manager).  Such cash management policy shall include a requirement that the Company holds accounts at more than one bank or, if the Company holds accounts at only one bank, that the Company holds more than one account at such bank with at least one account that is off the bank’s balance sheet (for example, a sweep account or money market account).  The Company shall provide a monthly statement to the Major Investors illustrating the Company’s cash balance and the accounts in which the Company’s cash is held.

 

 

5.9            Cybersecurity. The Company shall, within 180 days following the date of this Agreement, use commercially reasonable efforts to: (a) identify the Company’s confidential business information, trade secrets, and any information about identified or identifiable natural persons maintained, disclosed, or otherwise processed by or on behalf of the Company (collectively, “Protected Data”) and the Company’s servers, laptops, desktops, cloud computing, containers, virtual environments, data centers, and/or other Company or vendor systems and applications that process Protected Data, or are used to provide, host or enable the Company’s operations or services (collectively, “Systems”), (b) restrict access to Protected Data and Systems to those individuals or entities who have a need to access such Protected Data and Systems, (c) conduct a commercially reasonable risk assessment to evaluate the potential risks, vulnerabilities, and threats to Protected Data and Systems, (d) implement and maintain commercially reasonable physical, technical and administrative safeguards designed to protect the security, confidentiality, integrity and availability of all Protected Data and Systems, and (e) provide its applicable employees, agents, and contractors with privacy and security training as determined reasonably necessary by the Company.

 

5.10            CFIUS and Foreign Person Limitations.

 

(a)            Unless otherwise approved by the Board of Directors, the Company will not provide to any Foreign Person any DPA Triggering Rights. No Investor that is a Foreign Person shall be permitted to obtain any DPA Triggering Rights or a voting equity interest in the Company that exceeds 9.9% of the Company’s total voting securities pursuant to the Purchase Agreement, Section 4 of this Agreement, or otherwise, including by way of any secondary transaction(s), without the approval of the Board of Directors.

 

(b)            Each Investor covenants that it will notify the Company in advance of permitting any Foreign Person affiliated with Investor, whether affiliated as a limited partner or otherwise, to obtain through Investor any DPA Triggering Rights.

 

5.11            FCPA. The Company covenants that it shall not (and shall not permit any of its subsidiaries or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents to) promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, to any third party, including any “Government Official” (as defined in the Purchase Agreement), in each case, in violation of the U.S. Foreign Corrupt Practices Act (the “FCPA”), or any other applicable anti-bribery or anti-corruption law (collectively, “Anti-Corruption Laws”). The Company further covenants that it shall (and shall cause each of its subsidiaries to) cease all of its or their respective known activities, as well as remediate any known actions taken by the Company or its subsidiaries, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents, in violation of applicable Anti-Corruption Laws. The Company further covenants that it shall (and shall cause each of its subsidiaries to), within 180 days following the date of this Agreement, maintain commercially reasonable systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to provide reasonable assurances regarding compliance with the applicable Anti-Corruption Laws. Upon request by a Major Investor, the Company agrees to provide responsive information and/or certifications to such Major Investor concerning its compliance with the applicable Anti-Corruption Laws. The Company shall promptly notify each Major Investor if the Company becomes aware of any Enforcement Action (as defined in the Purchase Agreement).

 

 

5.12          Outbound Investment Rules.

 

(a)            The Company will not knowingly become, will not knowingly permit any of its subsidiaries to become, and will not knowingly invest in any “covered foreign person” as defined in 31 C.F.R. Part 850, as implemented or revised from time to time (the “Outbound Investment Rules”) in each case without notifying, where reasonably feasible, each Major Investor in advance of such change or investment.

 

(b)            Each Investor will notify the Company in writing within a reasonable time if it intends to become, or has a reasonable basis to expect it has or will become, a “person of a country of concern” (within the meaning of the Outbound Investment Rules), and, to the extent reasonably practicable, shall provide such notice in advance of such change.

 

5.13            Subsidiary Governance. The Company shall not permit any subsidiary of the Company to take any action without the approval of the Board of Directors to the extent approval of the Board of Directors would be required in the event such action was to be taken by the Company itself, including the requisite groups of directors whose approval would be required in the event such action was to be taken by the Company itself.

 

5.14            Tax Matters.

 

(a)            Promptly following (and in any event within ten (10) days after receipt of) written request by an Investor, the Company shall provide such Investor with a written statement informing such Investor whether such Investor’s interest in the Company constitutes a United States real property interest. The Company’s determination shall comply with the requirements of Treasury Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company shall provide timely notice to the Internal Revenue Service, in accordance with and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any successor regulation, that such statement has been made. The Company’s obligation to furnish such written statement shall continue notwithstanding the fact that a class of the Company’s stock may be regularly traded on an established securities market or the fact that there is no Preferred Stock then outstanding.

 

(b)            The Company and Investor agree that it is their intention that (a) the Series B Preferred Stock shall be treated as stock that is not “preferred stock” within the meaning of Section 305 of the Code and the Treasury Regulations issued thereunder, and (b) Investor shall not be required to include in income as a dividend for U.S. federal income tax purposes any income or gain in respect of the Series B Preferred Stock on account of the accrual of dividends thereon (including any deemed dividends or as a result of any discount) unless and until such dividends are declared and paid in cash. The Company and Investor agree to take no positions or actions inconsistent with such treatment (including on any Internal Revenue Service Form 1099), unless otherwise required by a change in applicable law after the Initial Closing, as defined in the Purchase Agreement.

 

 

(c)            The Company shall use commercially reasonable efforts to cooperate with Investor to structure any redemption of the Series B Preferred Stock permitted under the terms of the Company’s Certificate of Incorporation to be treated as a payment in exchange for stock pursuant to Section 302 of the Code.

 

5.15            Legend Removal. The Company agrees to use its commercially reasonable efforts to assist each Investor to remove any restrictive legends from the share certificates representing the shares of the Company’s capital stock (or any shares of capital stock of any entity into which such shares are exchanged or converted) held by such Investor promptly upon the expiration of any lock-up period applicable to the Investor pursuant to any lock-up or similar agreement entered by such Investor in connection with any public offering or listing of the Company’s capital stock (or any similar transaction), provided that the Investor is eligible at such time to sell such shares pursuant to the requirements of Rule 144 promulgated under the Securities Act. Each Investor agrees to provide the Company and its agents, including its external legal counsel and transfer agent, as applicable, all documentation reasonably required by such agents to remove restrictive legends from such shares.

 

5.16            Termination of Covenants. The covenants set forth in this Section 5, except for Section 5.4 and Section 5.15, shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) upon a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.

 

6.

Miscellaneous.

 

6.1            Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one (1) or more of such Holder’s Immediate Family Members; or (iii) after such transfer, together with its Affiliates, would be a Major Investor; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall, as a condition to the applicable transfer, establish a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

 

6.2            Governing Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.

 

6.3            Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.4            Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

6.5            Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on their signature page, Schedule A hereto, or (as to the Company) to the principal office of the Company and to the attention of the Chief Executive Officer, or in any case to such email address or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company, a copy (which copy shall not constitute notice) shall also be sent to Goodwin Procter LLP, 100 Northern Avenue, Boston, MA 02210, Attention: Catherine Magazu, Email: CMagazu@goodwinlaw.com.

 

 

6.6            Amendments and Waivers. Any term of this Agreement may be amended, modified or terminated and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the Requisite Holders; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, (a) this Agreement may not be amended, modified or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, modification, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction);, (b) Sections 3.1 and 3.2, Section 4 and any other section of this Agreement specifically applicable to the Major Investors (including this clause (b) of this Section 6.6) may be amended, modified, terminated or waived with only the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding and held by the Major Investors, which majority must include the Specified Holders, (c) the definition of “Competitor” and Section 5.7 as it relates to ARCH, in each case, as it relates to ARCH, and this clause (c) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of ARCH, (d) the definition of “Competitor” and Section 5.7 as it relates to Fidelity, in each case, as it relates to Fidelity, and this clause (d) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of Fidelity, (e) the definition of “Competitor” and Section 5.7 as it relates to Invus, in each case, as it relates to Invus, and this clause (e) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of Invus, (f) the definition of “Competitor” and Section 5.7 as it relates to Slate Path, in each case, as it relates to Slate Path, and this clause (f) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of Slate Path, (g) the definition of “Competitor” and Section 5.7 as it relates to Rock Springs, in each case, as it relates to Rock Springs, and this clause (g) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of Rock Springs, (h) the definition of “Competitor” and Section 5.7 as it relates to Sofinnova and Section 3.3(a), in each case, as it relates to Sofinnova, Section 5.14 and this clause (h) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of Sofinnova, and (i) the definition of “Competitor” and Section 5.7 as it relates to Viking and Section 3.3(b), in each case, as it relates to Viking, Section 5.14 and this clause (i) of this Section 6.6 may be amended, modified, terminated or waived (either generally in a particular instance and either retroactively or prospectively) only with the written consent of Viking. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time to add transferees of any Registrable Securities in compliance with the terms of this Agreement without the consent of the other parties; and Schedule A hereto may also be amended by the Company after the date of this Agreement without the consent of the other parties to add information regarding any additional Investor who becomes a party to this Agreement in accordance with Section 6.9. The Company shall give prompt notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination, or waiver. Any amendment, modification, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one (1) or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

6.7            Severability. In case any one (1) or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

 

6.8            Aggregation of Stock; Apportionment. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated Persons may apportion such rights as among themselves in any manner they deem appropriate.

 

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

 

6.10            Entire Agreement. Upon the effectiveness of this Agreement, the Prior Agreement shall be deemed amended and restated and superseded and replaced in its entirety by this Agreement, and shall be of no further force or effect. This Agreement (including any Schedules hereto) together with the, Certificate of Incorporation and other Transaction Agreements (as defined in the Purchase Agreement), constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

6.11            Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of the Commonwealth of Massachusetts, and to the jurisdiction of the United States District Court for the District of Massachusetts for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of the Commonwealth of Massachusetts, or the United States District Court for the District of Massachusetts, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

WAIVER OF JURY TRIAL: TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

 

6.12            Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

	COMPANY:
	CITY THERAPEUTICS, INC.
	By:	/s/ Andrew Orth
	Name:	Andrew Orth
	Title:	President and CEO

 

	Address:	399 Binney St.
		Cambridge, MA 02142

 

Email:

[***]

 

 

 

Exhibit 10.1

 

City Therapeutics, Inc.

 

2023 Stock Plan

 

Adopted on July 17, 2023

 

 

TABLE OF CONTENTS

 

Page

 

SECTION 1.	ESTABLISHMENT AND PURPOSE	1
SECTION 2.	ADMINISTRATION	1
(a)	Committees of the Board of Directors	1
(b)	Authority of the Board of Directors	1
SECTION 3.	ELIGIBILITY	1
(a)	General Rule	1
(b)	Ten-Percent Stockholders	1
SECTION 4.	STOCK SUBJECT TO PLAN	2
(a)	Basic Limitation	2
(b)	Additional Shares	2
SECTION 5.	TERMS AND CONDITIONS OF AWARDS OR SALES	2
(a)	Stock Grant or Purchase Agreement	2
(b)	Duration of Offers and Nontransferability of Rights	2
(c)	Purchase Price	3
SECTION 6.	TERMS AND CONDITIONS OF OPTIONS	3
(a)	Stock Option Agreement	3
(b)	Number of Shares	3
(c)	Exercise Price	3
(d)	Vesting and Exercisability	3
(e)	Basic Term	4
(f)	Termination of Service (Except by Death)	4
(g)	Leaves of Absence	4
(h)	Death of Optionee	4
(i)	Restrictions on Transfer of Options	5
(j)	No Rights as a Stockholder	5
(k)	Modification, Extension and Assumption of Options	5
(l)	Company’s Right to Cancel Certain Options	5
SECTION 7.	TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS	6
(a)	Restricted Stock Unit Agreement	6
(b)	Payment for Restricted Stock Units	6
(c)	Vesting Conditions	6
(d)	Forfeiture	6
(e)	Voting and Dividend Rights	6
(f)	Form and Time of Settlement of Restricted Stock Units	6
(g)	Death of Recipient	7
(h)	Creditors’ Rights	7
(i)	Modification, Extension and Assumption of Restricted Stock Units	7
(j)	Restrictions on Transfer of Restricted Stock Units	7

 

 

SECTION 8.	PAYMENT FOR SHARES	7
(a)	General Rule	7
(b)	Services Rendered	7
(c)	Promissory Note	7
(d)	Surrender of Stock	7
(e)	Cashless Exercise	8
(f)	Net Exercise	8
(g)	Other Forms of Payment	8
SECTION 9.	ADJUSTMENT OF SHARES	8
(a)	General	8
(b)	Corporate Transactions	9
(c)	Dissolution or Liquidation	10
(d)	Reservation of Rights	10
SECTION 10.	MISCELLANEOUS PROVISIONS	10
(a)	Securities Law Requirements	10
(b)	No Retention Rights	10
(c)	Treatment as Compensation	10
(d)	Governing Law	11
(e)	Conditions and Restrictions on Shares	11
(f)	Tax Matters	11
SECTION 11.	DURATION AND AMENDMENTS; STOCKHOLDER APPROVAL	12
(a)	Term of the Plan	12
(b)	Right to Amend or Terminate the Plan	12
(c)	Effect of Amendment or Termination	12
(d)	Stockholder Approval	12
SECTION 12.	DEFINITIONS	12

 

 

City Therapeutics, Inc. 2023 Stock Plan

 

SECTION 1.         ESTABLISHMENT AND PURPOSE.

 

The purpose of this Plan is to attract, incentivize and retain Employees, Outside Directors and Consultants through the grant of Awards. The Plan provides for the direct award or sale of Shares, the grant of Options to purchase Shares and the grant of Restricted Stock Units to acquire Shares. Options granted under the Plan may be ISOs intended to qualify under Code Section 422 or NSOs which are not intended to so qualify.

 

Capitalized terms are defined in Section 12.

 

SECTION 2.         ADMINISTRATION.

 

(a)            Committees of the Board of Directors. The Plan may be administered by one or more Committees. Each Committee shall consist, as required by applicable law, of one or more members of the Board of Directors who have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the Plan. Any reference to the Board of Directors in the Plan or an Award Agreement shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function.

 

(b)            Authority of the Board of Directors. Subject to the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Notwithstanding anything to the contrary in the Plan, with respect to the terms and conditions of awards granted to Participants outside the United States, the Board of Directors may vary from the provisions of the Plan to the extent it determines it necessary and appropriate to do so; provided that it may not vary from those Plan terms requiring stockholder approval pursuant to Section 11(d) below. All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Participants and all persons deriving their rights from a Participant.

 

SECTION 3.         ELIGIBILITY.

 

(a)            General Rule. Employees, Outside Directors and Consultants shall be eligible for the grant of Awards under the Plan.¹ However, only Employees shall be eligible for the grant of ISOs.

 

(b)            Ten-Percent Stockholders. A person who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for the grant of an ISO unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the Date of Grant and (ii) such ISO by its terms is not exercisable after the expiration of five years from the Date of Grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Code Section 424(d) shall be applied.

 

¹ Note that special considerations apply if the Company proposes to grant awards to an Employee or Consultant of a Parent company.

 

 

SECTION 4.         STOCK SUBJECT TO PLAN.

 

(a)            Basic Limitation. Not more than 1,035,000 Shares may be issued under the Plan, subject to Subsection (b) below and Section 9(a).² All of these Shares may be issued upon the exercise of ISOs. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares.

 

(b)            Additional Shares. In the event that Shares previously issued under the Plan are forfeited to or repurchased by the Company due to failure to vest, such Shares shall be added to the number of Shares then available for issuance under the Plan. In the event that Shares that otherwise would have been issuable under the Plan are withheld by the Company in payment of the Purchase Price, Exercise Price or withholding taxes, such Shares shall remain available for issuance under the Plan. In the event that an outstanding Option, Restricted Stock Unit or other right for any reason expires or is canceled, the Shares allocable to the unexercised or unsettled portion of such Option, Restricted Stock Unit or other right shall remain available for issuance under the Plan. To the extent an Award is settled in cash, the cash settlement shall not reduce the number of Shares remaining available for issuance under the Plan. Notwithstanding the foregoing, in the case of ISOs, this Subsection (b) shall be subject to any limitations imposed under Section 422 of the Code and the treasury regulations thereunder.

 

SECTION 5.         TERMS AND CONDITIONS OF AWARDS OR SALES.

 

(a)            Stock Grant or Purchase Agreement. Each award of Shares under the Plan shall be evidenced by a Stock Grant Agreement between the Grantee and the Company. Each sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Grant Agreement or Stock Purchase Agreement. The provisions of the various Stock Grant Agreements and Stock Purchase Agreements entered into under the Plan need not be identical.

 

(b)            Duration of Offers and Nontransferability of Rights. Any right to purchase Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days (or such other period as may be specified in the Award Agreement) after the grant of such right was communicated to the Purchaser by the Company. Such right is not transferable and may be exercised only by the Purchaser to whom such right was granted.

 

² Please refer to Exhibit A for a schedule of the initial share reserve and any subsequent increases in the reserve. 

 

 

(c)            Purchase Price. The Board of Directors shall determine the Purchase Price of Shares to be offered under the Plan at its sole discretion. The Purchase Price shall be payable in a form described in Section 8.

 

SECTION 6.         TERMS AND CONDITIONS OF OPTIONS.

 

(a)            Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board of Directors deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.

 

(b)            Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 9. The Stock Option Agreement shall also specify whether the Option is an ISO or an NSO.

 

(c)            Exercise Price.

 

(i)            General. Each Stock Option Agreement shall specify the Exercise Price, which shall be payable in a form described in Section 8. Subject to the remaining provisions of this Subsection (c), the Exercise Price shall be determined by the Board of Directors in its sole discretion.

 

(ii)            ISOs. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant, and a higher percentage may be required by Section 3(b). This Subsection (c)(ii) shall not apply to an ISO granted pursuant to an assumption of, or substitution for, another incentive stock option in a manner that complies with Code Section 424(a).

 

(iii)            NSOs. Except as specifically set forth in this Subsection (c)(iii), the Exercise Price of an NSO shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant. This Subsection (c)(iii) shall not apply to an NSO granted to a person who is not a U.S. taxpayer on the Date of Grant or to an NSO that is intended either to be exempt from Code Section 409A as a “short-term deferral” or to comply with the requirements of Code Section 409A. In addition, this Subsection (c)(iii) shall not apply to an NSO granted pursuant to an assumption of, or substitution for, another stock option in a manner that complies with Code Section 409A.

 

(d)            Vesting and Exercisability. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become vested and exercisable. No Option shall be exercisable unless the Optionee (i) has delivered an executed copy of the Stock Option Agreement to the Company or (ii) otherwise agrees to be bound by the terms of the Stock Option Agreement. The Board of Directors shall determine the vesting and exercisability provisions of the Stock Option Agreement at its sole discretion.

 

 

(e)            Basic Term. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed 10 years from the Date of Grant, and in the case of an ISO, a shorter term may be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine when an Option is to expire.

 

(f)            Termination of Service (Except by Death). If an Optionee’s Service terminates for any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of the following dates:

 

(i)            The expiration date determined pursuant to Subsection (e) above;

 

(ii)            The date three months after the termination of the Optionee’s Service for any reason other than Disability, or such earlier or later date as the Board of Directors may determine (but in no event earlier than 30 days after the termination of the Optionee’s Service); or

 

(iii)            The date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as the Board of Directors may determine.

 

The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). In the event that the Optionee dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). In no event will an Option, or the Shares underlying an Option, become vested and/or exercisable after termination of the Optionee’s Service unless the Board of Directors takes affirmative action or unless expressly provided in a written agreement between the Company and the Optionee.

 

(g)            Leaves of Absence. For purposes of Subsection (f) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence approved by the Company in writing.

 

(h)            Death of Optionee. If an Optionee dies while the Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates:

 

 

(i)            The expiration date determined pursuant to Subsection (e) above; or

 

(ii)            The date 12 months after the Optionee’s death, or such earlier or later date as the Board of Directors may determine (but in no event earlier than six months after the Optionee’s death).

 

All or part of the Optionee’s Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death (or became exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result of the Optionee’s death). In no event will an Option, or the Shares underlying an Option, become vested and/or exercisable after the Optionee’s death unless the Board of Directors takes affirmative action or unless expressly provided in a written agreement between the Company and the Optionee.

 

(i)            Restrictions on Transfer of Options. An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence. If the Board of Directors so provides, in a Stock Option Agreement or otherwise, an NSO may be transferable to the extent permitted by Rule 701 under the Securities Act. An ISO may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative.

 

(j)            No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such person submits a notice of exercise, pays the Exercise Price and satisfies all applicable withholding taxes pursuant to the terms of such Option.

 

(k)            Modification, Extension and Assumption of Options. Within the limitations of the Plan, the Board of Directors may modify, reprice, extend or assume outstanding Options or may accept the cancellation of outstanding options (whether granted by the Company or another issuer) in return for the grant of new Options or a different type of award for the same or a different number of Shares and at the same or a different Exercise Price (if applicable). The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option; provided, however, that a modification of an Option that is otherwise favorable to the Optionee (for example, providing the Optionee with additional time to exercise the Option after termination of employment or providing for additional forms of payment) but causes the Option to lose its tax-favored status (for example, as an ISO) shall not require the consent of the Optionee.

 

(l)            Company’s Right to Cancel Certain Options. Any other provision of the Plan or a Stock Option Agreement notwithstanding, the Company shall have the right at any time to cancel an Option that was not granted in compliance with Rule 701 under the Securities Act. Prior to canceling such Option, the Company shall give the Optionee not less than 30 days’ notice in writing. If the Company elects to cancel such Option, it shall deliver to the Optionee consideration with an aggregate value equal to the excess of (i) the Fair Market Value of the Shares subject to such Option as of the time of the cancellation over (ii) the Exercise Price of such Option. The consideration may be delivered in the form of cash or cash equivalents, in the form of Shares, or a combination of both. If the consideration would be a negative amount, such Option may be cancelled without the delivery of any consideration.

 

 

SECTION 7.         TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

 

(a)            Restricted Stock Unit Agreement. Each grant of Restricted Stock Units under the Plan shall be evidenced by a Restricted Stock Unit Agreement between the recipient and the Company. Such Restricted Stock Units shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Restricted Stock Unit Agreement. The provisions of the various Restricted Stock Unit Agreements entered into under the Plan need not be identical.

 

(b)            Payment for Restricted Stock Units. No cash consideration shall be required of the recipient in connection with the grant of Restricted Stock Units.

 

(c)            Vesting Conditions. Each Restricted Stock Unit Agreement shall specify the vesting requirements applicable to the Restricted Stock Units subject thereto, which the Board of Directors shall determine in its sole discretion.

 

(d)            Forfeiture. Unless a Restricted Stock Unit Agreement provides otherwise, upon termination of the recipient’s Service and upon such other times specified in the Restricted Stock Unit Agreement, any unvested Restricted Stock Units shall be forfeited to the Company.

 

(e)            Voting and Dividend Rights. The holders of Restricted Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Restricted Stock Unit granted under the Plan may, at the discretion of the Board of Directors, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Restricted Stock Unit is outstanding. Dividend equivalents may be converted into additional Restricted Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents that are not paid shall be subject to the same conditions and restrictions as the Restricted Stock Units to which they attach.

 

(f)            Form and Time of Settlement of Restricted Stock Units. Settlement of vested Restricted Stock Units may be made in the form of (i) cash, (ii) Shares or (iii) any combination of both, as determined by the Board of Directors. The actual number of Restricted Stock Units eligible for settlement may be larger or smaller than the number included in the original award, based on predetermined performance factors. Vested Restricted Stock Units shall be settled in such manner and at such time(s) as specified in the Restricted Stock Unit Agreement. Until Restricted Stock Units are settled, the number of Shares represented by such Restricted Stock Units shall be subject to adjustment pursuant to Section 9.

 

 

(g)            Death of Recipient. Any Restricted Stock Units that become distributable after the Participant’s death shall be distributed to the Participant’s estate or to any person who has acquired such Restricted Stock Units directly from the recipient by beneficiary designation, bequest or inheritance.

 

(h)            Creditors’ Rights. A holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Restricted Stock Unit Agreement.

 

(i)            Modification, Extension and Assumption of Restricted Stock Units. Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding restricted stock units (whether granted by the Company or a different issuer). The foregoing notwithstanding, no modification of a Restricted Stock Unit shall, without the consent of the Participant, impair the Participant’s rights or increase the Participant’s obligations under such Restricted Stock Unit.

 

(j)            Restrictions on Transfer of Restricted Stock Units. A Restricted Stock Unit shall be transferable by the Participant only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence. In addition, if the Board of Directors so provides, in a Restricted Stock Unit Agreement or otherwise, a Restricted Stock Unit shall also be transferable to the extent permitted by Rule 701 under the Securities Act.

 

SECTION 8.         PAYMENT FOR SHARES.

 

(a)            General Rule. The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 8. In addition, the Board of Directors in its sole discretion may also permit payment through any of the methods described in (b) through (g) below.

 

(b)            Services Rendered. Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the award.

 

(c)            Promissory Note. All or a portion of the Purchase Price or Exercise Price (as the case may be) of Shares issued under the Plan may be paid with a promissory note. The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon. The interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors in its sole discretion shall specify the term, interest rate, recourse, amortization requirements (if any) and other provisions of such note.

 

(d)            Surrender of Stock. All or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when the Option is exercised.

 

 

(e)            Cashless Exercise. All or part of the Exercise Price and any withholding taxes may be paid pursuant to a cashless exercise arrangement (whether through a securities broker or otherwise) established by the Company whereby Shares subject to an Option are sold and all or part of the sale proceeds are delivered to the Company.

 

(f)            Net Exercise.  An Option may permit exercise through a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares having an aggregate Fair Market Value (determined by the Board of Directors as of the exercise date) that does not exceed the aggregate Exercise Price or the sum of the aggregate Exercise Price and any withholding taxes (with the Company accepting from the Optionee payment of cash or cash equivalents to satisfy any remaining balance of the aggregate Exercise Price and, if applicable, any additional withholding taxes not satisfied through such reduction in Shares); provided that to the extent Shares subject to an Option are withheld in this manner, the number of Shares subject to the Option following the net exercise will be reduced by the sum of the number of Shares withheld and the number of Shares delivered to the Optionee as a result of the exercise.

 

(g)            Other Forms of Payment. To the extent that an Award Agreement so provides, the Purchase Price or Exercise Price of Shares issued under the Plan may be paid in any other form permitted by the Delaware General Corporation Law, as amended.

 

SECTION 9.         ADJUSTMENT OF SHARES.

 

(a)            General. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a combination or consolidation of the outstanding Stock into a lesser number of Shares, a reclassification, or any other increase or decrease in the number of issued shares of Stock effected without receipt of consideration by the Company, proportionate adjustments shall automatically be made, as applicable, in each of (i) the number and kind of Shares available under Section 4, (ii) the number and kind of Shares covered by each outstanding Option, Award of Restricted Stock Units and any outstanding and unexercised right to purchase Shares that has not yet expired pursuant to Section 5(b), (iii) the Exercise Price under each outstanding Option and the Purchase Price applicable to any unexercised stock purchase right described in clause (ii) above, and (iv) any repurchase price that applies to Shares granted under the Plan pursuant to the terms of a Company repurchase right under the applicable Award Agreement. In the event of a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a recapitalization, a spin-off, or a similar occurrence, the Board of Directors at its sole discretion may make appropriate adjustments in one or more of the items listed in clauses (i) through (iv) above; provided, however, that the Board of Directors shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code to the extent the Company is relying on the exemption afforded thereunder with respect to an Award. No fractional Shares shall be issued under the Plan as a result of an adjustment under this Section 9(a), although the Board of Directors in its sole discretion may make a cash payment in lieu of fractional Shares.

 

 

(b)            Corporate Transactions. In the event that the Company is a party to a merger or consolidation, or in the event of a sale of all or substantially all of the Company’s stock or assets, all Shares acquired under the Plan and all Awards outstanding on the effective date of the transaction shall be treated in the manner described in the definitive transaction agreement (or, in the event the transaction does not entail a definitive agreement to which the Company is party, in the manner determined by the Board of Directors in its capacity as administrator of the Plan, with such determination having final and binding effect on all parties), which agreement or determination need not treat all Awards (or all portions of an Award) in an identical manner. The treatment specified in the transaction agreement or as determined by the Board of Directors may include (without limitation) one or more of the following with respect to each outstanding Award:

  

(i)            The Company, the surviving corporation or a parent thereof may continue or assume the Award or substitute a comparable award for the Award (including, but not limited to, an award to acquire the same consideration paid to the holders of Shares in the transaction). For avoidance of doubt, a comparable award need not be the same type of award as the Award for which it is substituted, and, in the case of an Option, need not have the same tax-status (e.g., an NSO may be substituted for an ISO).

 

(ii)            The cancellation of the Award and a payment to the Participant with respect to each Share subject to the portion of the Award that is vested as of the transaction date equal to the excess of (A) the value, as determined by the Board of Directors in its absolute discretion, of the property (including cash) received by the holder of a share of Stock as a result of the transaction, over (if applicable) (B) the per-Share Exercise Price of the Award (such excess, the “Spread”).  Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent having a value equal to the Spread.  In addition, any escrow, indemnification, holdback, earn-out or similar provisions in the transaction agreement may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of Stock. Receipt of the payment described in this Subsection (b)(ii) may be conditioned upon the Participant acknowledging such escrow, indemnification, holdback, earn-out or other provisions on a form prescribed by the Company. If the Spread applicable to an Award is zero or a negative number, then the Award may be cancelled without making a payment to the Participant.

 

(iii)            Even if the Spread applicable to an Option is a positive number, the Option may be cancelled without the payment of any consideration; provided that the Optionee shall be notified of such treatment and given an opportunity to exercise the Option (to the extent the Option is vested or becomes vested as of the effective date of the transaction) during a period of not less than five (5) business days preceding the effective date of the transaction, unless (A) a shorter period is required to permit a timely closing of the transaction and (B) such shorter period still offers the Optionee a reasonable opportunity to exercise the Option.

 

(iv)            In the case of an Option: (A) suspension of the Optionee’s right to exercise the Option during a limited period of time preceding the closing of the transaction if such suspension is administratively necessary to facilitate the closing of the transaction and/or (B)  termination of any right the Optionee has to exercise the Option prior to vesting in the Shares subject to the Option (i.e., “early exercise”), such that following the closing of the transaction the Option may only be exercised to the extent it is vested.

 

 

For the avoidance of doubt, the Board of Directors has discretion to accelerate, in whole or part, the vesting and exercisability of an Award in connection with a corporate transaction covered by this Section 9(b).

 

(c)            Dissolution or Liquidation. To the extent not previously exercised or settled, Options, Restricted Stock Units and other rights to purchase Shares shall terminate immediately prior to the liquidation or dissolution of the Company.

 

(d)            Reservation of Rights. Except as provided in Section 7(e) or this Section 9, a Participant shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Award. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

 

SECTION 10.        MISCELLANEOUS PROVISIONS.

 

(a)            Securities Law Requirements. Shares shall not be issued under the Plan unless, in the opinion of counsel acceptable to the Board of Directors, the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. The Company shall not be liable for a failure to issue Shares as a result of such requirements. Without limiting the foregoing, the Company may suspend the exercise of some or all outstanding Options for a period of up to 60 days in order to facilitate compliance with Securities Act Rule 701(e).

 

(b)            No Retention Rights. Nothing in the Plan or in any right or Award granted under the Plan shall confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

 

(c)            Treatment as Compensation. Any compensation that an individual earns or is deemed to earn under this Plan shall not be considered a part of his or her compensation for purposes of calculating contributions, accruals or benefits under any other plan or program that is maintained or funded by the Company, a Parent or a Subsidiary.

 

 

(d)            Governing Law. The Plan and all awards, sales and grants under the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except its choice-of-law provisions), as such laws are applied to contracts entered into and performed in such State.

 

(e)            Conditions and Restrictions on Shares. Shares issued under the Plan shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal, other transfer restrictions and such other terms and conditions as the Board of Directors may determine. Such conditions and restrictions shall be set forth in the applicable Award Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In addition, Shares issued under the Plan shall be subject to conditions and restrictions imposed either by applicable law or by Company policy, as adopted from time to time, designed to ensure compliance with applicable law or laws with which the Company determines in its sole discretion to comply including in order to maintain any statutory, regulatory or tax advantage, which (for avoidance of doubt) need not be set forth in the applicable Award Agreement.

 

(f)            Tax Matters.

 

(i)            As a condition to the award, grant, issuance, vesting, purchase, exercise, settlement or transfer of any Award, or Shares issued pursuant to any Award, granted under this Plan, the Participant shall make such arrangements as the Board of Directors may require or permit for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such event.

 

(ii)            Unless otherwise expressly set forth in an Award Agreement, it is intended that Awards shall be exempt from Code Section 409A, and any ambiguity in the terms of an Award Agreement and the Plan shall be interpreted consistently with this intent. To the extent an Award is not exempt from Code Section 409A (any such award, a “409A Award”), any ambiguity in the terms of such Award and the Plan shall be interpreted in a manner that to the maximum extent permissible supports the Award’s compliance with the requirements of that statute. Notwithstanding anything to the contrary permitted under the Plan, in no event shall a modification of an Award not already subject to Code Section 409A, or any subsequent action taken with respect to such Award, be given effect if such modification or action would cause the Award to become subject to Code Section 409A unless the parties explicitly acknowledge and consent to the modification or action as one having that effect. A 409A Award shall be subject to such additional rules and requirements as specified by the Board of Directors from time to time in order for it to comply with the requirements of Code Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” to an individual who is considered a “specified employee” (as each term is defined under Code Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant’s separation from service or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to Section 409A(a)(1). In addition, if a transaction subject to Section 9(b) constitutes a payment event with respect to any 409A Award, then the transaction with respect to such award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A.

 

 

(iii)            Neither the Company nor any member of the Board of Directors shall have any liability to a Participant in the event an Award held by the Participant fails to achieve its intended characterization under applicable tax law.

 

SECTION 11.        DURATION AND AMENDMENTS; STOCKHOLDER APPROVAL.

 

(a)            Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board of Directors, subject to approval of the Company’s stockholders under Subsection (d) below. The Plan shall terminate automatically 10 years after the later of (i) the date when the Board of Directors adopted the Plan or (ii) the date when the Board of Directors approved the most recent increase in the number of Shares reserved under Section 4 that was also approved by the Company’s stockholders. The Plan may be terminated on any earlier date pursuant to Subsection (b) below.

 

(b)            Right to Amend or Terminate the Plan. Subject to Subsection (d) below, the Board of Directors may amend, suspend or terminate the Plan at any time and for any reason.

 

(c)            Effect of Amendment or Termination. No Shares shall be issued or sold and no Award granted under the Plan after the termination thereof, except upon exercise or settlement of an Award granted under the Plan prior to such termination. Except as expressly provided in Section 6(k) above, the termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Award previously granted under the Plan.

 

(d)            Stockholder Approval. To the extent required by applicable law, the Plan will be subject to approval of the Company’s stockholders within 12 months of its adoption date. An amendment of the Plan will be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.

 

SECTION 12.        DEFINITIONS.

 

(a)            “Award” means any award granted under the Plan, including as an Option, an award of Restricted Stock Units or the grant or sale of Shares pursuant to Section 5 of the Plan.

 

(b)            “Award Agreement” means a Restricted Stock Unit Agreement, Stock Grant Agreement, Stock Option Agreement or Stock Purchase Agreement or such other agreement evidencing an Award under the Plan.

 

 

(c)            “Board of Directors” means the Board of Directors of the Company, as constituted from time to time.

 

(d)            “Code” means the Internal Revenue Code of 1986, as amended.

 

(e)            “Committee” means a committee of the Board of Directors, as described in Section 2(a).

 

(f)            “Company” means City Therapeutics, Inc., a Delaware corporation.

 

(g)            “Consultant” means a person, excluding Employees and Outside Directors, who performs bona fide services for the Company, a Parent³ or a Subsidiary as a consultant or advisor and who qualifies as a consultant or advisor under Rule 701(c)(1) of the Securities Act or under Instruction A.1.(a)(1) of Form S-8 under the Securities Act.

 

(h)            “Date of Grant” means the date of grant specified in the Award Agreement, which date shall be the later of (i) the date on which the Board of Directors resolved to grant the Award or (ii) the first day of the Participant’s Service.

 

(i)            “Disability” means that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

 

(j)            “Employee” means any individual who is a common-law employee of the Company, a Parent⁴ or a Subsidiary.

 

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

 

(l)            “Exercise Price” means the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement.

 

(m)            “Fair Market Value” means the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.

 

(n)            “Grantee” means a person to whom the Board of Directors has awarded Shares under the Plan.

 

(o)            “ISO” means an Option that qualifies as an incentive stock option as described in Code Section 422(b). Notwithstanding its designation as an ISO, an Option that does not qualify as an ISO under applicable law shall be treated for all purposes as an NSO.

 

³ Note that special considerations apply if the Company proposes to grant awards to consultant or advisor of a Parent company.

⁴ Note that special considerations apply if the Company proposes to grant awards to an Employee of a Parent company.

 

 

(p)            “NSO” means an Option that does not qualify as an incentive stock option as described in Code Section 422(b) or 423(b).

 

(q)            “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Shares.

 

(r)            “Optionee” means a person who holds an Option.

 

(s)            “Outside Director” means a member of the Board of Directors who is not an Employee.

 

(t)            “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

 

(u)            “Participant” means the holder of an outstanding Award.

 

(v)            “Plan” means this City Therapeutics, Inc. 2023 Stock Plan.

 

(w)            “Purchase Price” means the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors.

 

(x)            “Purchaser” means a person to whom the Board of Directors has offered the right to purchase Shares under the Plan (other than upon exercise of an Option).

 

(y)            “Restricted Stock Unit” means a bookkeeping entry representing the equivalent of one Share, as awarded under the Plan.

 

(z)            “Restricted Stock Unit Agreement” means the agreement between the Company and the recipient of a Restricted Stock Unit that contains the terms, conditions and restrictions pertaining to such Restricted Stock Unit.

 

(aa)        “Securities Act” means the Securities Act of 1933, as amended.

 

(bb)        “Service” means service as an Employee, Outside Director or Consultant. In case of any dispute as to whether and when Service has terminated, the Board of Directors shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

 

(cc)        “Share” means one share of Stock, as adjusted in accordance with Section 9 (if applicable).

 

(dd)        “Stock” means the Common Stock of the Company.

 

 

(ee)        “Stock Grant Agreement” means the agreement between the Company and a Grantee who is awarded Shares under the Plan that contains the terms, conditions and restrictions pertaining to the award of such Shares.

 

(ff)        “Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the Optionee’s Option.

 

(gg)        “Stock Purchase Agreement” means the agreement between the Company and a Purchaser who purchases Shares under the Plan that contains the terms, conditions and restrictions pertaining to the purchase of such Shares.

 

(hh)        “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

 

Exhibit A

 

Schedule of Shares Reserved for Issuance under the Plan

 

Date of Board Approval		Date of Stockholder Approval		Number of Shares Added				Cumulative Number of Shares
July 17, 2023		August 14, 2023			Not Applicable				1,035,000
April 16, 2024		April 16, 2024			2,166,166				3,201,166
December 11, 2024		December 11, 2024			1,370,000				4,571,166
February 25, 2025		May 12, 2025			1,500,000				6,071,166
January 23, 2026		February 2, 2026			1,200,000				7,271,166
May 20, 2026		May 20, 2026			500,000				7,771,166
June 3, 2026		June 4, 2026			1,350,000				9,121,166

 

Summary of Modifications and Amendments to the Plan

 

The following is a summary of material modifications made to the Plan:

 

 

 

City Therapeutics, Inc. 2023 Stock Plan

 

Notice of Stock Option Grant (Early Exercise)

 

The Optionee has been granted the following option to purchase shares of the Common Stock of City Therapeutics, Inc. (the “Company”):

 

	Name of Optionee:	«Name»
	Total Number of Shares:	«TotalShares»
	Type of Option:	«ISO» Incentive Stock Option (ISO)
		«NSO» Nonstatutory Stock Option (NSO)
	Exercise Price per Share:	$«PricePerShare»
	Date of Grant:	«DateGrant»
	Date Exercisable:	This option may be exercised at any time after the Date of Grant for all or any part of the Shares subject to this option.
	Vesting Commencement Date:	«VestComDate»
	Vesting Schedule:	This option shall vest, and the Right of Repurchase shall lapse, with respect to the first «Percent»% of the Shares subject to this option when the Optionee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth above. This option shall vest, and the Right of Repurchase shall lapse, with respect to an additional «Fraction»% of the Shares subject to this option when the Optionee completes each month of continuous Service thereafter.
	Expiration Date:	«ExpDate». This option expires earlier if the Optionee’s Service terminates earlier, as provided in Section 6 of the Stock Option Agreement, or if the Company engages in certain corporate transactions, as provided in Section 9 of the Plan.

 

By signing below or otherwise accepting this option in a manner acceptable to the Company, the Optionee and the Company agree that this option is granted under, and governed by the terms and conditions of, this Notice of Stock Option Grant, the 2023 Stock Plan and the Stock Option Agreement. Both of the latter documents are attached to, and made a part of, this Notice of Stock Option Grant. Capitalized terms not otherwise defined herein or in the Stock Option Agreement shall have the meanings set forth in the Plan. Section 15 of the Stock Option Agreement includes important acknowledgements of the Optionee.

 

Optionee:		City Therapeutics, Inc.
		By:
		Title:

 

 

THE OPTION GRANTED PURSUANT TO THE NOTICE OF STOCK OPTION GRANT AND THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

City Therapeutics, Inc. 2023 Stock Plan:

Stock Option Agreement (Early Exercise)

 

SECTION 1.  Grant Of Option.

 

(a)            Option. On the terms and conditions set forth in the Notice of Stock Option Grant, this Agreement and the Plan, the Company has granted to the Optionee on the Date of Grant the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110% of Fair Market Value if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies). This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

 

(b)            $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.

 

(c)            Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Except as otherwise defined in this Agreement (including without limitation Section 16 hereof), capitalized terms shall have the meaning ascribed to such terms in the Plan.

 

SECTION 2.  Right To Exercise.

 

(a)            Exercisability. Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option may be subject to the Right of Repurchase under Section 7.

 

(b)            Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.

 

 

SECTION 3.  No Transfer Or Assignment Of Option.

 

Except as otherwise provided in or pursuant to this Agreement or the Plan, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.

 

SECTION 4.  Exercise Procedures.

 

(a)            Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option by: (i) signing and delivering written notice (on a form prescribed by the Company) to the Company pursuant to Section 14(c) specifying the election to exercise this option, the number of Shares for which it is being exercised and the form of payment, (ii) if requested by the Company, executing and delivering such stockholders agreements as apply to the holders of the Company’s preferred stock (including, without limitation, any right of first refusal and co-sale agreement and/or voting agreement of the Company) and (iii) delivering payment, in a form permissible under Section 5, for the full amount of the Purchase Price (together with any applicable withholding taxes under Subsection (b)). In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this option. In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in the order in which they vest in accordance with the Notice of Stock Option Grant.

 

(b)            Withholding Taxes. In the event that the Company determines that it is required to withhold any tax (including without limitation any income tax, social insurance contributions, payroll tax, payment on account or other tax-related items arising in connection with the Optionee’s participation in the Plan and legally applicable to the Optionee (the “Tax-Related Items”)) as a result of the grant, vesting or exercise of this option, or as a result of the vesting or transfer of shares acquired upon exercise of this option, the Optionee, as a condition of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all Tax-Related Items. The Optionee acknowledges that the responsibility for all Tax-Related Items is the Optionee’s and may exceed the amount actually withheld by the Company (or its affiliate or agent).

 

(c)            Issuance of Shares. After satisfying all requirements for exercise of this option, the Company shall cause to be issued one or more certificates evidencing, or electronic notation representing, the Shares for which this option has been exercised. Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and such person’s spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust. Until the issuance of the Shares has been entered into the books and records of the Company or a duly authorized transfer agent of the Company, no right to vote, receive dividends or any other right as a stockholder will exist with respect to such Shares. In the case of Restricted Shares, the Company shall cause any certificates evidencing such Shares to be deposited in escrow under Section 7(c). In the case of other Shares, the Company shall cause any certificates evidencing such Shares to be delivered to or upon the order of the person exercising this option.

 

 

SECTION 5. Payment For Stock.

 

(a)            Cash. All or part of the Purchase Price may be paid in cash or cash equivalents or pursuant to a form of electronic funds transfer acceptable to the Company.

 

(b)            Surrender of Stock. At the discretion of the Board of Directors, all or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when this option is exercised.

 

(c)            Cashless Exercise. All or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company. However, payment pursuant to the preceding sentence shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law. If the Stock is not publicly traded at the time this option is exercised, all or part of the Purchase Price and any withholding taxes may be paid pursuant to any other cashless exercise arrangement established by the Company.

 

SECTION 6. Term And Expiration.

 

(a)            Basic Term. This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).

 

(b)            Termination of Service (General). If the Optionee’s Service terminates for any reason or if the Optionee dies while in Service, this option, to the extent not vested, shall expire as provided in Subsection (e) below. To the extent this option is vested as of the date the Optionee’s Service terminates or the date the Optionee dies while in Service, or becomes vested as a result of such termination or death, this option shall expire as provided in Subsections (c) and (d) below. Once this option (or portion thereof) has terminated, the Optionee shall have no further rights with respect to the option (or portion thereof) or to the underlying Shares.

 

(c)            Termination of Service (Except by Death). If the Optionee’s Service terminates for any reason other than death, then this option, to the extent it had become vested before the Optionee’s Service terminated or becomes vested as a result of such termination, shall expire on the earliest of the following occasions:

 

(i)            The expiration date determined pursuant to Subsection (a) above;

 

(ii)            The date three months after the termination of the Optionee’s Service for any reason other than Disability; or

 

(iii)            The date six months after the termination of the Optionee’s Service by reason of Disability.

 

 

The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option had become vested before the Optionee’s Service terminated or becomes vested as a result of such termination. In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested before the Optionee’s Service terminated or becomes vested as a result of such termination.

 

(d)            Death of the Optionee. If the Optionee dies while in Service, then this option, to the extent it had become vested before the Optionee’s death or becomes vested as a result of the Optionee’s death, shall expire on the earlier of the following dates:

 

(i)            The expiration date determined pursuant to Subsection (a) above; or

 

(ii)            The date 12 months after the Optionee’s death.

 

All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested before the Optionee’s death or becomes vested as a result of the Optionee’s death.

 

(e)            Additional Vesting After Termination of Service; Expiration of Unvested Option. The period of time beginning on the date that the Optionee’s Service terminates or the date that the Optionee dies while in Service and ending on the date three months after the termination of the Optionee's Service or death while in Service, as applicable, is referred to in this Subsection (e) as the “post-termination period”. To the extent this option is not fully vested on the date the Optionee’s Service terminates or the date that the Optionee dies while in Service, the Board of Directors may, during the post-termination period, take action to cause this option to become vested (in whole or in part). In no event will this option become vested after termination of the Optionee’s Service or death unless the Board of Directors takes affirmative action pursuant to the preceding sentence or unless expressly provided in a written agreement between the Company and the Optionee. In this regard, any provision of this Agreement or another agreement that provides for vesting upon an event (including, without limitation, a change in control) will be deemed to require Service through the occurrence of such event unless the agreement clearly provides otherwise. On the date three months after termination of the Optionee’s Service or the date the Optionee dies while in Service, or if sooner on the expiration date set forth in the Notice of Stock Option Grant, this option shall expire to the extent it is not vested.

 

(f)            Extension of Post-Termination Exercise Periods. Following the date on which the Company’s Stock is first listed for trading on an established securities market, if during any part of the exercise period described in Subsections (c)(ii) or (iii) or Subsection (d)(ii) above the exercise of this option would be prohibited solely because the issuance of Shares upon such exercise would violate the registration requirements under the Securities Act or a similar provision of other applicable law, then instead of terminating at the end of such prescribed period, the then-vested portion of this option will instead remain outstanding and not expire until the earlier of (i) the expiration date determined pursuant to Section 6(a) above or (ii) the date on which the then-vested portion of this option has been exercisable without violation of applicable law for the aggregate period (which need not be consecutive) after termination of the Optionee’s Service specified in the applicable Subsection above.

 

 

(g)            Part-Time Employment and Leaves of Absence. If the Optionee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant. If the Optionee goes on a leave of absence, then, to the extent permitted by applicable law, the Company may adjust or suspend the vesting schedule set forth in the Notice of Stock Option Grant. Except as provided in the preceding sentence, Service shall be deemed to continue for any purpose under this Agreement while the Optionee is on a bona fide leave of absence approved by the Company in writing. Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work when such leave ends.

 

(h)            Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:

 

(i)            More than three months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);

 

(ii)            More than 12 months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

 

(iii)            More than three months after the date when the Optionee has been on a leave of absence for three months, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.

 

SECTION 7. Right Of Repurchase.

 

(a)            Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the Repurchase Period following the termination of the Optionee’s Service, but the Right of Repurchase may be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised, the Company shall pay the Optionee an amount equal to the lower of (i) the Exercise Price of each Restricted Share being repurchased or (ii) the Fair Market Value of such Restricted Share at the time the Right of Repurchase is exercised.

 

(b)            Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option Grant.

 

 

(c)            Escrow. Upon issuance, any certificate(s) for Restricted Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any additional or exchanged securities or other property described in Subsection (f) below shall immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the Right of Repurchase or the Right of First Refusal or (ii) if held in escrow, released to the Optionee upon the Optionee’s request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently than once every six months). In any event, all Shares that have ceased to be Restricted Shares, together with any other vested assets held in escrow under this Agreement, shall be released within 90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the Right of First Refusal.

 

(d)            Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period, unless the Company during the Repurchase Period notifies the holder of the Restricted Shares pursuant to Section 14(c) that it will not exercise its Right of Repurchase for some or all of the Restricted Shares. The Company shall pay to the holder of the Restricted Shares the purchase price determined under Subsection (a) above for the Restricted Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. If the Restricted Shares being repurchased are represented by certificate(s), any such certificate(s) shall be delivered to the Company. If the Restricted Shares being repurchased are not represented by certificate, the repurchase shall be effected by an appropriate book entry on the stock ledger for the Shares.

 

(e)            Termination of Rights as Stockholder. If the Right of Repurchase is exercised in accordance with this Section 7 and the Company makes available the consideration for the Restricted Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no longer have any rights as a holder of the Restricted Shares (other than the right to receive payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased pursuant to this Section 7, whether or not any certificate(s) for such Restricted Shares have been delivered to the Company or the consideration for such Restricted Shares has been accepted.

 

(f)            Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable for the Restricted Shares shall remain the same. In the event of any transaction described in Section 9(b) of the Plan or any other corporate reorganization, the Right of Repurchase may be exercised by the Company’s successor.

 

 

(g)            Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence. Subject to Section 11(a) below, the Optionee may transfer Restricted Shares to one or more members of the Optionee’s Immediate Family or to a trust or other entity established by the Optionee solely for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

(h)            Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of Repurchase from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 7.

 

SECTION 8. Right Of First Refusal.

 

(a)            Right of First Refusal. In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares. The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

 

(b)            Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions no less favorable to the Optionee than those described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Optionee is bound. Any proposed transfer on terms and conditions less favorable than those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

 

 

(c)            Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 8.

 

(d)            Termination of Right of First Refusal. Any other provision of this Section 8 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

 

(e)            Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust or other entity established by the Optionee solely for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

(f)            Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 8, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

 

(g)            Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 8.

 

 

SECTION 9. Legality Of Initial Issuance.

 

No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:

 

(a)            It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;

 

(b)            Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and

 

(c)            Any other applicable provision of federal, State or foreign law has been satisfied.

 

SECTION 10. No Registration Rights.

 

The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.

 

SECTION 11. Restrictions On Transfer of shares.

 

(a)            General Restrictions. The Shares acquired under this Agreement shall be subject to the transfer restrictions in the Company’s Bylaws, as may be amended from time to time, in addition to, and not in limitation of, the provisions of Section 8 and 11 of this Agreement. In addition, unless the Stock is readily tradeable on an established securities market, the transfer of any of the Shares acquired pursuant to this Agreement (or any interest therein) shall, at the Company’s request, be conditioned upon (i) effecting such transfer pursuant to a form of stock transfer agreement prescribed by the Company and (ii) payment of a transfer fee not to exceed $5,000.

 

(b)            Securities Law Restrictions. Regardless of whether the offer and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State or other relevant jurisdiction, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on the stock certificates (or electronic equivalent) or the imposition of stop-transfer instructions) and may refuse (or may be required to refuse) to transfer Shares acquired hereunder (or Shares proposed to be transferred in a subsequent transfer) if, in the judgment of the Company, such restrictions, legends or refusal are necessary or appropriate to achieve compliance with the Securities Act or other relevant securities or other laws, including without limitation under Regulation S of the Securities Act or pursuant to another available exemption from registration.

 

 

(c)            Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the public filing of the registration statement relating to the initial public offering (or commencing on the date of the final prospectus relating to any subsequent offering) as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (c). This Subsection (c) shall not apply to Shares registered in the public offering under the Securities Act.

 

(d)            Investment Intent at Grant. The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.

 

(e)            Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available that requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel, including (if applicable because the Company is relying on Regulation S under the Securities Act) that as of the date of exercise the Optionee is (i) not a U.S. Person; (ii) not acquiring the Shares on behalf, or for the account or benefit, of a U.S. Person; and (iii) is not exercising the option in the United States.

 

(f)            Legends. Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement shall bear the following legend:

 

“THE SHARES REPRESENTED HEREBY (AND ANY INTEREST THEREIN) MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF THE STOCK OPTION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ACQUIRED. SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. IN ADDITION, THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN SUCH STOCK OPTION AGREEMENT AND SEPARATELY PURSUANT TO THE BYLAWS OF THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH STOCK OPTION AGREEMENT AND BYLAWS TO THE HOLDER HEREOF WITHOUT CHARGE.”

 

 

Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY SECURITIES LAWS OF ANY U.S. STATE, AND MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY (CONFIRMED BY OPINION OF COUNSEL) OF AN ALTERNATIVE EXEMPTION FROM REGISTRATION UNDER THE ACT (INCLUDING WITHOUT LIMITATION IN ACCORDANCE WITH REGULATION S UNDER THE ACT), THESE SHARES MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED OF. HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”

 

(g)            Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

 

(h)            Administration. Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all other persons.

 

SECTION 12. drag along right.

 

(a)            Required Actions. If the Requisite Parties approve a Sale of the Company, then Optionee hereby agrees with respect to all Shares which the Optionee own(s) or over which the Optionee otherwise exercises voting or dispositive authority:

 

(i)            if such Sale of the Company requires stockholder approval under the Certificate, the Bylaws of the Company or any law, rule or regulation applicable to the Company, to vote (in person, by proxy or by action by written consent, as applicable) such Shares in favor of such Sale of the Company (it being understood that, within five (5) days after the delivery of a proxy or consent solicitation statement (or similar document requesting the consent or approval of stockholders) in respect of any Sale of the Company, the Optionee shall duly execute and deliver a proxy or consent, as the case may be, in favor of such Sale of the Company);

 

 

(ii)            if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by the Optionee as is being sold by the Selling Holders to the person to whom the Selling Holders propose to sell their Shares;

 

(iii)            to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

 

(iv)            if the consideration for such Shares pursuant to the Sale of the Company includes any securities, accept in lieu thereof an amount of cash equal to the fair value (as determined in good faith by the Company) of such securities to the extent reasonably necessary (as determined in good faith by the Company) to comply with applicable federal and state securities laws;

 

(v)            if the Selling Holders appoint a stockholder representative (the “Stockholder Representative”) for matters affecting the stockholders of the Company under the applicable definitive transaction agreements, to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Optionee’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the stockholders;

 

(vi)            to agree to make representations and warranties and to agree to indemnity and other liability obligations in connection with the Sale of the Company on terms and conditions that, taken as a whole, are no less favorable to Optionee than to other holders of Common Stock of the Company; and

 

(vii)            to execute and deliver all related documentation and take such other action in support of the Sale of the Company, as reasonably requested by the Company, including a written consent, release and/or joinder, and to not take any action inconsistent with the Sale of the Company.

 

(b)            Exceptions. Notwithstanding the foregoing, an Optionee will not be required to comply with Subsection (a) above in connection with any Sale of the Company unless (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock and (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, subject, in each case, to any “rollover” or similar arrangements provided in the definitive documents relating to such Sale of the Company. If the consideration to be paid in exchange for the Shares pursuant to such Sale of the Company includes any securities and due receipt thereof by the Optionee would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Optionee of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Optionee in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Optionee, an amount in cash equal to the fair value (as determined in good faith by the Company’s Board of Directors or the Requisite Parties, as applicable) of the securities which such Optionee would otherwise receive as of the date of the issuance of such securities in exchange for the Shares.

 

 

SECTION 13. Adjustment Of Shares.

 

In the event of any transaction described in Section 9(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 9(a) of the Plan. In the event that the Company is a party to a merger or consolidation or in the event of a sale of all or substantially all of the Company’s stock or assets, this option shall be subject to the treatment provided by the Board of Directors in its sole discretion, as provided in Section 9(b) of the Plan.

 

SECTION 14. Miscellaneous Provisions.

 

(a)            Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

 

(b)            No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate the Optionee’s Service at any time and for any reason, with or without cause.

 

(c)            Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, (iii) deposit with Federal Express Corporation, with shipping charges prepaid or (iv) deposit with any internationally recognized express mail courier service, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that the Optionee most recently provided to the Company in accordance with this Subsection (c). In addition, to the extent required or permitted pursuant to rules established by the Company from time to time, notices may be delivered electronically.

 

 

(d)            Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Optionee and by an authorized officer of the Company (other than the Optionee); provided, however, that a modification that is otherwise favorable to the Optionee (for example, providing the Optionee with additional time to exercise this option after termination of employment or providing for additional forms of payment) but causes this option to lose its tax-favored status (for example, as an ISO) shall not require the consent of the Optionee. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 

(e)            Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

 

(f)            Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.

 

(g)            Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

(h)            Binding Effect on Transferees, Heirs, Successors and Assigns. This Agreement shall be binding upon Optionee’s permitted transferees, heirs, successors and assigns; provided that for any such transfer to be deemed effective, the transferee shall agree on a form prescribed by the Company to be bound by the terms and conditions of this Agreement, including the restrictions on transfer in Section 11 and the drag along right in Section 12. The Company shall not record any transfer of Shares on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection (h).

 

SECTION 15. acknowledgements of the optionee.

 

In addition to the other terms, conditions and restrictions imposed on this option and the Shares issuable under this option pursuant to this Agreement and the Plan, the Optionee expressly acknowledges being subject to Sections 7 (Right of Repurchase), 8 (Right of First Refusal), 9 (Legality of Initial Issuance), 11 (Restrictions on Transfer of Shares, including without limitation the Market Stand-Off) and 12 (Drag Along Right), as well as the following provisions:

 

(a)            Tax Consequences. The Optionee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Optionee’s tax liabilities. The Optionee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this option or the Optionee’s other compensation. In particular, any Optionee subject to U.S. taxation acknowledges that this option is exempt from Section 409A of the Code only if the Exercise Price is at least equal to the Fair Market Value per Share on the Date of Grant. Since Shares are not traded on an established securities market, the determination of their Fair Market Value is made by the Board of Directors or by an independent valuation firm retained by the Company. The Optionee acknowledges that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and the Optionee shall not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low. In addition, if this option is designated as an ISO, the Optionee acknowledges that there is no guarantee that the option in fact qualifies for incentive stock option treatment or that it will continue to qualify for incentive stock option treatment at the time of exercise. In this regard, the Optionee acknowledges that the Company may take actions that will cause the option to cease to be eligible for incentive stock option treatment and that such actions do not require the Optionee’s consent.

 

 

(b)            Electronic Delivery of Documents. The Optionee acknowledges and agrees that the Company may, in its sole discretion, deliver all documents relating to the Company, the Plan or this option and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by email or other means of electronic transmission (including by posting them on a website maintained by the Company or a third party under contract with the Company). The Optionee acknowledges that the Optionee may incur costs in connection with any such delivery by means of electronic transmission, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with the Optionee’s ability to access the documents.

 

(c)            No Notice of Expiration Date. The Optionee agrees that the Company and its officers, employees, attorneys and agents do not have any obligation to notify him or her prior to the expiration of this option pursuant to Section 6, regardless of whether this option will expire at the end of its full term or on an earlier date related to the termination of the Optionee’s Service. The Optionee further agrees that the Optionee has the sole responsibility for monitoring the expiration of this option and for exercising this option, if at all, before it expires. This Subsection (c) shall supersede any contrary representation that may have been made, orally or in writing, by the Company or by an officer, employee, attorney or agent of the Company.

 

(d)            Waiver of Statutory Information Rights. The Optionee acknowledges and agrees that, upon exercise of this option and until the first sale of the Company’s Stock to the general public pursuant to a registration statement filed under the Securities Act, the Optionee shall waive, and shall be deemed to have waived, any rights the Optionee would otherwise have under Section 220 of the Delaware General Corporation Law (or under similar rights pursuant to any other applicable law) to inspect for any purpose and to make copies and extracts from the Company’s stock ledger, a list of its stockholders and its other books and records or the books and records of any subsidiary of the Company (the “Inspection Rights”).  The Optionee acknowledges and understands that, but for the waiver made herein, the Optionee would be entitled, upon compliance with the procedures set forth in Section 220 of the Delaware General Corporation Law, to Inspection Rights pursuant thereto, and further acknowledges and agrees that the waiver set forth herein is a knowing and voluntary waiver of such rights, that the Optionee has received sufficient consideration for such waiver and that the Company would not be willing to provide the benefits to the Optionee hereunder without the benefit of such waiver from the Optionee. This waiver applies only in the Optionee’s capacity as a stockholder and does not affect any other inspection rights the Optionee may have pursuant to any written agreement with the Company.

 

 

(e)            Plan Discretionary. The Optionee understands and acknowledges that (i) the Plan is entirely discretionary, (ii) the Company and the Optionee’s employer have reserved the right to amend, suspend or terminate the Plan at any time, (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.

 

(f)            Termination of Service. The Optionee understands and acknowledges that participation in the Plan ceases upon termination of the Optionee’s Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

 

(g)            Extraordinary Compensation. The value of this option shall be an extraordinary item of compensation outside the scope of the Optionee’s employment contract, if any, and shall not be considered a part of the Optionee’s normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

(h)            Authorization to Disclose. The Optionee hereby authorizes and directs the Optionee’s employer to disclose to the Company or any Subsidiary any information regarding the Optionee’s employment, the nature and amount of the Optionee’s compensation and the fact and conditions of the Optionee’s participation in the Plan, as the Optionee’s employer deems necessary or appropriate to facilitate the administration of the Plan.

 

(i)            Personal Data Authorization. The Optionee consents to the collection, use and transfer of personal data as described in this Subsection (i). The Optionee understands and acknowledges that the Company, the Optionee’s employer and the Company’s other Subsidiaries hold certain personal information regarding the Optionee for the purpose of managing and administering the Plan, including (without limitation) the Optionee’s name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Optionee’s favor (the “Data”). The Optionee further understands and acknowledges that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of the Optionee’s participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. The Optionee understands and acknowledges that the recipients of Data may be located in the United States or elsewhere. The Optionee authorizes such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering the Optionee’s participation in the Plan, including a transfer to any broker or other third party with whom the Optionee elects to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Optionee’s behalf. The Optionee may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection (i) by contacting the Company in writing.

 

 

SECTION 16. Definitions.

 

(a)            “Agreement” shall mean this Stock Option Agreement.

 

(b)            “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

(c)            “Certificate” shall mean the Company’s amended and restated certificate of incorporation as in effect from time to time.

 

(d)            “Company” shall mean City Therapeutics, Inc., a Delaware corporation.

 

(e)            “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

 

(f)            “Optionee” shall mean the person named in the Notice of Stock Option Grant.

 

(g)            “Plan” shall mean the City Therapeutics, Inc. 2023 Stock Plan, as in effect on the Date of Grant.

 

(h)            “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.

 

(i)            “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when the Optionee’s Service terminates for any reason, including (without limitation) death or disability.

 

(j)            “Requisite Parties” shall mean both the Board of Directors and the Selling Holders.

 

(k)            “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

 

(l)            “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 8.

 

(m)            “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

 

 

(n)            “Sale of the Company” shall mean: (i) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”), (ii) a sale of all or substantially all of the assets of the Company or (iii) any other transaction that qualifies as a “Liquidation Event” as defined in the Certificate.

 

(o)            “Selling Holders” shall mean the holders of a majority of the then-outstanding shares of Common Stock (voting together as a single class and on an as-converted basis).

 

(p)            “Service” shall mean service as an Employee, Outside Director or Consultant. In case of any dispute as to whether and when Service has terminated, the Board of Directors shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

 

(q)            “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.

 

(r)            “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 8.

 

(s)            “U.S. Person” shall mean a person described in Rule 902(k) of Regulation S of the Securities Act (or any successor rule or provision), which generally defines a U.S. person as any natural person resident in the United States, any estate of which any executor or administrator is a U.S. Person, or any trust of which of any trustee is a U.S. Person.

 

 

 

City Therapeutics, Inc. 2023 Stock Plan

Notice of Stock Option Exercise (Early Exercise)

 

You must sign this Notice on Page 3 before submitting it to the Company.

 

Optionee Information:

 

Name:			Social Security Number:
Address:			Employee Number:
			Email Address:

 

Option Information:

 

Date of Grant: _____________ ___, 20__		Type of Stock Option:
Exercise Price per Share: $________		¨  Nonstatutory (NSO)
Total number of shares of Common Stock of City Therapeutics, Inc. (the “Company”) covered by the option: __________________		¨  Incentive (ISO)

 

Exercise Information:

 

Number of shares of Common Stock of the Company for which the option is being exercised now: ________________.  (These shares are referred to below as the “Purchased Shares.”)
Total Exercise Price for the Purchased Shares: $____________
Form of payment enclosed [check all that apply]:
¨    Check for $____________, payable to “City Therapeutics, Inc.”
¨    Certificate(s) for ________________ shares of Common Stock of the Company.  These shares will be valued as of the date this notice is received by the Company.  [Requires Company consent.]
¨    Attestation Form covering ________________ shares of Common Stock of the Company.  These shares will be valued as of the date this notice is received by the Company.  [Requires Company consent.]
Name(s) in which the Purchased Shares should be registered [please review the attached explanation of the available forms of ownership, and then check one box]*:
¨    In my name only
¨    In the names of my spouse and myself as community property		My spouse’s name (if applicable):
¨    In the names of my spouse and myself as community property with the right of survivorship

 

 

¨    In the names of my spouse and myself as joint tenants with the right of survivorship
¨    In the name of an eligible revocable trust [requires Stock Transfer Agreement]		Full legal name of revocable trust:

 

*While the Company will register the Purchased Shares in accordance with your instruction, this document does not control or change the nature of the Purchased Shares as community property or separate property. You are advised to consult your own advisor to determine if additional steps or documentation are required in this regard.

 

Representations and Acknowledgements of the Optionee:

 

1.

I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares for investment for my account only, and not with a view to, or for resale in connection with, any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

2.

I understand that my purchase of the Purchased Shares has not been registered under the Securities Act by reason of a specific exemption therefrom and that the Purchased Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or I obtain an opinion of counsel (in form and substance satisfactory to the Company and its counsel) that registration is not required.

 

3.

I acknowledge that the Company is under no obligation to register the Purchased Shares or any sale or transfer thereof.

 

4.

I am aware of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction” and that the amount of securities being sold during any three-month period not exceed specified limitations. I understand that the conditions for resale set forth in Rule 144 have not been satisfied as of the date set forth below and that the Company is not required to take action to satisfy any conditions applicable to it.

 

5.

I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act.

 

6.

I acknowledge that I have received and had access to such information as I consider necessary or appropriate for deciding whether to invest in the Purchased Shares and that I had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Purchased Shares.

 

7.

I am aware that my investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. I am able, without impairing my financial condition, to hold the Purchased Shares for an indefinite period and to suffer a complete loss of my investment in the Purchased Shares.

 

 

8.

I acknowledge that the Purchased Shares remain subject to the Company’s right of first refusal, the drag-along right and the market stand-off (sometimes referred to as the “lock-up”) and may remain subject to the Company’s right of repurchase, all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement. I acknowledge that the Purchased Shares remain subject to the transfer restrictions in the Company’s Bylaws, as in effect at the time of my exercise. I acknowledge that any permitted transfer of the Purchased Shares may be subject to a transfer fee and must be effected on the Company’s form of stock transfer agreement, as further described in the Stock Option Agreement.

 

9.

I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the Notice of Stock Option Grant and Stock Option Agreement.

 

10.

I acknowledge that I have received a copy of the Company’s explanation of the forms of ownership available for my Purchased Shares. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me. In the event that I choose to transfer my Purchased Shares to a trust, I agree to sign a Stock Transfer Agreement on a form prescribed by the Company. In the event that I choose to transfer my Purchased Shares to a trust that does not satisfy the requirements described in the attached explanation (i.e., a trust that is not an eligible revocable trust), I also acknowledge that the transfer will be treated as a “disposition” for tax purposes. As a result, the favorable ISO tax treatment will be unavailable and other unfavorable tax consequences may occur.

 

11.

I acknowledge that I have received a copy of the Company’s explanation of the federal income tax consequences of an option exercise and the tax election under section 83(b) of the Internal Revenue Code. In the event that I choose to make a section 83(b) election, I acknowledge that it is my responsibility—and not the Company’s responsibility—to file the election in a timely manner, even if I ask the Company or its agents to make the filing on my behalf. I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Purchased Shares at this time.

 

12.

I agree that the Company does not have a duty to design or administer the 2023 Stock Plan or its other compensation programs in a manner that minimizes my tax liabilities. I will not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from my options or my other compensation. In particular, I acknowledge that my options are exempt from section 409A of the Internal Revenue Code only if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Company’s Board of Directors. Since shares of the Company’s Common Stock are not traded on an established securities market, the determination of their fair market value was made by the Company’s Board of Directors or by an independent valuation firm retained by the Company. I acknowledge that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and I will not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low.

 

13.

I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing.

 

Signature:		Date:

 

 

Explanation of Forms of Stock Ownership

 

Purpose of This Explanation

 

The purpose of this explanation is to provide you with a brief summary of the forms of legal ownership available for the shares that you are purchasing (the “Purchased Shares”). For a number of reasons, this explanation is no substitute for personal legal advice:

 

·

To make the explanation short and readable, only the highlights are covered. Some legal rules are not addressed, even though they may be important in particular cases.

 

·

While the summary attempts to deal with the most common situations, your own situation may well be different from the norm.

 

·

The law may change, and the Company is not responsible for updating this summary.

 

·

The form in which you own your shares may have a substantial impact on the estate tax treatment that applies to those shares when you die or the income tax treatment that applies when your survivors sell the shares after your death.

 

For these reasons, the Company strongly encourages you to consult your own adviser before exercising your option and before making a decision about the form of ownership for your shares.

 

Overview

 

The Notice of Stock Option Exercise offers five forms of taking title to the Purchased Shares:

 

·

In your name only,

 

·

In your name and the name of your spouse as community property,

 

·

In your name and the name of your spouse as community property with the right of survivorship,

 

·

In your name and the name of your spouse as joint tenants with the right of survivorship, or

 

•

In the name of an eligible revocable trust.

 

Title in the Purchased Shares depends upon (a) your marital status, (b) the marital property laws of your state of residence and (c) any agreement with your spouse altering the existing marital property laws of your state of residence. If you are not married, you generally will take title in your name alone. If you are married, title depends upon the marital property laws of your state of residence. In general, states are classified either as “community property” states or as “common-law property” states. (But individual state law may vary within these classifications.)

 

 

Community Property and Joint Tenancy

 

Community property states include California, Texas, Washington, Arizona, Nevada, New Mexico, Idaho, Louisiana and Wisconsin. In a community property state, property acquired during marriage by either spouse is presumed to be one-half owned by each spouse. All other property is classified as the separate property of the spouse who acquires the property. While either spouse has equal management and control over the community property and may sell, spend or encumber all community property, neither spouse may gift community property or partition his/her one-half interest without the consent of the other spouse. Upon divorce, all community property is divided equally among the spouses and each spouse is entitled to retain all of his/her separate property. Upon the death of a spouse, one-half of the community property (and all of the decedent spouse’s separate property) will pass to the decedent spouse’s heirs. The other one-half of the community property remains the property of the surviving spouse.

 

Other states are common-law property states. In a common-law property state, each spouse is generally deemed to own whatever he/she earns or acquires.

 

A married couple may elect to alter the marital property rules by mutually agreeing to take title to property in other forms. For example, a couple residing in a community property state may generally enter into an agreement and transform what otherwise would be community property into the separate property of the spouse who earns or acquires the property.

 

In addition, many community property and common-law property states allow married couples to take joint title in property acquired during marriage. For example, California allows a married couple to take title in a joint tenancy with the right of survivorship. In a joint tenancy, each spouse owns a one-half interest in the property as separate property. This means that each spouse may transfer or sell his/her one-half interest in the property while he/she is alive. However, unlike traditional separate property, a spouse cannot transfer his/her one-half interest to heirs at death. Instead, the surviving spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the property. (This is called the “right of survivorship.”) Both spouses must consent to taking property in a joint tenancy in lieu of having the community property laws apply.

 

California also allows a married couple to take title in the shares as community property with the right of survivorship. This means that the shares are treated like community property while both spouses are alive. However, if one spouse dies, then the other spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the shares. In other words, the decedent spouse’s will or trust does not control the disposition of the shares.

 

If you have the Purchased Shares issued in a form other than those described above, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

 

 

Trusts

 

A transfer to a trust generally should not be treated as a “disposition” of the Purchased Shares for tax purposes if the trust satisfies each of the following conditions:

 

·

You are the sole grantor of the trust,

 

·

You are the sole trustee, or you and your spouse are the sole co-trustees,

 

·

The trustee or trustees are not required to distribute the income of the trust to any person other than you and/or your spouse while you are alive, and

 

·

The trust permits you to revoke all or part of the trust and to have the trust’s assets returned to you, without the consent of any other person (including your spouse).

 

If you have the Purchased Shares issued to a trust that does not meet these requirements, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

 

If you have the Purchased Shares issued to any trust, you will be required to sign a Stock Transfer Agreement in your capacity as trustee. Under the Stock Transfer Agreement, the Purchased Shares remain subject to the Company’s right of first refusal and may remain subject to the Company’s right of repurchase, all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.

 

The Company will not check to determine whether the form of ownership that you elect in your Notice of Stock Option Exercise is appropriate. You should consult your own advisers on this subject. If an inappropriate election is made, the form of ownership may not withstand legal scrutiny or may have adverse tax consequences.

 

 

Explanation of Federal Income Tax Consequences
and Section 83(b) Election
(Current as of January 2022)

 

Purpose of This Explanation

 

The purpose of this explanation is to provide you with a brief summary of the tax consequences of exercising your option. For a number of reasons, this explanation is no substitute for personal tax advice:

 

·

To make the explanation short and readable, only the highlights are covered. Some tax rules are not addressed, even though they may be important in particular cases.

 

·

While the summary attempts to deal with the most common situations, your own tax situation may well be different from the norm.

 

·

State and foreign income taxes are not addressed at all, even though they could have a significant impact on your tax planning. Likewise, federal gift and estate taxes and state inheritance taxes are not discussed.

 

·

Tax planning involving incentive stock options is exceedingly complex, in part because of the possible application of the alternative minimum tax.

 

·

The explanation assumes that you are paying the exercise price of your option in cash (or in the form of a full-recourse promissory note with an interest rate that meets IRS requirements). If you are paying the exercise price in the form of stock, you become subject to special rules that are not addressed here.

 

·

This explanation assumes that your option is not subject to section 409A of the Internal Revenue Code. However, the Company cannot be certain that section 409A is inapplicable to your option. (Please refer to the last segment of this summary for more information about section 409A.)

 

·

The tax rules change often, and the Company is not responsible for updating this summary. (Please refer to the date at the top of this page.)

 

For these reasons, the Company strongly encourages you to consult your own tax adviser before exercising your option and before making a decision about filing or not filing a section 83(b) election.

 

Exercise of NSO to Purchase Vested Shares

 

The Notice of Stock Option Grant indicates whether your Purchased Shares are already vested. Vested shares are no longer subject to the Company’s right to repurchase them, although they are still subject to the Company’s right of first refusal. If you know that your Purchased Shares are already vested, there is no need to file a section 83(b) election.

 

 

If you are exercising an NSO to purchase vested shares, you generally will be taxed at the time of exercise. You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying. If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income on the exercise date.

 

Exercise of NSO to Purchase Non-Vested Shares

 

If you are exercising an NSO to purchase non-vested shares, and if you do not file a timely election under section 83(b) of the Internal Revenue Code, then you will not be taxed at the time of exercise. Instead, you will be taxed whenever an increment of Purchased Shares vests—in other words, when the Company no longer has the right to repurchase those shares. The Notice of Stock Option Grant indicates when this occurs, generally over a period of several years. Whenever an increment of Purchased Shares vests, you will recognize ordinary income in an amount equal to the excess of (a) the fair market value of those Purchased Shares on the date of vesting over (b) the exercise price you are paying for those Purchased Shares. If you are an employee or former employee of the Company, this amount will be subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income on each vesting date.

 

If you are exercising an NSO to purchase non-vested shares, and if you file a timely election under section 83(b) of the Internal Revenue Code, then you will be taxed at the time of exercise. You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying. If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income as a result of filing the section 83(b) election. Even if the fair market value of the Purchased Shares on the date of exercise equals the exercise price (and thus no tax is payable), the section 83(b) election must be made in order to avoid having any subsequent appreciation taxed as ordinary income at the time of vesting.

 

You must file a section 83(b) election with the Internal Revenue Service within 30 days after the Notice of Stock Option Exercise is signed. The 30-day filing period cannot be extended. If you miss the deadline, you will be taxed as the Purchased Shares vest, based on the value of the shares at that time. (See above.) The form for making the 83(b) election is attached. Additional copies of the form must be filed with the Company.

 

 

Disposition of NSO Shares

 

When you dispose of the Purchased Shares, you will recognize a capital gain equal to the excess of (a) the sale proceeds over (b) your tax basis in the Purchased Shares. If the sale proceeds are less than your tax basis, you will recognize a capital loss. The capital gain or loss will be long-term if you held the Purchased Shares for more than 12 months. The holding period normally starts when you exercise your NSO. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

 

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

 

Depending on the level of your adjusted gross income, the additional Medicare contribution tax may be imposed on any short-term and long-term capital gain income and can increase your marginal tax rate.

 

Limit on ISO Treatment

 

The Notice of Stock Option Grant indicates whether your option is a nonstatutory stock option (NSO) or an incentive stock option (ISO). The favorable tax treatment for ISOs is limited, regardless of what the Notice of Stock Option Grant indicates. Of the options that become exercisable in any calendar year, only options covering the first $100,000 of stock are eligible for ISO treatment. The excess over $100,000 automatically receives NSO treatment. For this purpose, stock is valued at the time of grant. This means that the value is generally equal to the exercise price.

 

For example, assume that you hold an option to buy 50,000 shares for $4 per share. Assume further that the entire option is exercisable immediately after the date of grant. (It is irrelevant when the underlying stock vests.) Only the first 25,000 shares qualify for ISO treatment. (25,000 times $4 equals $100,000.) The remaining 25,000 shares will be treated as if they had been acquired by exercising an NSO. This is true regardless of when the option is actually exercised; what matters is when it first could have been exercised.

 

 

Exercise of ISO and ISO Holding Periods

 

If you are exercising an ISO, you will not be taxed under the regular tax rules until you dispose of the Purchased Shares.¹ (The alternative minimum tax rules are described below.) The tax treatment at the time of disposition depends on how long you hold the shares. You will satisfy the ISO holding periods if you hold the Purchased Shares until the later of the following dates:

 

·

More than two years after the ISO was granted, and

 

·

More than one year after the ISO is exercised.

 

Disposition of ISO Shares

 

If you dispose of the Purchased Shares after satisfying both of the ISO holding periods, then you will recognize only a long-term capital gain at the time of disposition. The amount of the capital gain is equal to the excess of (a) the sale proceeds over (b) the exercise price. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

 

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

 

If you dispose of the Purchased Shares before either or both of the ISO holding periods are met, then you will recognize ordinary income at the time of disposition. The calculation of the ordinary income amount depends on whether the shares are vested at the time of exercise.

 

·

Shares Vested. If the shares are vested at the time of exercise, the amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price. But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale. Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes. Your tax basis in the Purchased Shares will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as ordinary income. Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of exercise.

 

·

Shares Not Vested. If the Purchased Shares are not vested at the time of exercise, then the amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of vesting over (b) the exercise price. But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale. Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes. Your tax basis in the Purchased Shares will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as ordinary income. Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of vesting. Please note that it makes no difference under the regular tax rules whether or not you filed a section 83(b) election at the time you exercised your ISO. In either case, your regular taxable income is measured as of the time of vesting rather than the time of exercise.

 

¹ Generally, a “disposition” of shares purchased under an ISO encompasses any transfer of legal title, such as a transfer by sale, exchange or gift. It generally does not include a transfer to your spouse, a transfer into joint ownership with right of survivorship (if you remain one of the joint owners), a pledge, a transfer by bequest or inheritance, or certain tax-free exchanges permitted under the Internal Revenue Code. A transfer to a trust is a “disposition” unless the trust is an eligible revocable trust, as described in the attached explanation.

 

 

Summary of Alternative Minimum Tax

 

The alternative minimum tax (AMT) must be paid to the extent that it exceeds your regular federal income tax for the year. For 2022, the first $206,100 ($103,050 for a married taxpayer filing a separate return) of your alternative minimum taxable income for the year over the allowable exemption amount (see below) is subject to alternative minimum taxation at the rate of 26%. The balance of your alternative minimum taxable income is subject to alternative minimum taxation at the rate of 28%. The dollar thresholds dividing the 26% and 28% rates are indexed for inflation in future years. Your alternative minimum tax base is equal to your alternative minimum taxable income (AMTI) minus your exemption amount.

 

·

Alternative Minimum Taxable Income. Your AMTI is equal to your regular taxable income, subject to certain adjustments and increased by items of tax preference. Among the many adjustments made in computing AMTI are the following:

 

·

State and local income and property taxes are not allowed as a deduction.

 

·

Certain interest and other deductions are not allowed.

 

·

When an ISO is exercised, the spread is added to income for AMT purposes. (See discussion below.)

 

·

Exemption Amount. Before AMT is calculated, AMTI is reduced by the exemption amount. Under current law, the exemption amount is as follows:

 

Year:		Joint Returns:				Single Returns:				Separate Returns:
20222		$	118,100			$	75,900			$	59,050

 

The allowable exemption amount is reduced by $0.25 for each $1.00 by which alternative minimum taxable income for the year exceeds the following amounts:

 

Year:		Joint Returns:				Single Returns:				Separate Returns:
20223		$	1,079,800			$	539,900			$	539,900

 

This means, for example, in 2022, the $118,100 exemption amount is phased out completely for married individuals filing joint returns when their alternative minimum taxable income reaches $1,552,200 [($118,100 ÷ $0.25) + $1,079,800].

 

²  Amounts are indexed for inflation in future years.

³  Amounts are indexed for inflation in future years.

 

 

Application of AMT When ISO Is Exercised

 

As noted above, when an ISO is exercised, the spread is included in AMTI at the time of exercise, unless the Purchased Shares are not yet vested at the time of exercise. If the Purchased Shares are not yet vested, the value of the shares minus the exercise price is included in AMTI when the shares vest. However, if you make an election under section 83(b) within 30 days after exercise, then the spread is included in AMTI at the time of exercise. You must file an 83(b) election with the Internal Revenue Service within 30 days after the Notice of Stock Option Exercise is signed. The 30-day filing period cannot be extended.

 

A special rule applies if you dispose of the Purchased Shares in the same year in which you exercised the ISO. If the amount you realize on the sale is less than the value of the stock at the time of exercise, then the amount includible in AMTI on account of the ISO exercise is limited to the gain realized on the sale.⁴

 

To the extent that your AMT is attributable to the spread on exercising an ISO (and certain other items), you may be able to apply the AMT that you paid as a credit against your income tax liability in future years. But the rules on calculating the available tax credits were amended frequently in recent years and have become extraordinarily complex. On this issue in particular, you must consult your own tax adviser.

 

When Purchased Shares are sold, your basis for purposes of computing the capital gain or loss under the AMT system is increased by the option spread that exists at the time of exercise. Again, an ISO is treated under the AMT system much like an NSO is treated under the regular tax system. But your basis in the ISO shares for purposes of computing gain or loss under the regular tax system does not reflect any AMT that you pay on the spread at exercise. Therefore, if you pay AMT in the year of the ISO exercise and regular income tax in the year of selling the Purchased Shares, you could pay tax twice on the same gain (except to the extent that you can use the AMT credit described above).

 

⁴  This is similar to the rule that applies under the regular tax system in the event of a disqualifying disposition of ISO stock. The amount of ordinary income that must be recognized in that case generally does not exceed the amount of the gain realized in the disposition.

 

 

Section 409A of the Internal Revenue Code

 

The preceding summary assumes that section 409A of the Internal Revenue Code does not apply to your option. In general, your option is exempt from section 409A if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Board of Directors. Since shares of Common Stock are not traded on an established securities market, the determination of their fair market value generally is made by the Board of Directors or by an independent appraisal firm retained by the Company. In either case, there is no guarantee that the Internal Revenue Service will agree with the valuation.

 

If your option were found to be subject to section 409A, then you would be required to recognize ordinary income as early as the year in which the option (or portion thereof) vests. This amount would also be subject to a 20% federal tax in addition to the federal income tax at your usual marginal rate for ordinary income. Additional state income taxes may apply in some states.

 

 

Section 83(b) Election

 

The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, and pursuant to Treasury Regulations Section 1.83-2, to include in gross income as compensation for services the excess (if any) of the fair market value of the shares described below over an amount paid for those shares.

 

A.

The taxpayer who performed the services is:

 

		Name:
		Address:
		Social Security No.:

 

B.

The property with respect to which the election is made is ______ shares of the Common Stock of City Therapeutics, Inc.

 

C.

The property was transferred to the taxpayer on __________ ___, _____.

 

D.

The taxable year for which the election is made is the calendar year _____.

 

E.

The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property if for any reason taxpayer’s service with the issuer terminates. The issuer’s repurchase right lapses in a series of installments over a ______-year period ending on __________ ___, _____.

 

F.

The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction that by its terms will never lapse) is $_____ per share x _____ shares = $_________.

 

G.

For the property transferred, the taxpayer paid $_____ per share × _____ shares = $_____.

 

H.

The amount to include in gross income is $__________. [The amount in Item F less the amount in Item G]

 

I.

This statement is executed on __________ ___, _____.

 

Signature of Spouse (if any)		Signature of Taxpayer

 

Within 30 days after the date of transfer of the property, this election must be filed with the Internal Revenue Service office where the taxpayer files his or her annual federal income tax return. The filing should be made by registered or certified mail, return receipt requested. The taxpayer must deliver a copy of the completed form to the Company.

 

 

 

City Therapeutics, Inc. 2023 Stock Plan

 

Notice of Stock Option Grant (Installment Exercise)

 

The Optionee has been granted the following option to purchase shares of the Common Stock of City Therapeutics, Inc. (the “Company”):

 

	Name of Optionee:	«Name»
	Total Number of Shares:	«TotalShares»
	Type of Option:	«ISO» Incentive Stock Option (ISO)
		«NSO» Nonstatutory Stock Option (NSO)
	Exercise Price per Share:	$«PricePerShare»
	Date of Grant:	«DateGrant»
	Vesting Schedule/Date Exercisable:	This option shall vest and become exercisable with respect to the first «Percent»% of the Shares subject to this option when the Optionee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth below. This option shall vest and become exercisable with respect to an additional «Fraction»% of the Shares subject to this option when the Optionee completes each month of continuous Service thereafter.
	Vesting Commencement Date:	«VestComDate»
	Expiration Date:	«ExpDate». This option expires earlier if the Optionee’s Service terminates earlier, as provided in Section 6 of the Stock Option Agreement, or if the Company engages in certain corporate transactions, as provided in Section 9 of the Plan.

 

By signing below or otherwise accepting this option in a manner acceptable to the Company, the Optionee and the Company agree that this option is granted under, and governed by the terms and conditions of, this Notice of Stock Option Grant, the 2023 Stock Plan and the Stock Option Agreement. Both of the latter documents are attached to, and made a part of, this Notice of Stock Option Grant. Capitalized terms not otherwise defined herein or in the Stock Option Agreement shall have the meanings set forth in the Plan. Section 14 of the Stock Option Agreement includes important acknowledgements of the Optionee.

 

Optionee:		City Therapeutics, Inc.
		By:
		Title:

 

 

THE OPTION GRANTED PURSUANT TO THE NOTICE OF STOCK OPTION GRANT AND THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

City Therapeutics, Inc. 2023 Stock Plan:

Stock Option Agreement (Installment Exercise)

 

SECTION 1. Grant Of Option.

 

(a)            Option. On the terms and conditions set forth in the Notice of Stock Option Grant, this Agreement and the Plan, the Company has granted to the Optionee on the Date of Grant the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110% of Fair Market Value if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies). This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

 

(b)           $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.

 

(c)            Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Except as otherwise defined in this Agreement (including without limitation Section 15 hereof), capitalized terms shall have the meaning ascribed to such terms in the Plan.

 

SECTION 2. Right To Exercise.

 

(a)            Exercisability. Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant.

 

(b)           Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.

 

 

SECTION 3. No Transfer Or Assignment Of Option.

 

Except as otherwise provided in or pursuant to this Agreement or the Plan, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.

 

SECTION 4. Exercise Procedures.

 

(a)            Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option by: (i) signing and delivering written notice (on a form prescribed by the Company) to the Company pursuant to Section 13(c) specifying the election to exercise this option, the number of Shares for which it is being exercised and the form of payment, (ii) if requested by the Company, executing and delivering such stockholders agreements as apply to the holders of the Company’s preferred stock (including, without limitation, any right of first refusal and co-sale agreement and/or voting agreement of the Company) and (iii) delivering payment, in a form permissible under Section 5, for the full amount of the Purchase Price (together with any applicable withholding taxes under Subsection (b)). In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this option.

 

(b)           Withholding Taxes. In the event that the Company determines that it is required to withhold any tax (including without limitation any income tax, social insurance contributions, payroll tax, payment on account or other tax-related items arising in connection with the Optionee’s participation in the Plan and legally applicable to the Optionee (the “Tax-Related Items”)) as a result of the grant, vesting or exercise of this option, or as a result of the transfer of shares acquired upon exercise of this option, the Optionee, as a condition of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all Tax-Related Items. The Optionee acknowledges that the responsibility for all Tax-Related Items is the Optionee’s and may exceed the amount actually withheld by the Company (or its affiliate or agent).

 

(c)            Issuance of Shares. After satisfying all requirements for exercise of this option, the Company shall cause to be issued one or more certificates evidencing, or electronic notation representing, the Shares for which this option has been exercised. Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and such person's spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust. Until the issuance of the Shares has been entered into the books and records of the Company or a duly authorized transfer agent of the Company, no right to vote, receive dividends or any other right as a stockholder will exist with respect to such Shares. The Company shall cause any certificates evidencing such Shares to be delivered to or upon the order of the person exercising this option.

 

SECTION 5. Payment For Stock.

 

(a)            Cash. All or part of the Purchase Price may be paid in cash or cash equivalents or pursuant to a form of electronic funds transfer acceptable to the Company.

 

 

(b)            Surrender of Stock. At the discretion of the Board of Directors, all or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when this option is exercised.

 

(c)            Cashless Exercise. All or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company. However, payment pursuant to the preceding sentence shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law. If the Stock is not publicly traded at the time this option is exercised, all or part of the Purchase Price and any withholding taxes may be paid pursuant to any other cashless exercise arrangement established by the Company.

 

SECTION 6. Term And Expiration.

 

(a)            Basic Term. This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).

 

(b)            Termination of Service (General). If the Optionee’s Service terminates for any reason or if the Optionee dies while in Service, this option, to the extent not vested and exercisable, shall expire as provided in Subsection (e) below. To the extent this option is vested and exercisable as of the date the Optionee’s Service terminates or the date the Optionee dies while in Service, or becomes vested and exercisable as a result of such termination or death, this option shall expire as provided in Subsections (c) and (d) below. Once this option (or portion thereof) has terminated, the Optionee shall have no further rights with respect to the option (or portion thereof) or to the underlying Shares.

 

(c)            Termination of Service (Except by Death). If the Optionee’s Service terminates for any reason other than death, then this option, to the extent it had become vested and exercisable before the Optionee’s Service terminated or becomes vested and exercisable as a result of such termination, shall expire on the earliest of the following occasions:

 

(i)            The expiration date determined pursuant to Subsection (a) above;

 

(ii)           The date three months after the termination of the Optionee’s Service for any reason other than Disability; or

 

(iii)          The date six months after the termination of the Optionee’s Service by reason of Disability.

 

 

The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option had become vested and exercisable before the Optionee’s Service terminated or becomes vested and exercisable as a result of such termination. In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested and exercisable before the Optionee’s Service terminated or becomes vested and exercisable as a result of such termination.

 

(d)            Death of the Optionee. If the Optionee dies while in Service, then this option, to the extent it had become vested and exercisable before the Optionee’s death or becomes vested and exercisable as a result of the Optionee’s death, shall expire on the earlier of the following dates:

 

(i)            The expiration date determined pursuant to Subsection (a) above;

 

(ii)           The date 12 months after the Optionee’s death.

 

All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become vested and exercisable before the Optionee’s death or becomes vested and exercisable as a result of the Optionee’s death.

 

(e)            Additional Vesting After Termination of Service; Expiration of Unvested Option. The period of time beginning on the date that the Optionee’s Service terminates or the date that the Optionee dies while in Service and ending on the date three months after the termination of the Optionee’s Service or death while in Service, as applicable, is referred to in this Subsection (e) as the “post-termination period”. To the extent this option is not fully vested and exercisable on the date the Optionee’s Service terminates or the date that the Optionee dies while in Service, the Board of Directors may, during the post-termination period, take action to cause this option to become vested and exercisable (in whole or in part). In no event will this option become vested or exercisable after termination of the Optionee’s Service or death unless the Board of Directors takes affirmative action pursuant to the preceding sentence or unless expressly provided in a written agreement between the Company and the Optionee. In this regard, any provision of this Agreement or another agreement that provides for vesting upon an event (including, without limitation, a change in control) will be deemed to require Service through the occurrence of such event unless the agreement clearly provides otherwise. On the date three months after termination of the Optionee’s Service or the date the Optionee dies while in Service, or if sooner on the expiration date set forth in the Notice of Stock Option Grant, this option shall expire to the extent it is not vested and exercisable.

 

(f)            Extension of Post-Termination Exercise Periods. Following the date on which the Company’s Stock is first listed for trading on an established securities market, if during any part of the exercise period described in Subsections (c)(ii) or (iii) or Subsection (d)(ii) above the exercise of this option would be prohibited solely because the issuance of Shares upon such exercise would violate the registration requirements under the Securities Act or a similar provision of other applicable law, then instead of terminating at the end of such prescribed period, the then-vested portion of this option will instead remain outstanding and not expire until the earlier of (i) the expiration date determined pursuant to Section 6(a) above or (ii) the date on which the then-vested portion of this option has been exercisable without violation of applicable law for the aggregate period (which need not be consecutive) after termination of the Optionee’s Service specified in the applicable Subsection above.

 

 

(g)            Part-Time Employment and Leaves of Absence. If the Optionee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant. If the Optionee goes on a leave of absence, then, to the extent permitted by applicable law, the Company may adjust or suspend the vesting schedule set forth in the Notice of Stock Option Grant. Except as provided in the preceding sentence, Service shall be deemed to continue for any purpose under this Agreement while the Optionee is on a bona fide leave of absence approved by the Company in writing. Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work when such leave ends.

 

(h)            Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:

 

(i)            More than three months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);

 

(ii)           More than 12 months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

 

(iii)          More than three months after the date when the Optionee has been on a leave of absence for three months, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.

 

SECTION 7. Right Of First Refusal.

 

(a)            Right of First Refusal. In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares. The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

 

 

(b)            Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions no less favorable to the Optionee than those described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Optionee is bound. Any proposed transfer on terms and conditions less favorable than those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

 

(c)            Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 7 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 7.

 

(d)            Termination of Right of First Refusal. Any other provision of this Section 7 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

 

(e)            Permitted Transfers. This Section 7 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust or other entity established by the Optionee solely for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

 

(f)            Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 7, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

 

(g)            Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 7.

 

SECTION 8. Legality Of Initial Issuance.

 

No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:

 

(a)           It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;

 

(b)           Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and

 

(c)           Any other applicable provision of federal, State or foreign law has been satisfied.

 

SECTION 9. No Registration Rights.

 

The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.

 

SECTION 10. Restrictions On Transfer of shares.

 

(a)            General Restrictions. The Shares acquired under this Agreement shall be subject to the transfer restrictions in the Company’s Bylaws, as may be amended from time to time, in addition to, and not in limitation of, the provisions of Section 7 and 10 of this Agreement. In addition, unless the Stock is readily tradeable on an established securities market, the transfer of any of the Shares acquired pursuant to this Agreement (or any interest therein) shall, at the Company’s request, be conditioned upon (i) effecting such transfer pursuant to a form of stock transfer agreement prescribed by the Company and (ii) payment of a transfer fee not to exceed $5,000.

 

 

(b)            Securities Law Restrictions. Regardless of whether the offer and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State or other relevant jurisdiction, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on the stock certificates (or electronic equivalent) or the imposition of stop-transfer instructions) and may refuse (or may be required to refuse) to transfer Shares acquired hereunder (or Shares proposed to be transferred in a subsequent transfer) if, in the judgment of the Company, such restrictions, legends or refusal are necessary or appropriate to achieve compliance with the Securities Act or other relevant securities or other laws, including without limitation under Regulation S of the Securities Act or pursuant to another available exemption from registration.

 

(c)            Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the public filing of the registration statement relating to the initial public offering (or commencing on the date of the final prospectus relating to any subsequent offering) as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (c). This Subsection (c) shall not apply to Shares registered in the public offering under the Securities Act.

 

(d)            Investment Intent at Grant. The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.

 

(e)            Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available that requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel, including (if applicable because the Company is relying on Regulation S under the Securities Act) that as of the date of exercise the Optionee is (i) not a U.S. Person; (ii) not acquiring the Shares on behalf, or for the account or benefit, of a U.S. Person; and (iii) is not exercising the option in the United States.

 

 

(f)            Legends. Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement shall bear the following legend:

 

“THE SHARES REPRESENTED HEREBY (AND ANY INTEREST THEREIN) MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF THE STOCK OPTION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ACQUIRED. SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. IN ADDITION, THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN SUCH STOCK OPTION AGREEMENT AND SEPARATELY PURSUANT TO THE BYLAWS OF THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH STOCK OPTION AGREEMENT AND BYLAWS TO THE HOLDER HEREOF WITHOUT CHARGE.”

 

Any certificates (or electronic equivalent) evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY SECURITIES LAWS OF ANY U.S. STATE, AND MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY (CONFIRMED BY OPINION OF COUNSEL) OF AN ALTERNATIVE EXEMPTION FROM REGISTRATION UNDER THE ACT (INCLUDING WITHOUT LIMITATION IN ACCORDANCE WITH REGULATION S UNDER THE ACT), THESE SHARES MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED OF. HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”

 

(g)            Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

 

(h)            Administration. Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 10 shall be conclusive and binding on the Optionee and all other persons.

 

 

SECTION 11. DRAG ALong right.

 

(a)            Required Actions. If the Requisite Parties approve a Sale of the Company, then Optionee hereby agrees with respect to all Shares which the Optionee own(s) or over which the Optionee otherwise exercises voting or dispositive authority:

 

(i)            if such Sale of the Company requires stockholder approval under the Certificate, the Bylaws of the Company or any law, rule or regulation applicable to the Company, to vote (in person, by proxy or by action by written consent, as applicable) such Shares in favor of such Sale of the Company (it being understood that, within five (5) days after the delivery of a proxy or consent solicitation statement (or similar document requesting the consent or approval of stockholders) in respect of any Sale of the Company, the Optionee shall duly execute and deliver a proxy or consent, as the case may be, in favor of such Sale of the Company);

 

(ii)           if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by the Optionee as is being sold by the Selling Holders to the person to whom the Selling Holders propose to sell their Shares;

 

(iii)          to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

 

(iv)          if the consideration for such Shares pursuant to the Sale of the Company includes any securities, accept in lieu thereof an amount of cash equal to the fair value (as determined in good faith by the Company) of such securities to the extent reasonably necessary (as determined in good faith by the Company) to comply with applicable federal and state securities laws;

 

(v)           if the Selling Holders appoint a stockholder representative (the “Stockholder Representative”) for matters affecting the stockholders of the Company under the applicable definitive transaction agreements, to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Optionee’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the stockholders;

 

(vi)          to agree to make representations and warranties and to agree to indemnity and other liability obligations in connection with the Sale of the Company on terms and conditions that, taken as a whole, are no less favorable to Optionee than to other holders of Common Stock of the Company; and

 

 

(vii)         to execute and deliver all related documentation and take such other action in support of the Sale of the Company, as reasonably requested by the Company, including a written consent, release and/or joinder, and to not take any action inconsistent with the Sale of the Company.

 

(b)            Exceptions. Notwithstanding the foregoing, an Optionee will not be required to comply with Subsection (a) above in connection with any Sale of the Company unless (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock and (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, subject, in each case, to any “rollover” or similar arrangements provided in the definitive documents relating to such Sale of the Company. If the consideration to be paid in exchange for the Shares pursuant to such Sale of the Company includes any securities and due receipt thereof by the Optionee would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Optionee of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Optionee in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Optionee, an amount in cash equal to the fair value (as determined in good faith by the Company’s Board of Directors or the Requisite Parties, as applicable) of the securities which such Optionee would otherwise receive as of the date of the issuance of such securities in exchange for the Shares.

 

SECTION 12. Adjustment Of Shares.

 

In the event of any transaction described in Section 9(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 9(a) of the Plan. In the event that the Company is a party to a merger or consolidation or in the event of a sale of all or substantially all of the Company’s stock or assets, this option shall be subject to the treatment provided by the Board of Directors in its sole discretion, as provided in Section 9(b) of the Plan.

 

SECTION 13. Miscellaneous Provisions.

 

(a)            Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

 

(b)            No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate the Optionee's Service at any time and for any reason, with or without cause.

 

 

(c)            Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, (iii) deposit with Federal Express Corporation, with shipping charges prepaid or (iv) deposit with any internationally recognized express mail courier service, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that the Optionee most recently provided to the Company in accordance with this Subsection (c). In addition, to the extent required or permitted pursuant to rules established by the Company from time to time, notices may be delivered electronically.

 

(d)            Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Optionee and by an authorized officer of the Company (other than the Optionee); provided, however, that a modification that is otherwise favorable to the Optionee (for example, providing the Optionee with additional time to exercise this option after termination of employment or providing for additional forms of payment) but causes this option to lose its tax-favored status (for example, as an ISO) shall not require the consent of the Optionee. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 

(e)            Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

 

(f)            Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.

 

(g)            Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

(h)            Binding Effect on Transferees, Heirs, Successors and Assigns. This Agreement shall be binding upon Optionee’s permitted transferees, heirs, successors and assigns; provided that for any such transfer to be deemed effective, the transferee shall agree on a form prescribed by the Company to be bound by the terms and conditions of this Agreement, including the restrictions on transfer in Section 10 and the drag along right in Section 11. The Company shall not record any transfer of Shares on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection (h).

 

 

SECTION 14. acknowledgements of the optionee.

 

In addition to the other terms, conditions and restrictions imposed on this option and the Shares issuable under this option pursuant to this Agreement and the Plan, the Optionee expressly acknowledges being subject to Sections 7 (Right of First Refusal), 8 (Legality of Initial Issuance), 10 (Restrictions on Transfer of Shares, including without limitation the Market Stand-Off) and 11 (Drag Along Right), as well as the following provisions:

 

(a)            Tax Consequences. The Optionee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Optionee’s tax liabilities. The Optionee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this option or the Optionee’s other compensation. In particular, any Optionee subject to U.S. taxation acknowledges that this option is exempt from Section 409A of the Code only if the Exercise Price is at least equal to the Fair Market Value per Share on the Date of Grant. Since Shares are not traded on an established securities market, the determination of their Fair Market Value is made by the Board of Directors or by an independent valuation firm retained by the Company. The Optionee acknowledges that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and the Optionee shall not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low. In addition, if this option is designated as an ISO, the Optionee acknowledges that there is no guarantee that the option in fact qualifies for incentive stock option treatment or that it will continue to qualify for incentive stock option treatment at the time of exercise. In this regard, the Optionee acknowledges that the Company may take actions that will cause the option to cease to be eligible for incentive stock option treatment and that such actions do not require the Optionee’s consent.

 

(b)            Electronic Delivery of Documents. The Optionee acknowledges and agrees that the Company may, in its sole discretion, deliver all documents relating to the Company, the Plan or this option and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by email or other means of electronic transmission (including by posting them on a website maintained by the Company or a third party under contract with the Company). The Optionee acknowledges that the Optionee may incur costs in connection with any such delivery by means of electronic transmission, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with the Optionee's ability to access the documents.

 

(c)            No Notice of Expiration Date. The Optionee agrees that the Company and its officers, employees, attorneys and agents do not have any obligation to notify him or her prior to the expiration of this option pursuant to Section 6, regardless of whether this option will expire at the end of its full term or on an earlier date related to the termination of the Optionee’s Service. The Optionee further agrees that the Optionee has the sole responsibility for monitoring the expiration of this option and for exercising this option, if at all, before it expires. This Subsection (c) shall supersede any contrary representation that may have been made, orally or in writing, by the Company or by an officer, employee, attorney or agent of the Company.

 

 

(d)            Waiver of Statutory Information Rights. The Optionee acknowledges and agrees that, upon exercise of this option and until the first sale of the Company’s Stock to the general public pursuant to a registration statement filed under the Securities Act, the Optionee shall waive, and shall be deemed to have waived, any rights the Optionee would otherwise have under Section 220 of the Delaware General Corporation Law (or under similar rights pursuant to any other applicable law) to inspect for any purpose and to make copies and extracts from the Company’s stock ledger, a list of its stockholders and its other books and records or the books and records of any subsidiary of the Company (the “Inspection Rights”).  The Optionee acknowledges and understands that, but for the waiver made herein, the Optionee would be entitled, upon compliance with the procedures set forth in Section 220 of the Delaware General Corporation Law, to Inspection Rights pursuant thereto, and further acknowledges and agrees that the waiver set forth herein is a knowing and voluntary waiver of such rights, that the Optionee has received sufficient consideration for such waiver and that the Company would not be willing to provide the benefits to the Optionee hereunder without the benefit of such waiver from the Optionee. This waiver applies only in the Optionee’s capacity as a stockholder and does not affect any other inspection rights the Optionee may have pursuant to any written agreement with the Company.

 

(e)            Plan Discretionary. The Optionee understands and acknowledges that (i) the Plan is entirely discretionary, (ii) the Company and the Optionee’s employer have reserved the right to amend, suspend or terminate the Plan at any time, (iii) the grant of an option does not in any way create any contractual or other right to receive additional grants of options (or benefits in lieu of options) at any time or in any amount and (iv) all determinations with respect to any additional grants, including (without limitation) the times when options will be granted, the number of Shares offered, the Exercise Price and the vesting schedule, will be at the sole discretion of the Company.

 

(f)            Termination of Service. The Optionee understands and acknowledges that participation in the Plan ceases upon termination of the Optionee's Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

 

(g)            Extraordinary Compensation. The value of this option shall be an extraordinary item of compensation outside the scope of the Optionee’s employment contract, if any, and shall not be considered a part of the Optionee's normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

(h)            Authorization to Disclose. The Optionee hereby authorizes and directs the Optionee’s employer to disclose to the Company or any Subsidiary any information regarding the Optionee’s employment, the nature and amount of the Optionee’s compensation and the fact and conditions of the Optionee’s participation in the Plan, as the Optionee’s employer deems necessary or appropriate to facilitate the administration of the Plan.

 

 

(i)             Personal Data Authorization. The Optionee consents to the collection, use and transfer of personal data as described in this Subsection (i). The Optionee understands and acknowledges that the Company, the Optionee’s employer and the Company’s other Subsidiaries hold certain personal information regarding the Optionee for the purpose of managing and administering the Plan, including (without limitation) the Optionee’s name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Optionee’s favor (the “Data”). The Optionee further understands and acknowledges that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of the Optionee’s participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. The Optionee understands and acknowledges that the recipients of Data may be located in the United States or elsewhere. The Optionee authorizes such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering the Optionee’s participation in the Plan, including a transfer to any broker or other third party with whom the Optionee elects to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Optionee’s behalf. The Optionee may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection (i) by contacting the Company in writing.

 

SECTION 15. Definitions.

 

(a)            “Agreement” shall mean this Stock Option Agreement.

 

(b)            “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

(c)            “Certificate” shall mean the Company’s amended and restated certificate of incorporation as in effect from time to time.

 

(d)            “Company” shall mean City Therapeutics, Inc., a Delaware corporation.

 

(e)            “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

 

(f)            “Optionee” shall mean the person named in the Notice of Stock Option Grant.

 

(g)            “Plan” shall mean the City Therapeutics, Inc. 2023 Stock Plan, as in effect on the Date of Grant.

 

(h)            “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.

 

(i)            “Requisite Parties” shall mean both the Board of Directors and the Selling Holders.

 

(j)            “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 7.

 

 

(k)            “Sale of the Company” shall mean: (i) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”), (ii) a sale of all or substantially all of the assets of the Company or (iii) any other transaction that qualifies as a “Liquidation Event” as defined in the Certificate.

 

(l)             “Selling Holders” shall mean the holders of a majority of the then-outstanding shares of Common Stock (voting together as a single class and on an as-converted basis).

 

(m)           “Service” shall mean service as an Employee, Outside Director or Consultant. In case of any dispute as to whether and when Service has terminated, the Board of Directors shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

 

(n)            “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.

 

(o)            “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 7.

 

(p)            “U.S. Person” shall mean a person described in Rule 902(k) of Regulation S of the Securities Act (or any successor rule or provision), which generally defines a U.S. person as any natural person resident in the United States, any estate of which any executor or administrator is a U.S. Person, or any trust of which of any trustee is a U.S. Person.

 

 

 

City Therapeutics, Inc. 2023 Stock Plan 

Notice of Stock Option Exercise (Installment Exercise)

 

You must sign this Notice on Page 3 before submitting it to the Company.

 

Optionee Information:

 

Name:			Social Security Number:
Address:			Employee Number:
			Email Address:

 

Option Information:

 

Date of Grant: _____________ ___, 20__		Type of Stock Option:
Exercise Price per Share: $________		¨ Nonstatutory (NSO)
Total number of shares of Common Stock of City Therapeutics, Inc. (the “Company”) covered by the option: __________________		¨  Incentive (ISO)

 

Exercise Information:

 

Number of shares of Common Stock of the Company for which the option is being exercised now: ________________. (These shares are referred to below as the “Purchased Shares.”)

 

Total Exercise Price for the Purchased Shares: $____________

 

Form of payment enclosed [check all that apply]:

 

¨	Check for $____________, payable to “City Therapeutics, Inc.”

¨	Certificate(s) for ________________ shares of Common Stock of the Company.  These shares will be valued as of the date this notice is received by the Company.  [Requires Company consent.]

¨	Attestation Form covering ________________ shares of Common Stock of the Company.  These shares will be valued as of the date this notice is received by the Company.  [Requires Company consent.]

 

Name(s) in which the Purchased Shares should be registered [please review the attached explanation of the available forms of ownership, and then check one box]*:

 

¨	In my name only

 

 

¨

In the names of my spouse and myself as community property

My spouse’s name (if applicable):

 

¨

In the names of my spouse and myself as community property with the right of survivorship

_____________________________________

 

¨	In the names of my spouse and myself as joint tenants with the right of survivorship

 

¨	In the name of an eligible revocable trust [requires Stock Transfer Agreement]	Full legal name of revocable trust:

 

*While the Company will register the Purchased Shares in accordance with your instruction, this document does not control or change the nature of the Purchased Shares as community property or separate property. You are advised to consult your own advisor to determine if additional steps or documentation are required in this regard.

 

Representations and Acknowledgements of the Optionee:

 

1.

I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares for investment for my account only, and not with a view to, or for resale in connection with, any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

2.

I understand that my purchase of the Purchased Shares has not been registered under the Securities Act by reason of a specific exemption therefrom and that the Purchased Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or I obtain an opinion of counsel (in form and substance satisfactory to the Company and its counsel) that registration is not required.

 

3.

I acknowledge that the Company is under no obligation to register the Purchased Shares or any sale or transfer thereof.

 

4.

I am aware of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction” and that the amount of securities being sold during any three-month period not exceed specified limitations. I understand that the conditions for resale set forth in Rule 144 have not been satisfied as of the date set forth below, and that the Company is not required to take action to satisfy any conditions applicable to it.

 

5.

I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act.

 

6.

I acknowledge that I have received and had access to such information as I consider necessary or appropriate for deciding whether to invest in the Purchased Shares and that I had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Purchased Shares.

 

7.

I am aware that my investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. I am able, without impairing my financial condition, to hold the Purchased Shares for an indefinite period and to suffer a complete loss of my investment in the Purchased Shares.

 

 

8.

I acknowledge that the Purchased Shares remain subject to the Company’s right of first refusal, the drag-along right and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement. I acknowledge that the Purchased Shares remain subject to the transfer restrictions in the Company’s Bylaws, as in effect at the time of my exercise. I acknowledge that any permitted transfer of the Purchased Shares may be subject to a transfer fee and must be effected on the Company’s form of stock transfer agreement, as further described in the Stock Option Agreement.

 

9.

I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the Notice of Stock Option Grant and Stock Option Agreement.

 

10.

I acknowledge that I have received a copy of the Company’s explanation of the forms of ownership available for my Purchased Shares. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me. In the event that I choose to transfer my Purchased Shares to a trust, I agree to sign a Stock Transfer Agreement on a form prescribed by the Company. In the event that I choose to transfer my Purchased Shares to a trust that does not satisfy the requirements described in the attached explanation (i.e., a trust that is not an eligible revocable trust), I also acknowledge that the transfer will be treated as a “disposition” for tax purposes. As a result, the favorable ISO tax treatment will be unavailable and other unfavorable tax consequences may occur.

 

11.

I acknowledge that I have received a copy of the Company’s explanation of the federal income tax consequences of an option exercise. I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Purchased Shares at this time.

 

12.

I agree that the Company does not have a duty to design or administer the 2023 Stock Plan or its other compensation programs in a manner that minimizes my tax liabilities. I will not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from my options or my other compensation. In particular, I acknowledge that my options are exempt from section 409A of the Internal Revenue Code only if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Company’s Board of Directors. Since shares of the Company’s Common Stock are not traded on an established securities market, the determination of their fair market value was made by the Company’s Board of Directors or by an independent valuation firm retained by the Company. I acknowledge that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and I will not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low.

 

13.

I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing.

 

Signature:		Date:

 

 

Explanation of Forms of Stock Ownership

 

Purpose of This Explanation

 

The purpose of this explanation is to provide you with a brief summary of the forms of legal ownership available for the shares that you are purchasing (the “Purchased Shares”). For a number of reasons, this explanation is no substitute for personal legal advice:

 

·

To make the explanation short and readable, only the highlights are covered. Some legal rules are not addressed, even though they may be important in particular cases.

 

·

While the summary attempts to deal with the most common situations, your own situation may well be different from the norm.

 

·

The law may change, and the Company is not responsible for updating this summary.

 

·

The form in which you own your shares may have a substantial impact on the estate tax treatment that applies to those shares when you die or the income tax treatment that applies when your survivors sell the shares after your death.

 

For these reasons, the Company strongly encourages you to consult your own adviser before exercising your option and before making a decision about the form of ownership for your shares.

 

Overview

 

The Notice of Stock Option Exercise offers five forms of taking title to the Purchased Shares:

 

·

In your name only,

 

·

In your name and the name of your spouse as community property,

 

·

In your name and the name of your spouse as community property with the right of survivorship,

 

·

In your name and the name of your spouse as joint tenants with the right of survivorship, or

 

·

In the name of an eligible revocable trust.

 

Title in the Purchased Shares depends upon (a) your marital status, (b) the marital property laws of your state of residence and (c) any agreement with your spouse altering the existing marital property laws of your state of residence. If you are not married, you generally will take title in your name alone. If you are married, title depends upon the marital property laws of your state of residence. In general, states are classified either as “community property” states or as “common-law property” states. (But individual state law may vary within these classifications.)

 

 

Community Property and Joint Tenancy

 

Community property states include California, Texas, Washington, Arizona, Nevada, New Mexico, Idaho, Louisiana and Wisconsin. In a community property state, property acquired during marriage by either spouse is presumed to be one-half owned by each spouse. All other property is classified as the separate property of the spouse who acquires the property. While either spouse has equal management and control over the community property and may sell, spend or encumber all community property, neither spouse may gift community property or partition his/her one-half interest without the consent of the other spouse. Upon divorce, all community property is divided equally among the spouses and each spouse is entitled to retain all of his/her separate property. Upon the death of a spouse, one-half of the community property (and all of the decedent spouse’s separate property) will pass to the decedent spouse’s heirs. The other one-half of the community property remains the property of the surviving spouse.

 

Other states are common-law property states. In a common-law property state, each spouse is generally deemed to own whatever he/she earns or acquires.

 

A married couple may elect to alter the marital property rules by mutually agreeing to take title to property in other forms. For example, a couple residing in a community property state may generally enter into an agreement and transform what otherwise would be community property into the separate property of the spouse who earns or acquires the property.

 

In addition, many community property and common-law property states allow married couples to take joint title in property acquired during marriage. For example, California allows a married couple to take title in a joint tenancy with the right of survivorship. In a joint tenancy, each spouse owns a one-half interest in the property as separate property. This means that each spouse may transfer or sell his/her one-half interest in the property while he/she is alive. However, unlike traditional separate property, a spouse cannot transfer his/her one-half interest to heirs at death. Instead, the surviving spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the property. (This is called the “right of survivorship.”) Both spouses must consent to taking property in a joint tenancy in lieu of having the community property laws apply.

 

California also allows a married couple to take title in the shares as community property with the right of survivorship. This means that the shares are treated like community property while both spouses are alive. However, if one spouse dies, then the other spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the shares. In other words, the decedent spouse’s will or trust does not control the disposition of the shares.

 

If you have the Purchased Shares issued in a form other than those described above, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

 

 

Trusts

 

A transfer to a trust generally should not be treated as a “disposition” of the Purchased Shares for tax purposes if the trust satisfies each of the following conditions:

 

·

You are the sole grantor of the trust,

 

·

You are the sole trustee, or you and your spouse are the sole co-trustees,

 

·

The trustee or trustees are not required to distribute the income of the trust to any person other than you and/or your spouse while you are alive, and

 

·

The trust permits you to revoke all or part of the trust and to have the trust’s assets returned to you, without the consent of any other person (including your spouse).

 

If you have the Purchased Shares issued to a trust that does not meet these requirements, then the transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax summary for additional information.

 

If you have the Purchased Shares issued to any trust, you will be required to sign a Stock Transfer Agreement in your capacity as trustee. Under the Stock Transfer Agreement, the Purchased Shares remain subject to the Company’s right of first refusal in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.

 

The Company will not check to determine whether the form of ownership that you elect in your Notice of Stock Option Exercise is appropriate. You should consult your own advisers on this subject. If an inappropriate election is made, the form of ownership may not withstand legal scrutiny or may have adverse tax consequences.

 

 

Explanation of U.S. Federal Income Tax Consequences
(Current as of January 2022)

 

Purpose of This Explanation

 

The purpose of this explanation is to provide you with a brief summary of the tax consequences of exercising your option. For a number of reasons, this explanation is no substitute for personal tax advice:

 

·

To make the explanation short and readable, only the highlights are covered. Some tax rules are not addressed, even though they may be important in particular cases.

 

·

While the summary attempts to deal with the most common situations, your own tax situation may well be different from the norm.

 

·

State and foreign income taxes are not addressed at all, even though they could have a significant impact on your tax planning. Likewise, federal gift and estate taxes and state inheritance taxes are not discussed.

 

·

Tax planning involving incentive stock options is exceedingly complex, in part because of the possible application of the alternative minimum tax.

 

·

This explanation assumes that your option is not subject to section 409A of the Internal Revenue Code. However, the Company cannot be certain that section 409A is inapplicable to your option. (Please refer to the last segment of this summary for more information about section 409A.)

 

·

The tax rules change often, and the Company is not responsible for updating this summary. (Please refer to the date at the top of this page.)

 

For these reasons, the Company strongly encourages you to consult your own tax adviser before exercising your option.

 

Exercise of NSO

 

If you are exercising an NSO, you generally will be taxed at the time of exercise. You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying. If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as income on the exercise date.

 

 

Disposition of NSO Shares

 

When you dispose of the Purchased Shares, you will recognize a capital gain equal to the excess of (a) the sale proceeds over (b) your tax basis in the Purchased Shares. If the sale proceeds are less than your tax basis, you will recognize a capital loss. The capital gain or loss will be long-term if you held the Purchased Shares for more than 12 months. The holding period starts when you exercise your NSO. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

 

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

 

Depending on the level of your adjusted gross income, the additional Medicare contribution tax may be imposed on any short-term and long-term capital gain income and can increase your marginal tax rate.

 

Limit on ISO Treatment

 

The Notice of Stock Option Grant indicates whether your option is a nonstatutory stock option (NSO) or an incentive stock option (ISO). The favorable tax treatment for ISOs is limited, regardless of what the Notice of Stock Option Grant indicates. Of the options that become exercisable in any calendar year, only options covering the first $100,000 of stock are eligible for ISO treatment. The excess over $100,000 automatically receives NSO treatment. For this purpose, stock is valued at the time of grant. This means that the value is generally equal to the exercise price.

 

For example, assume that you hold an option to buy 60,000 shares for $8 per share. Assume further that the entire option becomes exercisable in four equal annual installments. Only the first 50,000 shares qualify for ISO treatment. (12,500 times $8 equals $100,000.) The remaining 10,000 shares will be treated as if they had been acquired by exercising an NSO. This is true regardless of when the option is actually exercised; what matters is when it first could have been exercised.

 

Exercise of ISO and ISO Holding Periods

 

If you are exercising an ISO, you will not be taxed under the regular tax rules until you dispose of the Purchased Shares.¹ (The alternative minimum tax rules are described below.) The tax treatment at the time of disposition depends on how long you hold the shares. You will satisfy the ISO holding periods if you hold the Purchased Shares until the later of the following dates:

 

·

More than two years after the ISO was granted, and

 

¹  Generally, a “disposition” of shares purchased under an ISO encompasses any transfer of legal title, such as a transfer by sale, exchange or gift. It generally does not include a transfer to your spouse, a transfer into joint ownership with right of survivorship (if you remain one of the joint owners), a pledge, a transfer by bequest or inheritance, or certain tax-free exchanges permitted under the Internal Revenue Code. A transfer to a trust is a “disposition” unless the trust is an eligible revocable trust, as described in the attached explanation.

 

 

·

More than one year after the ISO is exercised.

 

Disposition of ISO Shares

 

If you dispose of the Purchased Shares after satisfying both of the ISO holding periods, then you will recognize only a long-term capital gain at the time of disposition. The amount of the capital gain is equal to the excess of (a) the sale proceeds over (b) the exercise price. In general, the maximum marginal federal income tax rate on long-term capital gains is 20% under current law, but lower long-term capital gain rates may apply to certain taxpayers.

 

Effective January 1, 2013, as a result of the Health Care and Education Reconciliation Act of 2010, an additional Medicare contribution tax is imposed at a rate of 3.8% on the “net investment income” of individuals with adjusted gross incomes in excess of $200,000 ($250,000 in the case of a joint return, and $125,000 in the case of a married taxpayer filing separately). “Net investment income” includes income from interest, dividends, and capital gains, reduced by the deductions properly allocated to such income.

 

If you dispose of the Purchased Shares before either or both of the ISO holding periods are met, then you will recognize ordinary income at the time of disposition. The amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price. But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale. Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes.

 

Your tax basis in the Purchased Shares will be equal to the sum of the exercise price you paid for the Purchased Shares plus any additional amount you recognized as ordinary income. Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of exercise.

 

Summary of Alternative Minimum Tax

 

The alternative minimum tax (AMT) must be paid to the extent that it exceeds your regular federal income tax for the year. For 2022, the first $206,100 ($103,050 for a married taxpayer filing a separate return) of your alternative minimum taxable income for the year over the allowable exemption amount (see below) is subject to alternative minimum taxation at the rate of 26%. The balance of your alternative minimum taxable income is subject to alternative minimum taxation at the rate of 28%. The dollar thresholds dividing the 26% and 28% rates are indexed for inflation in future years. Your alternative minimum tax base is equal to your alternative minimum taxable income (AMTI) minus your exemption amount.

 

 

·

Alternative Minimum Taxable Income. Your AMTI is equal to your regular taxable income, subject to certain adjustments and increased by items of tax preference. Among the many adjustments made in computing AMTI are the following:

 

·

State and local income and property taxes are not allowed as a deduction.

 

·

Certain interest and other deductions are not allowed.

 

·

When an ISO is exercised, the spread is added to income for AMT purposes. (See discussion below.)

 

·

Exemption Amount. Before AMT is calculated, AMTI is reduced by the exemption amount. Under current law, the exemption amount is as follows:

 

Year:		Joint Returns:			Single Returns:			Separate Returns:
20222		$	118,100		$	75,900		$	59,050

 

The allowable exemption amount is reduced by $0.25 for each $1.00 by which alternative minimum taxable income for the year exceeds the following amounts:

 

Year:		Joint Returns:			Single Returns:			Separate Returns:
20223		$	1,079,800		$	539,900		$	539,900

 

This means, for example, in 2022, the $118,100 exemption amount is phased out completely for married individuals filing joint returns when their alternative minimum taxable income reaches $1,552,200 [($118,100 ÷ $0.25) + $1,079,800].

 

Application of AMT When ISO Is Exercised

 

As noted above, when an ISO is exercised, the spread is included in AMTI at the time of exercise.

 

A special rule applies if you dispose of the Purchased Shares in the same year in which you exercised the ISO. If the amount you realize on the sale is less than the value of the stock at the time of exercise, then the amount includible in AMTI on account of the ISO exercise is limited to the gain realized on the sale.⁴

 

To the extent that your AMT is attributable to the spread on exercising an ISO (and certain other items), you may be able to apply the AMT that you paid as a credit against your income tax liability in future years. But the rules on calculating the available tax credits were amended frequently in recent years and have become extraordinarily complex. On this issue in particular, you must consult your own tax adviser.

 

²  Amounts are indexed for inflation in future years.

³Amounts are indexed for inflation in future years.

⁴This is similar to the rule that applies under the regular tax system in the event of a disqualifying disposition of ISO stock. The amount of ordinary income that must be recognized in that case generally does not exceed the amount of the gain realized in the disposition.

 

 

When Purchased Shares are sold, your basis for purposes of computing the capital gain or loss under the AMT system is increased by the option spread that exists at the time of exercise. Again, an ISO is treated under the AMT system much like an NSO is treated under the regular tax system. But your basis in the ISO shares for purposes of computing gain or loss under the regular tax system does not reflect any AMT that you pay on the spread at exercise. Therefore, if you pay AMT in the year of the ISO exercise and regular income tax in the year of selling the Purchased Shares, you could pay tax twice on the same gain (except to the extent that you can use the AMT credit described above).

 

Section 409A of the Internal Revenue Code

 

The preceding summary assumes that section 409A of the Internal Revenue Code does not apply to your option. In general, your option is exempt from section 409A if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Board of Directors. Since shares of Common Stock are not traded on an established securities market, the determination of their fair market value generally is made by the Board of Directors or by an independent appraisal firm retained by the Company. In either case, there is no guarantee that the Internal Revenue Service will agree with the valuation.

 

If your option were found to be subject to section 409A, then you would be required to recognize ordinary income as early as the year in which the option (or portion thereof) vests. This amount would also be subject to a 20% federal tax in addition to the federal income tax at your usual marginal rate for ordinary income. Additional state income taxes may apply in some states.

 

 

 

City Therapeutics, Inc. 2023 Stock Plan:

Summary of Stock Grant (for Services)

 

The Transferee is acquiring shares of the Common Stock of City Therapeutics, Inc. (the “Company”) on the following terms:

 

Name of Transferee:	«Name»
Total Number of Transferred Shares:	«TotalShares»
Date of Transfer:	«DateTransfer»
Vesting Commencement Date:	«VestComDate»
Vesting Schedule:	«Percent»% of the Transferred Shares shall vest, and the Forfeiture Condition shall lapse with respect to such shares, when the Transferee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth above. An additional «Fraction»% of the Transferred Shares shall vest, and the Forfeiture Condition shall lapse with respect to such shares, when the Transferee completes each month of continuous Service thereafter.

 

By signing below or otherwise accepting this award in a manner acceptable to the Company, the Transferee and the Company agree that the acquisition of the Transferred Shares is governed by the terms and conditions of this Summary of Stock Grant, the 2023 Stock Plan and the Stock Grant Agreement. Both of these latter documents are attached to, and made a part of, this Summary of Stock Grant. Capitalized terms not otherwise defined herein or in the Stock Grant Agreement shall have the meanings set forth in the Plan.

 

Transferee:		City Therapeutics, Inc.
		By:
Email Address:		Title:
Mailing Address:

 

 

City Therapeutics, Inc. 2023 Stock Plan:

 

Stock Grant Agreement (for Services)

 

SECTION 1. Acquisition Of Shares.

 

(a)           Transfer. On the terms and conditions set forth in the Summary of Stock Grant, this Agreement and the Plan, the Company agrees to transfer to the Transferee the number of Shares set forth in the Summary of Stock Grant. The transfer shall occur at the offices of the Company on the date of transfer set forth in the Summary of Stock Grant or at such other place and time as the parties may agree.

 

(b)           Consideration. The Transferee and the Company agree that the Transferred Shares are being issued to the Transferee as consideration for a portion of the services performed by the Transferee for the Company. The value of such portion is agreed to be not less than 100% of the Fair Market Value of the Transferred Shares.

 

(c)           Stock Plan and Defined Terms. The transfer of the Transferred Shares is subject to the Plan, a copy of which the Transferee acknowledges having received. The provisions of the Plan are incorporated into this Agreement by this reference. Except as otherwise defined in this Agreement (including without limitation Section 12 hereof), capitalized terms shall have the meaning ascribed to such terms in the Plan.

 

SECTION 2. Forfeiture Condition.

 

(a)           Scope of Forfeiture Condition. Until they vest in accordance with Subsection (b) below, the Transferred Shares shall be subject to forfeiture to the Company and shall be referred to as “Restricted Shares.” The Transferee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence. Subject to Section 4(b) below, the Transferee may transfer Restricted Shares to one or more members of the Transferee’s Immediate Family or to a trust or other entity established by the Transferee solely for the benefit of the Transferee and/or one or more members of the Transferee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Transferee transfers any Restricted Shares, then this Agreement shall apply to the Subsequent Transferee to the same extent as to the Transferee.

 

(b)           Vesting. The Transferred Shares shall vest, and the Forfeiture Condition shall lapse with respect to the Transferred Shares, in accordance with the vesting schedule set forth in the Summary of Stock Grant.

 

(c)           Execution of Forfeiture. The Forfeiture Condition shall be applicable only if the Transferee’s Service terminates for any reason, with or without cause, including (without limitation) death or disability, before all Transferred Shares have become vested. In the event that the Transferee’s Service terminates for any reason, any certificate(s) representing any remaining Restricted Shares shall be delivered to the Company. If the Restricted Shares are not represented by certificate, the forfeiture shall be effected by an appropriate book entry on the stock ledger for the Shares. The Company shall make no payment for Transferred Shares that are forfeited.

 

 

(d)           Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares or into which such Restricted Shares thereby become convertible shall immediately be subject to the Forfeiture Condition. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares.

 

(e)           Termination of Rights as Stockholder. If Transferred Shares are forfeited in accordance with this Section 2, then the person who is to forfeit such Transferred Shares shall no longer have any rights as a holder of such Transferred Shares. Such Transferred Shares shall be deemed to have been forfeited in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

 

(f)            Escrow. Upon issuance, any certificates for Restricted Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement. Any new, substituted or additional securities or other property described in Subsection (d) above shall immediately be delivered to the Company to be held in escrow, but only to the extent the Transferred Shares are at the time Restricted Shares. All regular cash dividends on Restricted Shares (or other securities at the time held in escrow) shall be paid directly to the Transferee and shall not be held in escrow. Restricted Shares, together with any other assets or securities held in escrow hereunder, shall be (i) surrendered to the Company for forfeiture and cancellation in the event that the Forfeiture Condition or Right of First Refusal applies or (ii) released to the Transferee upon the Transferee’s request to the extent the Transferred Shares are no longer Restricted Shares (but not more frequently than once every six months). In any event, all Transferred Shares that have vested (and any other vested assets and securities attributable thereto) shall be released within 60 days after the earlier of (i) the termination of the Transferee’s Service or (ii) the lapse of the Right of First Refusal.

 

(g)           Part-Time Employment and Leaves of Absence. If the Transferee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Summary of Stock Grant. If the Transferee goes on a leave of absence, then, to the extent permitted by applicable law, the Company may adjust or suspend the vesting schedule set forth in the Summary of Stock Grant. Except as provided in the preceding sentence, Service shall be deemed to continue while the Transferee is on a bona fide leave of absence approved by the Company in writing. Service shall be deemed to terminate when such leave ends, unless the Transferee immediately returns to active work when such leave ends.

 

 

SECTION 3. Right Of First Refusal.

 

(a)           Right of First Refusal. In the event that the Transferee proposes to sell, pledge or otherwise transfer to a third party any Transferred Shares, or any interest in Transferred Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Transferred Shares. If the Transferee desires to transfer Transferred Shares, the Transferee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Transferred Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Subsequent Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws. The Transfer Notice shall be signed both by the Transferee and by the proposed Subsequent Transferee and must constitute a binding commitment of both parties to the transfer of the Transferred Shares. The Company shall have the right to purchase all, and not less than all, of the Transferred Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

 

(b)           Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after receiving the Transfer Notice, the Transferee may, not later than 90 days after the Company received the Transfer Notice, conclude a transfer of the Transferred Shares subject to the Transfer Notice on the terms and conditions no less favorable to the Transferee than those described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Transferee is bound. Any proposed transfer on terms and conditions less favorable than those described in the Transfer Notice, as well as any subsequent proposed transfer by the Transferee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Transferred Shares on the terms set forth in the Transfer Notice within 60 days after the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Transferred Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Transferred Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

 

(c)           Additional or Exchanged Securities and Property. In the event of a merger or consolidation of the Company, a sale of all or substantially all of the Company’s stock or assets, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Transferred Shares subject to this Section 3 shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Transferred Shares subject to this Section 3.

 

 

(d)           Termination of Right of First Refusal. Any other provision of this Section 3 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Transferee desires to transfer Transferred Shares, the Company shall have no Right of First Refusal, and the Transferee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

 

(e)           Permitted Transfers. This Section 3 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Transferee’s Immediate Family or to a trust or other entity established by the Transferee solely for the benefit of the Transferee and/or one or more members of the Transferee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Transferee transfers any Transferred Shares, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Subsequent Transferee to the same extent as to the Transferee.

 

(f)            Termination of Rights as Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 3, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not any certificate(s) therefor have been delivered as required by this Agreement.

 

(g)           Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First Refusal from the Company shall be entitled to and assume all of the Company’s rights and obligations under this Section 3.

 

SECTION 4. Other Restrictions On Transfer.

 

(a)           Transferee Representations. In connection with the issuance and acquisition of Shares under this Agreement, the Transferee hereby represents and warrants to the Company as follows:

 

(i)            The Transferee is acquiring and will hold the Transferred Shares for investment for the Transferee’s account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.

 

(ii)           The Transferee understands that the Transferred Shares have not been registered under the Securities Act by reason of a specific exemption therefrom and that the Transferred Shares must be held indefinitely, unless their sale or other transfer is subsequently registered under the Securities Act or the Transferee obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required. The Transferee further acknowledges and understands that the Company is under no obligation to register the Transferred Shares.

 

 

(iii)          The Transferee is aware of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions. These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction,” and that the amount of securities being sold during any three-month period not exceed specified limitations. The Transferee acknowledges and understands that the conditions for resale set forth in Rule 144 have not been satisfied as of the Date of Transfer and that the Company is not required to take action to satisfy any such conditions.

 

(iv)          The Transferee will not sell, transfer or otherwise dispose of the Transferred Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act. The Transferee agrees that the Transferee will not dispose of the Transferred Shares unless and until the Transferee has complied with all requirements of this Agreement applicable to the disposition of Transferred Shares and the Transferee has provided the Company with written assurances, in substance and form satisfactory to the Company, that (A) the proposed disposition does not require registration of the Transferred Shares under the Securities Act or all appropriate action necessary for compliance with the registration requirements of the Securities Act or with any exemption from registration available under the Securities Act (including Rule 144) has been taken and (B) the proposed disposition will not result in the contravention of any transfer restrictions applicable to the Transferred Shares under applicable state law.

 

(v)           The Transferee has received and has had access to such information as the Transferee considers necessary or appropriate for deciding whether to invest in the Transferred Shares, and the Transferee has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Transferred Shares.

 

(vi)          The Transferee is aware that the Transferee’s investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss. The Transferee is able, without impairing the Transferee’s financial condition, to hold the Transferred Shares for an indefinite period and to suffer a complete loss of the Transferee’s investment in the Transferred Shares.

 

(b)           General Restrictions. The Shares acquired pursuant to this Agreement shall be subject to the transfer restrictions in the Company's Bylaws, as may be amended from time to time, in addition to, and not in limitation of, the provisions of Section 3 and 4 of this Agreement. In addition, unless the Stock is readily tradeable on an established securities market, the transfer of any Shares acquired pursuant to this Agreement (or any interest therein) shall, at the Company’s request, be conditioned upon (i) effecting such transfer pursuant to a form of stock transfer agreement prescribed by the Company and (ii) payment of a transfer fee not to exceed $5,000.

 

 

(c)           Securities Law Restrictions. Regardless of whether the offer and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State or other relevant jurisdiction, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of the Transferred Shares (including the placement of appropriate legends on the stock certificates (or electronic equivalent) or the imposition of stop-transfer instructions) and may refuse (or may be required to refuse) to transfer Shares acquired hereunder (or Shares proposed to be transferred in a subsequent transfer) if, in the judgment of the Company, such restrictions, legends or refusal are necessary or appropriate to achieve compliance with the Securities Act or other relevant securities or other laws, including without limitation under Regulation S of the Securities Act or pursuant to another available exemption from registration.

 

(d)           Market Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Transferee or a Subsequent Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Transferred Shares without the prior written consent of the Company or its managing underwriter. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the public filing of the registration statement relating to the initial public offering (or commencing on the date of the final prospectus relating to any subsequent offering) as may be requested by the Company or such underwriter. In no event, however, shall such period exceed 180 days. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Transferred Shares until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (d). This Subsection (d) shall not apply to Shares registered in the public offering under the Securities Act.

 

(e)           Rights of the Company. The Company shall not be required to (i) transfer on its books any Transferred Shares that have been sold or transferred in contravention of this Agreement or (ii) treat as the owner of Transferred Shares, or otherwise to accord voting, dividend or liquidation rights to, any Subsequent Transferee to whom Transferred Shares have been transferred in contravention of this Agreement.

 

 

SECTION 5. Successors And Assigns.

 

Except as otherwise expressly provided to the contrary, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and be binding upon the Transferee and the Transferee’s legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person has become a party to this Agreement or has agreed in writing to join herein and to be bound by the terms, conditions and restrictions hereof.

 

SECTION 6. No Retention Rights.

 

Nothing in this Agreement or in the Plan shall confer upon the Transferee any right to continue providing services to the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Transferee) or of the Transferee, which rights are hereby expressly reserved by each, to terminate the Transferee’s Service at any time and for any reason, with or without cause.

 

SECTION 7. Tax Election.

 

The acquisition of the Transferred Shares may result in adverse tax consequences that may be avoided or mitigated by filing an election under Code Section 83(b). Such election may be filed only within 30 days after the date of transfer set forth in the Summary of Stock Grant. The form for making the Code Section 83(b) election is attached to this Agreement as an Exhibit. The Transferee should consult with the Transferee’s tax advisor to determine the tax consequences of acquiring the Transferred Shares and the advantages and disadvantages of filing the Code Section 83(b) election. The Transferee acknowledges that it is the Transferee’s sole responsibility, and not the Company’s, to file a timely election under Code Section 83(b), even if the Transferee requests the Company or its representatives to make this filing on the Transferee’s behalf.

 

SECTION 8. Legends.

 

Any certificates (or electronic equivalent) evidencing Transferred Shares shall bear the following legends:

 

“THE SHARES REPRESENTED HEREBY (AND ANY INTEREST THEREIN) MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF THE STOCK GRANT AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ACQUIRED. SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND IMPOSES CERTAIN FORFEITURE CONDITIONS UPON TERMINATION OF SERVICE WITH THE COMPANY. IN ADDITION, THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN SUCH STOCK GRANT AGREEMENT AND SEPARATELY PURSUANT TO THE BYLAWS OF THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH STOCK GRANT AGREEMENT AND BYLAWS TO THE HOLDER HEREOF WITHOUT CHARGE.”

 

 

Any certificates (or electronic equivalent) evidencing the Transferred Shares acquired under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY SECURITIES LAWS OF ANY U.S. STATE, AND MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN THE ABSENCE OF REGISTRATION OR THE AVAILABILITY (CONFIRMED BY OPINION OF COUNSEL) OF AN ALTERNATIVE EXEMPTION FROM REGISTRATION UNDER THE ACT (INCLUDING WITHOUT LIMITATION IN ACCORDANCE WITH REGULATION S UNDER THE ACT), THESE SHARES MAY NOT BE SOLD, REOFFERED, PLEDGED, ASSIGNED, ENCUMBERED OR OTHERWISE TRANSFERRED OR DISPOSED OF. HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”

 

If required by the authorities of any State in connection with the issuance of the Transferred Shares, the legend or legends required by such State authorities shall also be endorsed on all such certificates.

 

SECTION 9. DRAG ALONG RIGHT.

 

(a)           Required Actions. If the Requisite Parties approve a Sale of the Company, then Transferee hereby agrees with respect to all Shares which the Transferee own(s) or over which the Transferee otherwise exercises voting or dispositive authority:

 

(i)            if such Sale of the Company requires stockholder approval under the Certificate, the Bylaws of the Company or any law, rule or regulation applicable to the Company, to vote (in person, by proxy or by action by written consent, as applicable) such Shares in favor of such Sale of the Company (it being understood that, within five (5) days after the delivery of a proxy or consent solicitation statement (or similar document requesting the consent or approval of stockholders) in respect of any Sale of the Company, the Transferee shall duly execute and deliver a proxy or consent, as the case may be, in favor of such Sale of the Company);

 

(ii)           if such transaction is a Stock Sale, to sell the same proportion of shares of capital stock of the Company beneficially held by the Transferee as is being sold by the Selling Holders to the person to whom the Selling Holders propose to sell their Shares;

 

 

(iii)          to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company;

 

(iv)          if the consideration for such Shares pursuant to the Sale of the Company includes any securities, accept in lieu thereof an amount of cash equal to the fair value (as determined in good faith by the Company) of such securities to the extent reasonably necessary (as determined in good faith by the Company) to comply with applicable federal and state securities laws;

 

(v)           if the Selling Holders appoint a stockholder representative (the “Stockholder Representative”) for matters affecting the stockholders of the Company under the applicable definitive transaction agreements, to consent to (i) the appointment of such Stockholder Representative, (ii) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (iii) the payment of such Transferee’s pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Stockholder Representative in connection with such Stockholder Representative’s services and duties in connection with such Sale of the Company and its related service as the representative of the stockholders;

 

(vi)          to agree to make representations and warranties and to agree to indemnity and other liability obligations in connection with the Sale of the Company on terms and conditions that, taken as a whole, are no less favorable to Transferee than to other holders of Common Stock of the Company; and

 

(vii)         to execute and deliver all related documentation and take such other action in support of the Sale of the Company, as reasonably requested by the Company, including a written consent, release and/or joinder, and to not take any action inconsistent with the Sale of the Company.

 

(b)           Exceptions. Notwithstanding the foregoing, a Transferee will not be required to comply with Subsection (a) above in connection with any Sale of the Company unless (i) each holder of each class or series of the Company’s stock will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of stock and (ii) each holder of Common Stock will receive the same amount of consideration per share of Common Stock as is received by other holders in respect of their shares of Common Stock, subject, in each case, to any “rollover” or similar arrangements provided in the definitive documents relating to such Sale of the Company. If the consideration to be paid in exchange for the Shares pursuant to such Sale of the Company includes any securities and due receipt thereof by the Transferee would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities; or (y) the provision to any Transferee of any information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such Transferee in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Transferee, an amount in cash equal to the fair value (as determined in good faith by the Company’s Board of Directors or the Requisite Parties, as applicable) of the securities which such Transferee would otherwise receive as of the date of the issuance of such securities in exchange for the Shares.

 

 

SECTION 10. MISCELLANEOUS PROVISIONS.

 

(a)           Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (except its choice-of-law provisions), as such laws are applied to contracts entered into and performed in such State.

 

(b)           Notice. Any notice required by the terms of this Agreement shall be given in writing. It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid, (iii) deposit with Federal Express Corporation, with shipping charges prepaid or (iv) deposit with any internationally recognized express mail courier service, with shipping charges prepaid. Notice shall be addressed to the Company at its principal executive office and to the Transferee at the address that the Transferee most recently provided to the Company in accordance with this Subsection (b). In addition, to the extent required or permitted pursuant to rules established by the Company from time to time, notices may be delivered electronically.

 

(c)           Entire Agreement. The Summary of Stock Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

 

(d)           Modifications and Waivers. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Transferee and an authorized officer of the Company (other than the Transferee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision of or of the same condition or provision at another time.

 

(e)           Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

(f)            Binding Effect on Transferees, Heirs, Successors and Assigns. This Agreement shall be binding upon Transferee’s permitted transferees, heirs, successors and assigns; provided that for any such transfer to be deemed effective, the transferee shall agree on a form prescribed by the Company to be bound by the terms and conditions of this Agreement, including the forfeiture condition in Section 2, the right of first refusal in Section 3, the restrictions on transfer in Section 4 and the drag along right in Section 9. The Company shall not record any transfer of Shares on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Subsection (f).

 

 

SECTION 11. acknowledgements of the Transferee.

 

In addition to the other terms, conditions and restrictions imposed on the Shares acquired pursuant to this Agreement, the Transferee expressly acknowledges being subject to Sections 2 (Forfeiture Condition), 3 (Right of First Refusal), 4 (Other Restrictions on Transfer, including without limitation the Market Stand-Off) and 9 (Drag Along Right), as well as the following provisions:

 

(a)           Electronic Delivery of Documents. The Transferee acknowledges and agrees that the Company may, in its sole discretion, deliver all documents relating to the Company, the Plan or this award and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission) by email or other means of electronic transmission (including by posting them on a website maintained by the Company or a third party under contract with the Company). The Transferee acknowledges that the Transferee may incur costs in connection with any such delivery by means of electronic transmission, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with the Transferee’s ability to access the documents.

 

(b)           Tax Consequences and Withholding. The Transferee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Transferee’s tax liabilities. The Transferee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this award or the Transferee’s other compensation. In the event that the Company determines that it is required to withhold any tax (including without limitation any income tax, social insurance contributions, payroll tax, payment on account or other tax-related items arising in connection with the Transferee’s participation in the Plan and legally applicable to the Transferee (the “Tax-Related Items”)) as a result of the grant or vesting of the Transferred Shares, the Transferee, as a condition of this award, shall make arrangements satisfactory to the Company to enable it to satisfy all Tax-Related Items. The Transferee acknowledges that the responsibility for all Tax-Related Items is the Transferee’s and may exceed the amount actually withheld by the Company (or its affiliate or agent).

 

(c)           Waiver of Statutory Information Rights. The Transferee acknowledges and agrees that, until the first sale of the Company’s Stock to the general public pursuant to a registration statement filed under the Securities Act, the Transferee shall waive, and shall be deemed to have waived, any rights the Transferee would otherwise have under Section 220 of the Delaware General Corporation Law (or under similar rights pursuant to any other applicable law) to inspect for any purpose and to make copies and extracts from the Company’s stock ledger, a list of its stockholders and its other books and records or the books and records of any subsidiary of the Company (the “Inspection Rights”).  The Transferee acknowledges and understands that, but for the waiver made herein, the Transferee would be entitled, upon compliance with the procedures set forth in Section 220 of the Delaware General Corporation Law, to Inspection Rights pursuant thereto, and further acknowledges and agrees that the waiver set forth herein is a knowing and voluntary waiver of such rights, that the Transferee has received sufficient consideration for such waiver and that the Company would not be willing to provide the benefits to the Transferee hereunder without the benefit of such waiver from the Transferee. This waiver applies only in the Transferee’s capacity as a stockholder and does not affect any other inspection rights the Transferee may have pursuant to any written agreement with the Company.

 

 

(d)           Plan Discretionary. The Transferee understands and acknowledges that (i) the Plan is entirely discretionary, (ii) the Company and the Transferee’s employer have reserved the right to amend, suspend or terminate the Plan at any time, (iii) the transfer of the Transferred Shares does not in any way create any contractual or other right to receive additional awards under the Plan at any time or in any amount and (iv) all determinations with respect to any additional awards, including (without limitation) the times when awards will be granted, the number of Shares offered and the vesting schedule, will be at the sole discretion of the Company.

 

(e)           Termination of Service. The Transferee understands and acknowledges that participation in the Plan ceases upon termination of the Transferee’s Service for any reason, except as may explicitly be provided otherwise in the Plan or this Agreement.

 

(f)            Extraordinary Compensation. The value of the Transferred Shares shall be an extraordinary item of compensation outside the scope of the Transferee’s employment contract, if any, and shall not be considered a part of the Transferee’s normal or expected compensation for purposes of calculating severance, resignation, redundancy or end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 

(g)           Authorization to Disclose. The Transferee hereby authorizes and directs the Transferee’s employer to disclose to the Company or any Subsidiary any information regarding the Transferee’s employment, the nature and amount of the Transferee’s compensation and the fact and conditions of the Transferee’s participation in the Plan, as the Transferee’s employer deems necessary or appropriate to facilitate the administration of the Plan.

 

(h)           Personal Data Authorization. The Transferee consents to the collection, use and transfer of personal data as described in this Subsection (h). The Transferee understands and acknowledges that the Company, the Transferee’s employer and the Company’s other Subsidiaries hold certain personal information regarding the Transferee for the purpose of managing and administering the Plan, including (without limitation) the Transferee’s name, home address, telephone number, date of birth, social insurance number, salary, nationality, job title, any Shares or directorships held in the Company and details of all options or any other entitlements to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Transferee’s favor (the “Data”). The Transferee further understands and acknowledges that the Company and/or its Subsidiaries will transfer Data among themselves as necessary for the purpose of implementation, administration and management of the Transferee’s participation in the Plan and that the Company and/or any Subsidiary may each further transfer Data to any third party assisting the Company in the implementation, administration and management of the Plan. The Transferee understands and acknowledges that the recipients of Data may be located in the United States or elsewhere. The Transferee authorizes such recipients to receive, possess, use, retain and transfer Data, in electronic or other form, for the purpose of administering the Transferee’s participation in the Plan, including a transfer to any broker or other third party with whom the Transferee elects to deposit Shares acquired under the Plan of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Transferee’s behalf. The Transferee may, at any time, view the Data, require any necessary modifications of Data or withdraw the consents set forth in this Subsection (h) by contacting the Company in writing.

 

 

SECTION 12. Definitions.

 

(a)           “Agreement” shall mean this Stock Grant Agreement.

 

(b)           “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

(c)           “Certificate” shall mean the Company’s amended and restated certificate of incorporation, as in effect from time to time.

 

(d)           “Company” shall mean City Therapeutics, Inc., a Delaware corporation.

 

(e)           “Forfeiture Condition” shall mean the forfeiture condition described in Section 2.

 

(f)            “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

 

(g)           “Plan” shall mean the City Therapeutics, Inc. 2023 Stock Plan, as amended.

 

(h)           “Requisite Parties” shall mean both the Board of Directors and the Selling Holders.

 

(i)            “Restricted Share” shall mean a Transferred Share that is subject to the Forfeiture Condition.

 

(j)            “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 3.

 

(k)           “Sale of the Company” shall mean: (i) a transaction or series of related transactions in which a person, or a group of related persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a “Stock Sale”), (ii) a sale of all or substantially all of the assets of the Company or (iii) any other transaction that qualifies as a “Liquidation Event” as defined in the Certificate.

 

(l)            “Selling Holders” shall mean the holders of a majority of the then-outstanding shares of Common Stock (voting together as a single class and on an as-converted basis).

 

 

(m)          “Service” shall mean service as an Employee, Outside Director or Consultant. In case of any dispute as to whether and when Service has terminated, the Board of Directors shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.

 

(n)           “Subsequent Transferee” shall mean any person to whom the Transferee has directly or indirectly transferred any Transferred Shares.

 

(o)           “Transferee” shall mean the individual named in the Summary of Stock Grant.

 

(p)           “Transfer Notice” shall mean the notice of a proposed transfer of Transferred Shares described in Section 3.

 

(q)           “Transferred Shares” shall mean the Shares acquired by the Transferee pursuant to this Agreement.

 

 

Exhibit I

 

Section 83(b) Election

 

The undersigned taxpayer hereby elects, pursuant to Section  83(b) of the Internal Revenue Code of 1986, as amended, and pursuant to Treasury Regulations Section 1.83-2, to include in gross income as compensation for services the fair market value of the shares described below.

 

(1)

The taxpayer who performed the services is:

 

Name:

 

	Address:

 

Social Security No.:

 

(2)

The property with respect to which the election is made is ______ shares of the Common Stock of City Therapeutics, Inc.

 

(3)

The property was transferred to the taxpayer on __________ __, ____.

 

(4)

The taxable year for which the election is made is the calendar year ____.

 

(5)

The property is subject to forfeiture if for any reason taxpayer’s service with the issuer terminates. The forfeiture condition lapses in a series of installments over a ____-year period ending on __________ __, ____.

 

(6)

The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction that by its terms will never lapse) is $______ per share x ______ shares = $__________.

 

(7)

No amount was paid for such property.

 

(8)

The amount to include in gross income is $______. [The amount in Line 6.]

 

(9)

A copy of this statement was furnished to City Therapeutics, Inc., for whom taxpayer rendered the services underlying the transfer of such property.

 

(10)

This statement is executed on __________ __, ____.

 

Spouse (if any)		Taxpayer

 

Within 30 days after the date of transfer of the property, this election must be filed with the Internal Revenue Service office where the taxpayer files the taxpayer's annual federal income tax return. The filing should be made by registered or certified mail, return receipt requested. The taxpayer must deliver a copy of the completed form to the Company.

 

 

 

Exhibit 10.4

 

CITY THERAPEUTICS, INC.

FORM OF NON-EMPLOYEE DIRECTOR

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (this “Agreement”) is made as of [●] by and between City Therapeutics, Inc., a Delaware corporation (the “Company”), and [●] (“Indemnitee”).

 

RECITALS

 

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company;

 

WHEREAS, in order to induce Indemnitee to [continue to] provide services to the Company, the Company wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by law;

 

WHEREAS, the Amended and Restated Certificate of Incorporation (as amended and in effect from time to time, the “Charter”) and the Amended and Restated Bylaws (as amended and in effect from time to time, the “Bylaws”) of the Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”);

 

WHEREAS, the Charter, the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the increased difficulty in attracting and retaining highly qualified persons such as Indemnitee is detrimental to the best interests of the Company’s stockholders;

 

WHEREAS, it is reasonable and prudent for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law, regardless of any amendment or revocation of the Charter or the Bylaws, so that they will [continue to] serve the Company free from undue concern that they will not be so indemnified;

 

WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided in the Charter, the Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

 

[WHEREAS, Indemnitee has certain rights to indemnification and/or insurance provided by [Name of Fund/Sponsor] (“[Name of Fund/Sponsor]”) which Indemnitee and [Name of Fund/Sponsor] intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided in this Agreement, with the Company’s acknowledgment and agreement to the foregoing being a material condition to Indemnitee’s willingness to [serve][continue to serve] on the Board.]¹

 

¹ This recital should be included if the director is affiliated with a fund or other entity that provides indemnification to the director that is intended to backstop the indemnification provided by the Company.

 

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1.          Services to the Company. Indemnitee agrees to [serve][continue to serve] as a director of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.

 

Section 2.          Definitions.

 

As used in this Agreement:

 

(a)          “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date of this Agreement; provided, however, that no Person who is a director or officer of the Company shall be deemed an Affiliate or an Associate of any other director or officer of the Company solely as a result of his or her position as director or officer of the Company.

 

(b)          A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own” and have “Beneficial Ownership” of, any securities:

 

(i)          which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, Beneficially Owns (as determined pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect on the date of this Agreement);

 

(ii)          which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has: (A) the legal, equitable or contractual right or obligation to acquire (whether directly or indirectly and whether exercisable immediately or only after the passage of time, compliance with regulatory requirements, satisfaction of one or more conditions (whether or not within the control of such Person) or otherwise) upon the exercise of any conversion rights, exchange rights, rights, warrants or options, or otherwise; (B) the right to vote pursuant to any agreement, arrangement or understanding (whether or not in writing); or (C) the right to dispose of pursuant to any agreement, arrangement or understanding (whether or not in writing) (other than customary arrangements with and between underwriters and selling group members with respect to a bona fide public offering of securities);

 

 

(iii)          which are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting or disposing of any securities of the Company; or

 

(iv)          that are the subject of a derivative transaction entered into by such Person or any of such Person’s Affiliates or Associates, including, for these purposes, any derivative security acquired by such Person or any of such Person’s Affiliates or Associates that gives such Person or any of such Person’s Affiliates or Associates the economic equivalent of ownership of an amount of securities due to the fact that the value of the derivative security is explicitly determined by reference to the price or value of such securities, or that provides such Person or any of such Person’s Affiliates or Associates an opportunity, directly or indirectly, to profit or to share in any profit derived from any change in the value of such securities, in any case without regard to whether (A) such derivative security conveys any voting rights in such securities to such Person or any of such Person’s Affiliates or Associates; (B) the derivative security is required to be, or capable of being, settled through delivery of such securities; or (C) such Person or any of such Person’s Affiliates or Associates may have entered into other transactions that hedge the economic effect of such derivative security;

 

Notwithstanding the foregoing, no Person engaged in business as an underwriter of securities shall be deemed the Beneficial Owner of any securities acquired through such Person’s participation as an underwriter in good faith in a firm commitment underwriting.

 

(c)          A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

 

(i)          Acquisition of Stock by Third Party. Any Person is or becomes the Beneficial Owner (as defined above), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, provided that a Change of Control shall be deemed to have occurred if subsequent to such reduction such Person becomes the Beneficial Owner, directly or indirectly, of any additional securities of the Company conferring upon such Person any additional voting power;

 

(ii)          Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(c)(i), 2(c)(iii) or 2(c)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;

 

 

(iii)          Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or successor entity) more than 50% of the combined voting power of the voting securities of the surviving or successor entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving or successor entity;

 

(iv)          Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale, lease, exchange or other transfer by the Company, in one or a series of related transactions, of all or substantially all of the Company’s assets; and

 

(v)          Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act whether or not the Company is then subject to such reporting requirement.

 

(d)          “Corporate Status” describes the status of a person as a current or former director of the Company or current or former director, manager, partner, officer, employee, agent or trustee of any other Enterprise which such person is or was serving at the request of the Company.

 

(e)          “Enforcement Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with an action to enforce indemnification or advancement rights, or an appeal from such action. Expenses, however, shall not include fees, salaries, wages or benefits owed to Indemnitee.

 

(f)          “Enterprise” shall mean any corporation (other than the Company), partnership, joint venture, trust, employee benefit plan, limited liability company or other legal entity of which Indemnitee is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee.

 

(g)          “Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses, however, shall not include amounts paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees, salaries, wages or benefits owed to Indemnitee.

 

(h)          “Independent Counsel” means a law firm, or a partner (or, if applicable, member or shareholder) of such a law firm, that is experienced in matters of Delaware corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company, any subsidiary of the Company, any Enterprise or Indemnitee in any matter material to any such party; or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

 

(i)          “Person” shall mean (i) an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated organization or any other association or entity including any successor (by merger or otherwise) thereof or thereto, and (ii) a “group” as that term is used for purposes of Section 13(d)(3) of the Exchange Act.

 

(j)          The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, regulatory or investigative nature, and whether formal or informal, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director of the Company or is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise or by reason of any action taken by Indemnitee or of any action taken on his or her part while acting as a director of the Company or while serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses can be provided under this Agreement; provided, however, that the term “Proceeding” shall not include any action, suit or arbitration, or part thereof, initiated by Indemnitee to enforce Indemnitee’s rights under this Agreement as provided for in Section 12(a) of this Agreement.

 

Section 3.          Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee to the extent set forth in this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, fines, penalties, excise taxes and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

 

Section 4.          Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee to the extent set forth in this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery (the “Delaware Court”) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court shall deem proper.

 

 

Section 5.          Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement and except as provided in Section 7, to the extent that Indemnitee is a party to or a participant in any Proceeding and is successful in such Proceeding or in defense of any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 6.          Reimbursement for Expenses of a Witness or in Response to a Subpoena. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any Proceeding to which Indemnitee is not a party and is not threatened to be made a party or (ii) receives a subpoena with respect to any Proceeding to which Indemnitee is not a party and is not threatened to be made a party, the Company shall reimburse Indemnitee for all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

 

Section 7.          Exclusions. Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement:

 

(a)          to indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received such amounts under any insurance policy, contract, agreement or otherwise; provided that the foregoing shall not [(i)] apply to any personal or umbrella liability insurance maintained by Indemnitee, [or, (ii) affect the rights of Indemnitee or the Fund Indemnitors as set forth in Section 13(c)];

 

(b)          to indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, or from the purchase or sale by Indemnitee of such securities in violation of Section 306 of the Sarbanes-Oxley Act of 2002 (“SOX”);

 

 

(c)          to indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the Company, any legal entity which it controls, any director or officer thereof or any third party, unless (i) the Board has consented to the initiation of such Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; provided, however, that this Section 7(c) shall not apply to (A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being sought as described in Section 12; or

 

(d)          to provide any indemnification or advancement of expenses that is prohibited by applicable law (as such law exists at the time payment would otherwise be required pursuant to this Agreement).

 

Section 8.          Advancement of Expenses. Subject to Section 9(b), the Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s (i) ability to repay the expenses, (ii) ultimate entitlement to indemnification under the other provisions of this Agreement and (iii) entitlement to and availability of insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered loss under the provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)). Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to the fullest extent required by law to repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required. The right to advances under this paragraph shall in all events continue until final disposition of any Proceeding, including any appeal therein. Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to Section 12(e) of this Agreement.

 

Section 9.          Procedure for Notification and Defense of Claim.

 

(a)          To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request therefor specifying the basis for the claim, the amounts for which Indemnitee is seeking payment under this Agreement, and all documentation related thereto as reasonably requested by the Company.

 

 

(b)          In the event that the Company shall be obligated hereunder to provide indemnification for or make any advancement of Expenses with respect to any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, or any claim, issue or matter therein, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld or delayed) upon the delivery to Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ separate counsel in any such Proceeding at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of such defense, (C) the Company shall not continue to retain such counsel to defend such Proceeding or (D) a Change in Control shall have occurred, then the fees and expenses actually and reasonably incurred by Indemnitee with respect to his or her separate counsel shall be Expenses hereunder.

 

(c)          In the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b) above, then the Company will be entitled to participate in the Proceeding at its own expense.

 

(d)          The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed). Without limiting the generality of the foregoing, the fact that an insurer under an applicable insurance policy delays or is unwilling to consent to such settlement or is or may be in breach of its obligations under such policy, or the fact that directors’ and officers’ liability insurance is otherwise unavailable or not maintained by the Company, may not be taken into account by the Company in determining whether to provide its consent. The Company shall not, without the prior written consent of Indemnitee (which consent shall not be unreasonably withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any non-monetary remedy imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder or (ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled to seek indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.

 

 

Section 10.          Procedure Upon Application for Indemnification.

 

(a)          Upon written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if such determination is required by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be made in the specific case by one of the following methods: (x) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board; or (y) if a Change in Control shall not have occurred: (i) by a majority vote of the disinterested directors, even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; or (iii) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board. For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought. In the case that such determination is made by Independent Counsel, a copy of Independent Counsel’s written opinion shall be delivered to Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within thirty (30) days after such determination. Indemnitee shall cooperate with the Independent Counsel or the Company, as applicable, in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel or the Company, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company shall likewise cooperate with Indemnitee and Independent Counsel, if applicable, in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel and Indemnitee, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Company and reasonably necessary to such determination. Any out-of-pocket costs or expenses (including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the Independent Counsel or the Company shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

 

(b)          If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a), the Independent Counsel shall be selected by the Board if a Change in Control shall not have occurred or, if a Change in Control shall have occurred, by Indemnitee. Indemnitee or the Company, as the case may be, may, within ten (10) days after written notice of such selection, deliver to the Company or Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 9(a), and (ii) the final disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been selected without objection, either Indemnitee or the Company may petition the Delaware Court for resolution of any objection which shall have been made by Indemnitee or the Company to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate. The person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

 

(c)          Notwithstanding anything to the contrary contained in this Agreement, the determination of entitlement to indemnification under this Agreement shall be made without regard to the Indemnitee’s entitlement to and availability of insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered loss under the provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)).

 

Section 11.          Presumptions and Effect of Certain Proceedings.

 

(a)          To the extent permitted by applicable law, in making a determination with respect to entitlement to indemnification hereunder, it shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof and the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with the making of any determination contrary to that presumption.

 

(b)          The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

(c)          Indemnitee shall be deemed to have acted in good faith if Indemnitee’s actions were based on the records or books of account of the Company or any other Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, officers, agents or employees of the Company or any other Enterprise in the course of their duties, or on the advice of legal counsel for the Company or any other Enterprise or on information or records given or reports made to the Company or any other Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or any other Enterprise. The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failure to act, of any director, manager, partner, officer, employee, agent or trustee of the Company, any subsidiary of the Company, or any Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 11(c) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

 

Section 12.          Remedies of Indemnitee.

 

(a)          Subject to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification for which a determination is to be made other than by Independent Counsel, (iv) payment of indemnification or reimbursement of expenses is not made pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within thirty (30) days after receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his or her entitlement to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

(b)          In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.

 

(c)          If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law.

 

(d)          The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

 

(e)          The Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all Enforcement Expenses and, if requested by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being sought. Such written request for advancement shall include invoices received by Indemnitee in connection with such Enforcement Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law need not be included with the invoice.

 

 

(f)          Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein.

 

Section 13.          Non-exclusivity; Survival of Rights; Insurance; [Primacy of Indemnification;] Subrogation.

 

(a)          The rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

(b)          To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, managers, partners, officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, manager, partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Upon request of Indemnitee, the Company shall also promptly provide to Indemnitee: (i) copies of all of the Company’s potentially applicable directors’ and officers’ liability insurance policies, (ii) copies of such notices delivered to the applicable insurers and (iii) copies of all subsequent communications and correspondence between the Company and such insurers regarding the Proceeding.

 

 

(c)          [The Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement of expenses and/or insurance provided by [Name of Fund/Sponsor] and certain of [its][their] affiliates (collectively, the “Fund Indemnitors”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Charter and/or Bylaws (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 13(c).]

 

(d)          [Except as provided in paragraph (c) above,] [I/i]n the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee [(other than against the Fund Indemnitors)], who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(e)          [Except as provided in paragraph (c) above,] [T/t]he Company’s obligation to provide indemnification or advancement hereunder to Indemnitee who is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement from such other Enterprise.

 

Section 14.          Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director of the Company or (b) one (1) year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his or her heirs, executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

 

Section 15.          Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

Section 16.          Enforcement.

 

(a)          The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to [serve][continue to serve] as a director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director of the Company.

 

(b)          This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Charter, the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

Section 17.          Modification and Waiver. No supplement, modification or amendment, or waiver of any provision, of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver. No supplement, modification or amendment of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such supplement, modification or amendment.

 

Section 18.          Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification, reimbursement or advancement as provided hereunder. The failure of Indemnitee to so notify the Company or any delay in notification shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise, unless, and then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to the Company’s ability to defend such Proceeding or matter; and, provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding.

 

 

Section 19.          Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (iii) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (iv) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

 

(a)          If to Indemnitee, at such address as Indemnitee shall provide to the Company.

 

(b)          If to the Company to:

 

City Therapeutics, Inc.

399 Binney Street

Cambridge, MA 02141

Attention: Chief Legal Officer

 

or to any other address as may have been furnished to Indemnitee by the Company.

 

Section 20.          Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding in such proportion as is deemed fair and reasonable in light of all of the circumstances in order to reflect (i) the relative benefits received by the Company and Indemnitee in connection with the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transactions.

 

Section 21.          Internal Revenue Code Section 409A. The Company intends for this Agreement to comply with the Indemnification exception under Section 1.409A-1(b)(10) of the regulations promulgated under the Internal Revenue Code of 1986, as amended (the “Code”), which provides that indemnification of, or the purchase of an insurance policy providing for payments of, all or part of the expenses incurred or damages paid or payable by Indemnitee with respect to a bona fide claim against Indemnitee or the Company do not provide for a deferral of compensation, subject to Section 409A of the Code, where such claim is based on actions or failures to act by Indemnitee in his or her capacity as a service provider of the Company. The parties intend that this Agreement be interpreted and construed with such intent.

 

Section 22.          Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of process at the address set forth in Section 19 of this Agreement with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

 

Section 23.          Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

Section 24.          Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

Section 25.          Monetary Damages Insufficient/Specific Enforcement. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will result in not forcing the Company to specifically perform its obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

	CITY THERAPEUTICS, INC.
	By:
		Name:
		Title:
	[Name of Indemnitee]

 

 

 

Exhibit 10.5

 

CITY THERAPEUTICS, INC.

 

FORM OF EMPLOYEE DIRECTOR / OFFICER

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (this “Agreement”) is made as of [●] by and between City Therapeutics, Inc., a Delaware corporation (the “Company”), and [●] (“Indemnitee”).

 

RECITALS

 

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company;

 

WHEREAS, in order to induce Indemnitee to [continue to] provide services to the Company, the Company wishes to provide for the indemnification of, and advancement of expenses to, Indemnitee to the maximum extent permitted by law;

 

WHEREAS, the Amended and Restated Certificate of Incorporation (as amended and in effect from time to time, the “Charter”) and the Amended and Restated Bylaws (as amended and in effect from time to time, the “Bylaws”) of the Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”);

 

WHEREAS, the Charter, the Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that the increased difficulty in attracting and retaining highly qualified persons such as Indemnitee is detrimental to the best interests of the Company’s stockholders;

 

WHEREAS, it is reasonable and prudent for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law, regardless of any amendment or revocation of the Charter or the Bylaws, so that they will [continue to] serve the Company free from undue concern that they will not be so indemnified; and

 

WHEREAS, this Agreement is a supplement to and in furtherance of the indemnification provided in the Charter, the Bylaws and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1.          Services to the Company. Indemnitee agrees to [continue to] serve as [a director and] an officer of the Company. Indemnitee may at any time and for any reason resign from [any] such position (subject to any other contractual obligation or any obligation imposed by law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.

 

 

Section 2.          Definitions.

 

As used in this Agreement:

 

(a)          “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date of this Agreement; provided, however, that no Person who is a director or officer of the Company shall be deemed an Affiliate or an Associate of any other director or officer of the Company solely as a result of his or her position as director or officer of the Company.

 

(b)          A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own” and have “Beneficial Ownership” of, any securities:

 

(i)          which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, Beneficially Owns (as determined pursuant to Rule 13d-3 of the Rules under the Exchange Act, as in effect on the date of this Agreement);

 

(ii)          which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has: (A) the legal, equitable or contractual right or obligation to acquire (whether directly or indirectly and whether exercisable immediately or only after the passage of time, compliance with regulatory requirements, satisfaction of one or more conditions (whether or not within the control of such Person) or otherwise) upon the exercise of any conversion rights, exchange rights, rights, warrants or options, or otherwise; (B) the right to vote pursuant to any agreement, arrangement or understanding (whether or not in writing); or (C) the right to dispose of pursuant to any agreement, arrangement or understanding (whether or not in writing) (other than customary arrangements with and between underwriters and selling group members with respect to a bona fide public offering of securities);

 

(iii)          which are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting or disposing of any securities of the Company; or

 

(iv)          that are the subject of a derivative transaction entered into by such Person or any of such Person’s Affiliates or Associates, including, for these purposes, any derivative security acquired by such Person or any of such Person’s Affiliates or Associates that gives such Person or any of such Person’s Affiliates or Associates the economic equivalent of ownership of an amount of securities due to the fact that the value of the derivative security is explicitly determined by reference to the price or value of such securities, or that provides such Person or any of such Person’s Affiliates or Associates an opportunity, directly or indirectly, to profit or to share in any profit derived from any change in the value of such securities, in any case without regard to whether (A) such derivative security conveys any voting rights in such securities to such Person or any of such Person’s Affiliates or Associates; (B) the derivative security is required to be, or capable of being, settled through delivery of such securities; or (C) such Person or any of such Person’s Affiliates or Associates may have entered into other transactions that hedge the economic effect of such derivative security.

 

 

Notwithstanding the foregoing, no Person engaged in business as an underwriter of securities shall be deemed the Beneficial Owner of any securities acquired through such Person’s participation as an underwriter in good faith in a firm commitment underwriting.

 

(c)          A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

 

(i)          Acquisition of Stock by Third Party. Any Person is or becomes the Beneficial Owner (as defined above), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, provided that a Change of Control shall be deemed to have occurred if subsequent to such reduction such Person becomes the Beneficial Owner, directly or indirectly, of any additional securities of the Company conferring upon such Person any additional voting power;

 

(ii)          Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in Sections 2(c)(i), 2(c)(iii) or 2(c)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;

 

(iii)          Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or successor entity) more than 50% of the combined voting power of the voting securities of the surviving or successor entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving or successor entity;

 

(iv)          Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale, lease, exchange or other transfer by the Company, in one or a series of related transactions, of all or substantially all of the Company’s assets; and

 

 

(v)          Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act whether or not the Company is then subject to such reporting requirement.

 

(d)          “Corporate Status” describes the status of a person as a current or former [director or] officer of the Company or current or former director, manager, partner, officer, employee, agent or trustee of any other Enterprise which such person is or was serving at the request of the Company.

 

(e)          “Enforcement Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with an action to enforce indemnification or advancement rights, or an appeal from such action. Expenses, however, shall not include fees, salaries, wages or benefits owed to Indemnitee.

 

(f)          “Enterprise” shall mean any corporation (other than the Company), partnership, joint venture, trust, employee benefit plan, limited liability company or other legal entity of which Indemnitee is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee.

 

(g)          “Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses, however, shall not include amounts paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees, salaries, wages or benefits owed to Indemnitee.

 

(h)          “Independent Counsel” means a law firm, or a partner (or, if applicable, member or shareholder) of such a law firm, that is experienced in matters of Delaware corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company, any subsidiary of the Company, any Enterprise or Indemnitee in any matter material to any such party; or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any Person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

 

(i)          “Person” shall mean (i) an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated organization or any other association or entity including any successor (by merger or otherwise) thereof or thereto, and (ii) a “group” as that term is used for purposes of Section 13(d)(3) of the Exchange Act.

 

(j)          The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, regulatory or investigative nature, and whether formal or informal, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the fact that Indemnitee is or was [a director or] an officer of the Company or is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise or by reason of any action taken by Indemnitee or of any action taken on his or her part while acting as [a director or] an officer of the Company or while serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses can be provided under this Agreement; provided, however, that the term “Proceeding” shall not include any action, suit or arbitration, or part thereof, initiated by Indemnitee to enforce Indemnitee’s rights under this Agreement as provided for in Section 12(a) of this Agreement.

 

Section 3.          Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee to the extent set forth in this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, fines, penalties, excise taxes and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

 

Section 4.          Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee to the extent set forth in this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery (the “Delaware Court”) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court shall deem proper.

 

 

Section 5.          Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement and except as provided in Section 7, to the extent that Indemnitee is a party to or a participant in any Proceeding and is successful in such Proceeding or in defense of any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 6.          Reimbursement for Expenses of a Witness or in Response to a Subpoena. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any Proceeding to which Indemnitee is not a party and is not threatened to be made a party or (ii) receives a subpoena with respect to any Proceeding to which Indemnitee is not a party and is not threatened to be made a party, the Company shall reimburse Indemnitee for all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

 

Section 7.          Exclusions. Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement:

 

(a)          to indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received such amounts under any insurance policy, contract, agreement or otherwise; provided that the foregoing shall not apply to any personal or umbrella liability insurance maintained by Indemnitee;

 

(b)          to indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, or from the purchase or sale by Indemnitee of such securities in violation of Section 306 of the Sarbanes-Oxley Act of 2002 (“SOX”);

 

(c)          to indemnify for any reimbursement of, or repayment to, the Company by Indemnitee of (i) any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company pursuant to the terms of (A) Section 304 of SOX, (B) Exchange Act Rule 10D-1 or (C) any formal policy of the Company adopted by the Board (or a committee thereof) or (ii) any other remuneration paid to Indemnitee if it shall be determined by a final judgment or other final adjudication that payment of such remuneration was or would have been in violation of law;

 

 

(d)          to indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the Company, any legal entity which it controls, any director or officer thereof or any third party, unless (i) the Board has consented to the initiation of such Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law; provided, however, that this Section 7(d) shall not apply to (A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being sought as described in Section 12; or

 

(e)          to provide any indemnification or advancement of expenses that is prohibited by applicable law (as such law exists at the time payment would otherwise be required pursuant to this Agreement).

 

Section 8.          Advancement of Expenses. Subject to Section 9(b), the Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s (i) ability to repay the expenses, (ii) ultimate entitlement to indemnification under the other provisions of this Agreement and (iii) entitlement to and availability of insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered loss under the provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)). Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to the fullest extent required by law to repay the advance if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required. The right to advances under this paragraph shall in all events continue until final disposition of any Proceeding, including any appeal therein. Nothing in this Section 8 shall limit Indemnitee’s right to advancement pursuant to Section 12(e) of this Agreement.

 

Section 9.          Procedure for Notification and Defense of Claim.

 

(a)          To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request therefor specifying the basis for the claim, the amounts for which Indemnitee is seeking payment under this Agreement and all documentation related thereto as reasonably requested by the Company.

 

(b)          In the event that the Company shall be obligated hereunder to provide indemnification for or make any advancement of Expenses with respect to any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, or any claim, issue or matter therein, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld or delayed) upon the delivery to Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Proceeding; provided that (i) Indemnitee shall have the right to employ separate counsel in any such Proceeding at Indemnitee’s expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of such defense, (C) the Company shall not continue to retain such counsel to defend such Proceeding or (D) a Change in Control shall have occurred, then the fees and expenses actually and reasonably incurred by Indemnitee with respect to his or her separate counsel shall be Expenses hereunder.

 

 

(c)          In the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b) above, then the Company will be entitled to participate in the Proceeding at its own expense.

 

(d)          The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed). Without limiting the generality of the foregoing, the fact that an insurer under an applicable insurance policy delays or is unwilling to consent to such settlement or is or may be in breach of its obligations under such policy, or the fact that directors’ and officers’ liability insurance is otherwise unavailable or not maintained by the Company, may not be taken into account by the Company in determining whether to provide its consent. The Company shall not, without the prior written consent of Indemnitee (which consent shall not be unreasonably withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any non-monetary remedy imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder or (ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled to seek indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.

 

Section 10.          Procedure Upon Application for Indemnification.

 

(a)          Upon written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if such determination is required by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be made in the specific case by one of the following methods: (x) if a Change in Control shall have occurred and indemnification is being requested by Indemnitee hereunder in his or her capacity as a director of the Company, by Independent Counsel in a written opinion to the Board; or (y) in any other case, (i) by a majority vote of the disinterested directors, even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; or (iii) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board. For purposes hereof, disinterested directors are those members of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought. In the case that such determination is made by Independent Counsel, a copy of Independent Counsel’s written opinion shall be delivered to Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within thirty (30) days after such determination. Indemnitee shall cooperate with the Independent Counsel or the Company, as applicable, in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel or the Company, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company shall likewise cooperate with Indemnitee and Independent Counsel, if applicable, in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel and Indemnitee, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Company and reasonably necessary to such determination. Any out-of-pocket costs or expenses (including reasonable attorneys’ fees and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the Independent Counsel or the Company shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

 

 

(b)          If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a), the Independent Counsel shall be selected by the Board[; provided that, if a Change in Control shall have occurred and indemnification is being requested by Indemnitee hereunder in his or her capacity as a director of the Company, the Independent Counsel shall be selected by Indemnitee]. Indemnitee [or the Company, as the case may be,] may, within ten (10) days after written notice of such selection, deliver to the Company [or Indemnitee, as the case may be,] a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the Person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within twenty (20) days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 9(a) and (ii) the final disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been selected without objection, either Indemnitee or the Company may petition the Delaware Court for resolution of any objection which shall have been made by Indemnitee or the Company to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a Person selected by the court or by such other Person as the court shall designate. The Person with respect to whom all objections are so resolved or the Person so appointed shall act as Independent Counsel under Section 10(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

(c)          Notwithstanding anything to the contrary contained in this Agreement, the determination of entitlement to indemnification under this Agreement shall be made without regard to the Indemnitee’s entitlement to and availability of insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered loss under the provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)).

 

 

Section 11.          Presumptions and Effect of Certain Proceedings.

 

(a)          To the extent permitted by applicable law, in making a determination with respect to entitlement to indemnification hereunder, it shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof and the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with the making of any determination contrary to that presumption.

 

(b)          The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

(c)          Indemnitee shall be deemed to have acted in good faith if Indemnitee’s actions were based on the records or books of account of the Company or any other Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, officers, agents or employees of the Company or any other Enterprise in the course of their duties, or on the advice of legal counsel for the Company or any other Enterprise or on information or records given or reports made to the Company or any other Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or any other Enterprise. The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failure to act, of any director, manager, partner, officer, employee, agent or trustee of the Company, any subsidiary of the Company, or any Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 11(c) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

 

Section 12.          Remedies of Indemnitee.

 

(a)          Subject to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(a) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification for which a determination is to be made other than by Independent Counsel, (iv) payment of indemnification or reimbursement of expenses is not made pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within thirty (30) days after receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his or her entitlement to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

(b)          In the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.

 

(c)          If a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification or (ii) a prohibition of such indemnification under applicable law.

 

(d)          The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

 

(e)          The Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all Enforcement Expenses and, if requested by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is being sought. Such written request for advancement shall include invoices received by Indemnitee in connection with such Enforcement Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law need not be included with the invoice.

 

 

(f)          Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding, including any appeal therein.

 

Section 13.          Non-exclusivity; Survival of Rights; Insurance; Subrogation.

 

(a)          The rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders or a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Charter, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

(b)          To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, managers, partners, officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, manager, partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Upon request of Indemnitee, the Company shall also promptly provide to Indemnitee: (i) copies of all of the Company’s potentially applicable directors’ and officers’ liability insurance policies, (ii) copies of such notices delivered to the applicable insurers and (iii) copies of all subsequent communications and correspondence between the Company and such insurers regarding the Proceeding.

 

 

(c)          In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(d)          The Company’s obligation to provide indemnification or advancement hereunder to Indemnitee who is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement from such other Enterprise.

 

Section 14.          Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as [both a director and] an officer of the Company or (b) one (1) year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his or her heirs, executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

Section 15.          Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

Section 16.          Enforcement.

 

(a)          The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to [continue to] serve as [a director and] an officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as [a director and] an officer of the Company.

 

 

(b)          This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Charter, the Bylaws and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

Section 17.          Modification and Waiver. No supplement, modification or amendment, or waiver of any provision, of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver. No supplement, modification or amendment of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee prior to such supplement, modification or amendment.

 

Section 18.          Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification, reimbursement or advancement as provided hereunder. The failure of Indemnitee to so notify the Company or any delay in notification shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise, unless, and then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to the Company’s ability to defend such Proceeding or matter; and, provided, further, that notice will be deemed to have been given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding.

 

Section 19.          Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (iii) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (iv) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

 

(a)          If to Indemnitee, at such address as Indemnitee shall provide to the Company.

 

(b)          If to the Company to:

 

City Therapeutics, Inc.

399 Binney Street

Cambridge, MA 02142

Attention: Chief Legal Officer

 

or to any other address as may have been furnished to Indemnitee by the Company.

 

 

Section 20.          Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding in such proportion as is deemed fair and reasonable in light of all of the circumstances in order to reflect (i) the relative benefits received by the Company and Indemnitee in connection with the event(s) and/or transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transactions.

 

Section 21.          Internal Revenue Code Section 409A. The Company intends for this Agreement to comply with the Indemnification exception under Section 1.409A-1(b)(10) of the regulations promulgated under the Internal Revenue Code of 1986, as amended (the “Code”), which provides that indemnification of, or the purchase of an insurance policy providing for payments of, all or part of the expenses incurred or damages paid or payable by Indemnitee with respect to a bona fide claim against Indemnitee or the Company do not provide for a deferral of compensation, subject to Section 409A of the Code, where such claim is based on actions or failures to act by Indemnitee in his or her capacity as a service provider of the Company. The parties intend that this Agreement be interpreted and construed with such intent.

 

Section 22.          Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of process at the address set forth in Section 19 of this Agreement with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

Section 23.          Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

 

Section 24.          Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

Section 25.          Monetary Damages Insufficient/Specific Enforcement. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will result in not forcing the Company to specifically perform its obligations pursuant to this Agreement) and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertakings in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

	CITY THERAPEUTICS, INC.
	By:
		Name:
		Title:
	[Name of Indemnitee]

 

 

 

Exhibit 10.10

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS
BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT
TREATS AS PRIVATE OR CONFIDENTIAL.

 

Research Collaboration and License Agreement

 

By And Between

 

Biogen MA Inc.

 

and

 

City Therapeutics, Inc.

 

Dated May 23, 2025

  

 

TABLE OF CONTENTS

 

		Page
ARTICLE 1	DEFINITIONS	1
ARTICLE 2	LICENSE GRANTS	22
2.1	License Grants	22
2.2	Sublicenses and Subcontracting	23
2.3	Responsibility for Sublicensees and Affiliates	24
2.4	No Implied Licenses	24
2.5	Upstream Agreements	25
2.6	Related Third Party Rights	25
2.7	Exclusivity	26
2.8	Option for Additional Target	26
ARTICLE 3	RESEARCH COLLABORATION	27
3.1	Overview	27
3.2	Research Plan	27
3.3	Research Activities	28
3.4	Reports of Research Activities	29
3.5	Data Packages and Candidate Selection	29
3.6	Costs of Research Activities	31
3.7	Performance of City Research Activities	31
3.8	Records	31
ARTICLE 4	GOVERNANCE	32
4.1	Alliance Management	32
4.2	Joint Research Committee	32
4.3	Other Committees	35
4.4	Disbandment of the JRC and Other Committees	35
ARTICLE 5	DEVELOPMENT, MANUFACTURING, REGULATORY MATTERS, AND COMMERCIALIZATION	35
5.1	Technology Transfers	35
5.2	Development and Medical Affairs	37
5.3	Manufacturing	37
5.4	Regulatory Activities	37
5.5	Commercialization	38
5.6	Diligence Obligations	38

 

 

5.7	Additional City Support	38
5.8	Reports	39
5.9	Allocation of Costs	39
ARTICLE 6	FINANCIAL TERMS	39
6.1	Upfront Payments	39
6.2	Milestone Payments	39
6.3	Royalties on Royalty-Bearing Products	40
6.4	Other Amounts Payable	42
6.5	Payment Method	42
6.6	Currency Exchange	42
6.7	Late Payments	42
6.8	Right to Offset	42
6.9	Taxes	42
6.10	Financial Audits	45
ARTICLE 7	REPRESENTATIONS, WARRANTIES, AND COVENANTS	45
7.1	Mutual Representations and Warranties of the Parties	45
7.2	Additional Representations and Warranties of City	46
7.3	Updated Disclosure Schedules	50
7.4	Covenants of Each Party	51
7.5	Covenants of City	51
7.6	OSIF Matters	52
7.7	Disclaimer of Warranties	52
ARTICLE 8	CONFIDENTIALITY	52
8.1	Non-Disclosure and Non-Use Obligation	52
8.2	Exemptions	53
8.3	Permitted Disclosures	53
8.4	Redacted Agreement	55
8.5	Confidential Treatment	56
8.6	Equitable Relief	56
8.7	Use of Name and Logo	56
8.8	Residual Knowledge	56
8.9	Publications	56
ARTICLE 9	INTELLECTUAL PROPERTY	57
9.1	Ownership	57
9.2	Patent Prosecution and Maintenance	59
9.3	Patent Enforcement	62
9.4	Infringement of Third Party Rights	63
9.5	Patent Oppositions and Other Proceedings	64
9.6	Patent Listing	65
9.7	Patent Term Extensions	65

 

 

9.8	Common Interest Agreement	65
9.9	Trademarks	65
9.10	Patent Counsel	65
ARTICLE 10	INDEMNIFICATION	65
10.1	Indemnification by City	65
10.2	Indemnification by Biogen	66
10.3	Procedure	66
10.4	Limitation Of Liability	67
10.5	Insurance	67
ARTICLE 11	TERM AND TERMINATION	67
11.1	Term	67
11.2	Termination for Failure to Make Selection	68
11.3	Termination for Cause	68
11.4	Termination by Biogen for Insolvency of City	69
11.5	Rights in Bankruptcy	69
11.6	Termination for Convenience by Biogen	71
11.7	Effects of Termination	71
11.8	Alternative Remedy in Lieu of Termination	72
11.9	Rights Accruing Prior to Expiration or Termination	73
11.10	Survival	73
11.11	Injunction for Particular Breach	74
11.12	[***]	74
ARTICLE 12	MISCELLANEOUS	75
12.1	Assignment	75
12.2	Entire Agreement; Amendments	75
12.3	Force Majeure	75
12.4	Export Control	76
12.5	Waiver and Non-Exclusion of Remedies	76
12.6	Severability	76
12.7	Notices	76
12.8	Governing Law	77
12.9	Dispute Resolution	77
12.10	Relationship of the Parties	79
12.11	Performance by Affiliates	79
12.12	Third Party Beneficiaries	79
12.13	Interpretation	79
12.14	Further Assurances	80
12.15	Counterparts	80

 

 

Exhibits:
Exhibit 1.20	Biogen Specified OSIF License Issues
Exhibit 1.193	Initial Research Plan
Exhibit 11.8	Alternative Remedy Exceptions
Schedules:
Schedule 1.88	Existing Licensed Patent Rights
Schedule 1.220	Target
Schedule 1.232	Upstream Agreements
Schedule 4.1.1	Contact List
Schedule 7.12	Initial Disclsure Schedule

  

 

 

RESEARCH COLLABORATION AND LICENSE AGREEMENT

 

This Research Collaboration And License Agreement (this “Agreement”) is entered into as of May 23, 2025 (the “Effective Date”) by and among Biogen MA Inc., a corporation organized under the laws of the Commonwealth of Massachusetts having an office at 225 Binney Street, Cambridge, MA 02142 (“Biogen”), and City Therapeutics, Inc., a corporation organized and existing under the laws of the State of Delaware having an office at 399 Binney Street, Cambridge, MA 02142 (“City”). Biogen and City are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, Biogen is engaged in, among other things, Research, Development, Manufacturing, and Commercialization of biopharmaceutical products, with certain expertise and proprietary platform technology;

 

WHEREAS, City is a biotechnology company engaged in the Research and Development of novel RNAi therapeutics, with certain expertise and proprietary platform technology;

 

WHEREAS, the Parties are interested in entering into a collaboration to utilize Biogen’s and City’s expertise and the Licensed Technology to perform collaborative Research and other activities, including the Research Activities, with the goal of Researching and Developing RNAi Triggers (as defined below) that inhibit the expression of [***] and Conjugates (as defined below) of such RNAi Triggers, each in accordance with the terms and conditions set forth in this Agreement; and

 

WHEREAS, City desires to grant to Biogen, and Biogen desires to receive from City, an exclusive, worldwide license under the Licensed Technology to exploit Licensed Compounds and Licensed Products in the Field in the Territory, in accordance with the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties hereto agree as follows:

 

ARTICLE 1
DEFINITIONS

 

As and when used in this Agreement (including in the recitals above), the following capitalized terms will have the meanings ascribed to them in this Article 1 (Definitions).

 

1.1

“Acquirer” means, with respect to a Party, any Third Party that is a counterparty in any Change of Control of such Party.

 

1.2

“Acquirer Technology” means, [***].

 

1.3

“Acquisition Party” means, with respect to a Party that undergoes a Change of Control, an Acquirer together with all of its Affiliates in existence immediately prior to the closing of such Change of Control or that become Affiliates of such Acquirer after the closing of such Change of Control (but, in each case, excluding such Party and its Pre-Existing Affiliates).

 

1.4

“Acquisition Transaction” has the meaning set forth in Section 2.7.3 (Acquisition of a Competitive Product by a Party).

 

 

1.5

“Additional Cure Period” has the meaning set forth in Section 11.3.4 (Disputes Regarding Material Breach).

 

1.6

“Additional Target Agreement” has the meaning set forth in Section 2.8.3.

 

1.7

“Additional Upfront Payment” has the meaning set forth in Section 6.1.2 (Additional Upfront Payment).

 

1.8

“Affiliate” of a Person means any other Person that (directly or indirectly) is controlled by, controls, or is under common control with such Person, but only for so long as such control exists. For the purposes of this definition, the term “is controlled by” (including, with correlative meanings, the terms “controls” and “under common control with”), as used with respect to a Person, will mean the possession by the applicable other Person, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and “control” will be presumed to exist if either of the following conditions is met: (a) in the case of a corporate entity, direct or indirect ownership by such other Person of voting securities entitled to cast more than 50% of the votes in the election of the directors of such corporation or (b) in the case of a non-corporate entity, direct or indirect ownership of more than 50% of the equity interests with the power to direct the management and policies of such entity. [***].

 

1.9

“Aggregate Annual Net Sales” means the aggregate Net Sales resulting from the sale of all the Royalty-Bearing Products in all the countries in the Territory during each Calendar Year. For the avoidance of doubt, “Aggregate Annual Net Sales” will exclude any Net Sales of a Royalty-Bearing Product in a country prior to the commencement of the Royalty Term for such Royalty-Bearing Product in such country or following expiration of the Royalty Term for such Royalty-Bearing Product in such country.

 

1.10

“Agreement” has the meaning set forth in the preamble.

 

1.11

“Agreement Patent Right” means any Patent Right owned or otherwise Controlled by either Party or its Affiliates (or both Parties or their respective Affiliates) that claims or Covers any Invention (including any Joint Patent Right, Biogen [***] Patent Right or City Core Technology Patent Right).

 

1.12

“Alliance Manager” means, with respect to each Party, the individual appointed by such Party from time to time to act as the alliance manager under this Agreement, which individual shall meet the requirements set forth in Section 4.1 (Alliance Management).

 

1.13

“Applicable Development Candidate Data Package Date” has the meaning set forth in Section 6.2.1 (Research Milestones).

 

1.14

“Applicable Law” means applicable (with respect to the particular activity, task, or obligation under this Agreement to which such term applies) laws, statutes, rules, regulations, and other pronouncements having the effect of law of any Governmental Authority that may be in effect from time to time, including for clarity any applicable rules, regulations, guidances and other requirements of any Regulatory Authority that may be in effect from time to time.

 

1.15

“Approved Labeling” means, with respect to a Licensed Product, the Regulatory Authority-approved full prescribing information for such Licensed Product.

 

 

1.16

“Assistance Term” means the period beginning upon the Development Candidate Selection Date and ending upon [***].

 

1.17

“Available Target” means [***].

 

1.18

“Bayh Dole Act” means the Patent and Trademark Law Amendments Act of 1980, codified at 35 U.S.C. §§ 200-212, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. Part 401.

 

1.19

“Biogen” has the meaning set forth in the preamble.

 

1.20

“Biogen Acceptable OSIF Agreement” means an amendment to the OSIF License or other written agreement between City and OSIF, in either case, [***] that is approved in writing by Biogen prior to execution thereof by City and OSIF.

 

1.21

“Biogen Acceptable OSIF Agreement Effective Date” has the meaning set forth in Section 6.1.2 (Additional Upfront Payment).

 

1.22

“Biogen [***] Patent Rights” means any and all Patent Rights that (a) claim any [***] Invention, and (b) do not claim any City Core Technology Invention.

 

1.23

“Biogen Indemnified Party” means Biogen, its Affiliates, Sublicensees and Subcontractors, and each of its and their respective employees, officers, directors, and agents.

 

1.24

“Biogen Records” has the meaning set forth in Section 6.10.1 (Record Retention; Audits).

 

1.25

“Biogen Research Activities” has the meaning set forth in the definition of “Research Activities”.

 

1.26

“Biogen Research Know-How” has the meaning set forth in the definition of “Biogen Research Technology”.

 

1.27

“Biogen Research Technology” means all Know-How and Patent Rights, in each case, that are (a) Controlled by Biogen as of the Effective Date or thereafter at any time prior to the end of the Research Term and (b) necessary for City to conduct the City Research Activities in accordance with the Research Plan. The Know-How within the Biogen Research Technology is referred to herein as the “Biogen Research Know-How”.

 

1.28

[***]

 

1.29

“Biosimilar Product” means, on a country-by-country basis, with respect to a Licensed Product, a product that is sold by a Third Party (other than a Sublicensee of Biogen or any of its Affiliates) (a) that has been licensed as a biosimilar or interchangeable biological product by the FDA pursuant to section 351(k) of the PHSA, or any subsequent or superseding law, statute, or regulation, and for which a Licensed Product is the reference product, as defined by section 351(i)(4) of the PHSA, (b) that has been granted a marketing authorization as a similar biological medicinal product by the European Union pursuant to Directive 2001/83/EC and Parliament and Council Regulation No. (EC) 726/2004, each as may be amended, or any subsequent or superseding law, statute or regulation, and for which such Licensed Product is the reference medicinal product as defined by Article 10(2)(A) of Directive 2001/83/EC, or (c) whose licensing, approval or marketing authorization from a Regulatory Authority relies on, in whole or in part, (i) a prior Regulatory Approval granted for such Licensed Product by such Regulatory Authority or (ii) any data generated in support of a prior Regulatory Approval granted for such Licensed Product by such Regulatory Authority.

 

 

1.30

“BLA” means a Biologics License Application, as defined in the FD&C Act, or any corresponding foreign application in the Territory, including, with respect to the European Union, a MAA filed with the EMA pursuant to the centralized approval procedure or with the applicable Regulatory Authority of a country in Europe with respect to the mutual recognition or any other national approval procedure.

 

1.31

[***] means [***] and (b) is (i) provided by Biogen to City for purposes of the Research Program or (ii) generated in the performance of the Research Program.

 

1.32

“[***] Invention” means any and all Inventions that (a) [***] or (b) (i) relate to the [***] and (ii) do not specifically relate to [***]

 

1.33

“Breach Notice” has the meaning set forth in Section 11.3.3 (Cure Periods for Material Breaches).

 

1.34

“Business Day” means any day other than a Saturday, Sunday, or bank or other public holiday in Boston, Massachusetts.

 

1.35

“Calendar Quarter” means the respective period of three consecutive calendar months ending on March 31st, June 30th, September 30th, or December 31st in any Calendar Year, except that the first Calendar Quarter of the Term will commence on the Effective Date, and the last Calendar Quarter of the Term will end on the effective date of the termination or expiration of this Agreement.

 

1.36

“Calendar Year” means any calendar year beginning on January 1st and ending on December 31st, except that the first Calendar Year of the Term will commence on the Effective Date, and the last Calendar Year of the Term will end on the effective date of the termination or expiration of this Agreement.

 

1.37

“Change of Control” means, with respect to a Party, the occurrence of any of the following events: (a) the consummation of a transaction or series of related transactions in which a Third Party, directly or indirectly, acquires from the stockholders of such Party an aggregate number of outstanding shares of capital stock representing more than 50% of the outstanding voting securities of such Party or otherwise obtains control of such Party, as “control” is defined in Section 1.8; (b) a merger, consolidation, or other similar transaction of such Party with or into a Third Party other than any such transaction in which the holders of the outstanding voting securities of such Party immediately prior to the consummation of such merger or consolidation continue to own a majority of the outstanding voting securities of the surviving entity (or its parent entity) immediately following such merger or consolidation; or (c) the sale, transfer, or other disposition to a Third Party of all or substantially all of such Party’s assets or business to which this Agreement relates (including, in the case of City, the Licensed Technology, the City Core Technology Patent Rights, and the City Core Technology Inventions), through one or a series of related transactions (whether via merger, sale of assets, or otherwise). Notwithstanding the foregoing, any transaction or series of transactions effected for the bona fide primary purpose of financing the operations of the applicable Party or changing the form or jurisdiction of organization of such Party will not be deemed a “Change of Control” for purposes of this Agreement.

 

1.38

“City” has the meaning set forth in the preamble.

 

 

1.39

“City Core Technology Invention” means any and all Inventions that (a) relate to [***] and (b) do not specifically relate to [***]

 

1.40

“City Core Technology Patent Rights” means any and all Patent Rights that (a) claim any City Core Technology Invention and (b) do not claim [***].

 

1.41

“City Indemnified Party” means City, its Affiliates, and each of its and their respective employees, officers, directors, and agents.

 

1.42

“City’s Knowledge” means, with respect to the applicable statement in this Agreement to which such term applies, that none of the following officers (or their successors, as applicable) of City are aware, after reasonable investigation (including consultation with City’s outside intellectual property counsel, but without any requirement to conduct additional freedom-to-operate searches to the extent not already conducted on behalf of City by such counsel), that such statement is untrue: [***].

 

1.43

“City Research Activities” has the meaning set forth in the definition of “Research Activities”.

 

1.44

“City Research Know-How” has the meaning set forth in the definition of “City Research Technology”.

 

1.45

“City Research Patent Rights” has the meaning set forth in the definition of “City Research Technology”.

 

1.46

“City Research Report” has the meaning set forth in Section 3.4.1 (Reports of Research Activities).

 

1.47

“City Research Technology” means all Know-How and Patent Rights, in each case, that are (a) Controlled by City as of the Effective Date or thereafter at any time prior to the end of the Research Term and (b) necessary for Biogen to conduct the Biogen Research Activities in accordance with the Research Plan. The Know-How within the City Research Technology is referred to herein as the “City Research Know-How” and the Patent Rights within the City Research Technology are referred to herein as the “City Research Patent Rights”.

 

1.48

[***]

 

1.49

[***]

 

1.50

“Clinical Trial” means any clinical trial in humans that is designed to generate data in support or maintenance of an IND or MAA, including any Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, pivotal trial, or any applicable post-approval clinical trial in humans.

 

1.51

“CMC” means chemistry, manufacturing and controls with respect to a product, which includes (a) manufacturing and process development records for such product and (b) all chemistry, manufacturing and control procedures necessary or useful for the manufacture of such product.

 

1.52

“CMC Activities” means those formulation development, process development, and other CMC-related activities, including sourcing and testing of all raw materials and components used in the manufacture of a product, and activities designed to support preparation of the CMC sections of any Regulatory Submissions or Regulatory Approval.

 

  

1.53

“CMO” has the meaning set forth in Section 5.1.2 (Manufacturing Technology Transfer Obligations).

 

1.54

“Collaboration Know-How” means: (a) all Know-How that is generated in performance of the Research Program (including as set forth in any City Research Reports, RNAi Trigger Data Packages and Development Candidate Data Packages) and is specific to the Target or any Program RNAi Trigger, Program Conjugate, Development Candidate, Licensed Compound, Licensed Product, [***]; and (b) all data that is generated in performance of the Research Program through the use of any Program RNAi Trigger, Program Conjugate, Development Candidate, Licensed Compound, Licensed Product, [***]

 

1.55

“Combination Product” means a Licensed Product that is (a) sold in the form of a combination that contains or comprises a Licensed Compound together with one or more other therapeutically active pharmaceutical agents [***].

 

1.56

“Commercialization,” “Commercializing,” or “Commercialize” means, with respect to any product, any and all activities directed to marketing, advertising, promoting, distributing, importing, exporting, using, offering to sell, and selling or otherwise commercializing such product, including: pre-launch activities to prepare a market for potential sales; modeling and pharmaco-economic studies; epidemiological studies; government affairs, and public policy activities; patient services, patient advocacy engagement; and activities related to pricing and reimbursement, including seeking and maintaining any applicable Pricing and Reimbursement Approvals; but excluding, in each case, any activities directed to Research, Manufacturing, Development, or Medical Affairs. “Commercialized” will be construed accordingly.

 

1.57

“Commercially Reasonable Efforts” means: (a) with respect to the activities of a Party in connection with [***], that level of efforts and resources that is required to carry out a task in a reasonably diligent and sustained manner without undue interruption, pause or delay; and (b) with respect to the efforts to be expended by Biogen or its Affiliate with respect to any Development or Commercialization obligation, objective, activity, or goal related to a Licensed Compound or Licensed Product under this Agreement, those efforts that Biogen would normally use to accomplish such obligation, objective, activity, or goal, and specifically means the carrying out of Development and Commercialization activities using efforts that Biogen would normally devote to a product at a similar stage in its development or product life and of similar market potential, strategic importance, and profit potential (taking into account payments under this Agreement and any agreements entered into or payments owed pursuant to Section 2.6 (Related Third Party Rights) or Section 6.3.4(c) (Third Party Payments)), based on conditions then prevailing and taking into account Biogen’s other products; the efficacy, safety, Approved Labeling, and profitability of the product; the competitiveness of alternative products sold by Third Parties in the marketplace; the patent and other proprietary position of the product; the likelihood of Regulatory Approval given the regulatory structure involved; and all other relevant factors. Commercially Reasonable Efforts will be determined on a country-by-country and Indication-by-Indication basis for the applicable Licensed Compound or Licensed Product, and it is anticipated that the level of effort will change over time, reflecting changes in the status of such Licensed Compound or Licensed Product (as applicable) and the market or country involved. City expressly understands and accepts that the use of Commercially Reasonable Efforts may result in Biogen ceasing the Development or Commercialization of a particular Licensed Compound or Licensed Product (in whole or in part), and that once Development or Commercialization for a particular Licensed Compound or Licensed Product has ceased in compliance with this Agreement, Commercially Reasonable Efforts does not require the continued re-evaluation of whether Development or Commercialization must be re-initiated for such Licensed Compound or Licensed Product.

 

 

1.58

“Competitive Product” means (a) [***].

 

1.59

“Confidential Information” means, with respect to a particular Party (the “Disclosing Party”), all Know-How or other information, including proprietary information and materials (whether or not patentable) regarding or embodying such Party’s technology, products, business information or objectives, that is communicated by or on behalf of the Disclosing Party to the other Party (the “Receiving Party”) or its permitted recipients in connection with this Agreement, including information disclosed prior to the Effective Date pursuant to the Confidentiality Agreement. Notwithstanding the foregoing: (a) the terms and conditions of this Agreement and the Joint Know-How will be considered Confidential Information of both Parties, with each Party deemed to be the Receiving Party with respect thereto; (b) the City Core Technology Inventions other than the Program RNAi Triggers will be considered Confidential Information of City, with Biogen deemed to be the Receiving Party with respect thereto; and (c) the Collaboration Know-How, the [***] Inventions, and the Program RNAi Triggers will be considered Confidential Information of Biogen, with City deemed to be the Receiving Party with respect thereto, provided that, as of the effective date of termination (but not expiration) of this Agreement, the Program RNAi Triggers (including any Collaboration Know-How that is specific to the Program RNAi Triggers and not specifically related to any Program Conjugate or [***] will be considered Confidential Information of City, with Biogen deemed to be the Receiving Party with respect thereto ((a) through (c)), collectively, the “Specified Confidential Information”).

 

1.60

“Confidentiality Agreement” means that certain Confidentiality Agreement dated August 28, 2024, by and between Biogen and City.

 

1.61

“Conjugate” means an RNAi Trigger covalently connected through a Linker to [***]

 

1.62

“Control” or “Controlled” means, with respect to a Party and any Know-How, Patent Rights, Regulatory Approvals, Regulatory Submissions or other Intellectual Property, the possession by such Party or any of its Affiliates (whether by ownership, license, or otherwise, other than pursuant to the licenses granted under Section 2.1 (License Grants)) of, (a) with respect to any tangible Know-How, the legal authority or right to physical possession of such tangible Know-How, with the right to provide such tangible Know-How to the other Party on the terms set forth herein, or (b) with respect to Patent Rights, Regulatory Approvals, Regulatory Submissions, intangible Know-How or other Intellectual Property, the legal authority or right to grant a license, sublicense, access, or right to use (as applicable) to the other Party under such Patent Rights, Regulatory Approvals, Regulatory Submissions, intangible Know-How or other Intellectual Property on the terms set forth herein, in each case ((a) and (b)), without breaching or otherwise violating the terms of any arrangement or agreement with a Third Party in existence as of the time such Party would first be required to provide such tangible Know-How to the other Party or grant the other Party such license, sublicense, access, or right to use such Patent Rights, Regulatory Approvals, Regulatory Submissions, intangible Know-How or other Intellectual Property (as applicable) under this Agreement. Notwithstanding the foregoing, for purposes of determining whether any Patent Rights, Know-How, or other Intellectual Property is Controlled by a Party and included in any licenses or rights granted by such Party to the other Party: [***].

 

1.63

“Cover” or “Covering” means, with respect to a particular Patent Right, and to the applicable product, technology, process, method, or mode of administration, that the manufacture, use, offer for sale, sale, or importation of such product or the practice of such technology, process, method, or mode of administration would, in the absence of ownership of or a license granted under such Patent Right, (a) infringe any claim of such Patent Right, or (b) in the case of a patent application that has not yet issued, infringe any claim of such patent application if it were to issue without change. The term “Covered by” will have the correlative meaning.

 

 

1.64

“Cure Period” has the meaning set forth in Section 11.3.3 (Cure Periods for Material Breaches).

 

1.65

“Data Package Date” means an RNAi Trigger Data Package Date or a Development Candidate Data Package Date, as applicable.

 

1.66

“Debarred” means, with respect to an individual or entity, that such individual or entity has been debarred or suspended under 21 U.S.C. §335(a) or (b), the subject of a conviction described in Section 306 of the FD&C Act, excluded from a federal or governmental health care program, debarred from federal contracting, convicted of or pled nolo contendere to any felony, or to any federal or state legal violation (including misdemeanors) relating to prescription drug products or fraud, the subject to OFAC sanctions or on the OFAC list of specially designated nationals, or the subject of any similar sanction of any Governmental Authority in the Territory.

 

1.67

“Defaulting Party” has the meaning set forth in Section 11.3.3 (Cure Periods for Material Breaches).

 

1.68

“Deliverables” means any and all deliverables to be generated or provided by City in connection with the performance of City Research Activities, as expressly specified in the Research Plan.

 

1.69

“Develop” or “Development” means, with respect to any product, any and all development or regulatory activities that relate to obtaining, maintaining or expanding Regulatory Approval of such product, including any and all activities related to the research, profiling, characterization, pre-clinical development, or nonclinical studies of such product, CMC Activities, clinical drug development activities conducted before or after obtaining Regulatory Approval for such product that are reasonably related to or leading to the development, preparation, or submission of data and information to a Regulatory Authority for the purpose of obtaining, supporting, expanding or maintaining Regulatory Approval of such product, together with all activities related to pharmacokinetic profiling, design and conduct of Clinical Trials of such product, pharmacovigilance activities, adverse event reporting, and regulatory affairs, statistical analysis, report writing and the creation and submission of Regulatory Submissions related to the foregoing (including the services of outside advisors and consultants in connection therewith); but excluding, in each case, any activities directed to Medical Affairs, Commercialization or Manufacturing. “Developing” and “Developed” will be construed accordingly.

 

1.70

“Development Candidate” means a Program Conjugate that has been selected by Biogen pursuant to Section 3.5.4 (Development Candidate Selection) for potential further Exploitation in a Licensed Product.

 

1.71

“Development Candidate Bring-Down Date” has the meaning set forth in Section 7.3.1 (Update as of Development Candidate Bring-Down Date).

 

1.72

“Development Candidate Data Package” has the meaning set forth in Section 3.5.3 (Development Candidate Data Packages).

 

1.73

“Development Candidate Data Package Date” means, with respect to a Program Conjugate, the date that the JRT delivers the Development Candidate Data Package for such Program Conjugate to the JRC in accordance with Section 3.5.3 (Development Candidate Data Packages).

 

 

1.74

“Development Candidate Data Package Disclosure Schedule” has the meaning set forth in Section 7.3.1 (Update as of Development Candidate Bring-Down Date).

 

1.75

“Development Candidate Selection” has the meaning set forth in Section 3.5.4 (Development Candidate Selection).

 

1.76

“Development Candidate Selection Criteria” means Biogen’s selection criteria for the Program Conjugates as defined in the Research Plan.

 

1.77

“Development Candidate Selection Date” has the meaning set forth in Section 3.5.4 (Development Candidate Selection).

 

1.78

“Development Candidate Selection Outside Date” means the earlier of: (a) the date that is [***] after the Effective Date, provided that, if, as of such date, there are ongoing Research Activities with respect to any Program Conjugate for purposes of confirming whether such Program Conjugate satisfies the Development Candidate Selection Criteria, then such date will be extended until the date that (i) such Research Activities are completed, (ii) if such Program Conjugate has satisfied the Development Candidate Selection Criteria, the Development Candidate Data Package Date has occurred with respect thereto and (iii) following the completion of the foregoing (i) and (ii), Biogen has had a reasonable period of [***] to determine whether to make a Development Candidate Selection with respect to such Program Conjugate; and (b) the date that is [***] after the Effective Date.

 

1.79

“Development Milestone Event” has the meaning set forth in Section 6.2.2 (Development Milestones).

 

1.80

“Development Milestone Payment” has the meaning set forth in Section 6.2.2 (Development Milestones).

 

1.81

“Disclosing Party” has the meaning set forth in the definition of “Confidential Information”.

 

1.82

“Divest” means, with respect to a Competitive Product, the sale by the applicable Party and its Affiliates of all of their rights of Exploitation with respect to such Competitive Product to a Third Party without the retention or reservation of any Exploitation obligation, interest, or participation rights (other than solely an economic interest or the right to enforce customary terms contained in the relevant agreements effectuating such transaction). “Divestiture” will be construed accordingly.

 

1.83

“Dollar” means the U.S. dollar, and “$” will be interpreted accordingly.

 

1.84

“Effective Date” has the meaning set forth in the preamble.

 

1.85

“European Union” or “EU” means the economic, scientific, and political organization of member states of the European Union, as its membership may be constituted from time to time.

 

1.86

“Excluded Matters” has the meaning set forth in Section 7.2.6.

 

1.87

“Executive Officers” means the Chief Executive Officer of City and the Head of Research of Biogen (or such Person’s designee, which designee will be at least at the level of a Vice President).

 

 

1.88

“Existing Licensed Patent Rights” means all Licensed Patent Rights in existence as of the Effective Date or the Development Candidate Bring-Down Date, as applicable. The Existing Licensed Patent Rights as of the Effective Date are listed on [***].

 

1.89

“Exploit” means Research, Develop, make, have made, use, perform Medical Affairs, offer for sale, sell, export, import, Manufacture, Commercialize, or otherwise exploit the applicable compound or product. “Exploitation” and “Exploiting” will be construed accordingly.

 

1.90

“FD&C Act” means the Federal Food, Drug and Cosmetic Act, as the same may be amended or supplemented from time to time.

 

1.91

“FDA” means the U.S. Food and Drug Administration, or any successor agency thereto.

 

1.92

“Field” means any and all uses. Notwithstanding the foregoing, for purposes of any licenses granted under the OSIF Patents or any OSIF Know-How, “Field” means all human therapeutic applications.

 

1.93

“First Commercial Sale” means, on a country-by-country and Licensed Product-by-Licensed Product basis, the first sale of the applicable Licensed Product under this Agreement in the applicable country by Biogen, its Affiliates, or its Sublicensees to an end user or prescriber for use, consumption, or resale, (a) following receipt of Regulatory Approval for such Licensed Product in such country and (b) where such sale results in a recordable Net Sale. Notwithstanding the foregoing, “First Commercial Sale” excludes transfers of Licensed Product to Third Parties as bona fide samples, as donations, for the performance of Clinical Trials, or for similar purposes in accordance with Applicable Law pertaining to any expanded access program, any compassionate sales or use program (including named patient program or single patient program), or any indigent program.

 

1.94

“Force Majeure” means, with respect to a Party, any event beyond the reasonable control of such Party, including acts of God, embargoes, war, acts of war (whether war be declared or not), terrorism, insurrections, riots, civil commotions, strikes, lockouts, or other labor disturbances (other than strikes, lockouts, or labor disturbances involving a Party’s own employees), government actions, omissions or delays in action by any Governmental Authority (except to the extent such delay results from the breach by the non-performing Party or any of its Affiliates of any term or condition of this Agreement), fire, earthquakes, floods, epidemics, pandemics, or quarantines.

 

1.95

“FTE” means a full-time-equivalent person year of scientific, technical, regulatory or professional work. An FTE shall consist of a total of [***] hours per Calendar Year, with any portion of an FTE calculated based upon hours worked divided by such annual total.

 

1.96

“FTE Rate” means, with respect to either Party, a rate of USD [***] per FTE for the first Calendar Year during the Term and thereafter increased annually, starting on January 1, 2027, by the percentage increase in the CPI as of December 31st of each Calendar Year over the level of the CPI as of December 31st of the prior Calendar Year.

 

1.97

“GAAP” means United States generally accepted accounting principles, which principles are currently used at the relevant time and consistently applied by the applicable Party.

 

1.98

“GLP” means all applicable good laboratory practice standards, including, as applicable, as set forth in the then-current good laboratory practice standards promulgated or endorsed by the U.S. Food and Drug Administration, as defined in 21 C.F.R. Part 58, and the equivalent Applicable Law in the applicable region in the Territory, each as may be amended and applicable from time to time.

 

 

1.99

“Governmental Authority” means any court, tribunal, arbitrator, agency, commission, department, ministry, official, authority, or other instrumentality of any nation, state, county, city, or other political subdivision.

 

1.100

“IND” means an Investigational New Drug application required pursuant to 21 C.F.R. Part 312 or any comparable filings outside of the United States required to commence human clinical trials in such country or region, and all supplements or amendments that may be filed with respect to the foregoing.

 

1.101

“IND-Enabling Toxicology Study” means any pharmacokinetic or toxicology study under GLP conditions that is intended to satisfy the requirements for filing an IND in the U.S.

 

1.102

“Indemnified Party” means the Party entitled to, or purported to be entitled to, indemnification by the other Party pursuant to Article 10 (Indemnification).

 

1.103

“Indemnifying Party” means the Party from which indemnification is sought pursuant to Article 10 (Indemnification).

 

1.104

“Indication” means the intended use of a Licensed Product for either therapeutic treatment or for the prevention of a specific disease, disorder, or condition in the indication section of the Approved Labeling for such Licensed Product, or that is the subject of a Clinical Trial and where it is intended that the data and results of such Clinical Trial (if successful) will be used to support a Regulatory Approval with distinct labeling in the indication section of the Approved Labeling relevant to usage of such Licensed Product in such disease, disorder or medical condition. All variants of a single disease, disorder or condition (whether classified by severity or otherwise), regardless of the patient population or line of therapy, will be treated as the same Indication.

 

1.105

“Inflation Reduction Act” means P.L. 117-169 (Aug. 16, 2022), as codified at 42 U.S.C. § 1320f, 42 U.S.C. § 1395w-3a and 42 U.S.C. § 1395w-114a (inter alia), and as it may be amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions, and modifications thereto).

 

1.106

“Infringement” has the meaning set forth in Section 9.3.1 (Third Party Infringement).

 

1.107

“Infringement Action” means an infringement, misappropriation, or other appropriate suit or action against any Infringement initiated pursuant to Section 9.3.2 (Infringement Actions).

 

1.108

“Initial Disclosure Schedule” means [***] attached hereto.

 

1.109

“Initiating Party” has the meaning set forth in Section 9.3.2(c) (Procedures).

 

1.110

“Initiation” means: (a) with respect to an IND-Enabling Toxicology Study, that the first animal subject has been dosed in such IND-Enabling Toxicology Study; and (b) with respect to any Clinical Trial, that five human subjects have been dosed in such Clinical Trial.

 

1.111

“Insolvency Event” has the meaning set forth in Section 11.4 (Termination by Biogen for Insolvency of City).

 

 

1.112

“Intellectual Property” means all Patent Rights, copyrights, design rights, trademarks, trade secrets, Know-How, and all other intellectual property rights (whether registered or unregistered) and all applications and rights to apply for any of the foregoing, anywhere in the world.

 

1.113

“Invention” means any invention conceived or first reduced to practice by or on behalf of either Party or its respective Affiliates, or both Parties or their respective Affiliates, in the performance of the Research Program.

 

1.114

“IP Embodiments” has the meaning set forth in Section 11.5.1.

 

1.115

“Joint Know-How” means any and all Inventions or other Know-How that are jointly owned by the Parties pursuant to Section 9.1.2 (Inventions). For the avoidance of doubt, “Joint Know-How” excludes any City Core Technology Inventions and any [***] Inventions.

 

1.116

“Joint Patent Rights” means any and all Patent Rights that claim any Joint Know-How. For the avoidance of doubt, “Joint Patent Rights” excludes any City Core Technology Patent Rights and any [***] Patent Rights.

 

1.117

“Joint Technology” means Joint Know-How and Joint Patent Rights.

 

1.118

“JRC” means the joint research committee established pursuant to Section 4.2.1 (Formation).

 

1.119

“JRT” means the joint research team established pursuant to Section 4.3.2 (Joint Research Team).

 

1.120

“Know-How” means any (a) proprietary information or materials, including records, improvements, modifications, techniques, assays, processes, methods, utilities, formulations, compositions of matter, articles of manufacture, materials (including chemical or biological materials), creation, discovery or finding, designs, protocols, formulas, data (including physical data, chemical data, toxicology data, animal data, raw data, clinical data, and analytical and quality control data), dosage regimens, control assays, product specifications, marketing, pricing and distribution costs, algorithms, technology, forecasts, profiles, strategies, plans, results in any form whatsoever, know-how, and trade secrets (in each case, whether or not patentable, copyrightable, or otherwise protectable), and (b) any physical embodiments of any of the foregoing, but in each case of (a) and (b) excluding any Patent Rights.

 

1.121

“Liability” means, collectively, any and all liabilities, losses, damages, expenses (including reasonable attorneys’ fees and expenses), and costs.

 

1.122

“Licensed Compound” means (a) any Program RNAi Trigger or Modified Program RNAi Trigger, or (b) any conjugate of any Program RNAi Trigger or Modified Program RNAi Trigger, including any Program Conjugate.

 

1.123

“Licensed Know-How” means any and all Know-How that is (a) Controlled by City as of the Effective Date or thereafter at any time prior to the end of the Term and (b) (i) necessary or reasonably useful to make, use, sell, offer to sell, import, Research, Develop or otherwise Exploit any Licensed Compound or Licensed Product (including any Program RNAi Trigger, Program Linker or Program Conjugate contained therein) or (ii) actually disclosed to Biogen by City in connection with the Research Program. Notwithstanding the foregoing, the Licensed Know-How includes the City Core Technology Inventions, the City Research Know-How and the OSIF Know-How, but excludes City’s interest in any Joint Know-How.

 

 

1.124

“Licensed Patent Rights” means any and all Patent Rights that are (a) Controlled by City as of the Effective Date or thereafter at any time prior to the end of the Term and (b) necessary to make, use, sell, offer to sell, import or otherwise Exploit any Licensed Compound or Licensed Product (including any Program RNAi Trigger, Program Linker or Program Conjugate contained therein). Notwithstanding the foregoing, the Licensed Patent Rights include the City Core Technology Patent Rights, the City Research Patent Rights and the OSIF Patents, but exclude City’s interest in any Joint Patent Rights.

 

1.125

“Licensed Product” means any product containing or comprising one or more Licensed Compounds. For clarity, the term “Licensed Product” includes all dosage forms, formulations, and line extensions thereof, and whether alone or with one or more [***], and all such forms, formulations, and line extensions of one particular Licensed Product shall be deemed as the same Licensed Product.

 

1.126

“Licensed Technology” means collectively, the Licensed Know-How, the Licensed Patent Rights, and City’s interest in the Joint Technology.

 

1.127

“Linker” means a molecular moiety designed to serve as a chemical bridge between an RNAi Trigger and another functional moiety.

 

1.128

“MAA” means any new drug application or other similar marketing authorization application, in each case, filed with the applicable Regulatory Authority in a country or other regulatory jurisdiction, which application is required to commercially market or sell a pharmaceutical or biologic product in such country or jurisdiction (and any amendments thereto), including all BLAs or any analogous application or submission with any Regulatory Authority outside of the United States.

 

1.129

“Major European Country” means any of France, Germany, Italy, Spain, or the United Kingdom.

 

1.130

“Manufacture” means, with respect to any product (including active ingredient and other material contained therein), any and all activities related to the manufacture of such product, including qualification, validation and scale-up, pre-clinical, clinical and commercial manufacture, packaging, labeling, filling, finishing, assembly, processing, in-process and finished product testing, release of such product or any component or ingredient thereof, quality assurance, quality control and audit activities related to manufacturing, testing and release of such product, ongoing stability tests, storage, shipping, supply or storage of such product (or any components or process steps involving such product or any companion diagnostic), placebo or comparator agent, as the case may be, product characterization, technical support activities, and regulatory activities related to any of the foregoing, but excluding any activities directed to Commercialization, Research, Development, or Medical Affairs. “Manufacturing” and “Manufactured” will be construed accordingly.

 

1.131

“Materials” shall mean any tangible chemical or biological material, such as small molecules, DNA, RNA, clones or cells, or animal models, each as set forth in the Research Plan.

 

1.132

“Maximum Fair Price” has the meaning set forth in the Inflation Reduction Act or, if under a similar U.S. state or federal law, a similar price under such U.S. state or federal law.

 

1.133

“Medical Affairs” means, with respect to a Licensed Product, any and all activities performed by or on behalf of a Party’s or its Affiliates’ medical affairs departments interacting with physicians or other healthcare professionals who utilize or conduct research related to a drug or biological product, including: supporting continuing medical education and other medical programs and communications; development, publication, and dissemination of publications; development and fulfillment of medical information responses; development and execution of disease awareness education including symposia and digital education initiatives; sponsorship and booth exhibition at key congresses; conducting health economic, burden of illness/disease, natural history and real world evidence studies; supporting educational fellowships and research grants, supporting external research efforts such as scientific research agreements and investigator initiated trials (following Regulatory Approval); medical resourcing, training and allocation; medical and scientific platform, content development, publications, and communications; conducting appropriate activities involving opinion leaders, including communications and engagement; conducting medical science liaison activities; advisory boards (to the extent related to medical affairs or clinical guidance) and conducting advisory board meetings or other consultant programs; establishing patient registries and expanded access programs; post-approval investigator initiated trials or scientific research agreements; life cycle management activities and clinical research.

 

 

1.134

“Medicare Price” means (a) with respect to a Licensed Product that is a covered Part D drug, the average negotiated price (as defined in Section 1860D-2(d) of the Social Security Act), minus the average rebate or other post-point of sale direct or indirect remuneration as described in 42 CFR 423.308, under prescription drug plans or MA-PD plans for such Licensed Product during the Calendar Year immediately prior to the Price Applicability Period or (b) with respect to a Licensed Product for which payment may be made under part B of title XVIII of the Social Security Act, the average payment amount under section 1847A(b)(4) of the Social Security Act across the four Calendar Quarters immediately prior to the Price Applicability Period.

 

1.135

“Milestone Events” means [***].

 

1.136

“Milestone Payments” means [***].

 

1.137

“Modified Program RNAi Trigger” means any RNAi Trigger that has [***].

 

1.138

“mRNA” means messenger ribonucleic acid.

 

1.139

“Net Sales” means with respect to a Licensed Product, the gross amount invoiced by or on behalf of Biogen or its Affiliates or Sublicensees (each of the foregoing Persons, a “Selling Party”) for the sale or other disposition of such Licensed Product to a Third Party (including Third Party Distributors) in the Territory, [***]:

 

(a)

[***]

 

(b)

[***]

 

(c)

[***]

 

(d)

[***]

 

(e)

[***]

 

[***]

 

[***]

 

[***]

 

 

In the case of any Combination Product sold in a given country and reporting period, Net Sales for the purpose of determining royalties and Sales Milestone Events of the Combination Product in such country will be calculated as follows:

 

[***]

 

[***]

 

[***]

 

[***]

 

1.140

“New License Agreement” means any direct license granted by City to a Sublicensee of Biogen as described in Section 2.2.2 (Survival of Sublicenses).

 

1.141

“Non-Defaulting Party” has the meaning set forth in Section 11.3.3 (Cure Periods for Material Breaches).

 

1.142

“Option” has the meaning set forth in Section 2.8.1.

 

1.143

“Option Exercise Notice” has the meaning set forth in Section 2.8.2.

 

1.144

“Option Exercise Period” means [***].

 

1.145

“Option Negotiation Period” has the meaning set forth in Section 2.8.3.

 

1.146

“Orphan Drug Designation” means a grant by the FDA of a request for designation under Section 526 of the FD&C Act as amended by Section 2 of the Orphan Drug Act (sections 525-528 (21 U.S.C. 360aa-360dd)) in the United States or any analogous grant by a Regulatory Authority in any other country in the Territory.

 

1.147

“OSIF” has the meaning set forth in the definition of “OSIF License”.

 

1.148

“OSIF Agreements” means the OSIF License and the OSIF SRA.

 

1.149

“OSIF Know-How” means any Know-How licensed to City pursuant to the OSIF Agreements as of the Effective Date or thereafter at any time prior to the end of the Term.

 

1.150

“OSIF License” means that certain Exclusive License Agreement entered into by and between the Ohio State Innovation Foundation (“OSIF”) and City, dated as of October 30, 2023, as amended by that certain Amendment No.1 dated as of February 8, 2024, that certain Amendment No. 2 dated as of April 3, 2025, and that certain Amendment No. 3 dated as of May 13, 2025, and as may be further amended as permitted under this Agreement.

 

1.151

“OSIF Patent” means any Patent Right licensed to City pursuant to the OSIF Agreements as of the Effective Date or thereafter at any time prior to the end of the Term.

 

1.152

“OSIF SRA” means that certain Sponsored Research Agreement entered into by and between The Ohio State University and City, dated as of October 31, 2023, as may be amended as permitted under this Agreement.

 

 

1.153

“Other Committee” has the meaning set forth in Section 4.3.1 (Formation).

 

1.154

[***].

 

1.155

“Other Third Party Rights” has the meaning set forth in Section 2.6.3 (Other Third Party Rights).

 

1.156

“Overall Royalty Floor” has the meaning set forth in Section 6.3.4(e)(ii).

 

1.157

“Parent RNAi Trigger” has the meaning set forth in the definition of “Modified Program RNAi Trigger”.

 

1.158

“Party” and “Parties” has the meaning set forth in the preamble.

 

1.159

“Patent Counsel” has the meaning set forth in Section 9.10 (Patent Counsel).

 

1.160

“Patent Rights” means any and all (a) patents, (b) patent applications, including all provisional and non-provisional applications, patent cooperation treaty (PCT) applications, substitutions, continuations, continuations-in-part, divisions and renewals, and all patent rights granted thereon, (c) all patents-of-addition, reissues, re-examinations, renewals, and extensions or restorations by existing or future extension or restoration mechanisms, including supplementary protection certificates and equivalents of any of the foregoing described in subsections (a) through (c) above, (d) inventor’s certificates, letters patent, or (e) any foreign counterparts or equivalents of the foregoing described in subsections (a) through (e) above, anywhere in the world.

 

1.161

“Patent Term Extension” means patent term extensions, supplementary protection certificates, or equivalents thereto in any country in the Territory, in each case, where applicable to a Licensed Product.

 

1.162

“Payments” means the amounts payable pursuant to this Agreement.

 

1.163

“Payment Conditions” has the meaning set forth in [***].

 

1.164

“Permitted Budget Increase” has the meaning set forth in Section 4.2.5 (Decision-Making Authority).

 

1.165

“Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, Governmental Authority, association or other entity.

 

1.166

“Phase I Clinical Trial” means a clinical trial in humans of a pharmaceutical or biologic product that meets the requirements of 21 C.F.R. § 312.21(a), as amended (or its successor regulation), or, with respect to any other country or region, the equivalent of such a clinical trial in such other country or region.

 

1.167

“Phase II Clinical Trial” means a clinical trial in humans of a pharmaceutical or biologic product that meets the requirements of 21 C.F.R. § 312.21(b), as amended (or its successor regulation), or, with respect to any other country or region, the equivalent of such a clinical trial in such other country or region.

 

1.168

“Phase III Clinical Trial” means a clinical trial in humans of a pharmaceutical or biologic product that (a) the FDA permits to be conducted under an open IND and (b) meets (and is designed to meet) the requirements of 21 C.F.R. § 312.21(c), as amended (or its successor regulation), or, with respect to any other country or region, the equivalent of such a clinical trial in such other country or region. A Phase II Clinical Trial, a phase 2b clinical trial or a phase 2/3 clinical trial shall not be considered a “Phase III Clinical Trial”; provided that if (i) at the time such clinical trial is initiated, it includes a prospectively planned opportunity for such clinical trial to be modified based on interim analyses to change to or add a Phase III Clinical Trial following an analysis of interim data from subjects in such clinical trial and (ii) based on pre-specified analyses following an analysis of interim data from subjects therein, such clinical trial is modified to meet and otherwise satisfies the criteria for a Phase III Clinical Trial, the results of which, together with prior data and information concerning the applicable Licensed Product, would (if such clinical trial meets its primary endpoints) be sufficient to support the filing of an MAA for such Licensed Product, as acknowledged by the FDA or other applicable Regulatory Authority, then such clinical trial shall constitute a Phase III Clinical Trial from and after the date that new patients are dosed in such Phase III Clinical Trial portion of such Clinical Trial for purposes of this Agreement and, for purposes of Section 6.2.2 (Development Milestones), the Initiation of such Phase III Clinical Trial shall be deemed to occur on the date of the first (1st) dosing of the fifth (5th) of such new patients in the Phase III Clinical Trial portion of such clinical trial.

 

 

1.169

“PHSA” means the Public Health Service Act as set forth at 42 U.S.C. Chapter 6A, as may be amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions and modifications thereto).

 

1.170

“Post-Selection Period” means the period beginning upon the Development Candidate Selection Date and expiring upon the expiration or earlier termination of this Agreement.

 

1.171

“Pre-Existing Affiliates” means, with respect to a Party that undergoes a Change of Control, those Affiliates of such Party following the closing of such Change of Control that were Affiliates of such Party immediately prior to the closing of such Change of Control.

 

1.172

“Pre-Selection Period” means the period beginning upon the Effective Date and expiring upon the date that is one day prior to the Development Candidate Selection Date.

 

1.173

“Price Applicability Period” has the meaning set forth in the Inflation Reduction Act or, if under a similar U.S. state or federal law, a similar period as set forth under such U.S. state or federal law.

 

1.174

“Pricing and Reimbursement Approval” means, in a country in which Regulatory Authorities authorize reimbursement for, or approve or determine pricing for, pharmaceutical or biologic products to be marketed and sold or reimbursed in such country, receipt (or, if required to make such authorization, approval or determination effective, publication) of such reimbursement authorization or pricing approval or determination (as the case may be).

 

1.175

“Product Third Party Rights” has the meaning set forth in Section 2.6.2 (Product Third Party Rights).

 

1.176

“Program Conjugate” means any Conjugate created in the performance of the Research Program.

 

1.177

“Program Linker” means any Linker identified or created in the performance of the Research Program.

 

1.178

“Program Patent Rights” means Licensed Patent Rights that claim any Program RNAi Trigger, Program Linker, Program Conjugate, Licensed Compound, or Licensed Product. For clarity, Program Patent Rights do not include City Core Technology Patent Rights.

 

 

1.179

“Program RNAi Trigger” means any RNAi Trigger provided by City to Biogen under this Agreement or identified or created in the performance of the Research Program.

 

1.180

“Proposed Target” has the meaning set forth in Section 2.8.2.

 

1.181

“Prosecuting Party” means, with respect to any Patent Right, the Party that is responsible for the preparation, filing, prosecution, and maintenance of such Patent Right pursuant to Section 9.2.1 (Right to File and Prosecute) or Section 9.2.2 (Step-In Rights), as applicable.

 

1.182

“Receiving Party” has the meaning set forth in the definition of “Confidential Information”.

 

1.183

“Redacted Agreement” has the meaning set forth in Section 8.4 (Redacted Agreement).

 

1.184

“Regulatory Approval” means, with respect to a particular country or other regulatory jurisdiction, any and all approvals of an MAA or other approval, product, or establishment license, registration, or authorization of any Regulatory Authority necessary for the commercial marketing or sale of a pharmaceutical or biologic product in such country or other regulatory jurisdiction, including, in each case, any and all Pricing and Reimbursement Approvals reasonably necessary to Commercialize such product in such country or regulatory jurisdiction, whether or not legally required to Commercialize such product in such country or regulatory jurisdiction, including, in the U.S., approval for reimbursement by the Centers for Medicare and Medicaid Services. The Parties acknowledge that, as of the Effective Date, approval for reimbursement by the Centers for Medicare and Medicaid Services is the only Pricing and Reimbursement Approval reasonably necessary to Commercialize a product in the U.S.

 

1.185

“Regulatory Authority” means any applicable Governmental Authority with jurisdiction or authority over the Development, Manufacture, Commercialization, or other Exploitation (including Regulatory Approval or Pricing and Reimbursement Approval) of pharmaceutical or biologic products in a particular country or other regulatory jurisdiction, and any corresponding national or regional regulatory authorities.

 

1.186

“Regulatory Exclusivity” means any exclusive marketing rights, data protection, or exclusivity rights or protection conferred by any Regulatory Authority with respect to a Licensed Product in a particular country or other regulatory jurisdiction that: (a) confers an exclusive Commercialization period during which Biogen or its Affiliates or Sublicensees have the exclusive right to market and sell the applicable product in such country for all applicable Indications for which the Licensed Product has been approved; and (b) prevents such Regulatory Authority from granting any Regulatory Approval of a Biosimilar Product for such exclusivity period or prevents a Third Party from making a cross reference to data held by such Regulatory Authority; but in all cases excluding Patent Rights and patent term extensions. If a Regulatory Authority confers more than one type of exclusivity with respect to a biological product in a country or jurisdiction (e.g., the FDA grants both biologic drug reference product exclusivity and orphan drug exclusivity with respect to such biological product), Regulatory Exclusivity will be deemed to apply to such Licensed Product in such country or jurisdiction so long as any exclusivity granted to such Licensed Product prevents such Regulatory Authority from granting any Regulatory Approval of a Biosimilar Product in any Indication in the Approved Labeling for such Licensed Product (i.e., the foregoing will no longer apply once such Regulatory Authority is able to grant such Regulatory Approval in at least one of such Indications) and prevents Third Parties from making any cross reference to data with respect to such Licensed Product held by such Regulatory Authority.

 

 

1.187

“Regulatory Submissions” means any filing, application, or submission with any Regulatory Authority in support of the Development, Manufacture, Commercialization, or other Exploitation of a pharmaceutical or biologic product (including to obtain, support, or maintain Regulatory Approval from that Regulatory Authority), and all correspondence or communication with or from the relevant Regulatory Authority, as well as minutes of any material meetings, telephone conferences, or discussions with the relevant Regulatory Authority. Regulatory Submissions include all INDs, BLAs, MAAs, and other applications for Regulatory Approval and their equivalents including Orphan Drug Designation.

 

1.188

“Related Third Party Rights” means any Know-How or Patent Rights owned or controlled by a Third Party (and not owned by or licensed to City or any of its Affiliates as of the Effective Date) which, if Controlled by City, would be Licensed Technology under this Agreement.

 

1.189

“Research” means any and all activities directed to the research, identification, generation, formatting, screening, selecting, testing (including in silico, in vitro, ex vivo human validation systems and animal models), optimization, stability testing and toxicology of compounds or products. When used as a verb, “to Research” and “Researching” means to engage or engaging in Research.

 

1.190

“Research Activities” means the discovery, identification, optimization, CMC and other research activities to be conducted by or on behalf of a given Party under the Research Plan and in accordance with such Research Plan and the terms of this Agreement. Accordingly, “City Research Activities” means those Research Activities allocated to City under the Research Plan, and “Biogen Research Activities” means those Research Activities allocated to Biogen under the Research Plan.

 

1.191

“Research Milestone Event” has the meaning set forth in Section 6.2.1 (Research Milestones).

 

1.192

“Research Milestone Payment” has the meaning set forth in Section 6.2.1 (Research Milestones).

 

1.193

“Research Plan” means the written plan agreed by the Parties governing the Parties’ Research Activities, as such plan may be amended from time to time in accordance with this Agreement. The [***].

 

1.194

“Research Program” means a research program, including all Research Activities, to generate Conjugates directed to the Target, as further described in this Agreement.

 

1.195

“Research Term” means the period beginning upon the Effective Date and expiring upon the earlier of (a) the Development Candidate Selection Date, and (b) the effective date of termination of this Agreement.

 

1.196

“Residual Knowledge” means any knowledge, technique, experience, or Know-How that is retained in the unaided memory of any officers, directors, agents, contractors, or employees of a Receiving Party after having access to Confidential Information.

 

1.197

“Results” means any and all results, information, data, presentations, summaries, and analyses that are generated, identified, or discovered pursuant to or prepared as a result of, or in connection with the performance of, the Research Activities under the Research Plan.

 

 

1.198

“RNAi Trigger” means a double-stranded short non-coding oligonucleotide designed to cleave mRNA and inhibit expression of the Target. For clarity, the term “RNAi Trigger” does not include any Conjugate.

 

1.199

“RNAi Trigger Candidate Selection” has the meaning set forth in Section 3.5.2 (RNAi Trigger Candidate Selection).

 

1.200

“RNAi Trigger Candidate Selection Outside Date” means the earlier of: (a) the date that is [***] after the Effective Date, provided that, if, as of such date, there are ongoing Research Activities with respect to any Program RNAi Trigger for purposes of confirming whether such Program RNAi Trigger satisfies the RNAi Trigger Selection Criteria, then such date will be extended until the date that (i) such Research Activities are completed, (ii) if such Program RNAi Trigger has satisfied the RNAi Trigger Selection Criteria, the RNAi Trigger Data Package Date has occurred with respect thereto and (iii) following the completion of the foregoing (i) and (ii), Biogen has had a reasonable period of time (not to exceed [***]) to determine whether to make an RNAi Trigger Candidate Selection with respect to such Program RNAi Trigger; and (b) the date that is [***] after the Effective Date.

 

1.201

“RNAi Trigger Data Package” has the meaning set forth in Section 3.5.1 (RNAi Trigger Data Packages).

 

1.202

“RNAi Trigger Data Package Date” means, with respect to a Program RNAi Trigger, the date that the JRT delivers the RNAi Trigger Data Package for such Program RNAi Trigger to the JRC in accordance with Section 3.5.1 (RNAi Trigger Data Packages).

 

1.203

“RNAi Trigger Selection Criteria” means Biogen’s selection criteria for Program RNAi Triggers as defined in the Research Plan.

 

1.204

“Royalty-Bearing Patent Claim” means [***].

 

1.205

“Royalty-Bearing Product” means, [***].

 

1.206

“Royalty Term” means, [***].

 

1.207

“Safeguard Procedures” has the meaning set forth in Section 2.7.2 (Exception for Acquisition of a Party).

 

1.208

“Sales Milestone Event” has the meaning set forth in Section 6.2.3 (Sales Milestones).

 

1.209

“Sales Milestone Payment” has the meaning set forth in Section 6.2.3 (Sales Milestones).

 

1.210

“SEC” means the United States Securities and Exchange Commission.

 

1.211

“Segregated Materials” has the meaning set forth in the definition of “Acquirer Technology”.

 

1.212

“Segregated Personnel” has the meaning set forth in Section 2.7.2.

 

1.213

“Selling Party” has the meaning set forth in the definition of “Net Sales”.

 

1.214

“Specified Confidential Information” has the meaning set forth in the definition of “Confidential Information”.

 

 

1.215

“Standard Royalty Floor” has the meaning set forth in Section 6.3.4(e)(i).

 

1.216

“Subcontractor” means a Third Party contractor engaged by a Party to perform certain obligations or exercise certain rights on behalf of such Party under this Agreement on a fee-for-service basis (which may include Third Party Distributors, contract research organizations, and contract manufacturing organizations).

 

1.217

“Sublicense Agreement” means any agreement under which a sublicense is granted to a Sublicensee under any Licensed Technology licensed to Biogen pursuant to Section 2.2.1 (Sublicensing by Biogen).

 

1.218

“Sublicense Election Notice” has the meaning set forth in Section 2.6.4 (Conditions for Related Third Party Rights).

 

1.219

“Sublicensees” means any Third Party, other than a Subcontractor, to which Biogen or any of its Affiliates grants a sublicense of its rights hereunder to Exploit Licensed Products, [***].

 

1.220

“Target” means a [***], including fragments thereof, or the genetic sequence that encodes for the [***].

 

1.221

“Tax” means any U.S. and non-U.S. federal, state, local, regional, municipal, or other tax or taxation, levy, duty, charge, withholding, or other assessment of any kind (including any related fine, penalty, addition to tax, surcharge, or interest) imposed by, or payable to, a Governmental Authority, including sales, use, excise, stamp, transfer, property, value added, goods and services, withholding, and franchise tax.

 

1.222

“Term” has the meaning set forth in Section 11.1 (Term).

 

1.223

“Territory” means all of the countries of the world, and their territories and possessions.

 

1.224

“Third Party” means any Person other than Biogen or City or their respective Affiliates.

 

1.225

“Third Party Agreement” has the meaning set forth in Section 6.3.4(c) (Third Party Payments).

 

1.226

“Third Party [***] Patent Right” means any Patent Right that (i) Covers a [***] incorporated into a Royalty-Bearing Product, and (ii) is not primarily directed to any component of such Royalty-Bearing Product other than the [***] component.

 

1.227

“Third Party Claims” means any claims, investigations, demands, or suits by a Third Party against a Biogen Indemnified Party or City Indemnified Party, as applicable.

 

1.228

“Third Party Distributor” means, with respect to a Licensed Product in a country, any Third Party that purchases its requirements for such Licensed Product in such country from Biogen or its Affiliates or Sublicensees and is appointed as a distributor to distribute, market, and resell such Licensed Product in such country, even if such Third Party is granted ancillary rights to Develop, package, or obtain Regulatory Approval of such Licensed Product in order to distribute, market, or sell such Licensed Product in such country.

 

1.229

“Third Party Patent Challenge” has the meaning set forth in Section 9.5.2 (Parties’ Patent Rights).

 

 

1.230

“Trademark” means any trademark, trade name, service mark, service name, brand, domain name, trade dress, logo, slogan, or other indicia of origin or ownership, including the goodwill and activities associated with each of the foregoing.

 

1.231

“United States” or “U.S.” means the United States of America and its territories and possessions (including the District of Columbia and Puerto Rico).

 

1.232

“Upstream Agreements” means any agreement between City or any of its Affiliates and any Third Party, whether existing as of the Effective Date or at any time thereafter prior to the end of the Term, pursuant to which City Controls (including by acquiring ownership rights to or in-licensing) any Licensed Technology. The Upstream Agreements as of the Effective Date are set forth on [***].

 

1.233

“U.S. Bankruptcy Code” means title 11 of the United States Code, as amended.

 

1.234

“Valid Claim” means, with respect to a particular country, (a) a claim of any issued and unexpired patent in such country whose validity, enforceability, or patentability has not been terminated by any of the following: (i) irretrievable lapse, abandonment, revocation, dedication to the public, or disclaimer; or (ii) a holding, finding, or decision of invalidity, unenforceability, or non-patentability, from which decision no appeal can be further taken, or (b) a claim within a patent application in such country that has not been pending for more than [***].

 

1.235

“VAT” means, (a) within the European Union, such tax as may be charged in accordance with (but subject to derogations from) Directive 2006/112/EC and any successor or equivalent legislation and any national legislation implementing that directive together with legislation supplemental thereto and the equivalent tax (if any) in that jurisdiction, and, (b) outside the European Union, value added tax or any form of consumption tax, as well as all other forms of taxes charged on the supply of a good or a service under Applicable Law, including (i) sales tax and goods and services tax, but in any event excluding any U.S. sales tax and (ii) in Canada, the Federal Goods and Services Tax, the Harmonized Sales Tax, the Quebec Sales Tax, and the Provincial Sales Tax.

 

1.236

“Wind-Down Period” has the meaning set forth in Section 2.7.3 (Acquisition of a Competitive Product by a Party).

 

1.237

“Withholding Tax” has the meaning set forth in Section 6.9.2.

 

ARTICLE 2
LICENSE GRANTS

 

2.1

License Grants.

 

2.1.1

Research Activities License Grants.

 

(a)

City hereby grants to Biogen and its Affiliates, during the Research Term, a royalty-free, worldwide, non-exclusive, non-sublicensable license under the City Research Technology solely for the purpose of performing (or having performed by one or more Subcontractors in accordance with Section 2.2.3 (Subcontracting by City and Biogen)) the Biogen Research Activities under the Research Plan.

 

(b)

Biogen hereby grants to City and its Affiliates, during the Research Term, a royalty-free, worldwide, non-exclusive, non-sublicensable (sub)license under the Biogen Research Technology and the Licensed Technology licensed to Biogen under Section 2.1.2 (Exclusive License Grant to Biogen) solely for the purpose of performing (or having performed by one or more Subcontractors in accordance with Section 2.2.3 (Subcontracting by City and Biogen)) the City Research Activities under the Research Plan.

 

 

2.1.2

Exclusive License Grant to Biogen. City hereby grants to Biogen and its Affiliates a worldwide, royalty-bearing, exclusive license, with the right to sublicense through multiple tiers (subject to the provisions of Section 2.2 (Sublicensing by Biogen)), under the Licensed Technology to Exploit the Licensed Compounds and Licensed Products in the Field in the Territory.

 

2.1.3

Covenant of Biogen. Notwithstanding anything to the contrary in Section 2.1.2 (Exclusive License Grant to Biogen), Biogen hereby covenants and agrees that, unless and until Development Candidate Selection occurs, Biogen shall not exercise the license granted in Section 2.1.2 (Exclusive License Grant to Biogen) to clinically Develop or Commercialize any Licensed Compound or Licensed Product. Effective as of the Development Candidate Selection Date, this Section 2.1.3 (Covenant of Biogen) will automatically, with no further action of either Party, terminate and be of no further force or effect, and Biogen will have all rights to freely exploit the license granted to Biogen under Section 2.1.2 (Exclusive License Grant to Biogen).

 

2.2

Sublicenses and Subcontracting.

 

2.2.1

Sublicensing by Biogen. From and after the Development Candidate Selection Date, Biogen and its Affiliates may grant sublicenses under Section 2.1.2 (Exclusive License Grant to Biogen) to any Affiliate or Third Party, including to any Subcontractor engaged by or on behalf of Biogen or any of its Affiliates, [***]. Notwithstanding the foregoing, Biogen and its Affiliates and Sublicensees may grant sublicenses under Section 2.1.1(a) (Research Activities License Grants) or Section 2.1.2 (Exclusive License Grant to Biogen) at any time during the Term to any Subcontractor engaged by or on behalf of Biogen or any of its Affiliates or Sublicensees in accordance with Section 2.2.3 (Subcontracting by City and Biogen).

 

2.2.2

Survival of Sublicenses. Notwithstanding Section 11.7.2 (Additional Effects of Termination), upon termination of this Agreement for any reason other than termination by Biogen under Section 11.6 (Termination for Convenience by Biogen) and upon the request of any Sublicensee not then in breach of its Sublicense Agreement or the terms of this Agreement applicable to such Sublicensee, City will (subject to the additional requirements in this Section 2.2.2 (Survival of Sublicenses)) enter into a New License Agreement from City to such Sublicensee on the same terms as this Agreement, taking into account any difference in license scope, territory, and duration of sublicense grant, provided, that, (i) the Sublicensee agrees to pay any monetary damages actually owed by Biogen to City at the time of termination solely to the extent such monetary damages are directly related to the scope of such Sublicensee’s Sublicense Agreement (e.g., with respect to license scope and territory); and (ii) the Sublicense Agreement was granted in accordance with the sublicensing provisions of this Agreement. Under any such New License Agreement between City and such former Sublicensee, such Sublicensee will be required to pay to City the same amounts in consideration for such direct grant as City would have otherwise received from Biogen pursuant to this Agreement on account of such Sublicensee’s Exploitation of the Licensed Products had this Agreement not been terminated. Under such New License Agreement, City will not be bound by any grant of rights broader than, and will not be required to perform any obligation, other than those rights and obligations (to the extent relevant to such Sublicensee) contained in this Agreement, and all applicable rights of City set forth in this Agreement will be included in such New License Agreement. Each Sublicensee will be an intended Third Party beneficiary of this Section 2.2.2 (Survival of Sublicenses) with the right to enforce the same against City. At the request of Biogen, City will issue a comfort letter directly to any potential Sublicensee confirming the terms of this Section 2.2.2 (Survival of Sublicenses). For the avoidance of doubt, nothing herein will grant to City any right to enter into a New License Agreement with any Person other than a Sublicensee in accordance with this Section 2.2.2 (Survival of Sublicenses), and nothing shall obligate City to enter into a New License Agreement with any Sublicensee if City offers to such Sublicensee terms and conditions for such New License Agreement with that are consistent with those (to the extent relevant to such Sublicensee) contained in this Agreement and such Sublicensee does not agree to such terms and conditions.

 

 

2.2.3

Subcontracting by City and Biogen. Subject to Section 2.3 (Responsibility for Sublicensees and Affiliates) and Section 7.4.1, City will be entitled to engage one or more Subcontractors to perform any of the City Research Activities under the Research Plan or other City activities under this Agreement only if (a) (i) such Subcontractor is expressly set forth in the Research Plan or (ii) City otherwise obtains the prior written consent of Biogen, (b) any such Subcontractor has the requisite expertise to conduct the relevant subcontracted responsibilities, and (c) any agreement with such a Subcontractor is consistent with the provisions of this Agreement including (i) an assignment or license to City of all Intellectual Property created in the conduct of the relevant Research Activities that would, if Controlled by City, constitute Licensed Technology, pursuant to which City receives sufficient rights to allow it to grant the licenses granted to Biogen under Sections 2.1.1(a) and 2.1.2 (Exclusive License Grant to Biogen), and (ii) terms and conditions under which such Subcontractor is obligated to preserve the confidentiality of any Confidential Information of Biogen received by such Subcontractor that are at least as stringent as those described in Article 8 (Confidentiality). Subject to Section 2.3 (Responsibility for Sublicensees and Affiliates) and Section 7.4.1, Biogen and its Affiliates and Sublicensees will be entitled to engage one or more Subcontractors to perform any of the Biogen Research Activities or other Biogen activities under this Agreement if such engagement is in accordance with Biogen’s standard practice for engaging Subcontractors.

 

2.3

Responsibility for Sublicensees and Affiliates. Each Party will remain liable under this Agreement for the performance of all its obligations under this Agreement notwithstanding any delegation to any licensee, Sublicensee, Subcontractor or Affiliate of such Party (whether directly or through multiple tiers), and will be responsible for and liable for compliance by such licensees, Sublicensees, Subcontractors and Affiliates with the applicable provisions of this Agreement.

 

2.4

No Implied Licenses. Except as expressly provided in this Agreement, neither Party will be deemed to have granted the other Party any license or other right with respect to any Intellectual Property of such Party, whether by implication, estoppel, or otherwise. Notwithstanding anything to the contrary in this Agreement, the license granted in Section 2.1.2 (Exclusive License Grant to Biogen) shall not be construed as granting to Biogen or its Affiliates (either expressly or by implication) any rights or license to any Licensed Know-How to the extent it relates to, or any Licensed Patent Right to the extent it Covers, any [***] in a Combination Product (other than any Licensed Know-How that relates to, or any Licensed Patent Right that Covers, the combination, use or other Exploitation of such Licensed Compound, on the one hand, with such [***], or compound class including such [***], on the other hand, but in which case, the licenses granted in Section 2.1.2 (Exclusive License Grant to Biogen) shall be only with respect to the Licensed Compound or its combination, use or other Exploitation in such Combination Product, and no license is granted to Exploit any [***] in such Combination Product itself).

 

 

2.5

Upstream Agreements.

 

2.5.1

Responsibility for Costs. As between the Parties, City will at all times remain responsible for 100% of any and all payments of any kind payable or otherwise arising under, or incurred in connection with, (a) any Upstream Agreement in existence as of the Effective Date or (b) subject to City’s compliance with Section 2.6.3 (Other Third Party Rights), any Upstream Agreement entered into thereafter during the Term, except, in the case of this clause (b), as expressly set forth in Section 2.6.4 (Conditions for Related Third Party Rights) (in each case ((a) and (b)), whether such payments accrue prior to, on, or following the Effective Date and including any payments that arise as result of this Agreement). Without limiting the foregoing, City covenants to Biogen that it will timely pay to OSIF all amounts required to be paid to OSIF under the OSIF Agreements, including paying to OSIF the applicable portion of the upfront payments set forth in Section 6.1 (Upfront Payments) within [***] of receiving such upfront payments from Biogen. City will provide to Biogen competent written evidence of each such payment to OSIF [***] after such payment is made.

 

2.5.2

Default and Cure; Offset Right. If City breaches or defaults under any of its obligations to any counterparty under any Upstream Agreement, then City will promptly notify Biogen in writing of any such breach or default. If City does not cure such breach or default by the date on which half of the applicable cure period remains under the applicable Upstream Agreement, then Biogen will have the right (but not the obligation), in its sole discretion, to cure any such breach or default under an Upstream Agreement (and City shall facilitate any such efforts to cure such breach or default) and to offset any and all costs and expenses incurred by Biogen in connection with curing such breach or default against any Milestone Payments, royalties, or other amounts payable to City under this Agreement. In addition, notwithstanding anything to the contrary in this Agreement, if any Upstream Agreement terminates and, following such termination, Biogen obtains a direct license from the applicable licensor under any Intellectual Property that was, prior to such termination, Licensed Technology, Biogen may offset any and all amounts paid by Biogen to such licensor in consideration for such rights against any Milestone Payments, royalties, or other amounts payable to City under this Agreement.

 

2.6

Related Third Party Rights.

 

2.6.1

Identification of Related Third Party Rights. If, following the Effective Date, City or any of its Affiliates identifies any Related Third Party Rights, then City shall promptly notify Biogen of such determination. After delivery of such notice, upon Biogen’s request, the Parties will promptly meet to discuss such Related Third Party Rights. Nothing in this Section 2.6 (Related Third Party Rights) will be deemed to limit or restrict in any respect Biogen’s rights to seek or obtain a license or other rights with respect to any intellectual property of any Third Party.

 

2.6.2

Product Third Party Rights. With respect to any Related Third Party Rights that [***] “Product Third Party Rights”), Biogen will have the sole right (but not the obligation) to obtain a license or other rights from the applicable Third Party under such Product Third Party Rights to Exploit the Licensed Compounds or Licensed Products. [***].

 

 

2.6.3

Other Third Party Rights. If City or any of its Affiliates enters into a Third Party agreement after the Effective Date to obtain a license or other rights under any Related Third Party Rights that are not Product Third Party Rights with the right to sublicense to Biogen under this Agreement (“Other Third Party Rights”), then (a) City will promptly provide to Biogen written notice identifying the applicable Other Third Party [***] and (b) Biogen will have the option to receive a sublicense of such rights in accordance with Section 2.6.4 (Conditions for Related Third Party Rights). [***].

 

2.6.4

Conditions for Related Third Party Rights. With respect to any Third Party rights for which City provides a notice to Biogen under Section 2.6.3 (Other Third Party Rights), Biogen will have the option to receive a sublicense under any such Other Third Party Rights by written notice to City (a “Sublicense Election Notice”). If Biogen elects to receive such sublicense and provides a Sublicense Election Notice to City, then Biogen will: [***]. If Biogen provides a Sublicense Election Notice, then, effective as of the date of such notice, the applicable Other Third Party Rights will automatically be deemed to be Controlled by City for purposes of this Agreement and will constitute Licensed Technology for all purposes under this Agreement, including the license grants to Biogen pursuant to Section 2.1.1(a) and Section 2.1.2 (Exclusive License Grant to Biogen), without any further action of the Parties.

 

2.6.5

Rights Not Licensed to Biogen. [***]

 

2.7

Exclusivity.

 

2.7.1

[***]

 

2.7.2

[***]

 

2.7.3

[***]

 

2.8

Option for Additional Target.

 

2.8.1

City hereby grants to Biogen an option to select one additional target that is not the Target, to become subject to a research collaboration and license agreement between the Parties [***] (the “Option”). Biogen may exercise the Option [***] in accordance with the terms of this Section 2.8 (Option for Additional Target).

 

2.8.2

If Biogen desires to exercise the Option, Biogen will provide written notice to City (an “Option Exercise Notice”) [***], which notice will specify the proposed additional target (the “Proposed Target”). City will provide written notice to Biogen [***] of the Proposed Target, specifying whether such Proposed Target is an Available Target.

 

2.8.3

If the Proposed Target is an Available Target, then, (a) during the period starting [***] and ending [***] (unless extended by the Parties’ mutual agreement) (the “Option Negotiation Period”), City and its Affiliates shall not grant to any Third Party any rights or licenses (or exclusivity commitments) with respect to [***] (b) the Parties shall [***] negotiate [***], a research collaboration and license agreement, in substantially the same form as this Agreement, with respect to the research by the Parties of RNAi therapeutics directed to such Proposed Target and the further Exploitation by Biogen of products containing such RNAi therapeutics (the “Additional Target Agreement”) and (c) if the Parties enter into an Additional Target Agreement, then Biogen shall pay to City an option exercise fee in the amount [***]. The Additional Target Agreement will include the same financial terms as this Agreement, except that the aforementioned option exercise fee will be in lieu of the upfront payments as set forth in Section 6.1 (Upfront Payments). [***]

 

 

2.8.4

If the Proposed Target is not an Available Target, then the Option will remain unexercised and Biogen will have the right (but no obligation) to submit a subsequent Option Exercise Notice for a different Proposed Target in accordance with the terms of this Section 2.8 (Option for Additional Target). [***]

 

ARTICLE 3
RESEARCH COLLABORATION

 

3.1

Overview. The Parties intend to collaborate on a Research Program, as further described in this Article 3 (Research Collaboration). During the Research Program, City will conduct certain Research Activities to discover and identify RNAi Triggers directed to the Target, with the goal of identifying multiple Program RNAi Triggers that meet the RNAi Trigger Selection Criteria, and the Parties will conduct certain Research Activities to discover and identify suitable Linkers for use in Conjugates. With respect to each Program RNAi Trigger that Biogen selects for incorporation into one or more Conjugate(s), the Parties will conduct certain Research Activities to generate Conjugates using such Program RNAi Trigger, with the goal of generating multiple Program Conjugates that meet the Development Candidate Selection Criteria. For the avoidance of doubt, the Parties anticipate that the Research Activities will be iterative to the extent set forth in the Research Plan, such that City will continue to conduct the City Research Activities as set forth in the Research Plan to discover and identify additional Program RNAi Triggers that meet the RNAi Trigger Selection Criteria in parallel with the Parties’ conduct of Research Activities to generate Conjugates with respect to each Program RNAi Trigger selected by Biogen.

 

3.2

Research Plan.

 

3.2.1

Initial Research Plan. The Research Plan as of the Effective Date is attached to this Agreement as [***].

 

3.2.2

Amendments to Research Plan. Either Party may propose amendments to the Research Plan to the other Party from time to time during the Research Term. Following any such proposal, and otherwise on at least an annual basis during the Research Term, the JRC will review the then-current Research Plan and will discuss, prepare and determine whether to approve any amendments thereto; provided that any such amended Research Plan will at all times meet the requirements of Section 3.2.3 (Research Plan Contents). Each amended Research Plan will become effective and supersede the previous Research Plan as of the date of approval by the JRC.

 

3.2.3

Research Plan Contents. The Research Plan will at all times include: (a) all activities of City to discover and identify multiple RNAi Triggers directed to the Target that satisfy the RNAi Trigger Selection Criteria; (b) all activities of each Party to discover and identify Linkers for use in Conjugates; (c) with respect to each Program RNAi Trigger selected by Biogen, all activities of each Party to use such Program RNAi Trigger, [***] and Linkers described in the foregoing clause (b) to generate Conjugates that satisfy the Development Candidate Selection Criteria, through Development Candidate Selection; (d) a list of the information to be provided in each RNAi Trigger Data Package; (e) a list of the information to be provided in each Development Candidate Data Package; (f) the RNAi Trigger Selection Criteria; (g) the Development Candidate Selection Criteria; (h) a timeline for the Research Activities; and (i) an estimated budget, provided by City in good faith, for the City Research Activities set forth in the then-current Research Plan. In the event of any conflict between the Research Plan and the terms of this Agreement, the terms of this Agreement will control.

 

 

3.3

Research Activities.

 

3.3.1

City Research Activities. During the Research Term, City shall use Commercially Reasonable Efforts to: (a) perform all City Research Activities; and (b) provide Biogen with all City Research Know-How as contemplated under the Research Plan and prepare and deliver all Deliverables and Results that are to be delivered by City under the terms of the Research Plan, including the City Research Reports. City will perform, or have performed, all City Research Activities in accordance with the Research Plan and the corresponding timelines, and otherwise in accordance with this Agreement. Notwithstanding anything to the contrary, City’s failure to meet the corresponding timelines shall not be deemed as a breach of this Agreement by City as long as City uses Commercially Reasonable Efforts to perform in accordance with such timelines, and any delay in the City Research Activities to the extent caused by Biogen’s failure to perform any Biogen Research Activities pursuant to the timelines set forth in the Research Plan or Biogen’s delay in providing any Biogen Research Know-How necessary for City’s performance of any City Research Activities will not be deemed a breach by City of its obligations to perform the City Research Activities in accordance with the Research Plan and the corresponding timelines.

 

3.3.2

Biogen Research Activities. During the Research Term, Biogen: (a) will lead all Biogen Research Activities; (b) provide City with all Biogen Research Know-How as contemplated under the Research Plan; and (c) may elect to conduct any other preclinical or nonclinical Research or Development activities with respect to Licensed Compounds or Licensed Products, including for purposes of evaluating whether to make an RNAi Trigger Candidate Selection or Development Candidate Selection, as well as related CMC and Manufacturing activities.

 

3.3.3

Materials. Each Party will provide the other Party with any Materials designated in the Research Plan to be provided by such Party to the other Party for the purpose of carrying out the Research Activities. All Materials will remain the property of the providing Party, and no such Materials (or derivatives, analogs, modifications, or components thereof) may be transferred, delivered, or provided to any Third Party, without the prior written consent of the providing Party, except to permitted Subcontractors for the sole purpose of conducting the applicable Research Activities. The receiving Party may only use such Materials for the applicable Research Activities and for no other purpose, and the receiving Party will only use such Material in compliance with Applicable Law. Each Party will not, and will cause its Affiliates to not, disassemble, manipulate, or reverse engineer any portion of the other Party’s Materials without the other Party’s prior written consent, and will take all necessary steps to prevent unauthorized use, disclosure, disassembly, manipulation, or reverse engineering of the other Party’s Materials. Without limiting any of the foregoing, if Biogen transfers to City any Materials, City will comply, and will cause its Affiliates and Subcontractors to comply, with Biogen’s internal policies applicable to the use of such Materials and, if such Materials are subject to Third Party obligations of Biogen or its Affiliates, with all terms and conditions applicable to the use of such Materials arising out of such Third Party obligations, in each case, that are disclosed to City in writing.

 

 

3.3.4

Manufacturing. During the Research Term, City (either itself or through an Affiliate or Subcontractor) will be responsible, at its sole cost, for the Manufacture and supply of all Program RNAi Triggers for use in the Research Activities. Biogen (either itself or through an Affiliate or Subcontractor) will be responsible, at its sole cost, for, and will have the sole and exclusive right with respect to, the Manufacture and supply of (a) any Linker and (b) any [***], in each case ((a) and (b)), for use in the Research Activities.

 

3.4

Reports of Research Activities.

 

3.4.1

Notwithstanding any provision to the contrary set forth in this Agreement, City will keep Biogen reasonably informed, through presentations at each JRT meeting and each JRC meeting, regarding the status and progress of all City Research Activities. During the Research Term on a quarterly basis and also upon reasonable written request of Biogen, City will prepare a written report or other format (e.g., slide deck) to update Biogen on the status of the City Research Activities performed as required by the Research Plan during the applicable Calendar Quarter (each, a “City Research Report”). Such reports must be sufficient in content to allow Biogen to evaluate the progress of the City Research Activities against the objectives and timelines included therefor in the Research Plan, and will include such other Deliverables, Results, or other information generated by City under the Research Plan, in each case, as are required to be delivered by City under the Research Plan. In addition, City will make all Results electronically available to Biogen on a continuous (i.e., at least monthly) basis.

 

3.4.2

During such time as Biogen is conducting any Biogen Research Activities, Biogen will keep City reasonably informed regarding the status, progress, and Results of all Biogen Research Activities, in each case, to the extent necessary for City to conduct the City Research Activities. Biogen will make its Results electronically available to City to the extent necessary for City to conduct the City Research Activities.

 

3.4.3

The JRT and the JRC will (a) review the City Research Reports, (b) confer regarding the progress of the Research Program, (c) review relevant Deliverables provided and Results generated in the performance of the City Research Activities, (d) consider and advise on any technical issues that may arise, and (e) review and discuss the Biogen Research Activities performed by or on behalf of Biogen during the same period and the Results thereof; provided that Biogen will not be obligated to discuss the Biogen Research Activities with the JRT, the JRC or City in the event of a Change of Control of City involving a Third Party that is, at such time, Exploiting any Competitive Product.

 

3.5

Data Packages and Candidate Selection.

 

3.5.1

RNAi Trigger Data Packages. On a rolling basis, no later than [***] after the date that any Program RNAi Trigger has achieved the RNAi Trigger Selection Criteria, City will deliver to the JRT all information and data required to be included in the RNAi Trigger Data Package, as set forth in the Research Plan. The JRT will, within [***] of receipt of such data, identify whether any data required to be included in the RNAi Trigger Data Package, as set forth in the Research Plan, is missing, and City will promptly (and in any event within [***] after such identification) provide to the JRT all such missing data (if any). Thereafter, the JRT will prepare a data package with respect to such Program RNAi Trigger containing all data required to be included in the RNAi Trigger Data Package, as set forth in the Research Plan (each, an “RNAi Trigger Data Package”), for submission to the JRC, and will submit such RNAi Trigger Data Package to the JRC following completion thereof. The JRC will review and discuss each such RNAi Trigger Data Package.

 

 

3.5.2

RNAi Trigger Candidate Selection.

 

(a)

Biogen will have the right, in its sole discretion, to select one or more Program RNAi Triggers for use in the generation of Program Conjugates under the Research Program (each, an “RNAi Trigger Candidate Selection”). On a Program RNAi Trigger-by-Program RNAi Trigger basis, Biogen may exercise such right by providing written notice to City of such selection at any time following the Effective Date and prior to the Development Candidate Selection Date.

 

(b)

Promptly following each RNAi Trigger Candidate Selection, the Parties will commence the activities set forth in the Research Plan with respect to the generation of Conjugates with respect to such Program RNAi Trigger. City will cooperate with Biogen and provide reasonable assistance and technology transfers pursuant to Section 5.1.1 (Know-How Technology Transfer Obligations) and Section 5.1.3 (Technical Assistance during Research Term and Assistance Term) to enable Biogen to conduct the Biogen Research Activities to generate Conjugates with respect to each Program RNAi Trigger selected by Biogen.

 

3.5.3

Development Candidate Data Packages. On a rolling basis, no later than [***] after the date that any Program Conjugate has achieved the Development Candidate Selection Criteria, each Party will deliver to the JRT all information and data generated by such Party that is required to be included in the Development Candidate Data Package, as set forth in the Research Plan. The JRT will, within [***] of receipt of such data, identify whether any data required to be included in the Development Candidate Data Package, as set forth in the Research Plan, is missing, and the responsible Party will promptly (and in any event within [***] after such identification) provide to the JRT all such missing data (if any). Thereafter, the JRT will prepare a data package with respect to such Program Conjugate containing all data required to be included in the Development Candidate Data Package, as set forth in the Research Plan (each, a “Development Candidate Data Package”), for submission to the JRC, and will submit such Development Candidate Data Package to the JRC following completion thereof. The JRC will review and discuss each such Development Candidate Data Package.

 

3.5.4

Development Candidate Selection.

 

(a)

Biogen will have the right, in its sole discretion, to select a Program Conjugate for potential further Exploitation pursuant to this Agreement (“Development Candidate Selection”), by providing written notice to City of such selection at any time during the Research Term (the date of such written notice, the “Development Candidate Selection Date”). Notwithstanding the foregoing, Biogen may deem the Development Candidate Selection Date to have occurred at any time during the Research Term upon written notice to City, without selecting any particular Program Conjugate for potential further Exploitation pursuant to this Agreement, and in such event all provisions of this Agreement will apply as if a Development Candidate Selection had occurred, as set forth in Section 3.5.4(b).

 

 

(b)

If Biogen makes a Development Candidate Selection in accordance with this Section 3.5.4 (Development Candidate Selection), then, effective as of the Development Candidate Selection Date, (i) the restrictions set forth in Section 2.1.3 (Covenant of Biogen) will automatically terminate and be of no further force or effect and (ii) the provisions of Article 5 (Development, Manufacturing, Regulatory Matters, and Commercialization) and Article 6 (Financial Terms) will apply with respect to Biogen’s Exploitation of the Licensed Compounds and Licensed Products. City will cooperate with Biogen and provide reasonable assistance and technology transfers pursuant to Section 5.1.1 (Know-How Technology Transfer Obligations), Section 5.1.2 (Manufacturing Technology Transfer Obligations) and Section 5.1.3 (Technical Assistance during Research Term and Assistance Term) to enable Biogen to advance the Development and Manufacture of the Licensed Compounds and Licensed Products. For the avoidance of doubt, notwithstanding Biogen’s Development Candidate Selection with respect to a particular Program Conjugate, nothing in this Agreement will require Biogen to Exploit the specific Program Conjugate that was the subject of such Development Candidate Selection, or any Licensed Product containing such Program Conjugate.

 

3.6

Costs of Research Activities. Each Party will be solely responsible for all costs and expenses, including internal costs, incurred by such Party and its Affiliates in the conduct of the Research Activities.

 

3.7

Performance of City Research Activities. City will (a) provide all resources necessary for it to perform all City Research Activities and (b) perform, and ensure that its Affiliates and Subcontractors perform, all City Research Activities in good scientific manner, with reasonable care and skill and in accordance with all Applicable Laws (including, as applicable, GLP) and the terms of this Agreement. As set forth under this Agreement, City will use Commercially Reasonable Efforts to complete all City Research Activities set forth under the Research Plan in accordance with the performance timelines set forth in the Research Plan and to provide to Biogen all Deliverables and Results set forth in the Research Plan within the timeframes included therefor. During the Research Term, City will devote the efforts of suitably qualified and trained employees and research assistants capable of carrying out the City Research Activities set forth under the Research Plan to a professional workmanlike standard and will provide all necessary materials and facilities therefor.

 

3.8

Records.

 

3.8.1

During the Research Term and for three years thereafter, City will maintain records of all City Research Activities in sufficient detail and in good scientific manner, appropriate for scientific, patent, and regulatory purposes, which records will be complete and properly reflect all work done and results achieved in the performance of City Research Activities by or on behalf of City.

 

3.8.2

Once every 12 months, during normal business hours and upon reasonable notice of not less than [***], Biogen, at its own cost, through an independent consultant, selected by Biogen and reasonably acceptable to City, will have the right to inspect all records of City or its authorized Third Party designees that relate to the performance of City Research Activities by or on behalf of City as may be reasonably necessary to verify City’s compliance of its obligations with respect to the City Research Activities hereunder. The consultant will enter a confidentiality agreement reasonably acceptable to City governing the use and disclosure of Biogen’s information disclosed to such firm, and such firm will disclose to Biogen only whether information provided by City as described above was accurate and the specific details concerning any discrepancies, which information will be Confidential Information of City. Biogen will have the right to arrange for its employees or independent consultants and (sub)contractors involved in the performance of activities under this Agreement to (a) visit the offices and laboratories of City once every 12 months during normal business hours and upon reasonable notice of not less than [***], and (b) discuss with City’s technical personnel and consultants the performance and progress of the City Research Activities and applicable Deliverables and associated Results in detail. After preparing or receiving the report for such visit or inspection, Biogen will provide City with a written summary of Biogen’s findings of any deficiencies or other areas of remediation that Biogen identifies during any such visit or inspection. City will use Commercially Reasonable Efforts to remediate any such deficiencies within [***] after City’s receipt of such report, at City’s cost and expense. Notwithstanding any provision to the contrary set forth in this Agreement, Biogen will have the right to inspect such records more than once every 12 months in order to confirm satisfactory remediation by City of any such deficiencies or other areas of remediation that Biogen identifies during any such visit or inspection.

 

 

ARTICLE 4
GOVERNANCE

 

4.1

Alliance Management.

 

4.1.1

Alliance Managers. Each Party will appoint a single individual who possesses sufficient alliance management experience and is otherwise suitably qualified and that has the requisite decision-making authority, in each case, to act as such Party’s alliance manager under this Agreement to support the Research Activities and the Research Program. [***]. Each Party may change the person designated as its Alliance Manager upon written notice (including via email notification) to the other Party, provided that such new Alliance Manager meets the requirements set forth in this Section 4.1.1 (Alliance Managers).

 

4.1.2

Roles and Responsibilities. The Alliance Managers will be responsible for (a) providing a single point of communication for seeking consensus both internally within the respective Party’s organization and between the Parties regarding key strategy and planning issues, (b) assisting the coordination of teams across functional areas as needed, and (c) performing such other functions as expressly allocated to the Alliance Managers under this Agreement.

 

4.2

Joint Research Committee.

 

4.2.1

Formation. As soon as practicable, but no later than 30 days after the Effective Date, the Parties will establish a JRC to oversee the Research Activities with solely the functions described below. The JRC will be composed of representatives of Biogen and of City, each of whom will be an employee of the applicable Party and will have the appropriate experience, expertise, and decision-making authority to perform its responsibilities on the JRC. Each Party will designate in writing up to three such representatives for the JRC. The JRC may elect to vary the number of representatives from time to time. Either Party may replace its representatives with other individuals at any time upon prior written notice to the other Party (including via email notification), provided that such individuals meet the requirements set forth in this Section 4.2.1 (Formation). The JRC may invite other employees of either Party from relevant support functions to participate in the discussions and meetings of the JRC, provided that such participants will have no voting authority at the JRC.

 

 

4.2.2

JRC Chairperson. The JRC will have a chairperson, to be designated by Biogen. The chairperson will be responsible for calling and convening meetings, but will have no special authority over the other members of the JRC, and will have no additional voting rights.

 

4.2.3

Meetings. The JRC will meet in person (alternating between a site designated by each of City and Biogen) or by audio or video teleconference at least once every Calendar Quarter until the conclusion of the Research Term, or with such other frequency as the Parties may agree. Specific meeting dates will be determined by agreement of the Parties. Either Party may also call a special meeting of the JRC (by audio or video teleconference) upon at least 10 Business Days’ prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed before the next regularly scheduled JRC meeting, and such Party will provide to the JRC materials reasonably adequate to enable an informed discussion of such matter by its members no later than three Business Days before the special meeting. Biogen will host the first regular meeting of the JRC at an agreed time and place no later than [***] days after the Effective Date. Each Party will be responsible for its own expenses relating to its attendance at or participation in JRC meetings. The Alliance Managers will jointly prepare and disseminate agendas and presentations no later than [***] Business Days in advance of each JRC meeting, unless otherwise agreed to by the Parties in writing. For each JRC meeting, the Alliance Managers will alternate which Alliance Manager will prepare meeting minutes (with Biogen’s Alliance Manager to prepare meeting minutes for the first JRC meeting), and such Alliance Manager will disseminate the proposed minutes to the Alliance Manager of the other Party within [***] Business Days after each such meeting for the review, comment, and approval of such other Party. Such other Party will have [***] Business Days from receipt of such proposed minutes to review and approve, or provide comments on, such minutes in writing (such approval not to be unreasonably withheld, conditioned, or delayed); provided that any minutes will be deemed approved if no response is received from such other Party within [***] Business Days after the circulation thereof.

 

4.2.4

Responsibilities. The JRC will serve as a forum for exchanging information regarding the Research Program and will oversee and monitor the progress of the Research Activities. Within such scope the JRC will, subject to Section 4.2.5 (Decision-Making Authority) and Section 4.2.6 (Limits on Committee Decision-Making Authority):

 

(a)

review and determine whether to approve amendments to the Research Plan, as described in Section 3.2.2 (Amendments to Research Plan);

 

(b)

review and discuss the City Research Reports, the progress of the Research Activities and relevant Deliverables provided and Results generated in the performance thereof since the previous JRC meeting, as described in Section 3.4 (Reports of Research Activities);

 

(c)

consider and advise on any technical issues that arise under the Research Activities;

 

 

(d)

discuss and coordinate the technology transfers described in Section 5.1 (Technology Transfers);

 

(e)

review and discuss each RNAi Trigger Data Package and Development Candidate Data Package;

 

(f)

form such Other Committees as the JRC may deem appropriate;

 

(g)

attempt to resolve any disputes on matters within the JRC’s or any Other Committee’s authority on an informal basis and in good faith prior to the institution of escalation to the Executive Officers or exercise of Biogen’s final decision-making authority, as applicable; and

 

(h)

perform such other functions as expressly allocated to the JRC under this Agreement or by the written agreement of the Parties.

 

4.2.5

Decision-Making Authority. A quorum for a meeting of the JRC will require the presence of at least one representative from each Party. The JRC will endeavor to reach decisions by consensus, with each Party, through its representative members of the JRC, having one vote, provided that a quorum must be present for any decision to be made by the JRC and each Party will require at least one representative to attend each JRC meeting. Subject to the terms of this Agreement, including Section 4.2.6 (Limits on Committee Decision-Making Authority), if the JRC is unable to reach consensus on any matter within its jurisdiction hereunder, then Biogen will have final decision-making authority with respect to such decision, provided that, with respect to any disputed matter at the JRC for which there is no agreement between the Parties, (a) within [***] Business Days following the JRC meeting from which such disputed matter arose, either Party may refer such matter to the Executive Officers for resolution and if the Executive Officers, after good faith discussions and negotiations, do not reach consensus on such disputed matter within [***] days after such matter is referred to them, then the Executive Officer of Biogen will have final decision-making authority with respect to such disputed matter and (b) if neither Party refers such disputed matter to the Executive Officers for resolution under clause (a) within [***] Business Days following the JRC meeting from which such disputed matter arose, [***].

 

4.2.6

Limits on Committee Decision-Making Authority. The JRC and each Other Committee will only have authority to determine, approve or resolve matters that it is expressly authorized to determine, approve or resolve under this Agreement. Notwithstanding any provision to the contrary set forth in this Agreement, neither the JRC nor any Other Committee will have the authority to: (a) amend or waive any provision of this Agreement or any of the Parties’ rights or obligations hereunder; (b) determine either Party’s compliance with the terms and conditions of this Agreement; (c) decide any issue in a manner that would conflict with the express terms and conditions of this Agreement; (d) decide any issue for which this Agreement expressly requires a Party’s approval or consent; or (e) resolve any dispute between the Parties (other than matters that it is expressly authorized to resolve) under this Agreement.

 

4.2.7

Discussion of Other siRNA Activities of City. At least once per Calendar Quarter, City will update Biogen regarding City’s general activities in the siRNA field and, upon Biogen’s request, the Parties will discuss how they may further collaborate on activities in the siRNA field outside the scope of this Agreement. At Biogen’s election, such quarterly update will occur either at a meeting of the JRC or at a separate meeting, and Biogen will determine which of Biogen’s employees (which employees may or may not be members of the JRC) will be present for such quarterly update. Notwithstanding the foregoing, in no event will either Party disclose to the other Party any information that constitutes a trade secret under Applicable Law and that is not included in the license explicitly granted by such Party to the other Party hereunder in the course of any such discussions, unless the first Party has first provided to the other Party a general description of the nature of such information, and the other Party has agreed in writing to receive disclosure of such information.

 

 

4.3

Other Committees.

 

4.3.1

Formation. If agreed by the Parties, the JRC may form other committees or working groups as may be necessary or desirable to facilitate the activities within the scope of the JRC’s authority under this Agreement (each such committee or working group, an “Other Committee”). A Party may refer any dispute on a matter within an Other Committee’s authority to the JRC for resolution. No such Other Committees’ authority (including decision-making authority) may exceed that specified for the JRC in this Article 4 (Governance).

 

4.3.2

Joint Research Team. As soon as practicable, but no later than 30 days after the JRC is established, the JRC will establish a JRT as an Other Committee with the purpose and authority to facilitate the Research Activities, including preparing and submitting to the JRC each RNAi Trigger Data Package and Development Candidate Data Package as set forth in Section 3.5.1 (RNAi Trigger Data Packages) and Section 3.5.3 (Development Candidate Data Packages), respectively. The JRT will meet in person (alternating between a site designated by each of City and Biogen) or by audio or video teleconference until the conclusion of the Research Term, at least once every month, or with such other frequency as the Parties may agree.

 

4.4

Disbandment of the JRC and Other Committees. The JRC (and all Other Committees formed by the JRC) will terminate immediately upon the later of: (a) completion of the technology transfers under Section 5.1 (Technology Transfers) to Biogen’s reasonable satisfaction and (b) the expiration of the Research Term, in each case ((a) or (b)), with no further action by either Party.

 

ARTICLE 5
DEVELOPMENT, MANUFACTURING, REGULATORY MATTERS, AND COMMERCIALIZATION

 

5.1

Technology Transfers.

 

5.1.1

Know-How Technology Transfer Obligations.

 

(a)

Transfer of City Research Know-How. During the Research Term, City will provide (and will cause its Affiliates and Subcontractors to provide) to Biogen copies of all City Research Know-How (including materials) that is necessary for the performance of any Biogen Research Activities, as more fully described in the Research Plan, in a timely manner as necessary to enable Biogen to conduct such Biogen Research Activities. Without limiting the foregoing, during the Research Term, City will provide (and will cause its Affiliates and Subcontractors to provide) to Biogen copies of all Deliverables that constitute City Research Know-How (including materials) that is made, conceived, discovered, or otherwise generated from the City Research Activities after such initial transfer of City Research Know-How and is necessary to enable Biogen to continue to perform any Biogen Research Activities, as determined by the JRC.

 

 

(b)

Transfer of Biogen Research Know-How. During the Research Term, Biogen will provide (and will cause its Affiliates and Subcontractors to provide) to City copies of all Biogen Research Know-How (including materials) that is necessary for the performance of any City Research Activities, as more fully described in the Research Plan, in a timely manner as necessary to enable City to conduct such City Research Activities.

 

(c)

Transfer of Licensed Know-How following Research Term. Promptly following the Development Candidate Selection Date, City will provide (and will cause its Affiliates and Subcontractors to provide) to Biogen all Licensed Know-How then-existing, including delivering copies of all Licensed Know-How (including materials) necessary or reasonably useful for Biogen to continue to Exploit any Licensed Compounds or Licensed Products that incorporate such Licensed Compounds, as determined by the JRC, to the extent not previously provided to Biogen pursuant to this Section 5.1 (Technology Transfers). Thereafter, City will continue to provide Biogen copies of all Licensed Know-How that is made, conceived, discovered, or otherwise generated after such initial transfer until the end of the Assistance Term.

 

5.1.2

Manufacturing Technology Transfer Obligations.

 

(a)

In addition to the initial technology transfer set forth in Section 5.1.1 (Know-How Technology Transfer Obligation), at Biogen’s request at any time during the Research Term or the Assistance Term, City will transfer, or have transferred, if applicable, to Biogen (or its designated Third Party manufacturer, pursuant to an appropriate confidentiality agreement with City) within 30 days following such request (i) all Licensed Know-How that is necessary or reasonably useful to enable Biogen to Manufacture (or have Manufactured) the Program RNAi Triggers, the Program Linkers, and any other components of the Program Conjugates, to the extent not previously transferred to Biogen under this Agreement, by providing copies or samples of relevant documentation, materials, and other embodiments of such Know-How, and by making available its qualified technical personnel on a reasonable basis to consult with Biogen with respect to such Know-How, and (ii) any then-existing materials (as well as any then-existing intermediates and impurities of such materials) used by City or its Affiliates or Manufacturing Subcontractors (each, a “CMO”) in the Manufacture thereof and in City’s Control. The JRC will coordinate and ensure that such transfer has been completed under this Section 5.1.2 (Manufacturing Technology Transfer Obligation).

 

(b)

Without limiting the foregoing, during the Research Term and the Assistance Term, City will provide Biogen with the opportunity, upon Biogen’s reasonable request during normal business hours, if and to the extent allowed under the agreement of City or its Affiliates with the applicable CMO, to observe the Manufacturing processes and procedures conducted by or on behalf of City for any Program RNAi Triggers, any Program Linkers, and any other components of the Program Conjugates (e.g., review assays, batch records, and release processes and procedures) for the purpose of enabling Biogen (or a Third Party manufacturer designated by Biogen) to Manufacture the Program RNAi Triggers, the Program Linkers, and any other components of the Program Conjugates.

 

 

(c)

At Biogen’s request at any time after the Development Candidate Selection Date, City will (and will cause its Affiliates to) either: (a) if requested by Biogen and agreed by City, assign to Biogen any agreement of City or its Affiliates with a CMO for the Manufacture of any Program RNAi Triggers, any Program Linkers, and any other components of the Program Conjugates, provided that such assignment is not prohibited by such CMO agreement; or (b) notify such CMO on a confidential basis of the rights granted to Biogen under this Agreement, facilitate the introduction of Biogen and such CMO, and provide any authorization letters necessary or useful to enable Biogen to engage such CMO to Manufacture any Program RNAi Triggers, any Program Linkers, and any other components of the Program Conjugates for and on behalf of Biogen using the Manufacturing processes established at such CMO for any such Program RNAi Triggers, Program Linkers, and other components of the Program Conjugates.

 

5.1.3

Technical Assistance during Research Term and Assistance Term. In addition to providing copies of the Licensed Know-How in accordance with this Section 5.1 (Technology Transfers), during the Research Term and the Assistance Term, City will provide (and will cause its Affiliates and Subcontractors to provide) relevant personnel reasonably available to Biogen with all reasonable assistance required in order to transfer to Biogen such Licensed Know-How required to be produced pursuant to this Section 5.1 (Technology Transfers) in a timely manner. During the Research Term and the Assistance Term, City will make its (and will cause its Affiliates and Subcontractors to make their) relevant personnel reasonably available to Biogen, at reasonable times during City’s normal business hours and upon reasonable prior notice, to answer any questions or provide instruction as reasonably requested by Biogen concerning the Licensed Technology in connection with its performance of the Biogen Research Activities and the Exploitation of the Licensed Compounds and Licensed Products that include such Licensed Compounds, in each case, as reasonably requested by Biogen.

 

5.2

Development and Medical Affairs. From and after the Development Candidate Selection Date, Biogen will have the sole and exclusive right to conduct, and will have sole discretion and decision-making authority with respect to, the further Research and Development of, and the performance of all Medical Affairs with respect to, the Licensed Compounds and Licensed Products, at its cost and expense. For the avoidance of doubt, nothing herein shall be construed to prevent Biogen from performing Research or non-clinical Development activities for any Program Conjugates, Licensed Compounds or Licensed Products prior to the Development Candidate Selection Date.

 

5.3

Manufacturing. From and after the Development Candidate Selection Date, Biogen will have the sole and exclusive right to undertake, and will have sole discretion and decision-making authority with respect to, all Manufacturing activities for the Development Candidate, Licensed Compounds, and Licensed Products, at its cost and expense. For the avoidance of doubt, nothing herein shall be construed to prevent Biogen from performing Manufacturing activities for any Program Conjugates, Licensed Compounds or Licensed Products prior to the Development Candidate Selection Date.

 

5.4

Regulatory Activities. From and after the Development Candidate Selection Date, Biogen will have sole control over, and will have sole discretion and decision-making authority with respect to, the preparation and submission of all Regulatory Submissions for all Licensed Products, at its cost and expense, including filing in its name or the name of its designee all MAAs and applications for obtaining, supporting, and maintaining Pricing and Reimbursement Approvals and Orphan Drug Designations for the Licensed Products. Without limiting the generality of Section 5.7 (Additional City Support), upon Biogen’s request City will assist Biogen in its efforts to prepare and submit any Regulatory Submissions to obtain, support, or maintain Regulatory Approvals for the Licensed Products, including by preparing any written reports as reasonably needed in support of any IND for a Licensed Product and providing to Biogen, upon Biogen’s request, all data, written reports, and other documentation Controlled by City or its Affiliates and related to any Licensed Product (which assistance and data generation must be in accordance with Applicable Law and requirements and standards by applicable Regulatory Authorities) as well as any necessary samples and materials. At Biogen’s request, the Parties will agree upon a plan pursuant to which such assistance will be provided.

 

 

5.5

Commercialization. From and after the Development Candidate Selection Date, Biogen will have the sole and exclusive right to conduct, and will have sole discretion and decision-making authority with respect to, the Commercialization and other Exploitation of all Licensed Compounds and Licensed Products, at its cost and expense.

 

5.6

Diligence Obligations.

 

5.6.1

[***].

 

5.6.2

[***].

 

5.6.3

[***].

 

5.7

Additional City Support. The Parties understand and agree that, following completion of the City Research Activities, in addition to the cooperation and assistance to be expressly provided under Section 5.1 (Technology Transfers) and Section 5.4 (Regulatory Activities), from time to time it may be necessary for Biogen to seek assistance and cooperation from City in connection with the further Exploitation of Licensed Compounds and Licensed Products. City hereby agrees to use reasonable efforts to make relevant personnel reasonably available to Biogen, at reasonable times during City’s normal business hours and upon reasonable prior notice, to answer any questions or provide instruction regarding CMC Activities of the Program RNAi Trigger and Program Linker as reasonably requested by Biogen or such other matters as agreed by the Parties, provided that Biogen shall pay City for the time of City’s personnel spent in providing such assistance and cooperation in accordance with Section 5.9 (Allocation of Costs). Except as otherwise provided in Section 5.9 (Allocation of Costs), each Party will be responsible for its own costs of undertaking such activities.

 

 

5.8

Reports. From the Development Candidate Selection Date until the First Commercial Sale of any Licensed Product in any jurisdiction, [***], Biogen will provide to City a high-level summary of the status of Development and (if applicable) Commercialization activities with respect to the Licensed Compounds and Licensed Products hereunder. Such reports will be the Confidential Information of Biogen and subject to the terms and conditions set forth in Article 8 (Confidentiality).

 

5.9

Allocation of Costs. Each Party will be responsible for its own costs of undertaking the technology transfers and other assistance contemplated by Section 5.1 (Technology Transfers), Section 5.4 (Regulatory Activities), and Section 5.7 (Additional City Support), until the expiration of the Assistance Term. [***].

 

ARTICLE 6
FINANCIAL TERMS

 

6.1

Upfront Payments.

 

6.1.1

Initial Upfront Payment. In partial consideration of the licenses granted to Biogen hereunder, Biogen will pay to City a one-time, non-refundable, non-creditable, initial upfront payment of $16,000,000 no later than [***] Business Days after receipt of an invoice from City for such amount, which invoice will be issued upon or promptly after the Effective Date.

 

6.1.2

Additional Upfront Payment. In partial consideration of the licenses granted to Biogen hereunder, following the later of [***] if City meets the Payment Conditions, Biogen will pay to City a one-time, non-refundable, non-creditable, additional upfront payment of [***] (the “Additional Upfront Payment”) no later than [***] days after receipt of an invoice from City for such amount, which invoice will be issued upon or promptly after such date that is the later of the foregoing clause (a) and (b).

 

6.2

Milestone Payments.

 

6.2.1

Research Milestones. [***] (each, a “Research Milestone Payment”) [***] (each, a “Research Milestone Event”) set forth in Table 6.2.1 below. [***] Research Milestone Event as set forth in Table 6.2.1 below. For the avoidance of doubt, [***].

 

Table 6.2.1 – Research Milestones
[***]	[***]	[***]
1.     [***]	[***]	[***]
[***]	[***]	[***]
2.     [***]	[***]	[***]

 

[***]

 

6.2.2

Development Milestones. [***] (each, a “Development Milestone Payment”) [***] (each, a “Development Milestone Event”) set forth in Table 6.2.2 below [***]. For the avoidance of doubt, [***].

 

 

Table 6.2.2 – Development Milestones
Development Milestone Event	Development Milestone Payment
1.     [***]	[***]
2.     [***]	[***]
3.     [***]	[***]
4.     [***]	[***]
5.     [***]	[***]
6.     [***]	[***]

 

6.2.3

Sales Milestones. [***] (each, a “Sales Milestone Payment”) [***] (each, a “Sales Milestone Event”) set forth in Table 6.2.3 below [***] in a Calendar Year. Each of the Sales Milestone Payments set forth below will be payable [***] in which the corresponding Sales Milestone Event is achieved. [***].

 

Table 6.2.3 – Sales Milestones
Sales Milestone Event	Sales Milestone Payment
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

 

6.3

Royalties on Royalty-Bearing Products.

 

6.3.1

Royalty Payments. Subject to the applicable adjustments to the royalties amounts owed pursuant to the provisions of Section 6.3.4 (Payment Adjustments), Biogen will pay to City royalties as a percentage of the Net Sales of the Royalty-Bearing Products, such percentage being in the amount of the applicable marginal royalty rates set forth in Table 6.3.1 below of the Aggregate Annual Net Sales of Royalty-Bearing Products.

 

Table 6.3.1– Marginal Royalty Rates
Aggregate Annual Net Sales of Royalty-Bearing Products	Marginal Royalty Rate (% of Aggregate Annual Net Sales)
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

 

Each marginal royalty rate set forth in Table 6.3.1 above will apply only to that portion of the Aggregate Annual Net Sales of the Royalty-Bearing Products in the Territory during a given Calendar Year that falls within the indicated range.

 

6.3.2

Royalty Term. On a Royalty-Bearing Product-by-Royalty-Bearing Product and country-by-country basis, Biogen’s obligation to pay royalties will be in effect only during the Royalty Term for the applicable Royalty-Bearing Product in the applicable country. Upon expiration of the Royalty Term for a given Royalty-Bearing Product in a given country: (i) no further royalties will be payable in respect of sales of such Royalty-Bearing Product in such country; and (ii) the licenses granted to Biogen under Section 2.1.2 (Exclusive License Grant to Biogen) with respect to the Exploitation of such Licensed Product in such country will automatically become fully paid-up, perpetual, irrevocable, and royalty-free. For clarity, only a single royalty will be payable as a result of one or more Royalty-Bearing Patent Claims Covering a Royalty-Bearing Product during the Royalty Term for such Royalty-Bearing Product in any country. For purposes of determining the Royalty Term for a Royalty-Bearing Product, all Royalty-Bearing Products containing the same Licensed Compound (regardless of form, dosage or formulation) will be considered one and the same Royalty-Bearing Product.

 

 

6.3.3

Royalty Reports; Payments.

 

(a)

Royalty Reports. No later than [***] days after [***] during which any royalty payments are owed, Biogen will submit to City a written report of (i) Net Sales of Royalty-Bearing Products sold, in the currency for which such Royalty-Bearing Products were sold (and, if the currency of sale was not Dollars, also in Dollars), by or on behalf of Biogen and its Affiliates and Sublicensees during such Calendar Quarter, on a Royalty-Bearing Product-by-Royalty-Bearing Product and country-by-country basis, (ii) the royalty payments payable on such Net Sales, (iii) the number of units of such Licensed Product represented by such Net Sales, (iv) the gross sales received by Biogen, its Affiliates and Sublicensees for such Licensed Product, (v) the aggregate deductions from gross sales of such Licensed Product (which, for clarity, will not be itemized), (vi) the exchange rates used in calculating any of the foregoing, and (vii) any other payment adjustments provided for under Section 6.3.4 (Payment Adjustments) with respect to such Licensed Products.

 

(b)

Royalty Payments. Royalties will be payable on a Calendar Quarter basis and Biogen will make any such royalty payments owed within [***] days after the end of the Calendar Quarter during which the applicable Net Sales of Royalty-Bearing Products occurred.

 

6.3.4

Payment Adjustments.

 

(a)

[***]

 

(b)

[***]

 

(c)

[***]

 

(d)

[***]

 

(e)

[***]

 

(i)

[***]

 

(ii)

[***]

 

 

6.4

Other Amounts Payable. With respect to any amounts owed under this Agreement by one Party to the other for which no other invoicing and payment procedure is otherwise specified in this ‎‎Agreement, each Party will provide an invoice, together with reasonable supporting documentation, to the other Party for such amounts owed. The owing Party will pay any undisputed amounts within [***] of receipt of the invoice, and any disputed amounts owed by a Party will be paid within 60 days of resolution of the dispute in accordance with Section ‎‎12.9 (Dispute Resolution).

 

6.5

Payment Method. All payments to be made between the Parties under this Agreement will be made in Dollars and may be paid by wire transfer in immediately available funds to a bank account designated by the receiving Party; provided that in no event will Biogen be obligated to make payments under this Agreement to any Affiliate of City that is organized in any jurisdiction outside of the U.S. without Biogen’s prior written consent.

 

6.6

Currency Exchange. The rate of exchange to be used in computing the amount of currency equivalent in U.S. Dollars owed to a Party under this Agreement will be Biogen’s then-current standard exchange rate methodology employed for the translation of foreign currency sales into U.S. Dollars in accordance with GAAP and consistently applied during the period.

 

6.7

Late Payments. If a Party does not receive payment of any undisputed sum due to it on or before the due date set forth under this Agreement, then simple interest will thereafter accrue on the sum due to such Party from the due date until the date of payment at a per-annum rate of one percentage point (one hundred basis points) over the then-current prime rate reported in The Wall Street Journal or the maximum rate allowable under Applicable Law, whichever is lower.

 

6.8

Right to Offset. Without limiting Biogen’s rights under Section 2.5.2 (Default and Cure; Offset Right), each Party will have the right to offset any amount owed by the other Party to such first Party under or in connection with this Agreement, against any payments owed by such first Party to the other Party under this Agreement, provided that, prior to offsetting such amount, such first Party has provided written notice of such proposed offset to the other Party, and the other Party has not provided a notice of dispute with respect thereto within 30 days after receipt of such offset notice (or such dispute has been finally resolved in accordance with this Agreement). Any offset amount pursuant to this Section 6.8 (Right to Offset) may include any amount actually owed under an indemnification obligation by the other Party. Such offsets will be in addition to any other rights or remedies available under this Agreement and Applicable Law.

 

6.9

Taxes.

 

6.9.1

City hereby represents and warrants that it is (a) the legal and beneficial owner for all Tax purposes of all Payments made or to be made to it hereunder, (b) established and taxable (for any Tax purpose) solely in the United States, and (c) does not maintain any permanent establishment (within the meaning of any applicable Tax treaty) or other fixed place of business in any jurisdiction outside of the United States.

 

 

6.9.2

Except as otherwise provided in this Section 6.9 (Taxes), if Biogen is required to deduct and withhold Taxes under Applicable Law from the Payments made to City or City’s assignee (such assignment solely as permitted under Section 12.1 (Assignment)), if applicable, (any such deduction and withholding, a “Withholding Tax”), and such Withholding Taxes cannot be eliminated or reduced under Applicable Law, Biogen will be permitted to deduct and withhold such Withholding Taxes, and any such amounts deducted or withheld by Biogen will be treated as having been paid to City (or its assignee) for purposes of this Agreement. Any such Withholding Taxes will be borne by City (or its assignee). If any such Withholding Tax is assessed against, or paid (but in each case not withheld) by Biogen, then City (or its assignee) will pay the relevant amount of such Withholding Tax to Biogen, except to the extent any interest or penalties are due as a result of any action or inaction by Biogen. Biogen represents that it does not expect to deduct or withhold any amounts from the upfront payments described in Section 6.1 (Upfront Payments), provided that City (or its assignee) provides a complete Form W-9. If City (or its assignee) may be entitled under any applicable Tax treaty to a reduction of rate of, or the elimination of, applicable Withholding Tax, then it may deliver to Biogen or the appropriate Governmental Authority the prescribed forms necessary to reduce the applicable rate of withholding or to relieve Biogen of its obligation to withhold Tax, and Biogen shall reasonably cooperate in taking any actions to reduce or eliminate any such withholding provided, that Biogen may deduct and delay from any payments owed by Biogen to City (or its assignee) pursuant to this Agreement an amount that Biogen reasonably estimates would be withheld if such actions to reduce or eliminate withholdings are rejected, and such amounts may be delayed until the conclusion of such tax authority ruling and provided further, that Biogen shall not be required to attend any tax court or similar tribunal proceeding in order to obtain such tax authority ruling. If City (or its assignee) timely delivers to Biogen a validly executed form establishing a reduced rate or exemption from withholding, Biogen will apply the reduced rate of withholding, or not withhold, as the case may be, provided that Biogen is in receipt of evidence of such, in a form reasonably satisfactory to Biogen and, for the avoidance of doubt, City (or its assignee) will, where appropriate, furnish Biogen with updated Form W-9 or W-8 BEN (or other appropriate form) at least every three years. If, in accordance with the foregoing, Biogen withholds any amount for Taxes, then it will pay to City (or its assignee) the balance (amount due less any Withholding Tax) when due, make timely payment (or cause its agent to make timely payment) to the proper taxing authority of the withheld amount, and send City (or its assignee) the best available proof of such payment within 60 days following that payment.

 

6.9.3

City has provided a properly completed and duly executed IRS Form W-9 to Biogen.

 

6.9.4

Each Party will be responsible for all Taxes imposed on such Party’s net income, or on net income allocated to such Party under Applicable Law.

 

6.9.5

VAT.

 

(a)

All Payments are exclusive of VAT. If VAT becomes payable under Applicable Law in respect of any Payment under this Agreement, then the payor of such Payment will pay such VAT at the applicable rate in respect of such Payment. In such case, VAT (if any) will be due and payable upon presentation of a valid VAT invoice (or, where there is no provision in the legislation for the jurisdiction concerned that a VAT invoice is required to be issued, a written demand containing such information as is customary in that jurisdiction). All Parties agree that they will reasonably cooperate to ensure the use of any VAT exemptions, zero ratings, reduced-ratings, suspensions, or other reliefs.

 

 

(b)

In the event that Payments made to City (or its assignee) as payee become subject to VAT as a result of a determination by a tax authority or change in applicable Tax law after the date hereof, or City’s (or its assignee’s) becoming (or City’s or City’s assignee already being) established for VAT purposes outside of the United States after the Effective Date, then this Section 6.9.5(b) will apply notwithstanding anything to the contrary in Section 6.9.5(a). To the extent that any Payment is subject to a VAT reverse-charge mechanism under Applicable Law, the payor of such Payment or its Affiliate, as applicable, will self-assess VAT and, subject to input VAT deduction of such self-assessed VAT, remit such amount to the applicable Governmental Authority. Where the prevailing legislation requires the recipient to self-account for VAT, then Biogen covenants that it will correctly account for VAT in respect of the services received. City (or its assignee) agrees that it will raise a tax invoice (or equivalent document) to support the charge to VAT. For the purposes of VAT, City (or its assignee) collaboration activities and rights and licenses provided by City (or its assignee) under this Agreement will be considered to be taxed under Article 44 of Council Directive 2006/112/EC or any equivalent provision in the country of performance if performed outside the European Union and as such will be considered to be taxed for VAT purposes in the country of the recipient. Any supply of goods under this Agreement will be taxed in accordance with the prevailing VAT legislation. In the event that the local competent tax authority determines that VAT is chargeable on a supply of goods, where City (or its assignee) is the payee, City (or its assignee) in the first instance will undertake all reasonable steps to refute any such assertions by the local tax authority. Only once this process is completed may City (or its assignee) raise valid tax invoices for the additional VAT liability.

 

(c)

Biogen will take all reasonable steps to recover any VAT liability on a supply of goods from the same local tax authorities by submitting regular claims. City will provide all necessary assistance to facilitate the recovery of this Tax. If the Tax cannot be recovered, then Biogen will be entitled to offset this Tax against any and all future payments to City or, where necessary, invoice City directly for these amounts, provided, however, that no such offset shall be applicable unless, and to the extent, City (or its assignee) is, becomes, or should have been established for VAT purposes outside of the United States.

 

(d)

Each Party will be responsible for any penalties or interest accruing due to incorrect VAT treatment of the supplies of goods or services made by that Party or any failure to correctly account for VAT on any receipt of a supply of goods or services under this Agreement except where those penalties or interest arise as a result of the actions of the other Party, in which case that Party will be liable to reimburse the value of the penalties and interest.

 

(e)

Each Party will be responsible for reporting its own transactions to the local tax authorities if required for VAT purposes. There will be no shared, mutual or otherwise collective VAT filings that may suggest that the Parties are anything other than separate operational entities for VAT purposes.

 

6.9.6

Orphan Credit. City will, at Biogen’s reasonable expense, cooperate with Biogen in seeking any Tax exemption or credits that may be available to Biogen with respect to any Licensed Product, including a deduction under Section 250 of the U.S. Internal Revenue Code for foreign derived intangible income, the Tax credit available under section 45C of the U.S. Internal Revenue Code by reason of a Party’s research and development expenditures contributing to the any compound under this Agreement being granted Orphan Drug Designation by the FDA and any U.S. Tax legislation enacted during the Term of this Agreement that could provide a material Tax benefit to either party or equivalent applicable law of another country but solely related to the Research Program and not to any other activity which is Biogen’s responsibility. Biogen will hold any Orphan Drug Designation and accordingly will be the claimant and beneficiary of the Tax credit available under Section 45C of the U.S. Internal Revenue Code.

 

 

6.10

Financial Audits.

 

6.10.1

Record Retention; Audits. Biogen will keep (and will cause its Affiliates and Sublicensees to keep) complete and accurate books and records pertaining to the sale or other disposition of Licensed Products (the “Biogen Records”) in reasonable detail to permit City to confirm the accuracy of all payments or costs reported, for at least the preceding [***]. Upon reasonable but in any case no less than [***] advance notice by City to Biogen and not more than [***] (in each case, except for cause), Biogen and its Affiliates will permit, and will cause their Sublicensees to permit, an independent certified public accounting firm of internationally recognized standing, selected by City and reasonably acceptable to Biogen, to have access during normal business hours to such of the records of Biogen and its Affiliates and, if applicable, their Sublicensees, as may be reasonably necessary to verify the accuracy of the applicable Biogen Records and the payments amounts owed to City hereunder, for any year ending not more than [***] prior to the date of such request. The accounting firm will enter a confidentiality agreement reasonably acceptable to Biogen governing the use and disclosure of Biogen’s information disclosed to such firm, and such firm will disclose to City only whether information provided by Biogen to City as described above was accurate and the specific details concerning any discrepancies, which information will be Confidential Information of Biogen.

 

6.10.2

Payment Discrepancies; Audit Disputes. Any disputes with respect to the findings of such accounting firm may be referred by either Party to the dispute resolution procedure set forth in Section 12.9 (Dispute Resolution). If either Party is found to have been underpaid any amounts payable to such Party hereunder or to have overpaid to the other Party any amounts payable hereunder, then such first Party will be entitled to recover any undisputed discrepancy, plus interest as set forth in Section 6.7 (Late Payments), no later than [***] after delivery to the Parties of the final report of such accounting firm. The fees charged by such accounting firm will be paid by City; provided that if the audit discloses a net underpayment of amounts owed or overreporting of expenses by Biogen of more than [***] of total amounts owed or expenses reported by Biogen for any Calendar Year period covered by the audit, then Biogen will pay the reasonable fees and expenses charged by such accounting firm. City will treat all financial information disclosed by its accounting firm pursuant to this Section 6.10 (Financial Audits) as Confidential Information of Biogen for purposes of Article 8 (Confidentiality) of this Agreement, and will cause its accounting firm to do the same.

 

ARTICLE 7
REPRESENTATIONS, WARRANTIES, AND COVENANTS

 

7.1

Mutual Representations and Warranties of the Parties. Each Party represents and warrants to the other Party as of the Effective Date that:

 

7.1.1

it is duly organized, validly existing, and in good standing under the Applicable Law of the jurisdiction of its incorporation and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations, in each case, under this Agreement;

 

 

7.1.2

the execution of this Agreement and the performance by such Party of its obligations hereunder have been duly authorized;

 

7.1.3

this Agreement has been duly executed and delivered on behalf of such Party, and is valid, legally binding, and enforceable against such Party in accordance with its terms;

 

7.1.4

the performance of this Agreement by such Party does not create a breach or default under any other agreement to which it is a Party;

 

7.1.5

the execution, delivery, and performance of this Agreement by such Party does not conflict with any agreement, instrument, or understanding, oral or written, to which it is a party or by which it is bound, nor violate any Applicable Law or regulation of any Governmental Authority; and

 

7.1.6

it has obtained all necessary government authorizations, consents, approvals, licenses, exemptions of, or filings or registrations with Governmental Authorities, under any Applicable Law currently in effect, that are or will be necessary for the transactions contemplated by this Agreement or any other agreement or instrument executed in connection herewith, or the performance by it of its obligations under this Agreement.

 

7.2

Additional Representations and Warranties of City. City further represents and warrants to Biogen that (a) except as set forth in the Initial Disclosure Schedule, as of the Effective Date, and (b) subject to Section 7.3.2 (Certain Clarifications), except as set forth in the Development Candidate Data Package Disclosure Schedule, as of the Development Candidate Bring-Down Date, in each case:

 

7.2.1

City has and will have the full right, power, and authority to grant all of the licenses and rights granted to Biogen under this Agreement;

 

7.2.2

City or its Affiliates solely own all rights, title, and interest in and to the Licensed Technology, free and clear of any lien, encumbrance, charge, mortgage, liability, or security interest, other than licenses granted in the ordinary course of business outside of the scope granted to Biogen under this Agreement;

 

7.2.3

all Licensed Patent Rights existing as of the Effective Date or the Development Candidate Bring-Down Date, as applicable, are listed on [***]. City is the sole and exclusive owner of the entire right, title, and interest in the Existing Licensed Patent Rights. All such Existing Licensed Patent Rights that are issued as of the Effective Date or the Development Candidate Bring-Down Date, as applicable, are subsisting and, to City’s Knowledge, are not invalid or unenforceable, in whole or in part, and have been filed and maintained, to City’s Knowledge, properly and correctly, and all applicable fees have been paid on or before the due date for payment. With respect to Existing Licensed Patent Rights that are pending applications owned or purported to be owned by City (and, with respect to any such application exclusively licensed to City, to City’s Knowledge), such applications have been filed, to City’s Knowledge, properly and correctly and are being diligently prosecuted in the respective patent offices in accordance with Applicable Law, and City and its Affiliates have presented all relevant references, documents, and information of which it is aware to the relevant patent examiner at the relevant patent office. To City’s Knowledge, City does not own or have license rights to use any Patent Rights not listed [***] that are necessary or reasonably useful to (a) perform the Biogen Research Activities or (b) Exploit any Licensed Compound or Licensed Product. During the Term, upon Biogen’s reasonable request, City will provide to Biogen an updated [***] that includes all then-existing Licensed Patent Rights;

 

 

7.2.4

there is no pending litigation, or litigation that has been threatened in writing to City or any of its Affiliates or, to City’s Knowledge, to any party to any Upstream Agreement, that alleges, or any written communication to City or any of its Affiliates or, to City’s Knowledge, to any party to any Upstream Agreement, alleging that City’s practice of the Licensed Technology prior to the Effective Date or the Development Candidate Bring-Down Date, as applicable, has infringed, misappropriated, or otherwise violated, or would infringe, misappropriate, or otherwise violate, any of the Intellectual Property of any Third Party;

 

7.2.5

there are no pending claims, and no judgments or settlements against, or amounts with respect thereto owed by, City or any of its Affiliates, with respect to the Licensed Technology or, as of the Development Candidate Bring-Down Date, the Licensed Products, and City has not received written notice threatening any such claims, judgments, or settlements;

 

7.2.6

the practice by City or Biogen under the Licensed Technology, the performance of the Research Plan, and the Exploitation by City or Biogen (or their respective Affiliates or Sublicensees) of any Program RNAi Triggers as incorporated into any Licensed Compound or Licensed Product, in each case, as permitted under this Agreement, does not and will not misappropriate or otherwise violate any Know-How or other Intellectual Property (excluding any Patent Right) of any Third Party; provided, however, that City makes no representation or warranty hereunder (a) as to the Exploitation of any [***] component of any Licensed Compound or Licensed Product or (b) as of the Development Candidate Bring-Down Date, as to the Exploitation of any Modified Program RNAi Trigger or any other component of a Program Conjugate, Licensed Compound, or Licensed Product to the extent not created or provided by or on behalf of City or its Affiliates or (c) as to any Conjugate or other combination of the Program RNAi Trigger with any other component not created or provided by or on behalf of City of its Affiliates ((a) through (c) collectively, the “Excluded Matters”); provided, further, that, notwithstanding anything to the contrary, Sections 7.2.6 and 7.2.7 set forth the sole and exclusive representation and warranty regarding infringement, misappropriation, or violation of Intellectual Property rights of any Third Party by City;

 

7.2.7

(a) City’s performance of the Research Plan does not and will not infringe any issued Patent Right of any Third Party or, if and when issued, any claim within any published patent application of any Third Party; [***] (b) the composition of matter of any Program RNAi Trigger does not and will not infringe any issued Patent Right of any Third Party or, if and when issued, any claim within any published patent application of any Third Party; [***] and (c) to City’s Knowledge, the practice by City or Biogen under the Licensed Technology, Biogen’s performance of the Research Plan, and the Exploitation by City or Biogen (or their respective Affiliates or Sublicensees) of any Program RNAi Triggers as incorporated into any Licensed Compound or Licensed Product, in each case, as permitted under this Agreement does not and will not infringe any issued Patent Right of any Third Party or, if and when issued, any claim within any published patent application of any Third Party; [***]

 

7.2.8

no Third Party has challenged, in a writing sent to City, City’s counsel, or any City designated agent for service of process, the ownership, scope, duration, validity, enforceability, priority, or right to use any Existing Licensed Patent Rights (including, by way of example, through the institution of or written threat of institution of interference, inter partes review, reexamination, protest, opposition, nullity, or similar invalidity proceeding before the United States Patent and Trademark Office or any foreign patent authority or court);

 

 

7.2.9

to City’s Knowledge, no Third Party is infringing, misappropriating, or otherwise violating, or threatening to infringe, misappropriate, or otherwise violate, the Licensed Technology or Biogen’s rights thereto;

 

7.2.10

City has not previously assigned, transferred, conveyed, or granted any license or other rights under the Licensed Technology (or any other Know-How or Patent Rights owned or in-licensed by City or its Affiliates that would, if Controlled by City, constitute Licensed Technology) in any way that would conflict with or limit the scope of any of the rights or licenses granted to Biogen hereunder;

 

7.2.11

(a) City has obtained, or caused its Affiliates, as applicable, to obtain, assignments from the inventors of all inventorship rights to the Existing Licensed Patent Rights owned or purported to be owned by City, and all such assignments are valid and enforceable and (b) to City’s Knowledge, the applicable licensor has obtained assignments from the inventors of all inventorship rights to the Existing Licensed Patent Rights in-licensed by City or its Affiliates, and all such assignments are valid and enforceable;

 

7.2.12

(a) the inventorship of the Existing Licensed Patent Rights is properly identified on each issued patent or patent application in the Existing Licensed Patent Rights owned or purported to be owned by City and (b) to City’s Knowledge, the inventorship of the Existing Licensed Patent Rights is properly identified on each issued patent or patent application in the Existing Licensed Patent Rights in-licensed by City or its Affiliates;

 

7.2.13

the Upstream Agreements set forth on [***] constitute all agreements pursuant to which City or its Affiliates Control any Licensed Technology (other than agreements entered into by and between City (or its Affiliates) and its employees, consultants and other service providers regarding assignment of Intellectual Property in the ordinary course of business) or obtain rights under any other Intellectual Property that would, if Controlled by City, constitute Licensed Technology, and City has provided to Biogen a true and complete copy of each Upstream Agreement. Neither City nor any of its Affiliates is in breach of any existing Upstream Agreement, nor have they received or given any written notice of default or termination under any existing Upstream Agreement. City and its Affiliates have not performed or omitted to perform any act that could give any Person a right to terminate any Upstream Agreement. To City’s Knowledge, (a) no facts or circumstances exist that would reasonably be expected to give rise to any such breach or termination and (b) no counterparty is in breach of any Upstream Agreement;

 

7.2.14

other than the Upstream Agreements set forth on [***] there are no Third Party agreements pursuant to which City Controls any of the Licensed Technology (other than agreements entered into by and between City (or its Affiliates) and its employees, consultants, and service providers regarding assignment of Intellectual Property in the ordinary course of business) or obtains rights under any other Intellectual Property that would, if Controlled by City, constitute Licensed Technology;

 

 

7.2.15

none of the Upstream Agreements (or any agreement to which City is a party) contains provisions that conflict with the rights and licenses granted to Biogen hereunder. There are no amounts that will be required to be paid by Biogen or its Affiliates or Sublicensees to a Third Party as a result of the Exploitation of Licensed Compounds or the Licensed Products in or for the Territory that arise out of any agreement to which City or any of its Affiliates is a party;

 

7.2.16

this Agreement constitutes a Sublicense Agreement that is a Direct Sublicense Agreement (each as defined in the OSIF License) under the OSIF License;

 

7.2.17

City and its Affiliates have taken commercially reasonable measures consistent with industry practices to protect the secrecy, confidentiality, and value of all Licensed Know-How that constitutes trade secrets under Applicable Law (including requiring all employees, consultants, and independent contractors to execute binding and enforceable agreements requiring all such employees, consultants, and independent contractors to maintain the confidentiality of such Licensed Know-How) and such Licensed Know-How has not been disclosed to, or, to City’s Knowledge, discovered by, any Third Party except pursuant to such confidentiality agreements, and, to City’s Knowledge, there has not been a breach of such confidentiality obligations by any party to such confidentiality agreements;

 

7.2.18

the Licensed Technology has not been created pursuant to, and is not subject to, any funding agreement with any Governmental Authority or any Third Party, and is not subject to the requirements of the Bayh-Dole Act or any similar provision of any Applicable Law, and any Patent Rights or Know-How arising out of the Research Program will not be subject to any such funding agreement or requirements. With respect to any Licensed Technology that is subject to the requirements of the Bayh-Dole Act, City has complied, and, to City’s Knowledge, its (sub)licensees and licensors, as applicable, of such Licensed Technology have complied, with all obligations as applicable to City and, to City’s Knowledge, its (sub)licensees and licensors, respectively pursuant to (a) all relevant funding agreement(s) between any Governmental Authority or other Person and City or City’s applicable licensor; and (b) the Bayh Dole Act. Without limitation of the foregoing, with respect to any such Licensed Technology, City has taken, and, to City’s Knowledge, its (sub)licensees and licensors, as applicable, of such Licensed Technology have taken, all actions necessary under the Bayh Dole Act to secure and retain ownership of such inventions and Patent Rights for City or City’s applicable licensor, including by complying with all disclosure, election, filing, prosecution, maintenance, defense, reporting and employee agreement requirements as set forth in 37 C.F.R. § 401.14 and in the funding agreement between any Governmental Authority or other Person and City or City’s applicable licensor, except for failure that has not resulted in such Governmental Authority or such Third Party that provided the funding retaining any claim of ownership or exercising any march-in rights to any such inventions and Patent Rights;

 

7.2.19

all information disclosed to Biogen by City relating to the Licensed Technology, and the materials and methods to be employed by City in the performance by or on behalf of City of the City Research Activities under the Research Plan and otherwise under this Agreement is, at the time of disclosure, accurate in all material respects;

 

7.2.20

neither City, nor its Affiliates, nor any of their employees, officers, Subcontractors, or consultants who have rendered services relating to the Licensed Technology or who are anticipated to conduct any activities under the Research Program has (a) ever been Debarred or is subject to debarment or convicted of a crime for which an entity or person could be Debarred or (b) ever been under indictment for a crime for which a person or entity could be so Debarred;

 

 

7.2.21

the representations and warranties of City in this Agreement and the information, documents, and materials furnished to Biogen in connection with its period of diligence prior to the Effective Date, do not, taken as a whole, (a) contain any untrue statement of a material fact (provided that, with respect to scientific knowledge, the truth of any statement will be deemed to be such truth as would be generally understood by a reasonable person in the scientific community as of the date that such statement was made) or (b) to City’s Knowledge, omit to state any material fact necessary to make the statements or facts contained therein, in light of the circumstances under which they were made, not misleading. City has not knowingly or intentionally failed to furnish Biogen with any information requested by Biogen, or intentionally concealed from Biogen any information in its possession, including information relating to the Licensed Technology that City reasonably believes would be material to Biogen’s decision to enter into this Agreement and undertake the commitments and obligations set forth herein; and

 

7.2.22

as of the Development Candidate Bring-Down Date, the data generated by or on behalf of City or its Affiliates and set forth in the applicable Development Candidate Data Package does not contain any untrue statement of a material fact (provided that, with respect to scientific knowledge, the truth of any statement will be deemed to be such truth as would be generally understood by a reasonable person in the scientific community as of the Development Candidate Bring-Down Date).

 

7.3

Updated Disclosure Schedules.

 

7.3.1

Update as of Development Candidate Bring-Down Date. Within 30 days of each Development Candidate Data Package Date, Biogen may request and, within ten days of [***] will deliver [***] an updated [***] and an updated [***] (collectively, the “Development Candidate Data Package Disclosure Schedule”) or (b) a written statement certifying that no updates are required and all such schedules and representations and warranties, as qualified by the Initial Disclosure Schedule, remain true and correct as of the date of such delivery (the “Development Candidate Bring-Down Date”); [***]

 

7.3.2

Certain Clarifications. Any update in the Development Candidate Data Package Disclosure Schedule will not be deemed to amend or supplement the Initial Disclosure Schedule as it exists as of the Effective Date, including for purposes of the indemnification provisions under Section 10.1 (Indemnification by City) and therefore will not cure any prior failure to disclose. For all representations and warranties for which City does not provide an updated schedule pursuant to Section 7.3.1 (Update as of Development Candidate Bring-Down Date), or if City fails to provide any updates schedules or such statement in clause (b) of Section 7.3.1 (Update as of Development Candidate Bring-Down Date), as of the Development Candidate Bring-Down Date City will be deemed to have made the representations and warranties in Section 7.2 (Additional Representations and Warranties of City) to Biogen as of the Development Candidate Bring-Down Date without any additional qualifications other than those set forth in the Initial Disclosure Schedule. City acknowledges and agrees that any disclosure made in the Development Candidate Data Package Disclosure Schedule cannot cure a breach of any covenant or obligation of City hereunder, including Section 7.4 (Covenants of each Party) and Section 7.5 (Covenants of City).

 

 

7.4

Covenants of Each Party. City covenants to Biogen and Biogen covenants to City, that:

 

7.4.1

Each Party will, and will ensure that its Affiliates, Sublicensees, and Subcontractors, obtain written agreements from any and all Persons involved in or performing any Research Activities (a) if by or on behalf of City, that assign to City such Persons’ rights, title, and interests in and to any Licensed Technology, Inventions, or Results created by such Persons in conducting such Research Activities, and (b) if by or on behalf of Biogen, that assign to Biogen such Persons’ rights, title, and interests in and to any Inventions created by such Persons in conducting such Research Activities, in each case of the foregoing, prior to any such person performing such activities. Each Party, its Affiliates, Sublicensees, and Subcontractors will pay all required inventor reward and remuneration to its or their employees, contractors, or other Persons who perform Research Activities or who conceive, discovery, develop, or otherwise make any invention under or in connection with this Agreement; and

 

7.4.2

in the performance of activities under this Agreement, neither Party will employ or use any Person who: (a) has ever been Debarred or is subject to debarment or convicted of a crime for which an entity or person could be Debarred; or (b) has ever been under indictment for a crime for which a person or entity could be so Debarred.

 

7.5

Covenants of City. City covenants to Biogen that:

 

7.5.1

City and its Affiliates will (a) maintain Control of all Licensed Technology owned or in-licensed by City or its Affiliates as of the Effective Date or at any time during the Term and (b) not assign, transfer, encumber, or otherwise grant any Third Party any rights with respect to any Licensed Technology that would conflict with, limit the scope of, or adversely affect the rights granted to Biogen under this Agreement. For the avoidance of doubt, the foregoing clause (a) does not prohibit (i) transfer of ownership of any Licensed Technology so long as City or its Affiliate maintains Control of such Licensed Technology following such transfer or (ii) abandonment of a Patent Right or claim thereof in the ordinary course of prosecution, subject to compliance with the terms of Section 9.2 (Patent Prosecution and Maintenance);

 

7.5.2

City will not enter into any agreement or effect any corporate restructuring with any Affiliate or Third Party that is in conflict with the rights to be granted to Biogen under this Agreement as of the Effective Date and will not take any action that would prevent it from granting the rights to be granted to Biogen under this Agreement as of the Effective Date or that would otherwise conflict with or adversely affect the rights granted to Biogen under this Agreement;

 

7.5.3

City will not practice or use, in the course of the Research Program, any Intellectual Property owned or in-licensed by City or any of its Affiliates, or to which City or any of its Affiliates otherwise has access, in each case, that is necessary to Exploit any Licensed Compound or Licensed Product, unless such Intellectual Property is Controlled by City;

 

7.5.4

during the Research Term, City will maintain sufficient resources to perform the Research Activities for which it is responsible under this Agreement in accordance herewith;

 

7.5.5

City and its Affiliates will (a) not breach or be in default under any of its obligations under any Upstream Agreement, (b) satisfy all of its obligations under the Upstream Agreements, including any obligations arising due to the execution of, or activities under, this Agreement, (c) not do any act or make any omission that could give rise to a termination right of any other party to any such Upstream Agreement, and (d) not terminate any such Upstream Agreement, or amend or waive any provision thereof in any way that adversely affect the rights or licenses granted to Biogen hereunder, in case of this clause (d), without Biogen’s prior written consent;

 

 

7.5.6

City and its Affiliates will furnish Biogen with copies of all notices and correspondence that City or its Affiliates receive in connection with any Upstream Agreement that are material or relevant to Biogen’s rights or obligations under this Agreement within a reasonable period following City’s or its Affiliates’ receipt of the same;

 

7.5.7

with respect to any Licensed Technology that is subject to the requirements of the Bayh-Dole Act or any similar provision of any Applicable Law, City will comply with all obligations applicable to City in all material respects pursuant to (a) all relevant funding agreement(s) between any Governmental Authority or other Person and City or City’s applicable licensor; and (b) the Bayh Dole Act. Without limitation of the foregoing, with respect to any such Licensed Technology, City will take, and will use diligent efforts to request that its (sub)licensees and licensors, as applicable, of such Licensed Technology takes, all actions necessary under the Bayh Dole Act to secure and retain ownership of such inventions and Patent Rights for City or City’s applicable licensor, including by complying with all disclosure, election, filing, prosecution, maintenance, defense, reporting and employee agreement requirements as set forth in 37 C.F.R. § 401.14 and in the funding agreement between any Governmental Authority or other Person and City or City’s applicable licensor, except for failure that would not result in such Governmental Authority or such Third Party that provided the funding retaining any claim of ownership or exercising any march-in rights to any such Licensed Technology; and

 

7.5.8

City and its Affiliates will not use any funding of any Governmental Authority to fund the Research Program.

 

7.6

OSIF Matters. Promptly following the Effective Date, City will initiate negotiations with OSIF to amend the OSIF License and achieve the Payment Conditions. [***]. During the Term unless and until the Biogen Acceptable OSIF Agreement Effective Date occurs, if the OSIF License terminates, City will use Commercially Reasonable Efforts to enforce and defend Biogen’s sublicense survival rights under Section 9.5 of the OSIF License, at Biogen’s request and direction.

 

7.7

DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. IN PARTICULAR, NEITHER CITY NOR BIOGEN MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY TO THE OTHER THAT THE RESEARCH PROGRAM WILL BE SUCCESSFUL OR THAT THE LICENSED COMPOUNDS OR LICENSED PRODUCTS WILL BE SUCCESSFULLY DEVELOPED OR COMMERCIALIZED HEREUNDER.

 

ARTICLE 8
CONFIDENTIALITY

 

8.1

Non-Disclosure and Non-Use Obligation. Except as otherwise expressly set forth herein, the Receiving Party (a) will, during the Term and for a period of ten years thereafter, keep the Confidential Information of the Disclosing Party confidential using at least the same degree of care with which the Receiving Party holds its own confidential information (but in no event less than a reasonable degree of care) and (b) will not (i) disclose such Confidential Information to any Person without the prior written approval of the Disclosing Party, except as expressly provided in Section 8.2 (Exemptions) or to its and its Affiliates’ directors, officers, employees or agents, in each case, who (A) have a need to know such Confidential Information solely to the extent necessary to exercise such Party’s rights or perform its obligations under this Agreement and (B) are similarly bound by confidentiality, non-disclosure, and non-use provisions at least as restrictive or protective of the Disclosing Party as those set forth in this Agreement, or (ii) use such Confidential Information for any purpose other than to exercise its rights or perform its obligations under this Agreement. The Receiving Party will use diligent efforts to cause any Persons to which Confidential Information is disclosed by the Receiving Party to comply with this Article 8 (Confidentiality), including the restrictions on use and disclosure set forth in this Section 8.1 (Non-Disclosure and Non-Use Obligation), and will be responsible for ensuring that such Persons maintain the Disclosing Party’s Confidential Information in accordance with this Article 8 (Confidentiality). The Receiving Party will remain responsible and liable for any failure by any such Persons to treat such Confidential Information as required under this Article 8 (Confidentiality). Each Party will promptly notify the other Party of any misuse or unauthorized disclosure of the other Party’s Confidential Information of which such Party becomes aware.

 

 

8.2

Exemptions. Notwithstanding the foregoing, information of a Disclosing Party will not be Confidential Information of such Disclosing Party to the extent that the Receiving Party can demonstrate through competent evidence that such information: (a) is already in the possession of the Receiving Party at the time of its receipt from the Disclosing Party and not through a prior disclosure by or on behalf of the Disclosing Party, as evidenced by contemporaneous written records; provided that the foregoing exemption will not apply with respect to Specified Confidential Information generated by the Receiving Party, (b) is generally available to the public before its receipt from the Disclosing Party, (c) became generally available to the public or otherwise part of the public domain after its disclosure by the Disclosing Party and other than through any act or omission of the Receiving Party or any of its Affiliates or disclosees in breach of this Agreement, including pursuant to Section 8.9.2 (Press Releases and Announcements), (d) is subsequently received by the Receiving Party or any of its Affiliates without obligation of confidentiality from a Third Party who had the right to disclose such information and who is not bound by any obligation of confidentiality with respect to such information, or (e) is developed independently by employees, subcontractors, consultants, or agents of the Receiving Party or any of its Affiliates without use of, reference to, or reliance upon the Disclosing Party’s Confidential Information, as evidenced by contemporaneous written records; provided that the foregoing exemption will not apply with respect to Specified Confidential Information generated by the Receiving Party. Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the rightful possession of the receiving Party merely because the Confidential Information is embraced by more general information in the public domain or in the rightful possession of the receiving Party. Further, no combination of features or disclosures will be deemed to fall within the foregoing exemptions merely because individual features are published or available to the general public or in the rightful possession of the Receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the Receiving Party.

 

8.3

Permitted Disclosures. Notwithstanding the obligations of confidentiality and non-use set forth in this Article 8 (Confidentiality), the Receiving Party may disclose the Disclosing Party’s Confidential Information solely to the extent that such disclosure is reasonably necessary in the following instances:

 

 

8.3.1

(a) the prosecution and maintenance of Patent Rights, including Licensed Patent Rights, Biogen [***] Patent Rights, and Joint Patent Rights, in each case, as contemplated by this Agreement; or (b) Regulatory Submissions and other filings with Governmental Authorities (including Regulatory Authorities), in the case of this clause (b), as necessary or reasonably useful for the Exploitation of a Licensed Compound or Licensed Product; provided that reasonable measures will be taken to assure confidential treatment of such information, to the extent such protection is available;

 

8.3.2

with respect to disclosure of the existence and terms and conditions of this Agreement (and no other Confidential Information of the Disclosing Party), to bona fide potential or actual investors, acquirers, lenders or other financial partners of such Party, and their respective attorneys, accountants, banks, investors, underwriters, and advisors, in each case, solely for the purpose of evaluating or carrying out such potential or actual investment, acquisition, debt transaction or other financial transaction; provided that, in each such case, (a) such Persons are bound by obligations of confidentiality, non-disclosure, and non-use at least as restrictive or protective of the Parties as those set forth in this Agreement; (b) any such disclosure is limited to the maximum extent practicable for the particular context in which it is being disclosed; (c) the term of such confidentiality obligation must be consistent with this Agreement or otherwise customary for such type and scope of disclosure; and (d) the Receiving Party will remain responsible and liable for any failure by any Person who receives Confidential Information pursuant to this Section 8.3.2 to treat such Confidential Information as required under this Article 8 (Confidentiality);

 

8.3.3

with respect to Biogen as the Receiving Party (or, solely in the case of permitted Subcontractors under Section 2.2.3 (Subcontracting by City and Biogen), with respect to City as the Receiving Party), disclosure to the Receiving Party’s Sublicensees and Subcontractors under this Agreement, in each case, solely for the purpose of allowing the Receiving Party to exercise its rights and perform its obligations hereunder; provided that such disclosure is covered by terms of confidentiality and non-use at least as restrictive as those set forth herein;

 

8.3.4

in response to a valid court order of competent jurisdiction or other supra-national, federal, national, regional, state, provincial, or local governmental or regulatory body of competent jurisdiction or as otherwise required to comply with Applicable Law (whether generally or in pursuit of an application for listing of securities) including the United States Securities and Exchange Commission or equivalent foreign agency or regulatory body, or otherwise required by judicial or administrative process; provided that in each such event, as promptly as reasonably practicable and to the extent not prohibited by Applicable Law or judicial or administrative process, such Receiving Party will first have (a) notified the other Party of such required disclosure, (b) provided a draft of the disclosure to the other Party reasonably in advance of such filing or disclosure for the other Party’s review and comment, which comments shall be considered in good faith, and (c) given such other Party a reasonable opportunity to quash such order or to obtain a protective order or confidential treatment requiring that the Confidential Information and documents that are the subject of such order are required to be disclosed be held in confidence by the applicable court or governmental or regulatory body or, if disclosed, be used only for the purposes for which the order was issued or such disclosure was required by Applicable Law; provided, further, that that the Confidential Information disclosed in response to such order or as required by Applicable Law shall be limited to that portion of the Confidential Information that is legally required to be disclosed in response to such order or by such Applicable Law. Confidential Information that is disclosed in order to comply with Applicable Law or by judicial or administrative process pursuant to this Section 8.3.4, in each case, will remain otherwise subject to the confidentiality and non-use provisions of this Article 8 (Confidentiality) with respect to the Party disclosing such Confidential Information pursuant to this Section 8.3.4, and such Party will take all steps reasonably necessary, including seeking of confidential treatment or a protective order for a period of at least 10 years (to the extent permitted by Applicable Law or Governmental Authority), to ensure the continued confidential treatment of such Confidential Information, and each Party will be responsible for its own legal and other external costs in connection with any such filing or disclosure pursuant to this Section 8.3.4.

 

 

8.3.5

to prosecute or defend litigation so long as there is 30 days’ prior written notice given by the Receiving Party before filing or other disclosure, and to enforce Patent Rights in connection with the Receiving Party’s rights and obligations pursuant to this Agreement;

 

8.3.6

in the case of City as the Receiving Party, to the licensor under any Upstream Agreement solely as necessary to comply with its obligations under such Upstream Agreement; provided that (a) such disclosure includes only such information as is expressly required to be disclosed to such licensor under such Upstream Agreement and (b) such disclosure is covered by terms of confidentiality and non-use at least as restrictive as those set forth herein; and provided, further, that in no event will such disclosure include any data or any sequence-level information relating to any Program RNAi Trigger, Program Linker, [***], Licensed Compound or Licensed Product, in each case, without Biogen’s prior written consent;

 

8.3.7

with respect to disclosure of any Joint Technology that constitutes Confidential Information (excluding any Collaboration Know-How), in the case of either Party as the Receiving Party, to exercise its rights to Exploit such Joint Technology as permitted under this Agreement; provided that such disclosure is covered by terms of confidentiality and non-use at least as restrictive as those set forth herein; or

 

8.3.8

in the case of Biogen as the Receiving Party, otherwise to exercise its rights or perform its obligations under this Agreement; provided that such disclosure is covered by terms of confidentiality and non-use at least as restrictive as those set forth herein.

 

If and whenever any Confidential Information is disclosed in accordance with this Section 8.3 (Permitted Disclosures), such disclosure will not cause any such information to cease to be Confidential Information except to the extent that such disclosure results in a public disclosure of such information (other than by breach of this Agreement).

 

8.4

Redacted Agreement. Notwithstanding anything to the contrary in this Article 8 (Confidentiality), each Party will be entitled to file a copy of this Agreement (or portions of this Agreement or an abstract of the terms of this Agreement) with the SEC or other Governmental Authorities as required to comply with Applicable Law, provided that it initially files a redacted copy of this Agreement (or portions of this Agreement or an abstract of the terms of this Agreement) reviewed by the other Party (“Redacted Agreement”) and, to the extent available, requests confidential treatment of the terms redacted from this Agreement for at least a reasonable period of time, in each case, as described in the following procedure. In the event of any such filing, each Party will (a) permit the other Party to review and comment upon a Redacted Agreement at least 10 Business Days in advance of its submission to the SEC or such other Governmental Authorities, (b) cooperate in good faith with and reasonably consider the other Party’s comments thereon, as consistent with the then-current legal requirements with respect thereto (as determined based on the reasonable advice of such Party’s outside counsel), (c) only disclose Confidential Information of the other Party that counsel reasonably advises is legally required to be disclosed, (d) promptly advise the other Party of any other substantive communications between it or its representatives with such Governmental Authority with respect to such confidential treatment request (as available) of such other Party’s Confidential Information, (e) upon the written request of the other Party, request a reasonable extension of the term of the confidential treatment period upon the expiration thereof, where available, and (f) if such Governmental Authority requests any changes to the redactions set forth in the Redacted Agreement, use reasonable efforts to support the redactions in the Redacted Agreement as originally filed and, to the extent reasonably practicable, before agreeing to any changes to the redactions proposed in the Redacted Agreement, discuss any such changes to the redactions proposed in the Redacted Agreement with the other Party and consider in good faith the other Party’s comments when deciding whether to agree to such changes. Each Party will be responsible for its own legal and other external costs in connection with any such filing, registration, or notification.

 

 

8.5

Confidential Treatment. Notwithstanding any provision to the contrary set forth in this Agreement, if a Party is required or permitted to make a disclosure of the other Party’s Confidential Information pursuant to Section 8.3.4 or Section 8.3.5, then it will, to the extent not prohibited by Applicable Law or judicial or administrative process, except where impracticable, give reasonable advance notice to the other Party of such proposed disclosure and use reasonable efforts to secure confidential treatment of such information and will only disclose that portion of Confidential Information that is legally required to be disclosed as advised by its legal counsel. In any event, each Party agrees to take all reasonable action to avoid disclosure of Confidential Information of the other Party hereunder.

 

8.6

Equitable Relief. Given the nature of the Confidential Information and the competitive damage that could result to a Party upon unauthorized disclosure, use, or transfer of its Confidential Information to any Third Party, the Parties agree that monetary damages may not be a sufficient remedy for any breach of this Article 8 (Confidentiality). In addition to all other remedies, a Party will be entitled to seek specific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Article 8 (Confidentiality).

 

8.7

Use of Name and Logo. Except as otherwise permitted under Section 8.3 (Permitted Disclosures) and Section 8.9.2 (Press Releases and Announcements), neither Party will use the name, logo, or Trademark of the other Party or any of its Affiliates or any of its or their respective (sub)licensees/Sublicensees (or any abbreviation or adaptation thereof) in any label, press release, or product advertising, or for any other promotional purpose, without first obtaining the other Party’s written consent.

 

8.8

Residual Knowledge. Notwithstanding any provision to the contrary set forth in this Agreement, a Receiving Party will not be liable for the use of Residual Knowledge, provided that such officer, director, agent, contractor, or employee (a) has not intentionally memorized such Residual Knowledge, (b) is not aware at the time of use that such Residual Knowledge is the Confidential Information of the Disclosing Party, and (c) has not been directed or encouraged by the Receiving Party to memorize such Residual Knowledge. Any use made by the Receiving Party of any such Residual Knowledge is on an “as is, where is” basis, with all faults and all representations and warranties disclaimed and at its sole risk.

 

8.9

Publications.

 

 

8.9.1

Coordination. City and Biogen will, from time to time and at the request of the other Party, discuss the general information relating to this Agreement that may be publicly disclosed; provided, however, that Biogen will have no obligation to consult with City with respect to any scientific publication or public announcement as described in Section 8.9.3 (Scientific Publications and Public Announcements).

 

8.9.2

Press Releases and Announcements.

 

(a)

Except for any disclosure expressly permitted under Section 8.3.4 or, with respect to Biogen, Section 8.9.3 (Scientific Publications and Public Announcements), neither Party will make any public announcement regarding this Agreement or its subject matter without the other Party’s prior written consent, except for either Party’s references to the other as the licensor or licensee (as applicable) or a collaboration partner under this Agreement.

 

(b)

After the issuance of any such press release or any other permitted public disclosure by a Party, the disclosing Party may make subsequent public disclosures reiterating such information without having to obtain the other Party’s prior consent and approval so long as the information in such press release or other public announcement remains true, correct, and the most current information with respect to the subject matters set forth therein at such time and that the frequency and form of such disclosure are reasonable.

 

8.9.3

Scientific Publications and Public Announcements. For clarity and notwithstanding anything to the contrary in this Section 8.9 (Publications), from and after the Development Candidate Selection Date, nothing in this Agreement will prevent Biogen and its Affiliates and its and their respective Sublicensees from making any scientific publication or public announcement concerning the Results or Biogen’s Exploitation of any Licensed Product (including research, development, and commercial information (including with respect to regulatory matters) regarding the Licensed Compounds and Licensed Products) under this Agreement; provided that, except as permitted under Section 8.3 (Permitted Disclosures), Biogen will not disclose any of City’s Confidential Information in any such publication or announcement without obtaining City’s prior written consent to do so, such consent not to be unreasonably withheld, conditioned, or delayed. Biogen may not submit such publication or make such announcement containing any Confidential Information of City that may affect City’s ability to seek patent protection for any Invention for which City has the right to prosecute the applicable Patent Rights pursuant to this Agreement, until City is given a reasonable period of time, and in no event less than 30 days, to seek such patent protection for any such Invention in such publication or presentation which it believes is patentable. Except for any disclosure expressly permitted under Section 8.3.4, during the Term, City will not make any publication or public announcement concerning the Results or otherwise regarding the Exploitation of any Licensed Compounds or Licensed Product without Biogen’s prior written consent. Each Party agrees to acknowledge the contributions of the other Party, and the employees of the other Party, in all publications as scientifically appropriate; provided, however, that either Party may decline to be named in any such publications and remain anonymous or unnamed in its sole discretion.

 

ARTICLE 9
INTELLECTUAL PROPERTY

 

9.1

Ownership.

 

 

9.1.1

Background IP. As between the Parties: (a) Biogen will retain sole ownership of all rights, title and interests in and to all Know-How and Patent Rights existing and owned by Biogen as of the Effective Date; and (b) City will retain sole ownership of all rights, title and interests in and to all Know-How and Patent Rights existing and owned by City as of the Effective Date.

 

9.1.2

Inventions.

 

(a)

[***]

 

(b)

[***]

 

(c)

[***]

 

(d)

Inventorship. All determinations of inventorship (with respect to Patent Rights and Know-How, whether patentable or not) under this Agreement will be made in accordance with U.S. patent law.

 

9.1.3

Disclosure. Biogen will promptly (and, in any event, prior to the filing of any patent application with respect to such Invention) disclose to City [***] City will promptly (and, in any event, prior to the filing of any patent application with respect to such Invention) disclose to Biogen [***]. Any such disclosure by either Party will include all the invention disclosures or other similar documents submitted to such Party by its or its Affiliates’ employees, agents, or independent contractors relating thereto. Each Party will also promptly respond to reasonable requests from the other Party for additional information relating thereto.

 

9.1.4

Covenants in Support of Assignment. Each Party shall, and hereby does, assign to the other Party and will cause each of its and its Affiliates’ officers, directors, employees, agents and contractors to assign to the other Party, in each case free and clear of all restrictions, liens or other encumbrances and without additional compensation, all such right, title and interest in and to any Inventions or other Know-How developed, created, conceived or reduced to practice hereunder as is necessary to fully effect the sole or joint ownership, as applicable, to the extent provided for in Section 9.1.2 (Inventions) (including in the event that U.S. law does not apply to the development, creation, conception or reduction to practice of any such Inventions or Know-How or any intellectual property rights therein). Each Party shall take (and cause its Affiliates, and their respective officers, directors, employees, agents and contractors to take) such further actions reasonably requested by the other Party, at the requesting Party’s cost and expense, to evidence the assignments set forth in this Section 9.1.2 (Inventions) and to assist the other Party in obtaining Patent Rights and other intellectual property protection with respect to Inventions and other Know-How assigned to such Party hereunder, including executing further assignments, consents, releases and other commercially reasonable documentation and providing good faith testimony by affidavit, declaration, in-person or other proper means in support of any effort by the other Party to establish, perfect, defend or enforce its rights in any such Inventions or Know-How, or Patent Rights that claim such Inventions or Know-How.

 

9.1.5

Standby License Grants. If a Party is unable to assign the applicable interest in any Inventions or other Know-How, or applicable Patent Rights, to the other Party as required by Section 9.1.2 (Inventions), then such Party shall, and hereby does, grant (and shall cause its Affiliates to grant) to the other Party a royalty-free, fully paid-up, worldwide, perpetual, irrevocable license (with the right to grant sublicenses through multiple tiers) under such Inventions, Know-How and Patent Rights, which license shall be: [***].

 

 

9.1.6

Joint Technology. Subject to the terms and conditions set forth in this Agreement, including the licenses granted in Section 2.1.1(a), Section 2.1.1(b), and Section 2.1.2 (Exclusive License Grant to Biogen) and the provisions of Section 2.7 (Exclusivity) and Section 11.7.2 (Additional Effects of Termination), (a) the Parties will jointly own (each having an undivided one-half interest in) all Joint Technology and (b) each Party will be entitled to practice and Exploit the Joint Technology for all purposes on a worldwide and perpetual basis and to license such Joint Technology through multiple tiers, without consent of the other Party (and where consent is required by Applicable Law, such consent is deemed hereby granted) and without a duty of accounting to the other Party. Each Party will grant and hereby does grant to the other Party all further permissions, consents, and waivers with respect to, and all licenses under, the Joint Technology, throughout the world, necessary to provide the other Party with the foregoing rights of use and Exploitation of the Joint Technology. Without limitation, each Party will cooperate with the other Party if the Parties determine to apply for U.S. or foreign patent protection for any Joint Technology and will obtain the cooperation of the individual inventors of any such Joint Technology. Without limiting the foregoing, the Parties acknowledge and agree that this Agreement will be understood to be a “joint research agreement” (as defined in 35 U.S.C. § 100(h)) for the purposes of 35 U.S.C. §102(c) entered into for the purpose of researching, identifying and developing Program RNAi Triggers, Program Conjugates, Licensed Compounds and Licensed Products under the terms set forth herein.

 

9.2

Patent Prosecution and Maintenance.

 

9.2.1

Right to File and Prosecute.

 

(a)

Licensed Patent Rights.

 

(i)

During the Term, except as set forth in Section 9.2.1(a)(ii) and Section 9.2.1(a)(iii), and subject to Section 9.2.4 (Limitations on Prosecution Rights), City will have (x) the sole right (but not the obligation) to prepare, file, prosecute, and maintain the City Core Technology Patent Rights and (y) the first right (but not the obligation) to prepare, file, prosecute, and maintain the Licensed Patent Rights that are not City Core Technology Patent Rights, in each case ((x) and (y)), at City’s sole expense using counsel of its choosing.

 

(ii)

City will keep Biogen reasonably informed, through the Patent Counsel, as to material developments with respect to its preparation, filing, prosecution, issuance or maintenance of any Licensed Patent Rights that claim any Program RNAi Trigger or Program Linker or that may otherwise affect any Program RNAi Trigger, Program Linker, Program Conjugate, Licensed Compound or Licensed Product. In the event that any such matters may affect any Program RNAi Trigger, Program Linker or Program Conjugate, City will provide Biogen a reasonable opportunity to review and comment on substantive communications from any patent authority in the Territory regarding the Program Patent Rights, as well as drafts of any substantive filings or responses to be made to such patent authorities in advance of submitting such filings or responses. City will consider Biogen’s comments regarding such communications and drafts in good faith but has no obligation to implement any such comments. In addition, City will provide Biogen with (x) copies of all final substantive filings and responses made to any patent authority with respect to the Program Patent Rights for which City is the Prosecuting Party, in a timely manner after submission thereof, and (y) notice at least forty-five (45) days in advance of abandoning any such Program Patent Rights.

 

 

(iii)

Notwithstanding anything to the contrary in this Section 9.2.1 (Right to File and Prosecute), (x) during the Term, Biogen will have the first right (but not the obligation) to prepare, file, prosecute, and maintain any and all Licensed Patent Rights that claim any Program Conjugate and (y) during the Post-Selection Period, Biogen will have the first right (but not the obligation) to prepare, file, prosecute, and maintain any and all other Licensed Patent Rights that claim any Program RNAi Trigger, Program Linker, Licensed Compound, or Licensed Product, in each case ((x) and (y)), at Biogen’s sole expense using counsel of its choosing. Biogen will keep City reasonably informed, through the Patent Counsel, as to material developments with respect to the preparation, filing, prosecution, issuance, and maintenance of the Program Patent Rights, and will provide City a reasonable opportunity to review and comment on substantive communications from any patent authority in the Territory regarding the Program Patent Rights, and on all drafts of any substantive filings or responses to be made to such patent authorities in advance of submitting such filings or responses. Biogen will consider City’s comments regarding such communications and drafts in good faith but is not required to implement such comments. In addition, Biogen will provide City with (A) copies of all final substantive filings and responses made to any patent authority with respect to the Program Patent Rights in a timely manner following submission thereof and (B) notice at least forty-five (45) days in advance of abandoning any such Program Patent Rights.

 

(b)

Joint Patent Rights. During the Term, Biogen will have the first right (but not the obligation) to prepare, file, prosecute, and maintain all Joint Patent Rights, at Biogen’s sole expense using counsel of its choosing. Biogen will be the Prosecuting Party with respect to all Joint Patent Rights and will be responsible for and pay all future costs and expenses incurred in connection with the preparation, filing, prosecution, and maintenance of the Joint Patent Rights. Biogen will keep City reasonably informed, through the Patent Counsel, as to material developments with respect to the preparation, filing, prosecution, issuance, and maintenance of the Joint Patent Rights, and will provide City a reasonable opportunity to review and comment on substantive communications from any patent authority in the Territory regarding the Joint Patent Rights, and on all drafts of any substantive filings or responses to be made to such patent authorities in advance of submitting such filings or responses. Biogen will consider City’s comments regarding such communications and drafts in good faith but is not required to implement such comments. In addition, Biogen will provide City with (i) copies of all final substantive filings and responses made to any patent authority with respect to the Joint Patent Rights in a timely manner following submission thereof and (ii) notice at least forty-five (45) days in advance of abandoning any such Joint Patent Rights.

 

 

(c)

Other Patent Rights. Except as expressly set forth in this Section 9.2.1 (Right to File and Prosecute), during the Term, as between the Parties, each Party will have the sole right (but not the obligation), in its sole discretion, to prepare, file, prosecute, and maintain all Patent Rights owned by such Party or its Affiliates (including, with respect to Biogen, the Biogen [***] Patent Rights), at such Party’s sole expense using counsel of its choosing.

 

9.2.2

Step-In Rights.

 

(a)

City’s Rights. If, during the Term, Biogen decides that it is no longer interested in the prosecution or maintenance of a particular Program Patent Right or Joint Patent Right filed by Biogen, then it will provide written notice to City of such decision within a reasonable time (at least [***] days prior to its abandonment) to allow City to be able to protect and maintain the applicable Program Patent Right or Joint Patent Right, which notice will indicate whether such decision was made for strategic prosecution reasons to protect the Licensed Products (e.g., to improve the exclusivity for or revenue from a Licensed Product), [***]. In such case, unless such decision was made for any such strategic prosecution reasons, City may assume the prosecution and maintenance of such Patent Right at City’s sole cost and expense, upon written notice to Biogen. In such event that City so elects to assume such prosecution and maintenance, (i) City will be responsible for 100% of the costs and expenses of its prosecution and maintenance of such Patent Right and (ii) City will have the right to prosecute and maintain such Patent Right in its sole discretion, using counsel of its choosing.

 

(b)

Biogen’s Rights. If, during Pre-Selection Period, City decides that it is no longer interested in the prosecution or maintenance of any Program Patent Right filed by City, then it will provide written notice to Biogen of such decision within a reasonable time (at least [***] days prior to its abandonment) to allow Biogen to be able to protect and maintain the applicable Program Patent Right. Biogen may, upon written notice to City, assume the prosecution and maintenance of such Patent Right at Biogen’s sole cost and expense. In such event that Biogen so elects to assume such prosecution and maintenance, (i) Biogen will be responsible for 100% of the costs and expenses of its prosecution and maintenance of such Patent Right and (ii) Biogen will have the right to prosecute and maintain such Patent Right in its sole discretion, using counsel of its choosing.

 

9.2.3

Cooperation and Coordination. The non-Prosecuting Party will (a) obtain and deliver to the Prosecuting Party any necessary documents for the Prosecuting Party to exercise its rights to prepare, file, prosecute and maintain all Patent Rights pursuant to Section 9.2.1 (Right to File and Prosecute) or Section 9.2.2 (Step-In Rights), as applicable, (b) render all signatures that will be necessary in connection with all such patent filings, and (c) assist the Prosecuting Party in all other reasonable ways that are necessary for the issuance of those Patent Rights for which such Prosecuting Party is responsible, as well as for the preparation, prosecution, defense, and maintenance of such Patent Rights, in each case ((a) through (c)), upon the Prosecuting Party’s request and at the Prosecuting Party’s expense.

 

9.2.4

Limitations on Prosecution Rights. For the avoidance of doubt, (a) in no event will City prepare, file, prosecute or maintain any Patent Rights that (i) claim or Cover any [***] or (ii) claim any Program Conjugate, except in the case of City’s exercise of a step-in right with respect to the prosecution of a Program Patent Right that claims a Program Conjugate, if and as permitted under Section 9.2.2(a) (City’s Rights); and (b) in no event will Biogen prepare, file, prosecute, or maintain any Patent Rights that claim any City Core Technology Invention.

 

 

9.2.5

OSIF Matters. City will reasonably consult with Biogen in good faith prior to designating in writing to OSIF the foreign jurisdictions in which any OSIF Patent will be filed. In no event will City abandon any Patent Right that City has the right to prepare, file, prosecute or maintain under the OSIF Agreements, cease to make any payments with respect to any OSIF Patent, make any act or omission that would cause City to relinquish its rights under any OSIF Patent or otherwise waive any rights of City with respect to any OSIF Patent, in each case, without first reasonably consulting with Biogen in good faith.

 

9.3

Patent Enforcement.

 

9.3.1

Third Party Infringement. During the Term, the Parties will promptly inform each other in writing if either Party becomes aware of any suspected, threatened, or actual infringement by any Third Party of any Licensed Patent Rights or Joint Patent Rights, or any Patent Rights Controlled by Biogen with respect to any [***] (each, an “Infringement”). Each Party will provide any available evidence of such Infringement with such notification.

 

9.3.2

Infringement Actions.

 

(a)

Enforcement of Program Patent Rights and Joint Patent Rights.

 

(i)

Biogen First Right. During the Term, Biogen will have the first right, but not the obligation, to initiate an Infringement Action against an Infringement with respect to any Program Patent Rights or Joint Patent Rights, in Biogen’s sole discretion and at Biogen’s sole cost and expense, subject to the provisions of this Section 9.3.2 (Infringement Actions).

 

(ii)

City Step-In Rights. During the Term, if Biogen does not initiate an Infringement Action against any Infringement with respect to any Program Patent Rights or Joint Patent Rights within 120 days after written notice of such Infringement is first provided by a Party under Section 9.3.1 (Third Party Infringement), then City will have the right to initiate and control an Infringement Action under the Program Patent Rights or Joint Patent Rights with respect to such Infringement by counsel of its own choosing, in City’s own discretion and at City’s cost and expense, and Biogen will have the right, at its own expense, to be represented in any such action by counsel of its own choosing; provided that, if Biogen notifies City during such 120-day period that it is electing in good faith not to institute any Infringement Action against such Infringement for strategic reasons, then City will not have the right to initiate and control any Infringement Action with respect to such Infringement.

 

(b)

Enforcement of Other Patent Rights. During the Term, except as set forth in Section 9.3.2(a) (Enforcement of Program Patent Rights and Joint Patent Rights), each Party will have the sole right, but not the obligation, to initiate an Infringement Action under any Patent Rights solely owned by such Party, against any Infringement, in such Party’s sole discretion and at such Party’s sole cost and expense.

 

 

(c)

Procedures. If the Party having the right to initiate an Infringement Action under this Section 9.3.2 (Infringement Actions) (the “Initiating Party”) desires to initiate such Infringement Action but may not do so due to Applicable Law or regulation (even as the assignee or exclusive licensee of such infringed Patent Right), then such Initiating Party may require that the other Party join as a named party in such action or itself initiate such Infringement Action, at the Initiating Party’s sole cost and expense. In such circumstance, the other Party hereby agrees to join as a named party in such action or itself initiate such Infringement Action, at the Initiating Party’s direction. The Initiating Party will take the lead in the control and conduct of any such Infringement Action under this Section 9.3.2 (Infringement Actions) and will keep the other Party reasonably informed of any such Infringement Action, and the other Party will reasonably assist the Initiating Party in any such Infringement Action under this Section 9.3.2 (Infringement Actions) at the Initiating Party’s expense. In no event may the Initiating Party settle any such Infringement Action in a manner that adversely affects the other Party’s rights or interests or imposes any obligation on the other Party without such other Party’s written consent, such consent not to be unreasonably withheld, delayed, or conditioned, provided that the foregoing will not be deemed to require the consent of such other Party in connection with a settlement of any action that would or may result in reduced payments under this Agreement.

 

(d)

Recoveries. Any amount recovered in any Infringement Action under this Section 9.3.2 (Infringement Actions), including any amount recovered in any settlement of such Infringement Action, will first be used to reimburse each Party’s costs and expenses with respect to such Infringement Action (which reimbursement will be on a pro rata basis to the extent such costs and expenses exceed such recovered amount. Thereafter, any additional amounts recovered will be retained by the Initiating Party, except that (i) any such amounts awarded to Biogen as compensation for lost sales or revenues with respect to a Royalty-Bearing Product [***] and (ii) any such amounts awarded to City in respect of any Infringement Action initiated by City with respect to a Program Patent Right or Joint Patent Right under Section 9.3.2(a)(ii) (City Step-In Rights) will be shared equally by the Parties.

 

9.4

Infringement of Third Party Rights.

 

9.4.1

Notice. If any Licensed Product becomes the subject of a Third Party’s claim or assertion of infringement of a Patent Right within the Territory, the Party first having notice of the claim or assertion will promptly notify the other Party.

 

9.4.2

Defense. Except as otherwise provided in Article 10 (Indemnification), Biogen will have the first right, but not the obligation, to defend any such Third Party claim or assertion of infringement of a Patent Right with respect to any Licensed Product, at Biogen’s expense. The non-defending Party will reasonably cooperate with the Party conducting the defense of the claim or assertion, including, if required to conduct such defense, furnishing a power of attorney.

 

 

9.4.3

Settlement; Licenses. Except as otherwise provided in Article 10 (Indemnification), neither Party will enter into any settlement of any claim described in this Section 9.4 (Infringement of Third Party Rights) that adversely affects the other Party’s rights or interests or imposes any obligation on the other Party without such other Party’s written consent, such consent not to be unreasonably withheld, delayed, or conditioned, provided that the foregoing will not be deemed to require the consent of such other Party in connection with a settlement of any action that would or may result in reduced payments under Section 6.3.4(c) (Third Party Payments). Each Party will have the right to decline to defend or to tender the defense of any claim described in this Section 9.4 (Infringement of Third Party Rights) upon reasonable written notice to the other Party, including if the other Party fails to agree to a settlement that the declining Party proposes and with respect to which such other Party has a consent right hereunder.

 

9.5

Patent Oppositions and Other Proceedings.

 

9.5.1

Third Party Patent Rights. If either Party desires to bring an opposition, action for declaratory judgment, nullity action, interference, declaration for non-infringement, reexamination, inter partes reviews, post-grant reviews, or other attack upon the validity, title, or enforceability of a Patent Right owned or controlled by a Third Party and having one or more claims that are specific to the Target and Cover a Licensed Compound or Licensed Product (except insofar as such action is a counterclaim to or defense of, or accompanies a defense of, a Third Party’s claim or assertion of infringement under Section 9.4 (Infringement of Third Party Rights), in which case the provisions of Section 9.4 (Infringement of Third Party Rights) will govern), such Party will so notify the other Party and the Parties will promptly confer through the Patent Counsel to determine whether to bring such action, the strategy to be employed in connection with any such action, or the manner in which to settle such action, provided that Biogen will have the final decision-making authority with respect thereto. Unless the Parties otherwise agree in writing, Biogen will have the sole right, but not the obligation, to bring, at its own expense and in its sole control, such action in the Territory. The Party not bringing an action under this Section 9.5.1 (Third Party Patent Rights) will be entitled to separate representation in such proceeding by counsel of its own choice and at its own expense and will cooperate fully with the Party bringing such action. Any awards or amounts received in bringing any such action will be first allocated to reimburse the initiating Party’s expenses in such action, and any remaining amounts will be allocated between the Parties as provided in Section 9.3.2(d) (Recoveries).

 

9.5.2

Parties’ Patent Rights. If any Licensed Patent Right or Joint Patent Right becomes the subject of any proceeding commenced by a Third Party within the Territory in connection with an opposition, reexamination request, action for declaratory judgment, nullity action, interference, inter partes reviews, post-grant reviews or other attack upon the patentability, validity, title or enforceability thereof (a “Third Party Patent Challenge”) (except insofar as such action is a counterclaim to or defense of, or accompanies a defense of, an action for infringement against a Third Party under Section 9.3 (Patent Enforcement) in which case the provisions of such section will govern), then the Prosecuting Party with respect to such Patent Right will control such defense at its own expense. The controlling Party will permit the non-controlling Party to participate in the proceeding to the extent permissible under Applicable Law, and to be represented by its own counsel in such proceeding, at the non-controlling Party’s expense, and the non-controlling Party will cooperate fully with the controlling Party with respect to such Third Party Patent Challenge. If either Party, as the controlling Party, decides that it does not wish to defend against such action that it controls, then to the extent that the other Party has a step-in right under Section 9.2 (Patent Prosecution and Maintenance), such other Party will have a step-in right to assume defense of such Third Party action at its own expense. Any awards or amounts received in defending any such Third Party action will be (a) first be used to reimburse each Party’s costs and expenses with respect to such Third Party Patent Challenge (which reimbursement will be on a pro rata basis to the extent such costs and expenses exceed such recovered amount, and (b) any remainder will be retained by the Party defending such action.

 

 

9.6

Patent Listing. Biogen will have the full and exclusive right, in its sole discretion, to determine and control the listing of any Patent Right (including any Licensed Patent Right or Joint Patent Right) in the “Purple Book” (or any successor thereto or equivalent thereof) in connection with the Regulatory Approval of any Licensed Product in the U.S., or in equivalent patent listings in any other country within the Territory.

 

9.7

Patent Term Extensions. Biogen will have the full and exclusive right and discretion to determine and control all filings of requests for Patent Term Extensions, including for any Licensed Patent Right or Joint Patent Right. All costs and expenses relating to the Patent Term Extensions will be born solely by Biogen. Upon request of Biogen and at Biogen’s cost and expense, City will provide support, assistance, and all necessary documents, in full, executed form if needed, to Biogen for the purpose of supporting, filing, obtaining, and maintaining Patent Term Extensions.

 

9.8

Common Interest Agreement. If the Parties agree that a common interest agreement is reasonably necessary to govern their discussion of Patent Right matters under this Agreement, then the Parties will negotiate in good faith to enter into such agreement.

 

9.9

Trademarks. Biogen will have the right to brand the Licensed Products using Biogen-related Trademarks and any other Trademarks it determines appropriate, which may vary by country or within a country. Biogen will own all rights in such Trademarks and will have the sole right to register and maintain such Trademarks in the countries and regions that it determines, at Biogen’s cost and expense.

 

9.10

Patent Counsel. Promptly following the Effective Date, each Party will designate patent counsel (and each Party may substitute such patent counsel from time to time) to coordinate with respect to the matters in this Article 9 (Intellectual Property) (the “Patent Counsel”).

 

ARTICLE 10
INDEMNIFICATION

 

10.1

Indemnification by City. City will indemnify, defend, and hold harmless each Biogen Indemnified Party from and against any and all Liabilities that a Biogen Indemnified Party incurs in connection with one or more Third Party Claims against such Biogen Indemnified Party to the extent resulting from or arising out of:

 

10.1.1

the breach by City or its Affiliates or Subcontractors of this Agreement or any of its representations, warranties, or covenants hereunder;

 

10.1.2

the gross negligence, willful misconduct, or fraud by or on the part of any City Indemnified Party in the performance of City’s obligations or exercising any of City’s rights under this Agreement;

 

 

10.1.3

any claim to the extent arising out of the City Research Activities, [***]; or

 

10.1.4

the breach or alleged breach by City or any of its Affiliates or sublicensees of any provision of any Upstream Agreement or any act or omission giving rise to a termination right of the applicable licensor under any Upstream Agreement (other than an act or omission by Biogen or any of its Affiliates or Sublicensees that constitutes a breach of Biogen’s obligations under this Agreement).

 

Notwithstanding the foregoing, City will have no obligation to indemnify any Biogen Indemnified Party to the extent that any Liabilities result from or arise out of (x) matters described under Section 10.2.1 or Section 10.2.2, or (y) the negligence of any Biogen Indemnified Party under this Agreement.

 

10.2

Indemnification by Biogen. Biogen will indemnify, defend, and hold harmless each City Indemnified Party from and against any and all Liabilities that a City Indemnified Party incurs in connection with one or more Third Party Claims against such City Indemnified Party to the extent resulting from or arising out of:

 

10.2.1

[***]

 

10.2.2

[***]

 

10.2.3

[***]

 

Notwithstanding the foregoing, Biogen will have no obligation to indemnify any City Indemnified Party to the extent that any Liabilities result from or arise out of (x) matters described under Section 10.1 (Indemnification by City) or (y) the negligence of any City Indemnified Party under this Agreement.

 

10.3

Procedure. Each Party will notify the other Party in writing promptly after it becomes aware of a claim for which indemnification may be sought hereunder. In case any proceeding (including any governmental investigation) will be instituted involving any Indemnified Party, such Indemnified Party will promptly notify the Indemnifying Party in writing, which notice will include the Liability or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under this Article 10 (Indemnification) (including a description of the claim and the nature and amount of such Liability, to the extent known), but in no event will the Indemnifying Party be liable for any Liabilities to the extent resulting from any delay in providing such notice. Promptly after receipt of such notice, the Indemnifying Party and Indemnified Party will meet to discuss how to respond to any claims that are the subject matter of such proceeding. Unless the Parties mutually agree in writing otherwise within thirty (30) days after a Party notifies the other Party of any claim for which indemnification may be sought hereunder, the Indemnifying Party may assume and control, with the sole power to direct, the defense and settlement of such claim at its own expense with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party. The Indemnified Party will cooperate fully with the Indemnifying Party in defense of any such Liability or Third Party Claim and provide to the Indemnifying Party copies of all papers and official documents received in respect of any such matter. In any such proceeding, the Indemnified Party will have the right to retain its own counsel, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless (a) the Indemnifying Party and the Indemnified Party will have agreed to the retention of such counsel or (b) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both Parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party will not be liable for any settlement of any proceeding effected without its written consent, but, if settled with such consent or if there is a final judgment for the plaintiff, then the Indemnifying Party agrees to indemnify the Indemnified Party from and against any Liability by reason of such settlement or judgment and, in the case of a final judgment, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party. The Indemnifying Party will not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which the Indemnified Party is a party and indemnification could have been sought hereunder by the Indemnified Party, unless such settlement includes an unconditional release of the Indemnified Party from all liability on claims that are the subject matter of such proceeding.

 

 

10.4

LIMITATION OF LIABILITY.

 

10.4.1

EXCEPT (A) FOR THE WILLFUL MISCONDUCT OR FRAUD OF A PARTY, (B) FOR A PARTY’S BREACH OF ITS OBLIGATIONS UNDER [***] OR (C) TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES INDEMNIFICATION UNDER THIS ARTICLE 10 (INDEMNIFICATION), IN NO EVENT WILL EITHER PARTY HAVE ANY CLAIMS AGAINST OR LIABILITY TO THE OTHER PARTY WITH RESPECT TO ANY INDIRECT, PUNITIVE, SPECIAL, INCIDENTAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES (INCLUDING ANY CLAIMS FOR LOST PROFITS OR REVENUES), HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY, OR OTHERWISE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN INFORMED OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES.

 

10.4.2

[***]

 

10.5

Insurance. Each Party will, at its own expense, procure and maintain during the Term and for a period of five years thereafter, insurance policies, including product liability insurance when applicable, adequate to cover its obligations hereunder and that are consistent with normal business practices of prudent companies similarly situated. Such insurance will not be construed to create a limit of a Party’s liability with respect to its indemnification obligations under this Article 10 (Indemnification). Each Party will provide the other Party with written evidence of such insurance. Notwithstanding any provision to the contrary set forth in this Agreement, Biogen may self-insure, in whole or in part, the insurance requirements described above.

 

ARTICLE 11
TERM AND TERMINATION

 

11.1

Term. The term of this Agreement will commence upon the Effective Date and, unless earlier terminated pursuant to this Article 11 (Term and Termination) or Section 12.3 (Force Majeure), will continue in full force and effect, on a Licensed Product-by-Licensed Product and country-by-country basis, until the latest of (a) the date there is no Royalty-Bearing Patent Claim with respect to such Licensed Product in such country, (b) the expiration of all Regulatory Exclusivity, if any, for such Licensed Product in such country, and (c) ten years after First Commercial Sale of such Licensed Product in such country, with this Agreement expiring in its entirety upon the expiration of the last such date for the last Licensed Product (such period of effectiveness, the “Term”). Following expiration of the Term with respect to a Licensed Product in a country, the grant in Section 2.1.2 (Exclusive License Grant to Biogen) shall become unrestricted, fully-paid, royalty-free, perpetual, and irrevocable for such Licensed Product in such country.

 

 

11.2

Termination for Failure to Make Selection.

 

11.2.1

If Biogen has not provided written notice to City of at least one RNAi Trigger Candidate Selection on or prior to the RNAi Trigger Candidate Selection Outside Date, then (a) Biogen may terminate this Agreement immediately upon written notice to City and (b) City may terminate this Agreement upon [***] written notice to Biogen, if Biogen does not make at least one RNAi Trigger Candidate Selection during such [***] notice period.

 

11.2.2

If Biogen has not provided written notice to City of a Development Candidate Selection on or prior to the Development Candidate Selection Outside Date, then (a) Biogen may terminate this Agreement immediately upon written notice to City and (b) City may terminate this Agreement upon [***] written notice to Biogen, if Biogen does not make a Development Candidate Selection during such [***] notice period.

 

11.3

Termination for Cause.

 

11.3.1

By Biogen. If Biogen believes City is in material breach of this Agreement, then Biogen may deliver notice of such breach and Biogen’s intent to exercise its termination right to City, which notice identifies the material breach and, if applicable, the actions or conduct that Biogen considers would be an acceptable cure of such material breach. If City does not cure such material breach within the applicable cure period set forth in Section 11.3.3 (Cure Periods for Material Breaches), then, subject to Section 11.3.4 (Disputes Regarding Material Breach), Biogen may terminate this Agreement in its entirety effective on written notice of termination to City.

 

11.3.2

By City. If City believes Biogen is in material breach of this Agreement, then City may deliver notice of such breach and City’s intent to exercise its termination right to Biogen, which notice identifies the material breach and, if applicable, the actions or conduct that City considers would be an acceptable cure of such material breach. If Biogen does not cure such material breach within the applicable cure period set forth in Section 11.3.3 (Cure Periods for Material Breaches), then, subject to Section 11.3.4 (Disputes Regarding Material Breach), City may terminate this Agreement in its entirety effective on written notice of termination to Biogen.

 

11.3.3

Cure Periods for Material Breaches. For all material breaches other than a failure to make a payment as set forth in this Agreement, the allegedly breaching Party (the “Defaulting Party”) will have [***] from receipt of a written notice of such material breach under Section 11.3.1 (By Biogen) or Section 11.3.2 (By City) (“Breach Notice”) from the other Party (the “Non-Defaulting Party”) to cure such material breach, and for any material breach arising from a failure to make a payment set forth in this Agreement, the cure period will be [***] from receipt of the Breach Notice (such [***] or [***] period, as applicable, the “Cure Period”). Notwithstanding the foregoing, if such material breach (other than a material breach arising from a failure to make a payment) cannot be reasonably cured during the foregoing Cure Period, then the Defaulting Party may submit to the Non-Defaulting Party a reasonable cure plan to remedy such material breach that is reasonably acceptable to the Non-Defaulting Party, and upon such submission, the applicable Cure Period will automatically be extended for so long as the Defaulting Party continues to use commercially reasonable efforts to cure such material breach in accordance with such cure plan, but for no more than [***] from receipt of the Breach Notice (subject to the dispute resolution procedures set forth in Section 11.3.4 (Disputes Regarding Material Breach)).

 

 

11.3.4

Disputes Regarding Material Breach. If the Defaulting Party disputes in good faith the occurrence, materiality, or cure of an alleged material breach identified by the Non-Defaulting Party in a Breach Notice, then the issue of whether the Non-Defaulting Party may properly terminate this Agreement on expiration of the applicable Cure Period will be resolved in accordance with Section 12.9 (Dispute Resolution). If, as a result of such dispute resolution process, it is determined that the Defaulting Party committed an uncured material breach of this Agreement, and the Defaulting Party does not cure such material breach within [***] (or [***] in the case of a payment breach) after the date of such determination (the “Additional Cure Period”), then such termination will be effective as of the expiration of the Additional Cure Period. This Agreement will remain in full force and effect during the pendency of any such dispute resolution proceeding, and the Cure Periods set forth in Section 11.3.3 (Cure Periods for Material Breaches) and any Additional Cure Period, in each case, will be tolled during any such dispute resolution proceeding. Any such proceeding will not suspend any obligations of either Party hereunder, and each Party will use reasonable efforts to mitigate any damages during pendency of such proceeding. If, as a result of such dispute resolution proceeding, it is determined that the Defaulting Party did not commit a material breach (or such material breach was cured in accordance with this Section 11.3 (Termination for Cause)), then no termination by the Non-Defaulting Party in respect of such alleged breach will be effective, and this Agreement will continue in full force and effect.

 

11.4

Termination by Biogen for Insolvency of City. Biogen may terminate this Agreement in its entirety in the event that City (a) files for protection under bankruptcy or insolvency laws, (b) makes an assignment for the benefit of creditors, (c) appoints or suffers appointment of a receiver or trustee over substantially all of its property that is not discharged within [***] after such appointment, (d) passes any board resolution authorizing any dissolution or liquidation (other than in connection with a sale of assets to another business that intends to carry on City’s business and that assumes this the Agreement in accordance with Section 12.1 (Assignment), (e) has an involuntary case filed against it under any bankruptcy or insolvency law that is not discharged within [***] of the filing, or (f) admits in writing its inability generally to meet its obligations as they fall due in the ordinary course of its business (each of (a) through (f), an “Insolvency Event”).

 

11.5

Rights in Bankruptcy. The Parties intend to take advantage of the protections of Section 365(n) (or any successor provision) of the U.S. Bankruptcy Code or any analogous provisions of Applicable Law in any other country or jurisdiction to the maximum extent permitted by Applicable Law. All rights and licenses now or hereafter granted by City to Biogen under or pursuant to this Agreement are, for all purposes of Section 365(n) of the U.S. Bankruptcy Code, but only to the extent they constitute licenses of “intellectual property” as defined in Section 101 of the U.S. Bankruptcy Code, shall be deemed to be licenses of rights to “intellectual property” for purposes of Section 365(n) of the U.S. Bankruptcy Code or any analogous provisions of Applicable Law in any other country or jurisdiction. Upon the occurrence of an Insolvency Event, Biogen, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code or any analogous provisions of Applicable Law in any other country or jurisdiction, including the right to obtain the Intellectual Property from another entity. Without limiting the generality of the foregoing, the Parties intend and agree that any sale of City’s assets under Section 363 of the U.S. Bankruptcy Code shall be subject to Biogen’s rights under Section 365(n), that Biogen cannot be compelled to accept a money satisfaction of its interests in the Intellectual Property licensed pursuant to this Agreement, and that any such sale therefore may not be made to a purchaser “free and clear” of Biogen’s rights under this Agreement and Section 365(n) without the express, contemporaneous consent of Biogen. Further, each Party agrees and acknowledges that all payments by Biogen to City under this Agreement, other than royalty payments under Section 6.3 (Royalties on Royalty-Bearing Products), shall not constitute royalties within the meaning of Section 365(n) of the U.S. Bankruptcy Code or relate to licenses of Intellectual Property under this Agreement:

 

 

11.5.1

City will, during the Term, create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, to the extent commercially feasible, of all Intellectual Property licensed to Biogen under this Agreement (collectively, “IP Embodiments”). Each Party acknowledges and agrees that “embodiments” of Intellectual Property within the meaning of Section 365(n) of the U.S. Bankruptcy Code may include: laboratory notebooks, cell lines, product samples, and inventory, research studies and data, Regulatory Approvals (and applications for Regulatory Approval) and rights of reference therein, the Licensed Technology, Results, tangible information (including Licensed Know-How and Joint Know-How), and all information related to the Licensed Technology. Upon the occurrence of an Insolvency Event, Biogen shall be entitled to a complete duplicate of (or complete access to, as appropriate) all such IP Embodiments, which, if not already in Biogen’s possession, shall be promptly delivered to it upon Biogen’s written request (x) after an Insolvency Event, unless City continues to perform all of its obligations under this Agreement, or (y) if not delivered pursuant to clause (x) above because City continues to perform, upon a final, unappealable decision to reject this Agreement by or on behalf of City by the receiver or trustee appointed to City for such Insolvency Event. Unless and until City rejects this Agreement, City shall perform all of its obligations under this Agreement. City shall not interfere with the rights of Biogen to intellectual property as set forth in this Section 11.5 (Rights in Bankruptcy), or any agreement supplemental to this Agreement, including the right to obtain the intellectual property (or such embodiments) from another entity. If City provides to Biogen any of the Intellectual Property licensed hereunder (or any embodiment thereof) pursuant to this Section 11.5 (Rights in Bankruptcy), Biogen shall have the right to perform City’s obligations pursuant to this Agreement with respect to such Intellectual Property, but neither such provision nor such performance by Biogen shall release City from liability resulting from rejection of this Agreement or the failure to perform such obligations.

 

11.5.2

All rights, powers, and remedies of Biogen provided in this Section 11.5 (Rights in Bankruptcy) are in addition to and not in substitution for any other rights, powers, and remedies now or hereafter existing at law or in equity (including the U.S. Bankruptcy Code) in the event of the commencement of a case under the U.S. Bankruptcy Code with respect to City. The Parties intend the following rights to extend to the maximum extent permitted by Applicable Law, and to be enforceable under U.S. Bankruptcy Code Section 365(n):

 

(a)

the right of access to any intellectual property (and all embodiments thereof) of City, or any Third Party with whom City contracts to perform an obligation of City pursuant to this Agreement, and, in the case of such Third Party, that is necessary or reasonably useful for the Exploitation of any Licensed Compounds or Licensed Products or the exercise of any other rights explicitly granted to Biogen under this Agreement;

 

 

(b)

the right to contract directly with any Third Party to complete the contracted work; and

 

(c)

the right to cure any default under any such agreement with a Third Party and set off the costs thereof against amounts payable to City under this Agreement.

 

11.6

Termination for Convenience by Biogen. Biogen may, in its sole discretion, terminate this Agreement on a country-by-country and Licensed Product-by-Licensed Product basis or in its entirety, for convenience upon [***] prior written notice to City.

 

11.7

Effects of Termination.

 

11.7.1

In General. Upon any termination (but not expiration) of this Agreement in its entirety (or, in the case of termination of this Agreement with respect to a Licensed Product or a country, solely with respect to such terminated Licensed Product or terminated country):

 

(a)

Wind-Down. During the applicable termination notice period, City will not commence any new City Research Activities after City’s receipt or provision (as applicable) of such notice of termination and the Parties will begin to wind-down their respective activities under this Agreement. The JRC will coordinate the wind-down of each Party’s efforts under this Agreement, or, if the JRC has disbanded, then the Parties will establish an appropriate committee to coordinate such wind-down, and the Parties will complete such wind-down in an orderly and reasonable manner.

 

(b)

Termination of Rights and Licenses. Without limiting the effect that such termination will have on any provisions of this Agreement, other than as expressly set forth herein, including those provisions that this Agreement expressly provides will survive such termination and subject to Section 2.2.2 (Survival of Sublicenses), all rights and licenses granted to each Party, except for licenses granted pursuant to Section 9.1.5 (Standby License Grants) and rights with respect to the Joint Technology granted pursuant to Section 9.1.6 (Joint Technology), will terminate; provided that such licenses will continue solely as necessary for the Parties to complete the orderly wind-down of their activities under this Agreement in accordance with Applicable Law and as otherwise permitted in accordance with Section 11.7.1(a) (Wind-Down) and Section 11.7.1(d) (Sell-Off Right).

 

(c)

Termination of Payment Obligations. Subject to Section 11.7.1(d) (Sell-Off Right), all payment obligations under this Agreement will terminate, other than those that are accrued and unpaid as of the effective date of such termination. For any payment obligations that are accrued and unpaid as of the effective date of termination, an invoice must be provided no later than [***] after the effective date of termination.

 

(d)

Sell-Off Right. Biogen will have the right to sell or otherwise dispose of the Licensed Products on hand at the time of such termination or in the process of Manufacturing; provided that any revenue obtained from such disposal will be treated as Net Sales and the provisions of Article 6 (Financial Terms) will apply to such Net Sales.

 

 

(e)

Return of Confidential Information. Upon the effective date of termination of this Agreement in its entirety, the Receiving Party will destroy (or, as directed by the Disclosing Party, return) all Confidential Information of the Disclosing Party to the Disclosing Party that is in the Receiving Party’s possession or control, except any Confidential Information required to continue to exercise a Party’s rights that survive termination of this Agreement (or certify such destruction in writing to the Disclosing Party, as applicable); provided, however, copies may be retained and stored solely for the purpose of determining its obligations under this Agreement, subject to the non-disclosure and non-use obligation under Article 8 (Confidentiality). In addition, the Receiving Party will not be required to return or destroy Confidential Information contained in any computer system back-up records made in the ordinary course of business; provided that such Confidential Information may not be accessed without the Disclosing Party’s prior written consent or as required by Applicable Law.

 

11.7.2

Additional Effects of Termination. If this Agreement is terminated in its entirety by either Party for any reason (but not, for the avoidance of doubt, if this Agreement expires), then, in addition to those general effects set forth in Section 11.7.1 (In General), each Party covenants and agrees that, following the effective date of termination of this Agreement, it will not, and will cause its Affiliates not to, [***]. If this Agreement is terminated with respect to one or more Licensed Products or one or more countries, this Section 11.7.2 (Additional Effects of Termination) will apply with respect to the Program Conjugates contained in such terminated Licensed Products in such terminated countries. [***].

 

11.8

Alternative Remedy in Lieu of Termination. Each Party stipulates and agrees that the other Party’s decision to enter into this Agreement and perform its obligations hereunder (including, as to Biogen, to invest in the Research Program and the Development of the Licensed Compounds and Licensed Products) is premised upon the assumption that the other Party will perform its obligations under this Agreement, and that a material breach of the Agreement by such other Party will undermine the economic fundamentals of the transaction for the Party, and that in such event such Party’s damages arising from the other Party’s breach may be of uncertain amount and difficult to prove. Accordingly, if Biogen has the right to terminate this Agreement pursuant to Section 11.3.1 (By Biogen) as a result of a material breach by City of Section 2.7 (Exclusivity), Article 8 (Confidentiality), Section 7.5.1, Section 7.5.2 (but only with respect to the rights to Licensed Technology granted to Biogen), or Section 7.5.5, then, subject to Section 11.3.4 (Disputes Regarding Material Breach), Biogen may, in its sole discretion and on written notice provided to City, which notice will be provided to City prior to expiration of the applicable Cure Period, if applicable (as it may be extended pursuant to Section 11.3.3 (Cure Periods for Material Breaches) or Section 11.3.4 (Disputes Regarding Material Breach)), elect to continue this Agreement as modified by this Section 11.8 (Alternative Remedy in Lieu of Termination), in lieu of terminating this Agreement under Section 11.3.1 (By Biogen), in which case, effective as of the expiration of such applicable Cure Period without City having cured the applicable material breach, if Biogen has the right to terminate this Agreement pursuant to Section 11.3.1 (By Biogen) after City has failed to cure such material breach within the applicable cure period set forth in Section 11.3.3 (Cure Periods for Material Breaches) and subject to Section 11.3.4 (Disputes Regarding Material Breach), then the following applies, which City stipulates and agrees would be a reasonable remedy in such circumstance and not a penalty. Notwithstanding the foregoing, in no event may Biogen exercise its rights under this Section 11.8 (Alternative Remedy in Lieu of Termination) as a result of any matter set forth in [***].

 

 

11.8.1

This Agreement will remain in full force and effect, including Biogen retaining all of its licenses and other rights granted under this Agreement, subject to all of its payment and other obligations hereunder; provided that the Milestone Payments for Milestone Events achieved after such Biogen election and the royalty rates payable under this Agreement for Net Sales of Licensed Product after such election, in each case, will be reduced by 50%; and

 

11.8.2

Any Biogen Confidential Information provided to City pursuant to this Agreement will be promptly destroyed or, as directed by Biogen, returned to Biogen, and Biogen will be released from its ongoing disclosure and information exchange obligations with respect to activities after the date of such election, other than disclosure obligations under Article 6 (Financial Terms).

 

Notwithstanding the foregoing, if either Party initiates a dispute resolution process pursuant to Section 11.3.4 (Disputes Regarding Material Breach), Biogen will continue to make Milestone Payments and royalties that become payable to City during any tolled portion of the Cure Period or Additional Cure Period (i.e., during the period after which this Section 11.8 (Alternative Remedy in Lieu of Termination) would have taken effect absent such dispute), until resolution of the dispute; provided that, upon resolution of such dispute, if it is ultimately determined that this Section 11.8 (Alternative Remedy in Lieu of Termination) applies, then City will promptly reimburse Biogen for 50% of the Milestone Payments and royalties paid to City during such tolled portion of the Cure Period or Additional Cure Period through the date of effectiveness of this Section 11.8 (Alternative Remedy in Lieu of Termination) (and Biogen’s offset right under Section 6.8 (Right to Offset) will apply with respect to any such amounts not so reimbursed).

 

If Biogen exercises its alternative remedy under this Section 11.8 (Alternate Remedy in Lieu of Termination), then the above alternative remedy will be the sole monetary remedy available to Biogen for the uncured material breach by City, but Biogen will retain applicable equitable remedies for such breach. For the avoidance of doubt, except as set forth in this Section 11.8 (Alternate Remedy in Lieu of Termination), if Biogen exercises the alternative remedy set forth above in this Section 11.8 (Alternate Remedy in Lieu of Termination), then all rights and obligations of both Parties under this Agreement will continue unaffected, unless and until this Agreement is subsequently terminated by either Party pursuant to this Article 11 (Term and Termination) or otherwise as expressly permitted under this Agreement. Notwithstanding the foregoing, this Section 11.8 (Alternate Remedy in Lieu of Termination) is subject to Section 6.3.4(e)(ii) (Maximum Royalty Adjustments).

 

11.9

Rights Accruing Prior to Expiration or Termination. Expiration or termination of this Agreement will not relieve the Parties of any obligation that accrued prior to such expiration or termination. Except as expressly set forth hereunder, any expiration or termination of this Agreement will be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement prior to expiration or termination, including any payment obligation that accrued prior to the effective date of such expiration or termination.

 

11.10

Survival.

 

 

11.10.1

The following provisions, as well as any other provisions which by their express terms are intended to survive termination, will survive termination of this Agreement: Article 1 (to the extent necessary to interpret the other surviving provisions), Section 2.1.2 (solely with respect to those Licensed Products and countries for which such license has already become perpetual, as provided in the final sentence of Section 11.1, prior to the effective date of termination), Section 2.2.2 (in the instances set forth therein), Section 2.3, Section 2.4, Section 3.3.3 (except for the first sentence thereof), Section 3.8 (for the time period set forth in Section 3.8.1), Section 5.8 (solely with respect to the last sentence and for the time period set forth in Section 8.1), Section 6.7, Section 7.7, Section 8.1 (for the time period set forth therein), Section 8.2, Section 8.3 (except Sections 8.3.3 and 8.3.8), Section 8.4, Section 8.5, Section 8.6, Section 8.7, Section 8.8, Section 9.1, Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.5, 9.6 and 9.7 (each, solely with respect to the Joint Patent Rights), Section 9.3.2(c), Section 9.3.2(d), Section 10.1, Section 10.2, Section 10.3, Section 10.4, Section 10.5 (for the time period set forth therein), Section 11.5 (only in the event of termination pursuant to Section 11.4), Section 11.7, Section 11.9, this Section 11.10, Section 11.11, Article 12 (except for Section 12.3) and the following Sections, solely with respect to payments accruing prior to the effective date of termination of this Agreement and solely for purposes of final accounting with respect thereto: Sections 2.5, 2.6.4, 5.9, 6.2, 6.3, 6.4, 6.5, 6.6, 6.8, 6.9 and 6.10.

 

11.10.2

The following provisions, as well as any other provisions which by their express terms are intended to survive expiration, will survive expiration of this Agreement: Article 1 (to the extent necessary to interpret the other surviving provisions), Section 2.1.2 (as provided in the final sentence of Section 11.1), Section 2.3, Section 2.4, Section 3.3.3 (except for the first sentence thereof), Section 3.8 (for the time period set forth in Section 3.8.1), Section 5.8 (solely with respect to the last sentence and for the time period set forth in Section 8.1), Section 6.7, Section 7.7, Section 8.1 (for the time period set forth therein), Section 8.2, Section 8.3 (except for Section 8.3.3), Section 8.4, Section 8.5, Section 8.6, Section 8.7, Section 8.8, Section 8.9, Section 9.1, Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.5, 9.6 and 9.7 (each, solely with respect to the Joint Patent Rights), Section 9.3.2(c), Section 9.3.2(d), Section 9.4, Section 9.8, Section 9.9, Section 10.1, Section 10.2, Section 10.3, Section 10.4, Section 10.5 (for the time period set forth therein), Section 11.1 (solely with respect to the last sentence thereof), Section 11.5, Section 11.9, this Section 11.10, Section 11.11, Article 12 (except for Section 12.3), and the following Sections, solely with respect to payments accruing prior to the expiration of this Agreement and solely for purposes of final accounting with respect thereto: Sections 2.5, 2.6.4, 5.9, 6.2, 6.3, 6.4, 6.5, 6.6, 6.8, 6.9 and 6.10.

 

11.11

Injunction for Particular Breach. Without limiting either Party’s rights under Section 12.9.2 (Preliminary Injunctions), each Party acknowledges and agrees that the damages and harm to the other Party, for the first Party’s uncured breach of its obligations under Section 2.7 (Exclusivity), Article 8 (Confidentiality), or Article 9 (Intellectual Property), likely are difficult to ascertain and not predictable, and thus each Party covenants and agrees that, in the event that such Party has in fact breached its obligations under Section 2.7 (Exclusivity), Article 8 (Confidentiality), or Article 9 (Intellectual Property) and has not cured such breach, then monetary damages likely will not be a sufficient remedy for any such breach, and that in addition to all other remedies, the non-breaching Party will be entitled to obtain specific performance and injunctive and other equitable relief as a remedy for any such breach of Section 2.7 (Exclusivity), Article 8 (Confidentiality), or Article 9 (Intellectual Property), without the need to show irreparable harm.

 

11.12

[***].

 

 

ARTICLE 12
MISCELLANEOUS

 

12.1

Assignment. Neither this Agreement nor any interest hereunder will be assignable by City without the prior written consent of Biogen, except as follows: (a) City may, subject to the terms of this Agreement, assign its rights and obligations under this Agreement, without Biogen’s consent, in whole, to its successor-in-interest in connection with the sale of all or substantially all of its assets, whether in a merger, acquisition, consolidation, asset sale, or similar transaction or series of related transactions, provided that such sale is not primarily for the benefit of its creditors, (b) City may, without Biogen’s consent, assign its rights and obligations under this Agreement to any of its Affiliates, provided that City will remain liable for all of its obligations under this Agreement notwithstanding such assignment under this subclause (b), [***] Biogen may freely assign this Agreement or any interest hereunder, in whole or in part (x) at any time during the Term, (i) to its successor-in-interest in connection with the sale of all or substantially all of its assets, whether in a merger, acquisition, consolidation, asset sale, or similar transaction or series of related transactions, provided that such sale is not primarily for the benefit of its creditors, or (ii) to any Affiliate, provided that Biogen will remain responsible to City for the performance of any obligation assigned to an Affiliate, notwithstanding such assignment under this subclause (x)(ii), and (y) from and after the Development Candidate Selection Date, to any Third Party. [***]. Each Party will promptly notify the other Party of any assignment of this Agreement or any interest hereunder under the provisions of this Section 12.1 (Assignment). This Agreement will be binding upon the successors and permitted assigns of the Parties, and in the case of any such successor relationship or permitted assignment, the name of a Party appearing herein will be deemed to mean the names of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Agreement. Any assignment not in accordance with this Section 12.1 (Assignment) will be null, void, and of no legal effect.

 

12.2

Entire Agreement; Amendments. This Agreement, together with the Schedules and Exhibits attached hereto, sets forth the entire agreement between the Parties and supersedes all previous and contemporaneous negotiations, representations, or agreements, written or oral, regarding the subject matter hereof. Any other express or implied agreements and understandings, negotiations, writings and commitments, either oral or written, with respect to the Research Program or the licenses granted hereunder are superseded by the terms of this Agreement (including the Confidentiality Agreement, which Confidentiality Agreement is hereby terminated effective as of the Effective Date). This Agreement may be amended or modified (or any obligation thereof may be released or discharged) only by an instrument in writing duly executed by authorized representatives on behalf of the Parties. In case of inconsistencies between this Agreement and any Schedule or Exhibit hereof, the terms of this Agreement will prevail unless the Parties have agreed in writing explicitly that the Schedule or Exhibit, as applicable, should prevail.

 

12.3

Force Majeure. Neither Party will be held liable to the other Party nor be deemed to have breached this Agreement for failure or delay in performing any obligation under this Agreement to the extent that such failure or delay is caused by or results from a Force Majeure event and for so long as such failure or delay continues to be caused by or result from such Force Majeure event, and provided that such Party uses Commercially Reasonable Efforts to find an alternate means of performing any effected obligation, remedy its inability to perform, or to avoid the effects of such Force Majeure event. The non-performing Party will notify the other Party in writing of any Force Majeure circumstances that may affect its performance under this Agreement as soon as reasonably practical, but in no event more than [***] after the occurrence of such circumstance, will provide a good faith estimate of the period for which its failure or delay in performance under this Agreement is expected to continue based on currently available information, and will undertake reasonable efforts necessary to mitigate and overcome such Force Majeure circumstances and resume normal performance of its obligations hereunder as soon a reasonably practicable under the circumstances. During the pendency of the claimed Force Majeure event, the non-performing Party will update such notice to the other Party on a weekly basis, or more frequently if requested by the other Party, to provide updated summaries of its mitigation efforts and its estimates of when normal performance under the Agreement will be able to resume. In addition, if a Party’s failure to perform any material obligations under this Agreement as a result of a Force Majeure event continues for longer than [***], then the other Party may terminate this Agreement by providing [***] written notice to the non-performing Party.

 

 

12.4

Export Control. This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States or other countries that may be imposed on the Parties from time to time. Each Party agrees that it will not export, directly or indirectly, any technical information acquired from the other Party under this Agreement or any products using such technical information to a location or in a manner that at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other governmental entity in accordance with Applicable Law.

 

12.5

Waiver and Non-Exclusion of Remedies. The failure of either Party to require performance by the other Party of any of that other Party’s obligations under this Agreement will in no manner affect the right of such Party to enforce the same at a later time, subject only to applicable statutes of limitation as to any particular breach of an obligation. No waiver by any Party of any condition, or of the breach of any provision, term, representation, or warranty contained in this Agreement will be effective unless set forth in writing and duly executed by authorized representatives on behalf of the Parties. No such waiver will be deemed to be or construed as a further or continuing waiver of any such condition or breach, or of any other condition or of the breach of any other provision, term, representation, or warranty hereof. The remedies provided in this Agreement are not exclusive and the Party suffering from a breach or default of this Agreement may pursue all other remedies, both legal and equitable, alternatively, or cumulatively, except as expressly set forth herein.

 

12.6

Severability. If, under Applicable Law, any provision of this Agreement or portion thereof is for any reason held to be invalid, illegal, or unenforceable in any court of competent jurisdiction, then the same will not affect any other portion of this Agreement and its validity, as it is the intent of the Parties that this Agreement will be construed in such fashion as to maintain its existence, validity, and enforceability to the greatest extent possible. In any such event, this Agreement will be construed as if such provision or portion thereof had never been contained in this Agreement with respect to such jurisdiction, and there will be deemed substituted therefore a provision as will most nearly carry out the intent of the Parties as expressed in this Agreement to the fullest extent permitted by Applicable Law; provided that the foregoing will not apply if such substitution would have the effect of materially altering the rights and obligations of the Parties, in which event this Agreement may be terminated by mutual written agreement of the Parties. To the fullest extent permitted by Applicable Law, each Party hereby waives any provision of law that would render any provision hereof invalid, illegal, or unenforceable in any respect.

 

12.7

Notices. All notices and other communications given or made pursuant to this Agreement will be in writing, specifically refer to this Agreement, and will be deemed to have been duly given on the date delivered, if delivered personally, or on the next Business Day after being sent by reputable overnight courier (with delivery tracking provided, signature required, and delivery prepaid), in each case, to the Parties at the following addresses, or on the date sent and confirmed by confirmatory return email to the email address specified below (or at such other address, or email address for a Party as will be specified by notice given in accordance with this Section 12.7 (Notices)). This Section 12.7 (Notices) is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.

 

 

If to City:

 

City Therapeutics, Inc.

399 Binney Street

Cambridge, MA 02142

Attention: Chief Executive Officer

[***]

 

With a copy to:

 

Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP

3570 Carmel Mountain Road

San Diego, CA 92130

[***]

[***]

 

If to Biogen:

 

Biogen MA Inc.

225 Binney Street

Cambridge, MA 02142

Attention: Chief Legal Officer

[***]

 

With a copy to:

 

Covington & Burling

One International Place

Suite 1020

Boston, MA 02110-2627

[***]

[***]

 

12.8

Governing Law. This Agreement, and all claims arising under or in connection herewith, will be governed by and interpreted in accordance with the substantive laws of the Commonwealth of Massachusetts, without regard to conflict of law principles thereof. The Parties agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods.

 

12.9

Dispute Resolution. Any dispute arising out of or in connection with this Agreement (except for disputes arising at the JRC, which will be resolved pursuant to Section 4.2.5 (Decision-Making Authority) or as provided in Section 11.11 (Injunction for Particular Breach)) will be settled, if possible, through good faith negotiations between the Parties, and in the case of any such dispute, each Party commits to conduct such negotiations reasonably and in good faith. If the Parties are unable to settle such dispute within [***] days after first considering and discussing the resolution of such dispute, then such dispute will be referred to the Executive Officers. The Executive Officers of both Parties will meet to attempt to resolve such dispute. Such resolution, if any, of a referred issue will be set forth in writing and will be final and binding on the Parties. All negotiations pursuant to this Section 12.9 (Dispute Resolution) are confidential and will be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. If the Executive Officers cannot resolve such dispute within 30 days after either Party requests such a meeting in writing, then either Party will have the right to pursue any and all remedies available at law or in equity, consistent with Section 12.9.1 (Jurisdiction; Venue).

 

 

12.9.1

Jurisdiction; Venue. Each Party irrevocably submits to the exclusive jurisdiction of (a) the state courts of the Commonwealth of Massachusetts, and (b) the United States District Court for the District of Massachusetts, for the purposes of any suit, action, or other proceeding arising out of this Agreement or out of any transaction contemplated hereby. Each Party agrees to commence any such action, suit, or proceeding either in the United States District Court for the District of Massachusetts or if such suit, action, or other proceeding may not be brought in such court for jurisdictional reasons, in the state courts of the Commonwealth of Massachusetts. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit, or proceeding arising out of this Agreement or the transactions contemplated hereby in such courts, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit, or proceeding brought in any such court has been brought in an inconvenient forum. Each Party irrevocable consents to service of process in the manner provided under Section 12.7 (Notices) or by first class certified mail, return receipt requested, postage prepaid. THE PARTIES EXPRESSLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE AND FOREGO ANY RIGHT TO TRIAL BY JURY.

 

12.9.2

Preliminary Injunctions. Notwithstanding any provision to the contrary set forth in this Agreement, in the event of an actual or threatened breach of a Party’s obligations under this Agreement, a Party may seek a temporary restraining order or a preliminary injunction from any court of competent jurisdiction in order to prevent immediate and irreparable injury, loss, or damage on a provisional basis.

 

12.9.3

Patent and Trademark Disputes. Notwithstanding any provision to the contrary set forth in this Agreement, any and all issues regarding the scope, construction, validity, and enforceability of any Patent Rights or Trademark relating to a Licensed Product that is the subject of this Agreement will be determined in a court or other tribunal, as the case may be, of competent jurisdiction under the applicable patent or trademark laws of the country in which such Patent Rights or Trademark rights were granted or arose.

 

12.9.4

Payment Tolling. During the pendency of any dispute resolution proceeding between the Parties under this Section 12.9 (Dispute Resolution) regarding the obligation to make any payment under this Agreement from one Party to the other Party (in whole or in part), the obligation to make such disputed payment will be tolled until the final outcome of such dispute has been established, but all other payment obligations that are not disputed will remain in force and payable. If it is ultimately determined that one Party is obligated to make disputed payment to the other Party, the paying Party shall pay interest to the receiving Party on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at the applicable rate set forth in Section 6.7 (Late Payments).

 

12.9.5

Confidentiality. Any and all activities conducted under this Section 12.9 (Dispute Resolution), including any and all proceedings and decisions hereunder, will be deemed Confidential Information of each of the Parties, and will be subject to Article 8 (Confidentiality), to the extent applicable in accordance with Applicable Law.

 

 

12.10

Relationship of the Parties. It is expressly agreed that City, on the one hand, and Biogen, on the other hand, will be independent contractors and that the relationship between the two Parties will not constitute a partnership, joint venture or agency, including for tax purposes. Neither City nor Biogen will have the authority to make any statements, representations or commitments of any kind, or to take any action that will be binding on the other, without the prior written consent of the other Party to do so. All Persons employed by a Party will be employees of that Party and not of the other Party and all expenses and obligations incurred by reason of such employment will be for the account and expense of such Party. Neither Party (nor any successor, assignee, transferee, or Affiliate of a Party) will treat or report the relationship between the Parties arising under this Agreement as a partnership for United States tax purposes, without the prior written consent of the other Party, unless required by Applicable Law.

 

12.11

Performance by Affiliates. Each Party recognizes that the other Party may perform some or all of its obligations under this Agreement through its Affiliates; provided, however, that such other Party will remain responsible for the performance by its Affiliates as if such obligations were performed by such other Party; and provided, further, that Biogen shall not perform its payment obligations through an Affiliate resident in a jurisdiction that, as of the time of such delegation by Biogen, requires Biogen to deduct and withhold tax under Applicable Law that cannot be eliminated or reduced under the applicable Tax treaty (or otherwise) to an amount less than or equal to the U.S. withholding tax that at such time would apply to payments by Biogen to City.

 

12.12

Third Party Beneficiaries. There are no implied Third Party beneficiaries hereunder. The provisions of this Agreement are for the exclusive benefit of the Parties, and no other Person will have any right or claim against any Party by reason of these provisions or be entitled to enforce any of these provisions against any Party, except (a) the indemnification rights (i) of the Biogen Indemnified Parties pursuant to Section 10.1 (Indemnification by City) and Section 10.3 (Procedure) and (ii) of the City Indemnified Parties pursuant to Section 10.2 (Indemnification by Biogen) and Section 10.3 (Procedure) and (b) as expressly provided in Section 2.2.2 (Survival of Sublicenses).

 

12.13

Interpretation. Except where the context expressly requires otherwise, (a) the use of any gender herein will be deemed to encompass references to either or both genders, and the use of the singular will be deemed to include the plural (and vice versa), (b) the words “include”, “includes” and “including” will be deemed to be followed by the phrase “without limitation,” (c) the word “will” will be construed to have the same meaning and effect as the word “shall,” (d) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject to any restrictions on such amendments, supplements, or modifications set forth herein), (e) any reference herein to any person or entity will be construed to include the person’s or entity’s successors and assigns, (f) the words “herein,” “hereof,” and “hereunder”, and words of similar import, will be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (g) all references herein to Sections, Exhibits, or Schedules will be construed to refer to Sections, Exhibits, or Schedules of this Agreement, and references to this Agreement include all Exhibits and Schedules hereto, (h) the word “notice” means notice in writing (whether or not specifically stated) and will include notices, consents, approvals, and other written communications contemplated under this Agreement, (i) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent,” or “approve” or the like will require that such agreement, consent, or approval be specific and in writing, whether by written agreement, letter, approved minutes, or otherwise (but excluding e-mail and instant messaging), (j) references to any specific law, rule or regulation, or article, section, or other division thereof, will be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof, (k) the term “or” will be interpreted in the inclusive sense commonly associated with the term “and/or,” and (l) references to any Sections include Sections and subsections that are part of the related Section (e.g., a section numbered “Section 2.2” would be part of “Section 2”, and references to “Section 2.2” would also refer to material contained in the subsection described as “Section 2.2(a)”).

 

 

12.14

Further Assurances. Each of City and Biogen agrees to duly execute and deliver, or cause to be duly executed or delivered, such further reasonable instruments and do and cause to be done such further reasonable acts, which may include the filing of additional assignments, agreements, documents, and instruments, as the other Party may at any time and from time to time reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement.

 

12.15

Counterparts. This Agreement may be executed in counterparts, all of which taken together will be regarded as one and the same instrument. Counterparts may be delivered via electronic mail, including Adobe™ Portable Document Format (PDF) or any electronic signature complying with the U.S. Federal ESIGN Act of 2000, and any counterpart so delivered will be deemed to be original signatures, will be valid and binding upon the Parties, and, upon delivery, will constitute due execution of this Agreement.

 

[Signature Page follows.]

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the Effective Date.

 

	BIOGEN MA INC.
	By:	/s/ Adam Keeney
		(Signature)
	Name:	Adam Keeney
	Title:	Executive Vice President, Corporate Development

 

	CITY THERAPEUTICS, INC.
	By:	/s/ Andy Orth
		(Signature)
	Name:	Andy Orth
	Title:	President and CEO

 

Signature Page to Research Collaboration and License Agreement

 

 

Exhibit 1.20

 

Biogen Specified OSIF License Issues

 

[***]

 

 

Exhibit 1.193

 

Initial Research Plan

 

[***]

 

 

Exhibit 11.8

 

Alternative Remedy Exceptions

 

[***]

 

 

Schedule 1.88

 

Existing Licensed Patent Rights

 

[***]

 

 

Schedule 1.220

 

Target

 

[***]

 

 

Schedule 1.232

 

Upstream Agreements

 

[***]

 

 

Schedule 4.1.1

 

Contact List

 

[***]

 

 

Schedule 7.2

 

Initial Disclosure Schedule

 

[***]

 

 

 

Exhibit 10.11

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS
BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT
TREATS AS PRIVATE OR CONFIDENTIAL.

 

RESEARCH COLLABORATION AND LICENSE AGREEMENT

 

between

 

CITY THERAPEUTICS, INC.

 

and

 

BAUSCH + LOMB IRELAND LIMITED

 

July 8, 2024

 

 

RESEARCH COLLABORATION AND LICENSE AGREEMENT

 

This RESEARCH COLLABORATION AND LICENSE AGREEMENT (this “Agreement”) is entered into as of July 8, 2024 (the “Effective Date”), by and between CITY THERAPEUTICS, INC., a Delaware corporation with a place of business at 399 Binney Street, Cambridge, MA 02142 (“City”), and Bausch + Lomb Ireland Limited, a corporation organized under the laws of Ireland, having offices at 3013 Lake Drive, Citywest Business Campus, Dublin 24, Ireland (“B+L”). In this Agreement, B+L and City are collectively referred to as the “Parties” and each individually as a “Party”.

 

RECITALS

 

WHEREAS, B+L desires to enter into a research collaboration with City pursuant to which City shall undertake a research program for Licensed Molecules (as defined below), which would enable B+L to develop, and subsequently commercialize, one or more Licensed Products (as defined below) in the Field (as defined below) and the Territory (as defined below); and

 

WHEREAS, City desires to grant to B+L, and B+L desires to obtain from City, an exclusive, worldwide license to certain City intellectual property to develop, manufacture and commercialize Licensed Molecules and Licensed Products in the Field throughout the Territory.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

 

Article 1
DEFINITIONS

 

As used in this Agreement, the following terms shall have the meanings set forth below:

 

1.1           “Acquiring Organization” means [***].

 

1.2           “Acquiring Organization Intellectual Property” means all Know-How and Patents Controlled by the Acquiring Organization, except for: [***].

 

1.3           “Acquiror” shall have the meaning set forth in Section 1.4.

 

1.4           “Acquisition” of a Person (a “Target Person”) means [***].

 

1.5           “Additional B+L Studies” shall have the meaning set forth in Section 2.2.2.

 

1.6           “Additional B+L Studies Efforts Obligations” shall have the meaning set forth in Section 2.2.2.

 

 

1.7           “Affiliate” shall mean, with respect to a Party, any Person that controls, is controlled by, or is under common control with that Party, but only for so long as such control exists. For the purpose of this definition and the “Acquisition” definition set forth in Section 1.4, “control” shall mean, direct or indirect, ownership of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interest in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby the entity or person controls or has the right to control the board of directors or equivalent governing body of a corporation or other entity, or the ability to cause the direction of the management or policies of a corporation or other entity. In the case of entities organized under the laws of certain countries, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity. [***].

 

1.8           “Agreement” shall have the meaning set forth in the preamble hereto.

 

1.9           “Annual Net Sales” for a Calendar Year for a particular Licensed Product shall mean Net Sales of such Licensed Product in all countries in such Calendar Year.

 

1.10         “Applied B+L Technology” means, [***].

 

1.11         “Assumed Patents” shall have the meaning set forth in Section 8.2.3(b).

 

1.12         “Audited Party” shall have the meaning set forth in Section 6.11.2.

 

1.13         “Auditing Party” shall have the meaning set forth in Section 6.11.2.

 

1.14         “B+L” shall have the meaning set forth in the preamble hereto.

 

1.15         “B+L Indemnitees” shall have the meaning set forth in Section 11.2.

 

1.16         “Bankruptcy Code” shall have the meaning set forth in Section 9.6.2.

 

1.17         “Budget Amount” shall mean [***].

 

1.18         “Business Day” shall mean any day that is not a Saturday, Sunday or other day on which commercial banks are authorized or required to be closed, as the case may be, in New York, USA or Dublin, Ireland.

 

1.19         “Calendar Quarter” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

 

1.20         “Calendar Year” shall mean a period of twelve (12) consecutive calendar months ending on December 31.

 

1.21         “City” shall have the meaning set forth in the preamble hereto.

 

1.22         “City Indemnitees” shall have the meaning set forth in Section 11.1.

 

 

1.23         “City Molecule-Specific Patent” shall mean [***].

 

1.24         “City Owned Patents” shall mean Licensed Patents that are owned solely by City or any of its Affiliates (or jointly by City and any of its Affiliates).

 

1.25         “City Royalty Event” shall mean [***].

 

1.26         “City Royalty Payment” shall have the meaning set forth in Section 3.5.

 

1.27         “Claim Basis” shall have the meaning set forth in Section 11.3.2.

 

1.28         “Clinical Trial” shall mean any human clinical study of a pharmaceutical product.

 

1.29         “CMC Licensed Know-How” shall mean Licensed Know-How necessary or reasonably useful to Manufacture Licensed Molecules or Licensed Products.

 

1.30         “Combination Product” shall mean a Licensed Product that contains both: (a) one or more Licensed Molecules; and (b) either (i) one or more Other API (including any combination of a Licensed Product sold together in a single package or for a single price with a separately formulated product containing an Other API) or (ii) any Third Party drug delivery device, drug eluting implant, or drug eluting polymer, in each case, for the administration of the portion of such Licensed Product containing a Licensed Molecule (each a “Drug Delivery Device”).

 

1.31         “Commercialize” shall mean any and all activities directed to the promotion, marketing, distribution or sale (and offer for sale or import or export for sale) of a product. “Commercializing” and “Commercialization” shall have corresponding meanings.

 

1.32         “Commercially Reasonable Efforts” shall mean, [***].

 

1.33         “Committed Target Notice” shall have the meaning set forth in Section 2.8.

 

1.34         “Committee Deadlock” shall have the meaning set forth in Section 4.4.

 

1.35         “Competing Product” shall mean [***].

 

1.36         “Competing Research Product” shall mean [***].

 

 

1.37         “Confidential Information” shall mean all confidential or proprietary information, Know-How, or data of one Party (the “Disclosing Party”) that is provided or disclosed by the Disclosing Party or its employees, agents, or other representatives to the other Party (the “Receiving Party”) or that the Receiving Party otherwise receives or accesses directly from the Disclosing Party or its employees, agents, or other representatives in the course of performing its obligations or exercising its rights under this Agreement and is marked or otherwise identified as confidential or that, by its nature, a reasonable Person would understand to be confidential. Notwithstanding the foregoing sentence, Confidential Information does not include any information, Know-How, or data:

 

(a)           that the Receiving Party can document was already known to the Receiving Party at the time of disclosure by the Disclosing Party without a duty of confidentiality;

 

(b)           generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

 

(c)           generally available to the public or otherwise part of the public domain after its disclosure, other than through any act or omission of a Party in breach of such Party’s confidentiality obligations under this Agreement;

 

(d)           subsequently disclosed to the Receiving Party by a Third Party who had no obligation to the Disclosing Party or any Affiliate of the Disclosing Party not to disclose such information to others; or

 

(e)           independently discovered or developed by or on behalf of the Receiving Party without the use of, reliance on or reference to the Confidential Information belonging to the other Party and the Receiving Party has contemporaneous documentation or other competent evidence to that effect.

 

Subject to the exclusions in clause (c) above, the terms of this Agreement shall be deemed to be the Confidential Information of both Parties (and both Parties shall be deemed to be the Receiving Party with respect thereto).

 

Subject to the exclusions in clauses (b)-(d) above: [***].

 

1.38         “Confirmation Notice” shall have the meaning set forth in Section 2.8.

 

1.39         “Control” and its correlative terms, “Controlled” or “Controls”, with respect to Know-How or Patents, shall mean the ability to grant a right, license or sublicense to such Know-How or Patents (other than pursuant to any rights granted in this Agreement) without violating the terms of any agreement with any Third Party; provided, however, [***].

 

1.40         “Cover,” “Covered” or “Covers” shall mean, as to a process, composition of matter, or product and a Patent, that, in the absence of a license granted under, or ownership of, such Patent, the making (including methods of making), using (including methods of use, such as methods of treatment), selling, offering for sale or importation of such process, composition of matter or product would infringe such Patent or, as to a pending claim included in such Patent, the making, using, selling, offering for sale or importation of such process, composition of matter or product would infringe such Patent if such pending claim were to issue in an issued Patent without modification.

 

1.41         “CRO” shall have the meaning set forth in Section 2.2.1.

 

1.42         “Development” shall mean any and all activities directed to obtaining and maintaining Regulatory Approval for a product for any indication, including research, discovery, composition of matter identification and generation, non-clinical, pre-clinical trials and Clinical Trials, post approval studies, supporting Manufacturing, production process development and formulation and related regulatory activities. “Develop” and “Developing” shall have corresponding meanings.

 

 

1.43         “Development Candidate Selection” shall have the meaning set forth in Section 3.1.1.

 

1.44         “Development Candidate Selection Notice” shall have the meaning set forth in Section 3.1.1.

 

1.45         “Development Candidate Selection Payment” shall have the meaning set forth in Section 3.1.1.

 

1.46         “Development Candidate Selection Period” shall mean the period commencing [***].

 

1.47         “Development Candidate Selection Termination Condition” shall have the meaning set forth in Section 3.1.4.

 

1.48         “Disclosing Party” shall have the meaning set forth in Section 1.37.

 

1.49         “Drug Delivery Device” shall have the meaning set forth in Section 1.30.

 

1.50         “Effective Date” shall have the meaning set forth in the preamble hereto.

 

1.51         “EMA” shall mean the European Medicines Agency and any successor or replacement agency.

 

1.52         “Exclusivity Period” shall mean the period beginning [***].

 

1.53         “Exploit” shall mean to make, have made, import, use, sell, offer for sale, Develop, Manufacture, and Commercialize. “Exploitation” shall mean the act of Exploiting a composition of matter, product or process.

 

1.54         “FD&C Act” shall mean the U.S. Federal Food, Drug and Cosmetic Act, as amended or supplemented from time to time.

 

1.55         “FDA” shall mean the U.S. Food and Drug Administration, and any successor or replacement agency.

 

1.56         “Field” shall mean [***].

 

1.57         “First Commercial Sale” shall mean, with respect to any Licensed Product and country, the first sale to a Third Party for end use, including consumption, of such Licensed Product in such country; provided, that such sale is after all required Regulatory Approvals have been granted to sell such Licensed Product in such country. Registration samples, inter-company transfers to Affiliates or Sublicensees of a Party for resale, and supply for compassionate use, named patient use, clinical trial purposes or other similar non-commercial uses shall not constitute a First Commercial Sale.

 

 

1.58         “Force Majeure Event” shall have the meaning set forth in Section 12.4.

 

1.59         “FTE” shall mean the equivalent of the work of one (1) employee full time for one (1) Calendar Year (consisting of at least a total of [***] per Calendar Year) of work directly related to the Research Plan. Any person who works more than [***] per Calendar Year and any person who devotes less than [***] per Calendar Year shall be treated as an FTE on a pro rata basis based upon the actual number of hours worked divided by [***].

 

1.60         “FTE Cost” shall mean, for any period, the FTE Rate multiplied by the number of FTEs in such period.

 

1.61         “FTE Rate” shall mean, with respect to either Party, a rate of [***] per FTE per year.

 

1.62         “GAAP” shall mean United States generally accepted accounting principles, consistently applied. Unless otherwise defined or stated, financial terms will be calculated by the accrual method under GAAP.

 

1.63         “Generic Entry” shall mean, with respect to a particular Licensed Product, the first arm’s length sale to a Third Party of a Generic Product of such Licensed Product for use or consumption in a country.

 

1.64         “Generic Product” shall mean, after Regulatory Approval of a Licensed Product in a country, any other pharmaceutical product designated for human use launched by a Third Party in such country that (a) has the same active pharmaceutical ingredient(s), administration route and dosage form as such Licensed Product, and (b) is approved for use pursuant to a Regulatory Approval process governing approval of generic or interchangeable drugs based on the then-current standards for Regulatory Approval in such country (e.g., a non-U.S. equivalent to an abbreviated new drug application submitted pursuant to Section 505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)), a new drug application submitted pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(b)(2)), or a relevant equivalent under non-U.S. law).

 

1.65         “Good Clinical Practice” or “GCP” shall mean the then-current good clinical practice applicable to the clinical Development of a pharmaceutical product under applicable Law, including the ICH guidelines, U.S. Good Clinical Practice and clause 2 of Article 1 of European Union directive on the conduct of clinical trials 2001/20/EC.

 

1.66         “Good Laboratory Practice” or “GLP” shall mean the then-current Good Laboratory Practice Standards promulgated or endorsed by the FDA or in the case of any other country, comparable regulatory standards promulgated or endorsed by the Regulatory Authorities in that country.

 

 

1.67         “Good Manufacturing Practice” or “GMP” shall mean the then-current Good Manufacturing Practices as specified in the United States Code of Federal Regulations, ICH Guideline Q7A, or equivalent Laws of an applicable Governmental Authority of any other relevant country at the time of manufacture.

 

1.68         “Governmental Authority” shall mean any court, tribunal, arbitrator, agency, department, board, division, administration, legislative body, commission, official or other instrumentality of (a) any government of any country, (b) a federal, state, province, county, city or other political subdivision thereof, or (c) any international, multinational or supranational body.

 

1.69         “Gross-Up Payments” shall have the meaning set forth in Section 6.7.

 

1.70         “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

1.71         “ICH” shall mean the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use.

 

1.72         “Incomplete Data Package Notice” shall have the meaning set forth in Section 2.9.1.

 

1.73         “IND” shall mean any Investigational New Drug application, as defined in Title 21 of the Code of Federal Regulations, on file with the FDA before commencement of Clinical Trials, or any comparable filing with any relevant Regulatory Authority in any country or jurisdiction including a Clinical Trial application.

 

1.74         “Indemnification Claim” shall have the meaning set forth in Section 11.3.1.

 

1.75         “Indemnitee” shall have the meaning set forth in Section 11.3.2.

 

1.76         “Indemnitor” shall have the meaning set forth in Section 11.3.2.

 

1.77         “Infringement Action” shall have the meaning set forth in Section 8.3.1(a).

 

1.78         “Initial NHP Study Plan” shall have the meaning set forth in Section 2.2.1.

 

1.79         “Initiation” of a Clinical Trial shall mean the dosing of the [***] subject in the relevant Clinical Trial.

 

1.80         “Invalidity Claim” shall have the meaning set forth in Section 8.5.1.

 

1.81         “Invention” shall mean an invention invented by a Party in performance of the Research Plan.

 

 

1.82         “JAMS” shall have the meaning set forth in Section 1.102(1).

 

1.83         “Joint Inventions” shall have the meaning set forth in Section 8.1.2.

 

1.84         “Joint Molecule-Specific Patents” shall mean [***].

 

1.85         “Joint Patent Costs” shall have the meaning set forth in Section 8.2.4(c).

 

1.86         “Joint Patents” shall have the meaning set forth in Section 8.2.2.

 

1.87         “Joint Research Committee” or “JRC” shall have the meaning set forth in Section 4.1.

 

1.88         “Know-How” shall mean all technical information, know-how and data, inventions (whether patentable or not), discoveries, trade secrets, specifications, processes, formulae, and other technology applicable to compositions of matter, formulations, compositions, products or to their manufacture, Development, use or Commercialization.

 

1.89         “Law” shall mean all laws, statutes, ordinances, rules, rulings, treaties, procedures, notices, regulations, writs, judgments, decrees, injunctions (whether preliminary or final), orders and other pronouncements having the effect of law of any Governmental Authority that may be in effect from time to time.

 

1.90         “Licensed Know-How” means all Know-How Controlled by City or any of its Affiliates during the Term that is necessary or reasonably useful to Exploit Licensed Molecules or Licensed Products. Notwithstanding the foregoing, Licensed Know-How does not include any: (a) Patents, (b) Know-How that relates to Other API and does not relate to a Licensed Molecule, or (c) Acquiring Organization Intellectual Property.

 

1.91         “Licensed Molecule” shall mean [***].

 

1.92         “Licensed Patents” shall mean all Patents Controlled by City or any of its Affiliates during the Term that are necessary to make, use, sell, offer to sell or import any Licensed Molecule or a Licensed Product. Notwithstanding the foregoing, Licensed Patents do not include: [***].

 

1.93         “Licensed Product” shall mean any product containing one or more Licensed Molecules, in any dosage form, formulation or method of delivery.

 

1.94         “Licensed Technology” shall mean all Licensed Patents and Licensed Know- How.

 

1.95         [***]

 

1.96         “Manufacture” shall mean, in respect of a product, the production, manufacture, formulation, processing, filling, finishing, packaging, labeling, shipping and holding of such product or any intermediate thereof, including pre-clinical, clinical and commercial manufacture and analytic development, product characterization, stability testing, quality assurance and quality control.

 

 

1.97         “Materials” shall mean any tangible chemical or biological material, including any small molecules, DNA, RNA, clones, cells, and any expression product, progeny, derivative or other improvement thereto, along with any tangible chemical or biological material.

 

1.98         “Milestone Event” shall have the meaning set forth in Section 6.4.1.

 

1.99         “Milestone Payment” shall have the meaning set forth in Section 6.4.1.

 

1.100       “Molecule-Specific Patents” shall have the meaning set forth in Section 8.3.1(a).

 

1.101       “NDA” shall mean a new drug application submitted to the FDA pursuant to Section 505(b) of the FD&C Act (21 U.S.C. § 355(b)), and all amendments and supplements thereto, or any comparable filing with any relevant Regulatory Authority in any country or jurisdiction.

 

1.102       “Net Sales” means [***]

 

(a)            [***]

 

(b)            [***]

 

(c)            [***]

 

(d)            [***]

 

(e)            [***]

 

(f)             [***]

 

(g)            [***]

 

(h)            [***]

 

(i)             [***]

 

Each of the amounts set forth above shall be determined from [***].

 

With respect to any sale of a Licensed Product in a given country for [***].

 

[***]

 

[***]

 

 

[***]

 

[***]

 

[***]

 

1

[***]

 

2

[***]

 

3

[***]

 

[***]

 

1.103       “NHP Study” shall mean the non-human primate study contemplated under the Research Plan.

 

1.104       “NHP Study Molecule(s)” shall have the meaning set forth in Section 4.2.

 

1.105       “NHP Study Plan” shall mean the plan approved by the JRC (including if determined by B+L as a result of a NHP Study Plan Deadlock) for undertaking the NHP Study, which shall include a non-binding budget for the estimated Research Costs for the performance thereof and protocol.

 

1.106       “NHP Study Plan Deadlock” shall have the meaning set forth in Section 4.4.

 

1.107       “Ordinary Research Costs” shall mean all Research Costs other than those incurred in performance of the NHP Study Plan.

 

1.108       “OSIF Agreement” shall mean that certain Exclusive License Agreement entered into by and between the Ohio State Innovation Foundation and City Therapeutics, Inc. dated as of October 30, 2023.

 

1.109       “OSIF Covered Molecule” shall have the meaning set forth in Section 3.3.1.

 

1.110       “OSIF Patent” shall mean any Patent licensed to City pursuant to the OSIF Agreement.

 

1.111       “Other API” shall mean an active pharmaceutical ingredient that is not a Licensed Molecule.

 

1.112       “Party” and “Parties” shall have the meaning set forth in the preamble hereto.

 

1.113       “Patent Challenge” shall have the meaning set forth in Section 9.5.

 

1.114       “Patent Challenge Notice Date” shall have the meaning set forth in Section 9.5.

 

 

1.115       “Patent Term Extension” shall have the meaning set forth in Section 8.4.

 

1.116       “Patents” shall mean (a) all patents or patent applications, including any continuations, continuations-in-part, divisions, provisional, converted provisional, continued prosecution or substitute applications, (b) any patent issued with respect to any of the foregoing patent applications, including utility models, petty patents, innovation patents and design patents and certificates of invention, (c) any reissue, reexamination, renewal, restoration or extension (including any supplementary protection certificate and the like) of any of the foregoing patents or patent applications, and (d) all foreign counterparts of any of the foregoing, or as applicable portions thereof or individual claims therein.

 

1.117       “Person” shall mean any individual, corporation, company, partnership, trust, limited liability company, association or other business entity.

 

1.118       “Personnel Research Costs” shall mean the costs of City’s or its Affiliates’ employees in connection with the performance of the Research Plan (including the NHP Study Plan) (calculated as the FTE Costs).

 

1.119       “Phase II Clinical Trial” shall mean a Clinical Trial of a Licensed Product as a monotherapy or in combination with one or more other products: (a) with the primary endpoint of evaluating its effectiveness for a particular indication or indications, its short term tolerance and safety, but is not intended to be pivotal to support Regulatory Approval for such Licensed Product; or (b) that meets the definition in 21 C.F.R. §312.21(b) or any of its foreign equivalents.

 

1.120       “Phase III Clinical Trial” shall mean a Clinical Trial of a Licensed Product as a monotherapy or in combination with one or more other products: (a) on a sufficient number of patients, which trial (i) is designed to establish that such Licensed Product is safe and efficacious for its intended use, and (ii) is pivotal to support Regulatory Approval for such Licensed Product; or (b) that meets the definition in 21 C.F.R. §312.21(c) or any of its foreign equivalents.

 

1.121       “Post-NHP Additional Study” shall have the meaning set forth in Section 2.9.2.

 

1.122       “Post-NHP Additional Study Notice” shall have the meaning set forth in Section 2.9.2.

 

1.123       “Post-NHP Additional Studies End Date” means the first to occur of: [***].

 

1.124       “Post-NHP Additional Studies Update” shall have the meaning set forth in Section 2.9.2.

 

1.125       “Pre-Clinical Data Package” shall have the meaning set forth in Section 2.9.1.

 

1.126       “Program Molecule” shall have the meaning set forth in Section 1.91.

 

1.127       “Proposed Replacement Target” shall have the meaning set forth in Section 2.8.

 

 

1.128       “Prosecution” or “Prosecute” shall have the meaning set forth in Section 8.2.1.

 

1.129       “Receiving Party” shall have the meaning set forth in Section 1.37.

 

1.130       “Regulatory Approval” shall mean any and all approvals (including applicable pricing and reimbursement approvals), licenses, registrations or authorizations of any Regulatory Authority, in each case, necessary to Commercialize a product in a country (e.g., an NDA).

 

1.131       “Regulatory Authority” shall mean any national, supranational, regional, state or local regulatory agency, administration, department, bureau, commission, council or other governmental entity including the FDA and the EMA and any other agencies in any country involved in the granting or receipt of Regulatory Approvals.

 

1.132       “Regulatory Clearance” means any and all waiting periods under the HSR Act with respect to the transactions contemplated by this Agreement (and any extension thereof, including any agreements (i.e., timing agreements or otherwise) with a Governmental Authority not to consummate the transactions for any period of time) and any and all waiting periods, clearances or approvals in connection with other Regulatory Filings that are otherwise required to consummate the transactions contemplated hereby shall have expired, been terminated, been made, or been obtained.

 

1.133       “Regulatory Documentation” means, with respect to a Licensed Product, all INDs, NDAs, and other regulatory applications submitted to any Regulatory Authority, regulatory materials, drug dossiers, and any other reports, records, correspondence, and other materials with respect to any Regulatory Authority relating to the Licensed Product and required to Develop, Manufacture, or Commercialize the Licensed Product other than Regulatory Approvals.

 

1.134       “Regulatory Exclusivity” means, with respect to a Licensed Product and a country, any data exclusivity or other right of exclusivity (other than Patent exclusivity), granted or afforded by applicable Law or by a Regulatory Authority in such country, that confers exclusive marketing rights with respect to such Licensed Product in such country and prevents the initial market entry of a Generic Product with respect to such Licensed Product.

 

1.135       “Regulatory Filings” shall have the meaning set forth in Section 3.1.2.

 

1.136       “Regulatory Filings Contingent Notice” shall have the meaning set forth in Section 3.1.2.

 

1.137        “Regulatory Laws” means the Sherman Act, 15 U.S.C. §§ 1-7, as amended; the Clayton Act, 15 U.S.C. §§ 12-27, 29 U.S.C. §§ 52-53, as amended; the HSR Act; the Federal Trade Commission Act, 15 U.S.C. § 41-58, as amended; any other federal, state, or foreign law, regulation or decree that are designed or intended to prohibit, restrict, or regulate actions having the purpose or effect of monopolization, restraint of trade, or lessening of competition through merger or acquisition; and all applicable laws in effect from time to time that are designed or intended to prohibit, restrict or regulate actions by foreigners to acquire interests in or control over domestic equities, securities, entities, assets, land or other holdings for reasons of national security or other public policy.

 

 

1.138       “Related Targets” shall mean [***].

 

1.139       “Research Costs” shall mean the following reasonable and documented costs and expenses incurred by or on behalf of City or its Affiliates in connection with the performance of the Research Plan: [***].

 

1.140       “Research Period” shall mean the period beginning on the Effective Date and ending on the Research Period End Date.

 

1.141       “Research Period End Date” shall mean the earlier of: [***].

 

1.142       “Research Plan” shall mean: (a) the research plan set forth in Schedule 1.142 and; (b) the NHP Study Plan.

 

1.143       “Research Plan Termination Notice” shall have the meaning set forth in Section 9.3.1.

 

1.144       “Reverted Product” means a Licensed Product that, [***]

 

1.145       “Royalty Payment” shall have the meaning set forth in Section 6.6.1.

 

1.146       “Royalty Rate” shall have the meaning set forth in Section 6.6.1.

 

1.147       “Royalty Term” shall have the meaning set forth in Section 6.6.1.

 

1.148       “Sales & Royalty Report” shall mean a written report or reports showing each of: [***].

 

1.149       “Sales Milestone Event” shall have the meaning set forth in Section 6.5.

 

1.150       “Sales Milestone Payment” shall have the meaning set forth in Section 6.5.

 

1.151       “Security Regulators” shall have the meaning set forth in Section 7.6.

 

1.152       “Segregate” means, with respect to any given product or program of an Acquiring Organization, to segregate activities directed to [***]:

 

(a)            [***]

 

(b)            [***].

 

1.153       “Senior Officer” shall mean [***].

 

1.154       “siRNA” means [***].

 

 

1.155       “Sublicense Agreement” shall mean any agreement under which a sublicense is granted to a Sublicensee under any Licensed Technology licensed to B+L pursuant to Section 3.2.

 

1.156       “Sublicensee” shall mean any Third Party to whom a sublicense is granted under any Licensed Technology licensed to B+L pursuant to Section 3.2 (whether directly or indirectly as a sub-sublicensee at any tier level).

 

1.157       “Target” shall mean: [***].

 

1.158      “Target Person” shall have the meaning set forth in Section 1.4.

 

1.159       “Target Replacement Deadline” shall mean the earlier of: [***].

 

1.160       “Target Replacement Notice” shall have the meaning set forth in Section 2.8.

 

1.161       “Term” shall have the meaning set forth in Section 9.1.

 

1.162       “Termination Date” shall mean the effective date of termination of this Agreement in accordance with its terms.

 

1.163       “Territory” means worldwide.

 

1.164       “Third Party” shall mean any Person who is not a Party or an Affiliate of a Party.

 

1.39.

 

1.165       “Third Party Claims” shall have the meaning set forth in Section 11.1.

 

1.166       “Third Party Compensation” shall have the meaning set forth in Section

 

1.167       “Third Party License” shall have the meaning set forth in Section 6.6.2(c).

 

1.168       “US” and “USA” shall mean the United States of America, including all of its territories and possessions.

 

1.169       “USD” shall mean United States Dollars.

 

1.170       “Valid Claim” shall mean a claim of: (a) an issued and unexpired Patent that has not been abandoned, cancelled or held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction unappealed within the time allowed for appeal, or that has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise; or (b) a pending patent application that was filed and is being prosecuted in good faith and has not been cancelled, withdrawn from consideration, abandoned or finally disallowed without the possibility of appeal or refiling of the application; provided, however, that Valid Claim shall exclude any such pending claim in an application that has not been granted within [***] following the earliest priority filing date for such application unless and until such claim is granted.

 

 

1.171       “Wind Down Period” shall have the meaning set forth in Section 9.3.1.

 

1.172       “Withholding Taxes” shall have the meaning set forth in Section 6.7.

 

1.173       Interpretation. Unless the context of this Agreement otherwise requires: (a) words of one gender include the other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby,” and other similar words refer to this entire Agreement; (d) the words “include”, “includes”, and “including” when used in this Agreement shall be deemed to be followed by the words “without limitation”, unless otherwise specified; (e) the terms “Article” and “Section” refer to the specified Article and Section of this Agreement (unless clear from the context that it refers to an Article or Section of some other document); (f) “or” has the inclusive meaning represented by the phrase “and/or”; (g) the words “will” and “shall” shall have the same meaning; (h) The letter “M” used in connection with the USD figures in this Agreement denotes “million” and the letter “B” used in connection with the USD figures in this Agreement denotes “billion”; and (i) references to a Law include any amendment or modification to such Law and any rules or regulations issued thereunder, whether such amendment or modification is made, or issuance of such rules or regulations occurs, before or, only with respect to events or developments occurring or actions taken or conditions existing after the date of such amendment, modification or issuance, after the date of this Agreement, but only to the extent such amendment or modification, to the extent it occurs after the date hereof, does not have a retroactive effect. Whenever this Agreement refers to a number of days, unless otherwise specified, such number shall refer to calendar days.

 

Article 2
RESEARCH AND DEVELOPMENT COLLABORATION

 

2.1           Conduct of Research Plan. City shall use Commercially Reasonable Efforts to perform all activities set forth in the Research Plan prior to [***]. City and B+L will conduct their activities under the Research Plan in accordance with good scientific standards and practices and the terms of the Research Plan and in compliance in all material respects with the requirements of GLP, GMP, GCP, as applicable, and all applicable Laws, including the Animal Welfare Act (AWA) for any USDA-covered species. In addition, laboratory animal work will be performed in a manner consistent with the guidance of an internal Institutional Animal Care and Use Committee (IACUC) and the recommended guidelines of the American Association of Laboratory Animal Science (AALAS). In the case of work performed at City’s facility, the internal vivarium shall also be subject to inspection by the Commission of Laboratory Animals of the Cambridge Public Health Department.

 

 

2.2           Preparation of NHP Study Plan and Conduct of NHP Study.

 

2.2.1           At the request of either Party, the Parties shall promptly and jointly prepare a draft of the plan for undertaking the NHP Study (“Initial NHP Study Plan”) for the purpose of allowing for completion of the NHP Study in the timeframe contemplated under the Research Plan. City shall be primarily responsible for preparing the Initial NHP Study Plan and shall incorporate all reasonable comments from B+L in connection therewith. Following completion of the draft, City shall provide a copy of the Initial NHP Study Plan to the JRC for review. Thereafter, B+L and City shall use Commercially Reasonable Efforts to finalize an NHP Study Plan (to be completed without unreasonable delay), including a non-binding budget for the expected Research Costs for the performance of such NHP Study Plan and study protocol and the selection of NHP Study Molecules. If B+L is conducting Additional B+L Studies (as defined below) to evaluate Program Molecules, then, with respect to B+L, such Commercially Reasonable Efforts shall include completing such Additional B+L Studies in a reasonably prompt manner (or terminating such Additional B+L Studies if B+L decides they are no longer necessary). City shall use Commercially Reasonable Efforts to perform all activities set forth in the NHP Study Plan not intended to be performed by the contract research organization (“CRO”) and shall oversee and coordinate with the CRO with respect to those activities set forth in the NHP Study Plan to be performed by the CRO, in accordance with the terms of the Research Plan (including the NHP Study Plan), in accordance with good scientific standards and practices, and in compliance in all material respects with the requirements of GLP, GMP, GCP, as applicable, and all applicable Laws.

 

2.2.2           B+L may, at its own cost, conduct studies to evaluate Program Molecules prior to the NHP Study (“Additional B+L Studies”). Within [***] after the end of each Calendar Quarter, B+L shall provide City with a written summary of the primary activities undertaken with respect to any Additional B+L Studies in such most recently ended Calendar Quarter. If applicable, within [***] of completion of any Additional B+L Study, B+L shall provide City with material data and results generated from such Additional B+L Studies (it being understood that B+L shall not be obligated to generate any particular data, or analyze, compile or organize any data that is generated, in relation to any Additional B+L Studies). Prior to making Development Candidate Selection, B+L shall not [***]. Unless and until the JRC has determined a NHP Study Plan, B+L shall use Commercially Reasonable Efforts to terminate or promptly conduct and complete (or terminate) all Additional B+L Studies (if any) (the “Additional B+L Studies Efforts Obligation”).

 

2.3           Research Costs. For purposes of B+L’s internal budgeting process, within [***] days of the Effective Date, City shall provide to B+L a reasonable estimate of the portion of the Budget Amount and the NHP Study Plan budget that City expects to utilize both during the period ending on [***] and the period ending on the [***]. City shall provide to B+L a reasonable estimate within [***] of the portions of the Budget Amount and the NHP Study Plan budget that City expects to utilize during the fiscal year ending on [***]. City shall use Commercially Reasonable Efforts to perform its activities set forth in the Research Plan (other than the NHP Study) within the Budget Amount, including all costs and expenses associated with its use of any Third Party’s resources or facilities in connection therewith. City shall use Commercially Reasonable Efforts to perform its activities set forth in the NHP Study Plan within the budget included in the NHP Study Plan, including all costs and expenses associated with its use of any Third Party’s resources or facilities in connection therewith. B+L shall use Commercially Reasonable Efforts to perform its activities set forth in the Research Plan (including, if applicable, the NHP Study Plan) at B+L’s sole cost and expense, including all costs and expenses associated with its use of any Third Party’s resources or facilities in connection therewith.

 

 

2.4           Payment of Research Costs. B+L shall reimburse City for all Research Costs incurred by City (including, without limitation, for the NHP Study). Notwithstanding the foregoing, B+L has no obligation to reimburse City for aggregate Ordinary Research Costs in excess of the Budget Amount. After the last day of each calendar month in which City incurs costs in conducting activities under the Research Plan, City shall provide B+L with (a) a report of all Research Costs that were incurred by City in performing such activities in such calendar month, and (b) an invoice for the amount of such Research Costs. B+L shall pay the amount of invoices provided pursuant to this Section 2.4 within [***].

 

2.5           Subcontracts. City and B+L may perform activities under the Research Plan through one or more Third Party subcontractors, provided that (a) none of the rights of a Party under this Agreement are materially adversely affected as a result of the other Party’s subcontracting; (b) any such Third Party subcontractor to whom a Party discloses Confidential Information of the other Party shall enter into an appropriate written agreement obligating such Third Party to be bound by obligations of confidentiality and restrictions on use of such other Party’s Confidential Information that are no less restrictive than the obligations of the disclosing Party in this Agreement; (c) City shall obligate its subcontractors to agree in writing to assign or license (with the right to grant sublicenses) to City any inventions (and patent rights covering such inventions) created by such Third Party in performing such services for City that are necessary to the research, Development, Manufacture, or Commercialization of Program Molecules; and (d) the Party shall at all times be responsible for the acts and omissions of its subcontractors as if they are such Party’s acts and omissions. Subcontracting shall not relieve a Party of its obligations or liability under this Agreement, and each Party will remain responsible for the performance of its obligations hereunder notwithstanding any such subcontracts.

 

2.6           Materials. Each Party may, as a matter of course as described in the Research Plan, furnish to the other Party samples of Materials that it Controls and that are necessary for the other Party to carry out its responsibilities under the Research Plan. Neither Party shall use such Materials provided by the other Party except in performance of the Research Plan or as otherwise licensed under this Agreement. Except with the prior written consent of the supplying Party, the Party receiving any Materials will not distribute or otherwise allow the release of Materials to any Third Party, except for subcontracting (subject to the provisions of Section 2.5) as permitted hereunder. All Materials will remain the sole property of the supplying Party, will be used in compliance with all applicable Laws, and will be used with prudence and appropriate caution in any experimental work because not all of their characteristics may be known.

 

 

2.7           Records; Reports; Monthly Updates.

 

2.7.1           Records. City will maintain and cause its employees and subcontractors to maintain, records and laboratory notebooks of its research activities under the Research Plan in sufficient detail and in a good scientific manner appropriate for regulatory and intellectual property protection purposes, during the Term and for [***] thereafter. If requested by B+L, City will provide B+L with a copy of any such records to the extent specific to or materially related to any Program Molecule.

 

2.7.2           Reports. City will provide quarterly updates and reports to B+L through the JRC regarding (a) the cumulative Research Costs, and (b) the Research Plan activities and results, including summaries of the data and information generated and, if reasonably requested by B+L, any raw data relating to the Research Plan, including activities thereunder to the extent specific to or materially related to any Program Molecule, summaries of data associated with the research activities and an assessment of progress under and the estimated timetable for completion of the Research Plan, advancement of Program Molecules to the next phase of research. City shall provide any such written summaries to JRC members at least [***] in advance of the applicable quarterly JRC meeting.

 

2.7.3           Monthly Updates. City will provide monthly updates regarding the Research Plan activities and results to the JRC.

 

2.8           Target Replacement Option. B+L may replace the Target [***] and only with a proposed replacement target in the Field on the terms set forth in this Section 2.8. If B+L wishes to replace the Target, B+L shall notify City of the proposed replacement target (the “Proposed Replacement Target”) prior to the Target Replacement Deadline (such notice, the “Target Replacement Notice”). Within [***] following receipt of the Target Replacement Notice, City shall notify B+L in writing stating either: (a) if true, that City is contractually obligated to perform research for or to license Patents or Know-How to a Third Party with respect to such Proposed Replacement Target (or molecules that inhibit the expression of such Proposed Replacement Target) (“Committed Target Notice”); or, alternatively, (b) that the Proposed Replacement Target is confirmed as the new Target (“Confirmation Notice”). The Target shall be replaced with the Proposed Replacement Target if: (i) City does not provide Committed Target Notice within [***] following its receipt of Target Replacement Notice; or (ii) City provides Confirmation Notice. If City provides a Committed Target Notice, then B+L may continually resubmit Target Replacement Notice in accordance with this Section 2.8 until the earlier of: (A) the date a Target Replacement Notice results in a new Target in accordance with this Section 2.8; or (B) the later of: [***]. For clarity, if a Target Replacement Notice is submitted by B+L prior to the Target Replacement Deadline, B+L may continue to submit one or more Target Replacement Notice(s) after the Target Replacement Deadline until a Confirmation Notice is received by B+L, as long each Target Replacement Notice is submitted within [***] of City’s prior Committed Target Notice. For clarity, upon the provision or deemed provision of Confirmation Notice, the Target shall no longer mean [***] and instead shall mean the Proposed Replacement Target for which Confirmation Notice is provided (or deemed provided).

 

 

2.9           Pre-Clinical Data Package.

 

2.9.1           City shall deliver to B+L a data package of the results and data for the data points set out in Schedule 2.9 with respect to such NHP Study Molecules (the “Pre-Clinical Data Package”) promptly after the completion of the Research Plan (but no later than [***] after such completion). B+L may, within [***] after receipt of what City intends as a Pre-Clinical Data Package, notify City that such purported Pre-Clinical Data Package is incomplete in a manner describing the precise data points B+L believes must be provided to complete such purported Pre-Clinical Data Package (“Incomplete Data Package Notice”). If B+L provides such Incomplete Data Package Notice within [***] after receipt of such purported Pre-Clinical Data Package and the Pre-Clinical Data Package is incomplete or B+L reasonably requests additional information that is in City’s or its Affiliates’ possession and was created in performance of the Research Plan, then City shall promptly update the purported Pre-Clinical Data Package with the information reasonably requested by B+L that would make such purported Pre-Clinical Data Package a complete Pre-Clinical Data Package (but no later than [***] after City’s receipt of such Incomplete Data Package Notice, which [***] period shall automatically be extended to [***] at City’s request as long as City is diligently working on updating the purported Pre-Clinical Data Package). Notwithstanding anything to the contrary, a purported Pre-Clinical Data Package shall, without limitation, be deemed a complete Pre-Clinical Data Package if B+L does not provide Incomplete Data Package Notice within [***] after receipt of such purported Pre-Clinical Data Package.

 

2.9.2           If B+L reasonably determines in good faith that additional pre-clinical studies of any Primary Molecules are necessary for B+L to determine whether to make Development Candidate Selection, then B+L shall, within [***] after receiving a complete Pre-Clinical Data Package, promptly notify City of the additional studies it intends to conduct for such purpose (each an “Post-NHP Additional Study” and such notice, “Post-NHP Additional Study Notice”) and shall use Commercially Reasonable Efforts to promptly conduct and complete (or terminate) all Post-NHP Additional Studies. Within [***] after the end of [***], B+L shall provide City with a written summary of the material activities undertaken with respect to the Post-NHP Additional Studies in such [***] period (each an “Post-NHP Additional Studies Update”). If applicable, within [***] of completion of any Post-NHP Additional Study, B+L shall provide City with material data and results generated from such Post-NHP Additional Study (it being understood that B+L shall not be obligated to generate any particular data, or analyze, compile or organize any data that is generated, in relation to any Post-NHP Additional Study). For all purposes of this Section 2.9.2, Post-NHP Additional Studies shall not include (and, prior to making Development Candidate Selection, B+L shall not perform or have performed with a Program Molecule) any toxicology study intended to meet the requirements for filing an IND.

 

 

Article 3

 

DEVELOPMENT CANDIDATE SELECTION; LICENSE GRANTS

 

3.1           Development Candidate Selection.

 

3.1.1           Subject to Section 3.1.2, B+L may, at any time during the Development Candidate Selection Period, make the “Development Candidate Selection” by: (a) notifying City that B+L is selecting one or more Licensed Molecules as clinical candidates (without the need to specify the Licensed Molecule it intends for such selection) (“Development Candidate Selection Notice”); and (b) paying City a non-refundable fee in an amount equal to [***] (“Development Candidate Selection Payment”). Upon Development Candidate Selection, City will, and upon Development Candidate Selection hereby does, grant to B+L the license set forth in Section 3.2.

  

3.1.2           If B+L determines or reasonably believes that any Regulatory Filings may be required in connection with making the Development Candidate Selection and/or the grant of the license by City to B+L in connection therewith, then, during the Development Candidate Selection Period, B+L shall notify City that it is making the Development Candidate Selection subject to Regulatory Clearance (along with such other information required in the Development Candidate Selection Notice) (“Regulatory Filings Contingent Notice”). The Parties shall use their respective commercially reasonable efforts to promptly file or cause to be filed, within [***] from the delivery of the Regulatory Filings Contingent Notice, any required filings under the HSR Act, and shall make or cause to be made as promptly as practicable and advisable any other filings that B+L reasonably determines in good faith to be necessary or appropriate to consummate the transactions contemplated by the Agreement, including the Development Candidate Selection and/or the grant of the license by City to B+L in connection therewith (collectively, the “Regulatory Filings”). The Parties shall also use their respective commercially reasonable efforts to (x) respond to any inquiries or requests for information and documentary material received from any Governmental Authority in connection with the Regulatory Filings and (y) otherwise take such actions so as to promptly obtain Regulatory Clearance. In connection with the Regulatory Filings, each Party shall (i) consult and cooperate with each other in the preparation of such filings or related submissions to any Governmental Authority, (ii) promptly inform the other Party of any material communication received by such Party from any Governmental Authority regarding the transactions contemplated by the Agreement, (iii) furnish to the other Party all information required for any such filings or related submissions to any Governmental Authority and provide the other Party with an opportunity to review in advance and comment on any material filings or submissions, including, if requested, considering in good faith, reasonable additions, deletions or changes suggested in connection therewith (provided that no Party shall be required to provide copies of filing(s) made pursuant to the HSR Act and other materials may be redacted or withheld (A) to remove business or commercially sensitive material; (B) as necessary to comply with contractual arrangements or applicable Law; and (C) as necessary to address reasonable attorney-client or other privilege or confidentiality concerns), (iv) not participate in any material meeting with any Governmental Authority regarding the transactions contemplated by the Agreement unless it first consults with the other Party in advance, and to the extent permitted by the Governmental Authority, gives the other Party the opportunity to be present thereat, and (v) not agree to any voluntary extension of any statutory deadline or waiting period or to any voluntary delay of the consummation of the transactions contemplated by the Agreement at the behest of any Governmental Authority without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed). [***]. For the avoidance of doubt, neither City nor its Affiliates shall take any of the actions in the immediately preceding sentence without B+L’s prior written consent, which consent may be withheld at the sole discretion of B+L.

 

 

3.1.3           If B+L provides Regulatory Filings Contingent Notice: (a) Development Candidate Selection (and the grant of the license by City to B+L in connection therewith) will not be effective (and payment of the Development Candidate Selection Payment will not be required) unless and until all Regulatory Clearance occurs and, at such time, B+L shall make the Development Candidate Selection Payment to City no later than [***] after receipt of such Regulatory Clearance; and (b) the Development Candidate Selection Period shall be extended until Regulatory Clearance has occurred. If the original Development Candidate Selection Period (i.e., other than as extended pursuant to this Section 3.1.3) would have expired prior to the receipt of all Regulatory Clearance, then B+L shall pay to City the Development Candidate Selection Payment no later than [***] after such receipt.

 

3.1.4           This Agreement shall expire in accordance with Section 9.1 if: (a) the Development Candidate Selection Period expires and B+L has neither (i) made a Development Candidate Selection in accordance with Section 3.1.1 or 3.1.3 (including by paying the Development Candidate Selection Payment), nor (ii) provided Regulatory Filings Contingent Notice in accordance with Section 3.1.2; or (b) B+L has determined (and notified City accordingly, which it shall be required to do promptly following making such determination) that it is no longer commercially reasonable to continue to seek to obtain Regulatory Clearance and that therefore it will not effectuate the Development Candidate Selection (each of (a)-(b) a “Development Candidate Selection Termination Condition”). In such case, the license granted pursuant to Section 3.2 shall never apply, and City shall be free to Exploit any and all Licensed Molecules and Licensed Products, alone or with Third Parties, without any further obligation to B+L (except pursuant to any royalty obligations set forth in Section 3.5, if applicable).

 

3.2           License Grant. Effective as of B+L’s exercise of the Development Candidate Selection pursuant to Section 3.1 and subject to the terms and conditions of this Agreement, City, on behalf of itself and its Affiliates, shall grant and does hereby grant to B+L and its Affiliates, an exclusive, royalty-bearing, worldwide, sublicensable (subject to Section 3.4), non-transferable (except pursuant to Section 12.1) license, under the Licensed Technology to Exploit the Licensed Molecules and Licensed Products in the Field in the Territory.

 

3.3           Additional Patents.

 

3.3.1           Notwithstanding Section 3.2 or anything to the contrary, neither City nor any of its Affiliates grant any sublicense to B+L under (and Licensed Patents do not include) any OSIF Patents. City shall promptly inform B+L in writing of each Licensed Molecule that City creates in performance of the Research Plan that is Covered by any OSIF Patent (each an “OSIF Covered Molecule”).

 

3.3.2           If: (a) City creates OSIF Covered Molecules in performance of the Research Plan; and (b) the JRC determines that such OSIF Covered Molecules should be the Licensed Molecules that are advanced to non-GLP non-human primate studies in performance of the Research Plan, then, upon B+L’s written request City shall [***]. Notwithstanding anything to the contrary, City (and not B+L) shall be responsible for all payments to OSIF with respect to such sublicense.

 

 

3.4           Sublicenses. B+L shall have the right to grant sublicenses, in whole or in part, under the licenses granted in Section 3.2 to its Affiliates or Sublicensees; provided, however, that B+L (a) shall ensure that the terms of any Sublicense Agreement are consistent with this Agreement, and (b) shall remain responsible for compliance with the terms of this Agreement. B+L’s rights to sublicense are limited to those expressly set forth in this Section 3.4 and any sublicense which is not granted in accordance with the terms and conditions of this Section 3.4 is hereby deemed null and void. B+L shall provide City with a copy of any Sublicense Agreement, and any amendment thereto, within [***] after its execution; provided that B+L shall have the right to redact from such copy of such Sublicense Agreement or amendment thereto (i) any information which B+L determines in good faith to be necessary to redact in order to protect any of its or its Sublicensee’s confidential or proprietary information that is not necessary in order to confirm compliance with B+L’s obligations under this Agreement, and (ii) any financial terms.

 

3.5           City Royalty. If this Agreement expires or terminates after the City Royalty Event, and City (or its Affiliates or licensees) subsequently Commercializes a Licensed Molecule created in performance of the Research Plan, then City shall pay to B+L a [***] royalty on Net Sales (where references to “B+L” in the definition of Net Sales will be replaced with “City”) of products containing such Licensed Molecule in the Territory (the “City Royalty Payment”). The City Royalty Payment shall be payable to B+L until [***]. The City Royalty Payment shall be made subject to and in accordance with the terms set forth in Article 6 (including the royalty reductions set forth in Section 6.6.2), in each case applied mutatis mutandis with respect to City Royalty Payments payable by City.

 

3.6           Exclusivity.

 

3.6.1           During the Exclusivity Period, City shall not, itself or with or through any Affiliate or Third Party, research, Develop, Manufacture or Commercialize any Competing Product in the Field.

 

3.6.2           During the period beginning on [***], City shall not, itself or with or through any Affiliate or Third Party, research, Develop, Manufacture or Commercialize any Competing Research Product in the Field.

 

3.6.3           During the period beginning on the Effective Date and ending on the earlier of [***], City shall not research, Develop, Manufacture or Commercialize any molecule, product or target on behalf of a Third Party (e.g., a licensee of the results of such activities) [***]. For clarity, this Section does not restrict City or its Affiliates from conducting any activity on its own behalf with respect to [***].

 

3.6.4            [***].

 

 

3.7           No Implied Rights. Neither Party grants any right or license to the other Party under any Know-How, Patent or other intellectual property rights of such Party except as expressly granted in this Agreement. All rights not expressly granted by a Party under this Agreement are reserved to such Party.

 

3.8           Technology Transfer. As soon as reasonably practicable following the effectiveness of the Development Candidate Selection, City shall deliver to B+L, [***]: (a) all material Licensed Know-How, and (b) other Licensed Know-How reasonably requested by B+L within [***] of B+L’s exercise of the Development Candidate Selection, in each case of (a) and (b), to the extent such Licensed Know-How is in City’s possession and Control that is related to the Licensed Molecules and was not otherwise part of the Pre-Clinical Data Package. City shall use Commercially Reasonable Efforts with respect to those activities for which it is responsible to ensure orderly transition and uninterrupted development thereof. If City becomes aware (including as a result of written notice from B+L) and confirms that any material Licensed Know-How related to the Licensed Molecules in its possession and Control as of the date of the Development Candidate Selection were not included in the Pre-Clinical Data Package or the Licensed Know-How transferred to B+L pursuant to this Section 3.8, then City shall promptly notify B+L of such determination, and City shall promptly take such actions as may be reasonably necessary to deliver such Licensed Know-How, as applicable, to B+L.

 

3.9           Cooperation. Following the Development Candidate Selection, and until the date that is [***], City shall use Commercially Reasonable Efforts, [***], to make its relevant personnel reasonably available to B+L, at reasonable times during City’s normal business hours and upon reasonable prior notice, to answer any questions or provide instruction as reasonably requested by B+L concerning the Licensed Technology or otherwise in connection with Development of the Licensed Products. B+L shall pay City for the aggregate time of City’s personnel spent in answering such questions and providing such instruction in excess of the [***] aggregate FTE hours in any calendar month. Such time shall be charged at the FTE Rate [***] and B+L shall pay City such amounts within [***].

 

3.10         CMC Transfer. Following the Development Candidate Selection, and until the date that is [***], City shall have no obligation to deliver any CMC Licensed-Know How pursuant to Section 3.8 and/or Section 3.9 unless requested by B+L. If B+L requests CMC Licensed Know-How and/or related assistance of City personnel, then City shall provide such CMC Licensed Know-How and/or related assistance, and B+L shall promptly reimburse City for all reasonable and documented out-of-pocket and internal costs incurred by City in providing CMC Licensed Know-How and assistance. City shall have no obligation to make its personnel available to B+L for more than [***] in the aggregate across all personnel. B+L shall pay City for the aggregate time of City’s personnel spent in answering such questions and providing such assistance. Such time shall be charged at the FTE Rate [***] and B+L shall pay City such amounts within [***]. This Section 3.10 shall apply notwithstanding anything to the contrary in Section 3.8 or Section 3.9.

 

 

Article 4
JOINT RESEARCH COMMITTEE

 

4.1           Establishment of Joint Research Committee. Within [***] after the Effective Date, the Parties shall establish a joint research committee (the “Joint Research Committee” or “JRC”) consisting of an appropriate number of representatives as may be agreed upon by the Parties, with an equal number of representatives designated by each Party. The initial members of the JRC will be nominated by the Parties promptly following the Effective Date. Such representatives shall be individuals suitable in seniority and experience and having delegated authority to make decisions of the JRC with respect to matters within the scope of the JRC’s responsibilities. The JRC shall have no authority to alter, amend or waive the terms and conditions of this Agreement (including any payment conditions or terms, periods for performance, or obligations of the Parties) or the Research Plan. A Party may change one or more of its representatives serving on the JRC at any time upon notice to the other Party, provided that such replacement is of comparable (or greater) authority and scope of functional responsibility within that Party’s organization as the person he or she is replacing. The JRC shall remain in effect until the first to occur of (a) the expiration or earlier termination of this Agreement, and (b) the Development Candidate Selection.

 

4.2           Responsibilities. The JRC shall oversee the performance of the Research Plan. The JRC shall also be responsible for finalizing the NHP Study Plan consistent with the data necessary for the Pre-Clinical Data Package as set forth on Schedule 2.9 and, as part of such finalization shall determine which Program Molecule(s) to advance to the NHP Study (each, an “NHP Study Molecules”), and perform such other functions as are specifically designated for the JRC in this Agreement or that the Parties mutually agree in writing to refer to the JRC. The JRC shall not select more than [***] Program Molecules as NHP Study Molecules without each Party’s written consent.

 

4.3           Meetings. The JRC shall meet in person (a) as mutually agreed between the Parties, (b) as required to review the Initial NHP Study Plan submitted for its review (c) as required to review any proposed amendments to the Research Plan submitted by either Party, and (d) as required to resolve disputes, disagreements or deadlocks unresolved by the JRC, in each case, on such dates, and at such places and times, as the Parties shall agree; provided that the Parties shall endeavor to have the first meeting of the JRC within [***] after its establishment. As appropriate, the JRC may invite a reasonable number of non-voting employees, consultants and scientific advisors to attend its meetings as non-voting observers, provided that such invitees are bound by confidentiality obligations at least as stringent as the provisions set forth herein. For clarity, except for the approval of the NHP Study Plan, the JRC has no authority to amend the Research Plan; any amendment of the Research Plan will be in accordance with Section 12.9.

 

4.4           Decisions. All decisions of the JRC shall be made by unanimous vote, with each Party having one (1) vote. In order to make any decision, the JRC must have present (in person or via telephone or videoconference) and voting at least one (1) representative of each Party. Subject to the terms of this Agreement, if the JRC does not resolve a matter within [***], or such shorter time as may be determined by the Parties, after it begins discussing any such delegated matter (a “Committee Deadlock”), then the JRC shall escalate such Committee Deadlock to the Senior Officers for resolution by consensus. If following consideration by the Senior Officers for a period of up to [***] there is still no consensus, then [***] shall have the final decision-making authority with respect to such Committee Deadlock. For clarity, if there is a Committee Deadlock with respect to finalizing an NHP Study Plan (a “NHP Study Plan Deadlock”) then [***] shall decide what constitutes the final NHP Study Plan. A NHP Study Plan Deadlock cannot occur unless and until there are no Additional B+L Studies being conducted.

 

 

Article 5
DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION

 

5.1           Diligence Obligations. Following Development Candidate Selection, B+L shall at all times use Commercially Reasonable Efforts to seek Regulatory Approval for [***] Licensed Product for [***] indication in [***]. Following Regulatory Approval of a Licensed Product in [***], B+L shall use Commercially Reasonable Efforts to Commercialize the Licensed Product in such country.

 

5.2           Development Responsibility. Other than as set forth in Section 5.1, from and after Development Candidate Selection, B+L will, subject to the terms of this Agreement, be solely responsible and have sole decision-making authority, at its expense, for the Development of the Licensed Molecules and Licensed Product in the Field in the Territory.

 

5.3           Regulatory Responsibility. Other than as set forth in Section 5.1, from and after Development Candidate Selection, B+L shall (i) have the sole decision-making authority to determine the regulatory plans and strategies for the Licensed Product in the Field in the Territory, (ii) be responsible for making all regulatory submissions and filings with respect to the Licensed Product in the Field in the Territory, (iii) be responsible for interfacing, corresponding, and meeting with the applicable Regulatory Authorities, including the FDA, regarding the Licensed Product in the Field in the Territory and (iv) be responsible for obtaining and maintaining Regulatory Approvals for the Licensed Products in the Field in the Territory in the name of B+L or its Affiliates, Sublicensees, or distributors.

 

5.4           Commercialization Responsibility. Other than as set forth in Section 5.1, from and after Development Candidate Selection, B+L will be solely responsible, at its sole cost and expense, for Commercializing all Licensed Products in the Field in the Territory. Other than as set forth in Section 5.1, all decisions regarding Commercialization of the Licensed Products in the Field in the Territory, including the design, sale, pricing, and promotion of the Licensed Products in the Field in the Territory under this Agreement, shall be within the sole discretion of B+L and its Affiliates.

 

 

Article 6
FINANCIAL PROVISIONS

 

6.1            Upfront Payment. Within [***], B+L shall make a one-time lump sum payment to City of Five Million Dollars (USD$5,000,000), which payment shall be non-refundable, non-contingent and non-creditable against other payments due hereunder.

 

6.2            Convertible Note. On the Effective Date, B+L will purchase from City for Ten Million Dollars (USD$10,000,000) a convertible promissory note with a principal amount of Ten Million Dollars (USD$10,000,000) pursuant to the terms of a Note Purchase Agreement and accompanying Convertible Promissory Note, in the forms attached hereto as Exhibit 6.2. At the Effective Date, City shall deliver to B+L an executed Convertible Promissory Note against payment of the purchase price therefor by wire transfer to a bank account designated by City within [***].

 

6.3            Development Candidate Selection Payment. If B+L makes a Development Candidate Selection, B+L shall pay City the Development Candidate Selection Payment [***] (and, if B+L provides Regulatory Filings Contingent Notice, effectiveness) of the Development Candidate Selection as set forth in Section 3.1. Such payment shall be non-refundable, non-contingent and non-creditable against other payments due hereunder. For clarity, only [***].

 

6.4            Development and First Commercial Sale Milestone Payments.

 

6.4.1           B+L shall pay City the following non-refundable and non-creditable milestone payments (each, a “Milestone Payment”) upon achievement of each of the corresponding milestone events (each, a “Milestone Event”) by or on behalf of B+L, any of its Affiliates, or any Sublicensees:

 

#	Milestone Event	Milestone Payment (USD)
1.	[***]	[***]
2.	[***]	[***]
3.	[***]	[***]
4.	[***]	[***]
5.	[***]	[***]
6.	[***]	[***]

 

Each Milestone Payment shall be deemed earned as of the first achievement of the corresponding Milestone Event. B+L shall provide City with notice of the achievement of each Milestone Event and shall pay City the corresponding Milestone Payment within [***] after the applicable Milestone Event is first achieved. [***].

 

 

6.4.2           For Section 6.4.1:

 

(a)            [***].

 

(b)            [***].

 

6.5            Sales Milestone Payments. Subject to the terms of this Agreement, B+L shall make the following payments to City (each a “Sales Milestone Payment”) after the achievement of the applicable event set forth below (each a “Sales Milestone Event”). Each of the Sales Milestone Payments are payable only once and, accordingly, the total payments made to City pursuant to this Section 6.5 shall not exceed [***]. Achievement of the Sales Milestone Events for a Calendar Year shall be based on aggregate Annual Net Sales of all Licensed Products in the Field in the Territory in such Calendar Year. B+L will notify City and shall pay to City the corresponding Sales Milestone Payment [***] in which the applicable Sales Milestone Event is achieved, provided that, [***].

 

Sales Milestone Event	Sales Milestone Paymen (USD)
[***]	[***]
[***]	[***]
[***]	[***]

 

6.6            Royalties.

 

6.6.1           Royalty Rates. B+L shall pay City a percentage of Annual Net Sales of each Licensed Product (the “Royalty Rate”) in each Calendar Quarter as set forth in this Section 6.6 (“Royalty Payment”). The Royalty Payment shall be payable to City after each Calendar Quarter on a Licensed Product-by-Licensed Product basis and country-by-country basis until [***].

 

Worldwide Annual Net Sales of the applicable Licensed Product	Royalty Rate
[***]	[***]
[***]	[***]
[***]	[***]

 

 

Determination of the applicable Royalty Rate shall be based on aggregate Annual Net Sales of each applicable Licensed Product (not all Licensed Products) in the Field in the Territory. For clarity, each Royalty Rate set forth in the table immediately above shall only be applied to the Annual Net Sales within the applicable royalty range. For example, the total royalties due for a Licensed Product in a Calendar Year (i.e., the aggregate of the royalty payments for each of the four Calendar Quarters in such Calendar Year) with Annual Net Sales of [***] would be calculated as follows:

 

[***] =	[***]	[***]
	[***]	[***]
	[***]	[***]
	[***]	[***]

 

[***].

 

6.6.2           Royalty Reductions. Subject to Section 6.6.3, on a Licensed Product-by-Licensed Product basis and country-by-country basis:

 

(a)            [***].

 

(b)            [***].

 

(c)            [***].

 

6.6.3           Royalty Floor. In no event will the total reductions under Section 6.6.2 reduce any Royalty Payment payable to City, with respect to a given Licensed Product in a given country in any Calendar Quarter, by more than [***] of the amount that would otherwise be payable for such Licensed Product in such country in such Calendar Quarter if such reductions were not made.

 

6.7           Taxes. Except as otherwise set forth in this Section 6.7, each Party shall be responsible for its own taxes, duties, levies, imposts, assessments, deductions, fees, withholdings or similar charges imposed on or measured by net income or overall gross income (including branch profits), gross receipts, capital, ability or right to do business, property, and franchise or similar taxes pursuant to applicable Law. [***]. B+L shall submit reasonable proof of payment of the Withholding Taxes within a reasonable period of time after such Withholding Taxes are remitted to the Governmental Authority. [***]. The Parties shall reasonably cooperate to eliminate or minimize any Withholding Taxes. [***].

 

6.8           Statements and Payment. Within [***] after each Calendar Quarter during the term of this Agreement following the First Commercial Sale of a Licensed Product, B+L will provide to City a Sales & Royalty Report and shall pay the applicable royalty amount.

 

6.9           Currency Exchange. For any currency conversion required in determining the amount of payments due hereunder, the amount in foreign currencies shall be converted into USD using [***].

 

 

6.10         Payment Method. All payments due to a Party hereunder shall be made via wire transfer of immediately available USD funds from a bank in the United States to an account designated in writing by that Party to the other Party.

 

6.11         Records Retention; Financial Audit.

 

6.11.1         Record Retention. Each Party shall maintain complete and accurate books, records and accounts for the calculation of Research Costs, reporting and payment of Withholding Taxes, and Royalty Payments due, as applicable, in sufficient detail to confirm the accuracy of any Research Cost reports and any Royalty Payments required under this Agreement, which books, records and accounts shall be retained until [***] after the end of the period to which such books and records pertain.

 

6.11.2         Financial Audit. Each Party (the “Auditing Party”) shall have the right to have an independent certified public accounting firm of internationally recognized standing reasonably acceptable to the other Party (the “Audited Party”) have access during normal business hours, upon reasonable prior notice, to such of the records of the Audited Party and its Affiliates as may be required to verify the accuracy of the calculation of Research Costs, Net Sales and Royalty Payments incurred or due for any year ending not more than [***] prior to the date of such request. Such verifications may not (a) be conducted for any Calendar Quarter more than [***] after the end of such Calendar Quarter, (b) be conducted more than once in any [***] period or (c) be repeated for any period unless, subject to the foregoing clauses (a) and (b), a subsequent verification uncovers a material error that is reasonable for the Auditing Party to assume existed in previously audited records. The independent certified public accounting firm shall disclose to the Auditing Party only the amounts which the independent certified public accounting firm believes to be inaccurate, with respect to Research Costs, or due and payable hereunder to City, with respect to Royalty Payments, shall provide a copy of same to the Audited Party, and shall disclose no other information revealed in such audit. Any and all records of the Audited Party and its Affiliates examined by such independent certified public accounting firm shall be deemed the Audited Party’s Confidential Information, which may not be disclosed by said independent certified public accounting firm to any Third Party or (except for the information expressly sought to be confirmed by the Auditing Party as set forth in this Section 6.11.2) to the Auditing Party. The Auditing Party shall bear all costs of such audit, unless the audit reveals a discrepancy in its favor of more than [***] in which case the Audited Party shall bear the cost of the audit. The result of the audit shall, in the absence of manifest error, be final and binding on the Parties.

 

6.11.3         Payment of Additional Amounts. If, based on the results of any audit conducted under Section 6.11.2, payments are owed to a Party under this Agreement, then the other Party shall make such payments within [***] after the accounting firm’s written report is delivered to the Parties, with interest calculated thereon in accordance with Section 6.12.

 

6.12         Interest on Late Payments. Any failure by either Party to make a payment of any undisputed amount when due shall obligate that Party to pay interest to the other Party on the amount unpaid at [***] (or, if lower, the maximum rate permitted by applicable Law) calculated on a daily basis and payable for the period from the date payment is due until the date payment is actually made, without prejudice to the recipient’s right to receive payment on the due date.

 

 

Article 7
CONFIDENTIALITY

 

7.1           Protection of Confidential Information. The Receiving Party shall not, and shall cause its Affiliates and its and their officers, directors, employees and agents not to, disclose or disseminate Confidential Information of the Disclosing Party to any Third Party unless expressly permitted hereunder, and shall not use such Confidential Information for any purpose other than in performing the Receiving Party’s obligations or exercising the Receiving Party’s rights under this Agreement. In addition, the Receiving Party shall take, and shall cause its Affiliates to take, reasonable steps to protect the Confidential Information of the Disclosing Party from unauthorized use or disclosure, which steps shall be no less than those the Receiving Party takes to protect its own confidential or proprietary material of a similar nature. City shall not, and, to the extent such information is disclosed to its Affiliates, shall cause such Affiliates and its and their officers, directors, employees and agents not to, disclose or disseminate Licensed Know-How that is both Confidential information of City and relating solely to the Development, Manufacture or Commercialization of Licensed Molecules or Licensed Products to any Third Party unless expressly permitted hereunder, and shall not use such Confidential Information for any purpose other than in performing its obligations under this Agreement and shall take, and shall cause such Affiliates to take, reasonable steps to protect such Licensed Know-How relating solely to the Development, Manufacture or Commercialization of Licensed Molecules or Licensed Products from unauthorized use or disclosure, which steps shall be no less than those the Receiving Party takes to protect its own confidential or proprietary material of a similar nature. Each Party shall be responsible for any breach of its confidentiality obligations by its respective employees and agents. The foregoing obligations shall apply equally to all copies, extracts and summaries of the Disclosing Party’s Confidential Information.

 

7.2           Certain Permitted Disclosures.

 

7.2.1           Disclosure Required by Law. Notwithstanding the foregoing, the Receiving Party may disclose Confidential Information of the Disclosing Party to the extent such disclosure is required by applicable Law, provided that, to the extent it may legally do so, the Receiving Party shall: (a) give reasonable advance notice to the Disclosing Party of such disclosure to permit the Disclosing Party to use its reasonable efforts to secure confidential treatment of such Confidential Information prior to disclosure to the extent such treatment is applicable (whether through protective orders or otherwise), (b) cooperates with the Disclosing Party in the exercise of its right to protect the confidentiality of the Confidential Information, and (c) discloses only that Confidential Information that is required to be disclosed.

 

7.2.2           Disclosure for Agreement Purposes. The Receiving Party may disclose Confidential Information of the Disclosing Party to a Third Party to the extent such disclosure is reasonably necessary to exercise the rights granted to or retained by it under this Agreement, including in preparing, filing, maintaining or prosecuting Patents, prosecuting or defending litigation or submitting information to Governmental Authorities for the purpose of seeking Regulatory Approvals with respect to a Licensed Product, as applicable.

 

 

7.2.3           Disclosure to Certain Third Parties. The Receiving Party may disclose such of the Disclosing Party’s Confidential Information to (a) its Affiliates, employees, directors and consultants who have a need to know such Confidential Information, in each case, who are bound by obligations of confidentiality and non-use at least as stringent as those by which the Receiving Party is bound hereunder. Additionally, each Party may disclose the terms of this Agreement to its existing or potential investors, collaborators, licensees or acquirers, in each case, who are bound by obligations of confidentiality and non-use at least as stringent as those by which the Receiving Party is bound hereunder.

 

7.3           Return of Confidential Information. Upon termination of this Agreement, the Receiving Party shall promptly return or destroy all of the Disclosing Party’s Confidential Information, including all information relating to Licensed Products received hereunder and copies thereof in any medium, unless, and solely for so long as, the Receiving Party has continuing rights to use the foregoing pursuant to Article 9. Notwithstanding the foregoing, the Receiving Party may retain one copy for its legal files. Nothing herein shall require the erasure or destruction of back-up media made in the ordinary course of business, provided that it is not accessible in the ordinary course of business.

 

7.4           Unauthorized Use. If the Receiving Party becomes aware of any unauthorized use or disclosure of the Disclosing Party’s Confidential Information, it shall promptly notify the Disclosing Party of such unauthorized use or disclosure.

 

7.5           Public Disclosure. Neither Party shall mention or otherwise use the name, logo or trademark of the other Party or any of its Affiliates or any abbreviation or adaptation thereof in any advertising, marketing, promotional or sales literature or other form of publicity, except as follows:

 

7.5.1           Either Party or its Affiliates may make such a disclosure to the extent required by the rules of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded.

 

7.5.2           Upon either Party’s request, the Parties shall cooperate in good faith to mutually agree on a press release with respect to this Agreement. Except for any subsequent announcements that contain no additional information that is not included in such press release (or as otherwise authorized under this Agreement), neither Party shall issue any other public announcement, press release or other public disclosure regarding this Agreement or its subject matter without the other Party’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed.

 

 

7.6           Public Securities Disclosure. A Party may disclose this Agreement and its terms in securities filings with the Securities Exchange Commission (or equivalent foreign agency) (“Security Regulators”) to the extent required by applicable Laws. In such event, the Party seeking such disclosure will prepare a draft confidential treatment request and proposed redacted version of this Agreement to request confidential treatment for this Agreement, and the other Party agrees to promptly (and in any event, no more than [***] after receipt of such confidential treatment request and proposed redactions) give its input in a reasonable manner in order to allow the Party seeking disclosure to file its request within the time lines prescribed by the regulations of the applicable Security Regulators. The Party seeking such disclosure shall reasonably consider the other Party’s proposed redactions but shall have no obligation to include such proposed redactions to the extent such Party reasonably believes such proposed redactions would not comply with applicable Law.

 

Article 8
INTELLECTUAL PROPERTY

 

8.1           Inventions.

 

8.1.1           Solely Invented Inventions. Subject to the licenses and other rights granted herein, as between the Parties, each Party shall own and retain all right, title and interest in and to any and all Inventions invented solely by or on behalf of such Party (or its Affiliates).

 

8.1.2           Jointly Invented Inventions. Subject to the licenses and other rights granted herein, as between the Parties, the Parties shall each own an equal, undivided interest in any and all right, title, and interest in and to any Inventions invented jointly by or on behalf of City or its Affiliates, on the one hand, and B+L or its Affiliates, on the other hand, in performance of the Research Plan (the “Joint Inventions”). Subject to the license granted under Section 3.2, the applicable exclusivity obligations under Section 3.6, and the other provisions of this Agreement, and without granting any rights in any intellectual property other than Joint Inventions (e.g., without granting any rights to any pre-existing inventions on which such Joint Inventions rely or any Patents claiming such pre-existing inventions), each Party shall have the right to Exploit (and license others to Exploit) any of the Joint Inventions without the consent of (or right to account to) the other Party other than as set forth in this Agreement.

 

8.1.3           Inventorship. The determination of whether an Invention is solely or jointly invented by a Party for the purpose of allocating proprietary rights (including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in accordance with the principles of patent law in the USA (in the case of non-patentable Know-How, inventorship will also be determined under such principles by treating such Know-How as if it were patentable).

 

 

8.2           Prosecution and Maintenance of Patents.

 

8.2.1           Solely-Owned Patents. Subject to Section 8.2.3, each Party shall have the sole right (but not the obligation), in its sole discretion and at its sole cost, to prepare, file, prosecute (including any interferences, oppositions, reissue proceedings, reexaminations and similar proceedings) and maintain (collectively, “Prosecution” or to “Prosecute”) all Patents owned solely by such Party, including Patents claiming Inventions solely owned by such Party.

 

8.2.2           Joint Patents. Subject to Section 8.2.4, City shall have the sole right (but not the obligation), in its sole discretion, to Prosecute all Patents claiming Joint Inventions (“Joint Patents”).

 

8.2.3           City Molecule-Specific Patents.

 

(a)           Section 8.2.1 and Section 8.2.2 notwithstanding, City will promptly provide B+L with copies of all correspondence to or from the USPTO, EPO and equivalent patent offices in foreign jurisdictions relating to City Molecule-Specific Patents. City will reasonably cooperate with B+L in Prosecuting the City Molecule-Specific Patents, and in such case, in the event of any disagreement between City and B+L regarding the Prosecution of City Molecule-Specific Patents under this Section: (a) after Development Candidate Selection, B+L will have final decision-making authority and City will (and will cause its outside counsel to) Prosecute City Molecule-Specific Patents as instructed by B+L, including in countries requested by B+L to the extent permitted by applicable Law; and (b) prior to the Development Candidate Selection, City will have final decision-making authority.

 

(b)           If City intends to abandon any filed U.S. Patent and all foreign equivalents of such Patent that would constitute City Owned Patents that Covers a Program Molecule and City has not appointed any other Third Party to continue Prosecuting such Patents, City will give B+L notice thereof within [***] prior to allowing such Patents to become abandoned, and B+L will thereafter have the right, but not the obligation, to Prosecute such City Owned Patents. If B+L assumes responsibility for any City Owned Patents pursuant to this Section 8.2.3(b) (“Assumed Patents”), City will transfer control of such Prosecution of such Assumed Patents to B+L (or B+L’s outside counsel) and reasonably cooperate with B+L (and its outside counsel) in Prosecuting such Patents and, in such case, in the event of any disagreement between City and B+L regarding the Prosecution of such Assumed Patents, B+L will have final decision-making authority and, if the Prosecution of such Patents remains with City, City will (and will cause its outside counsel to) Prosecute such Patents as instructed by B+L, including in countries requested by B+L to the extent permitted by applicable Law, and B+L will reimburse City for all reasonable and documented out-of-pocket costs incurred by City in connection with the Prosecution of the Assumed Patents.

 

(c)           As between the Parties, City will be solely responsible for all costs and expenses City incurs in connection with the Prosecution of the City Owned Patents (other than Assumed Patents). Notwithstanding the foregoing, if B+L makes the Development Candidate Selection, B+L will reimburse City for all reasonable and documented out-of-pocket costs incurred by City in connection with the Prosecution of the City Molecule-Specific Patents (including, without limitation, those costs incurred prior to such Development Candidate Selection).

 

 

(d)           After Development Candidate Selection, B+L will have the right, but not the obligation, to Prosecute the City Molecule-Specific Patents at its own cost. If B+L chooses to abandon any filed City Molecule-Specific Patent (whether in any country or all countries) then, B+L will provide City with reasonable notice prior to allowing such City Molecule-Specific Patent(s) to be abandoned and City will thereafter have the right to continue to Prosecute such City Molecule-Specific Patent in such countries at its own cost and shall control all Prosecution decisions with respect thereto.

 

8.2.4           Joint Molecule-Specific Patents.

 

(a)           Section 8.2.1 and Section 8.2.2 notwithstanding, City will Prosecute any Joint Patents, in the names of both City and B+L. City will keep B+L reasonably informed with respect to such Prosecution activities and will provide B+L an opportunity to review and comment on material documents related to such Prosecution which comments City will consider in good faith. City will take such reasonable acts in connection therewith as City deems appropriate, provided City considers in good faith any comments of B+L and is acting in good faith to obtain and maintain Joint Patents effective for market exclusivity of Licensed Products. If City decides not to be responsible for Prosecuting any particular Joint Patent in any particular country, City will notify B+L in writing and B+L will have the right, but not the obligation, to be responsible for such activities in such country. In this case, B+L may Prosecute such Joint Patents in such country in the names of both City and B+L. B+L will keep City reasonably informed with respect to such Prosecution activities and will provide City an opportunity to review and comment on material documents related to such Prosecution which comments B+L will consider in good faith. B+L will take such reasonable acts in connection therewith as B+L deems appropriate, provided B+L considers in good faith any comments of City and is acting in good faith to obtain and maintain Joint Patents effective for market exclusivity of Licensed Products. Each Party will, at its own cost, sign all legal documents necessary to Prosecute Joint Patents. Each Party will fully cooperate with the other Party in providing the other Party with necessary information in its possession for such Prosecution.

 

(b)           Section 8.2.2 notwithstanding, with respect to Joint Molecule-Specific Patents, City will promptly provide B+L with copies of all correspondence to or from the USPTO, EPO and equivalent patent offices in foreign jurisdictions, relating to such Joint Molecule-Specific Patents. City will reasonably cooperate with B+L in Prosecuting the Joint Molecule-Specific Patents, and in such case, in the event of any disagreement between City and B+L regarding the Prosecution of Joint Molecule-Specific Patents under this Section: (a) after Development Candidate Selection, B+L will have final decision-making authority and, if the Prosecution of such Patents remains with City, City will (and will cause its outside counsel to) Prosecute Joint Molecule-Specific Patents as instructed by B+L, including in countries requested by B+L to the extent permitted by applicable Law; and (b) prior to the Development Candidate Selection, City will have final decision-making authority. After Development Candidate Selection, B+L will have the right, but not the obligation, to Prosecute the Joint Molecule-Specific Patents. If B+L assumes responsibility for any Joint Molecule-Specific Patents pursuant to this Section, City will transfer control of such Prosecution to B+L (or B+L’s outside counsel) upon B+L’s request.

 

 

(c)           The Parties will share [***] the reasonable and documented out-of-pocket costs incurred for Prosecution of Joint Patents (the “Joint Patent Costs”). The Party who is responsible for the Prosecution of the Joint Patent will, through its patent counsel, if applicable, invoice the other Party for its share of such Joint Patent Costs within [***] after the end of the month during which such Joint Patent Costs were incurred and the other Party will pay its share of such Joint Patent Costs to the applicable Party or its patent counsel within [***] after receipt of such invoice. Notwithstanding this Section 8.2.4(c), if a Party does not wish to bear Joint Patent Costs with respect to a Joint Patent in a country, such Party may, by providing [***] prior written notice to the other Party, terminate its obligation to pay such Joint Patent Costs. In this case, such Party will promptly assign all of its right, title and interest in and to such Joint Patent in such country to the other Party upon such other Party’s written request at such other Party’s cost; provided, however, that such Joint Patent will cease being a Joint Patent and will be deemed a Patent solely owned by City if B+L is the assigning Party or a Patent solely owned by B+L if City is the assigning Party.

 

(d)           Notwithstanding Section 8.2.4(c), if B+L makes the Development Candidate Selection, B+L will reimburse City for all reasonable and documented out-of-pocket costs incurred by City in connection with the Prosecution of the Joint Molecule-Specific Patents (including, without limitation, those costs incurred prior to such Development Candidate Selection).

 

(e)           If B+L chooses to abandon any filed Joint Molecule-Specific Patent (whether in any country or all countries) then, B+L will provide City with reasonable notice prior to allowing such Joint Molecule-Specific Patent(s) to be abandoned and City will thereafter have the right to continue to Prosecute such Joint Molecule-Specific Patent in such countries at its own cost and shall control all Prosecution decisions with respect thereto.

 

8.2.5           Each Party agrees to reasonably cooperate with the other with respect to the Prosecution of Patents pursuant to this Section 8.2. At the request of the other Party, the Party responsible for Prosecuting a Patent will make reasonable efforts to separately Prosecute subject matter solely related to City Molecule-Specific Patents and Joint Molecule-Specific Patents separate from other subject matter which may be disclosed or claimed in any Patent hereunder, to the extent it may reasonably do so without jeopardizing or impairing any such Patents. Each Party’s rights to Prosecute a Patent pursuant to this Section 8.2 will be subject to the applicable provisions of any agreements between the Party controlling such Patents and its licensor.

 

8.3           Patent Enforcement.

 

8.3.1           Enforcement of Molecule-Specific Patents after the Development Candidate Selection.

 

(a)           After the Development Candidate Selection, B+L will have the first right to institute infringement suits or take other action under the City Molecule-Specific Patents and Joint Molecule-Specific Patents (collectively, the “Molecule-Specific Patents”) (an “Infringement Action”).

 

 

(b)           If B+L institutes or undertakes an Infringement Action in accordance with Section 8.3.1(a), City will cooperate with B+L in its efforts to protect such Molecule-Specific Patents and will agree to be a party in any suit, if required for B+L to obtain legal standing, in each case, at B+L’s sole expense. B+L will notify and keep City apprised in writing of such Infringement Action and will consider and take into account City’s reasonable interests and requests regarding such Infringement Action.

 

(c)           If B+L does not institute or undertake an Infringement Action in accordance with Section 8.3.1(a) for a period of [***] after being requested by City to do so, or (if sooner) at least [***] prior to the last date such Infringement Action may be brought, City may institute or undertake and thereafter control such Infringement Action. In such event, City will have the right, but not the obligation, to institute or undertake such suit or other appropriate Infringement Action in the name of City or of B+L or in the names of both of them, at City’s cost. B+L will cooperate fully with City in its efforts to protect such Patents and will agree to be a party in any suit, if required, in each case with respect to such Infringement Action, in each case at City’s sole expense. City will notify and keep B+L apprised in writing of such Infringement Action and will consider and take into account B+L’s reasonable interests and requests regarding such Infringement Action.

 

8.3.2           Enforcement of Joint Patents; Enforcement of Molecule-Specific Patents Absent the Development Candidate Selection. City will have the first right to institute infringement suits or take other actions under the Joint Patents that are not Molecule-Specific Patents. Additionally, City will have the first right to institute infringement suits or take other action under the Molecule-Specific Patents prior to, and otherwise in the absence of, the Development Candidate Selection, at City’s cost. City will have the right to institute such suits or other appropriate actions in the name of City or of B+L, or in the names of both of them. B+L will cooperate fully with City in its efforts to protect such Patents and will agree to be a party in any suit, if required, at City’s sole expense. City will notify and keep B+L apprised in writing of such action and will consider and take into account B+L’s reasonable interests and requests regarding such action. If City does not institute or undertake an Infringement Action in accordance with the foregoing for a period of [***] after being requested by B+L to do so, or (if sooner) at least [***] prior to the last date such Infringement Action may be brought, B+L may institute or undertake and thereafter control such Infringement Action. In such event, B+L will have the right, but not the obligation, to institute or undertake such suit or other appropriate Infringement Action in the name of B+L or of City or in the names of both of them, at B+L’s cost. City will cooperate fully with B+L in its efforts to protect such Patents and will agree to be a party in any suit, if required, in each case with respect to such Infringement Action, in each case at City’s sole expense. B+L will notify and keep City apprised in writing of such Infringement Action and will consider and take into account City’s reasonable interests and requests regarding such Infringement Action.

 

8.3.3           Cooperation. In any Infringement Action brought under this Section 8.3 in any jurisdiction, each Party will reasonably cooperate with each other, in good faith, relative to the other Party’s efforts to protect the applicable Patents and will agree to be a party to such Infringement Action, if necessary. Notwithstanding anything to the contrary in this Section 8.3, neither Party will settle or compromise any related defense nor infringement suit brought under the Molecule-Specific Patents pursuant to this Section 8.3, without the prior written consent of the other Party, which consent will not be unreasonably withheld, conditioned or delayed. Furthermore, each Party will provide the other Party with reasonable prior notice and opportunity to review and comment, and will consider in good faith all reasonable comments from the other Party on, any proposed arguments asserted or to be asserted in any enforcement action under this Section 8.3.

 

 

8.3.4           Recoveries. With respect to any Infringement Action initiated pursuant to this Section 8.3, any recovery obtained as a result of any such proceeding, by settlement or otherwise, will be applied in the following order of priority:

 

(a)           first, the Parties will be [***]

 

(b)           any remainder will be: [***].

 

8.4           Patent Term Extensions. The Parties shall cooperate with each other in determining with respect to the Licensed Product if any Licensed Patent would be eligible for patent term extension pursuant to 35 U.S.C. §154-156 and as appropriate, applicable foreign patent Laws (the “Patent Term Extension”), and then in obtaining the Patent Term Extension with respect to the Patents; provided, however, that the Party entitled to Prosecute such Patent shall make the final decision with respect to obtaining such Patent Term Extension.

 

8.5           Patent Invalidity Claims.

 

8.5.1           Right to Respond. If during the Term a Third Party initiates a patent opposition, reexamination, or other proceeding in any patent office, asserting that Joint Patents or Molecule-Specific Patents are invalid or otherwise unenforceable (an “Invalidity Claim”), the Parties will treat such Invalidity Claim in accordance with Section 8.2.3 or Section 8.2.4, as applicable. For the avoidance of doubt, any response to a Third Party declaratory judgment action with respect to such Joint Patent or Molecule-Specific Patent claims or a counterclaim of invalidity or unenforceability of such claims made in the context of infringement suits or other action will be governed by Section 8.3.

 

8.5.2           Invalidity Claims. The non-controlling Party will cooperate with the controlling Party in the preparation and formulation of a response to an Invalidity Claim, and in taking other steps reasonably necessary to respond, to such Invalidity Claim. The controlling Party will have the sole and exclusive right to select counsel for the response to such Invalidity Claim. The non-controlling Party will also have the right to participate and be represented relative to such proceeding by its own counsel at its own expense. The controlling Party will not settle or compromise any Invalidity Claim in a manner that admits the invalidity or unenforceability of any Molecule-Specific Patents, or that requires a payment to the Third Party in respect of such Invalidity Claim, without the consent of the other Party, which consent will not be unreasonably withheld, conditioned or delayed. For clarity, “control” under this Article 8 will mean final decision-making authority regarding controlling preparation, filing, prosecution and maintenance of Molecule-Specific Patents or Joint Patents, as applicable.

 

 

Article 9
TERM AND TERMINATION

 

9.1           Term. Unless terminated earlier pursuant to this Article 9, the term of this Agreement will remain in force for the period commencing on the Effective Date and ending upon the earlier of (a) the occurrence of any Development Candidate Selection Termination Condition, or (b) the expiration of the last-to-expire of all Royalty Terms for all Licensed Products (the “Term”).

 

9.2           Termination at Will by B+L; NHP Study Termination. B+L shall have the right to terminate this Agreement in its entirety or on a country-by-country basis for any reason or no reason at any time on [***] prior written notice to City. This Agreement shall also terminate [***] after: (a) the Parties jointly agree that neither an NHP Study nor a different non-human primate study designed by, overseen and paid for by B+L, will be conducted; or (b) a NHP Study Plan Deadlock occurs and B+L does not, within [***] after such NHP Study Plan Deadlock is escalated to the Senior Officers, provide City with written notice of the final NHP Study Plan determined by B+L as a result of such NHP Study Plan Deadlock.

 

9.3           Termination of Research Plan.

 

9.3.1           B+L shall have the right to terminate the Research Plan prior to the completion thereof upon [***] notice to City (“Research Plan Termination Notice” and, such [***] period, the “Wind Down Period”).

 

9.3.2           If B+L provides Research Plan Termination Notice, City shall wind-down its activities under the Research Plan during the Wind Down Period and provide a data package of all available data, including results of preclinical studies, relating to City’s performance of the Research Plan through the end of the Wind Down Period to B+L during the Wind Down Period. B+L shall remain obligated to pay City all Research Costs incurred prior to termination or that are non-cancellable out-of-pocket expenses (excluding Ordinary Research Costs in excess of the Budget Amount), even if actually incurred after termination or expiration. Regardless of the actual monthly Personnel Research Costs during the Wind Down Period, for the purposes of B+L’s payment obligations, the monthly Personnel Research Cost during the Wind Down Period shall not be deemed to be less than the average monthly Personnel Research Cost for the portion of the Research Period elapsed prior to Research Plan Termination Notice.

 

9.4           Material Breach. In the event of a material breach of this Agreement, the non- breaching Party shall have the right to terminate this Agreement by notice to the breaching Party specifying the nature of such breach in reasonable detail. Such termination shall become effective [***] (or, in the case of non-payment during the Research Period, [***] from receipt of such notice by the breaching Party, unless the breaching Party has cured such breach within such [***] period (or, in the case of non-payment during the Research Period, [***]. Notwithstanding anything to the contrary in the foregoing, after (and only after) Development Candidate Selection Payment, if the breaching Party can reasonably establish that the material breach is limited to, and only has an impact on, one country in the Territory, then the non-breaching Party shall only be entitled to terminate this Agreement with respect to such country and the termination of the Agreement with respect to such country shall not impact the breaching Party’s rights in the other countries in the Territory.

 

 

9.5           Patent Challenge. If B+L or any of its Affiliates or Sublicensees, challenges, under any court action or proceeding, or before any patent office, the validity, patentability or enforceability of any Patent licensed to B+L under this Agreement, or initiates a reexamination of any such Patent, or materially assists any Third Party to conduct any of the foregoing activities (each, a “Patent Challenge”) and such Patent Challenge is not a defense against a claim, action or proceeding asserted by City, its Affiliates or its licensees against B+L or its Affiliates or Sublicensees, then City may terminate this Agreement in its entirety on [***] notice to B+L (the date of delivery of such notice, the “Patent Challenge Notice Date”). Notwithstanding the foregoing, (i) if a Sublicensee makes a Patent Challenge and B+L terminates such Sublicensee’s sublicense or causes such Sublicensee to withdraw such Patent Challenge within [***] after the Patent Challenge Notice Date, then City cannot terminate this Agreement pursuant to this Section 9.5 with respect to such Sublicensee’s Patent Challenge and (ii) if B+L or any of its Affiliates makes a Patent Challenge and B+L withdraws or causes such Affiliates to withdraw such Patent Challenge within [***] after the Patent Challenge Notice Date, then City cannot terminate this Agreement pursuant to this Section 9.5 with respect to such Patent Challenge by B+L or such Affiliates.

 

9.6           Insolvency.

 

9.6.1           To the extent permitted by applicable Law, either Party may terminate this Agreement in its entirety effective immediately upon notice to the other Party if, at any time, such other Party (a) files in any court or agency pursuant to any statute or regulation of any state or country a petition in bankruptcy or insolvency or for reorganization (except for solvent reorganization or solvent reconstruction) or for an arrangement or for the appointment of a receiver or trustee of the Party or of substantially all of its assets, (b) proposes a written agreement of composition or extension of substantially all of its debts, (c) is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition is not be dismissed within [***] after the filing thereof, (d) proposes to be a party to any dissolution or liquidation, (e) admits in writing its inability generally to meet its obligations as they fall due in the general course, or (f) makes an assignment of substantially all of its assets for the benefit of creditors.

 

 

9.6.2           All rights and licenses granted under or pursuant to any section of this Agreement are for purposes of Section 365(n) of Title 11, United States Code or any analogous provisions in any other country or jurisdiction (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined in Section 101(56) of the Bankruptcy Code (and any equivalent provisions under the bankruptcy or insolvency Laws of any other relevant jurisdiction). The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. The non-bankrupt Party shall further be entitled to a complete duplicate of, or complete access to, any such intellectual property and all embodiments of such intellectual property, which, if not already in its possession, shall be promptly delivered to the non-bankrupt Party (a) upon the commencement of a bankruptcy proceeding upon the non-bankrupt Party’s written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-bankrupt Party. The Parties acknowledge and agree that payments made under Section 6.2 shall not (x) constitute royalties within the meaning of Section 365(n) of the Bankruptcy Code or any analogous provisions in any other country or jurisdiction, or (y) relate to licenses of intellectual property hereunder.

 

9.7           Effect of Expiration or Termination of this Agreement.

 

9.7.1           Accrued Obligations. Upon expiration or termination of this Agreement for any reason neither Party shall be released from any liability (including, without limitation, any payment obligation) that, at the time of such expiration or the Termination Date, has already accrued to the other Party or that is attributable to a period prior to such expiration or the Termination Date.

 

9.7.2           B+L For Cause Termination. If B+L terminates this Agreement in accordance with Section 9.4 after the Development Candidate Selection:

 

(a)           the license and rights granted to B+L under Section 3.2 shall survive;

 

(b)           [***] shall survive;

 

(c)           [***] shall survive; and

 

(d)           subject to the foregoing, except as otherwise expressly provided herein, all other rights and obligations of each Party hereunder will cease, including Sections [***].

 

For clarity, City may still terminate this Agreement pursuant to Section 9.5 after B+L terminates this Agreement in a manner giving effect to this Section 9.7.2, in which case, Section 9.8 shall apply notwithstanding anything to the contrary in Section 9.7.2.

 

9.7.3           In-Process Clinical Trials. Notwithstanding any other provision in this Section 9.7, if there is any Clinical Trial of Licensed Products being conducted at the Termination Date, the Party conducting such Clinical Trial shall be entitled to continue Exploiting the Licensed Products, as applicable, to the extent and for the period necessary to effect an orderly transfer or wind down of such Clinical Trial, in a timely manner and in accordance with applicable Laws.

 

 

9.8           Survival.

 

9.8.1           Upon the expiration or termination of this Agreement for any reason, subject to Section 9.7 and Section 9.8.4: (a) all rights and obligations of the Parties under this Agreement (including, without limitation, the license and rights granted to B+L under Section 3.2 and all sublicenses thereunder) shall terminate, provided that the rights and obligations of the Parties set forth in [***] shall survive any expiration or termination of this Agreement; and (b) none of B+L, its Sublicensees, or its Affiliates shall Develop or Commercialize any product containing a Program Molecule in the countries to which such expiration or termination applies.

 

9.8.2           Upon the expiration of this Agreement (other than pursuant to Section 9.1(b)) or termination of this Agreement for any reason (including, without limitation, under Section 9.2 with respect to a particular country, but excluding any termination by B+L pursuant to Section 9.4), subject to Section 9.7, B+L shall, to the extent permitted by applicable Law, (a) provide to City a summary report of the status of the Development and Commercialization of the Licensed Products in the terminated countries through the effective date of termination; (b) transfer to City all applicable (A) Regulatory Approvals in such terminated countries that B+L owns with respect to any Licensed Product and (B) Regulatory Documentation in such terminated countries that B+L owns with respect to any Licensed Product, in each case of (A) and (B) to the extent necessary for Developing, Manufacturing, or Commercializing the Licensed Products in the terminated countries, provided, that B+L may retain a copy of such items for its records; (c) transfer to City copies of all pre-clinical and clinical study records and analysis owned or otherwise Controlled by B+L and directly relating to the Development or Commercialization of any Licensed Product in such country; (d) if City requests within [***] of the effective date of such termination, sell to City all B+L’s inventory of Licensed Products specific to the terminated countries [***]; and (e) reasonably cooperate with City to facilitate the orderly transition of the Manufacture and Commercialization of Licensed Products in the terminated countries to City; in each case of (a) through (e), at City’s cost (but subject to the immediately following sentence). The first [***] FTE hours of such transfer services performed by B+L personnel for all such countries in the aggregate shall be at no-charge and, to the extent City reasonably requests additional work beyond such [***], City shall reimburse B+L at the FTE Rate. City shall be responsible for paying or reimbursing B+L for, as applicable, all Third Party costs associated with the transfers and related services contemplated pursuant to this Section 9.8.

 

9.8.3           [***].

 

9.8.4           Notwithstanding anything herein, upon the expiration of the Term following the expiration of the last-to-expire of all Royalty Terms for all Licensed Products pursuant to Section 9.1(b), all rights and licenses granted by City to B+L pursuant to Section 3.2 of this Agreement shall survive and shall become fully paid-up, perpetual, and irrevocable.

 

9.9           Termination Not Sole Remedy. Termination is not the sole remedy under this Agreement and, whether or not termination is effected, all other remedies at equity or law shall remain available to the Parties except as agreed to otherwise herein.

 

 

Article 10
REPRESENTATIONS AND WARRANTIES AND COVENANTS

 

10.1         Mutual Representations and Warranties. Each of City and B+L represents and warrants to the other Party, as of the Effective Date, that:

 

10.1.1         such Party is an entity duly organized, validly existing and in good standing under the Laws of the state or country (as applicable) of its organization, is qualified to do business and is in good standing as a foreign entity in each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification and failure to have such qualification would prevent it from performing its obligations under this Agreement, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

 

10.1.2         such Party is duly authorized, by all requisite action, to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by such Party does not require any shareholder action or approval, and the Person executing this Agreement on behalf of such Party is duly authorized to do so by all requisite action;

 

10.1.3         except for Regulatory Filings (if any are required), no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority or a Third Party is required on the part of such Party in connection with the valid execution, delivery and performance of this Agreement;

 

10.1.4         this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms except as enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights; and (b) equitable principles of general applicability; and

 

10.1.5         such Party has all requisite authorization and consent necessary to provide the Materials provided by such Party and for such Materials to be used as contemplated in the Research Plan, in each case, without violation of any applicable Laws or Third Party rights;

 

10.1.6         the execution, delivery and performance by it of this Agreement and its compliance with the terms and provisions of this Agreement does not conflict with or result in a breach of any of the terms or provisions of (a) any other contractual or other obligations of such Party, (b) the provisions of its operating documents or bylaws, or (c) any order, writ, injunction or decree of any Governmental Authority entered against it or by which it or any of its property is bound;

 

10.1.7         neither such Party, nor any of its employees, officers, directors, consultants and advisors (a) are currently excluded, debarred, or otherwise ineligible to participate in any government health care programs; (b) has been convicted of a criminal offense related to the provision of healthcare items or services but yet to be excluded, debarred, or otherwise declared ineligible to participate in such health care programs; and (c) is, to such Party’s knowledge, under investigation by any Governmental Authority or otherwise aware of any circumstances which would reasonably be expected to result in it, or any of its Affiliates or their respective employees, officers, directors, consultants and advisors, being excluded from participation in the such health care programs; and

 

 

10.1.8         the employees of such Party or its Affiliates that are providing services under this Agreement are under a written obligation to assign all right, title and interest in and to their inventions and discoveries, whether or not patentable, to such Party as the sole owner thereof.

 

10.2         City’s Additional Representations and Warranties. City additionally represents and warrants to B+L, as of the Effective Date, that:

 

10.2.1         Schedule 10.2.1 completely and accurately sets out all Licensed Patents in existence as of the Effective Date;

 

10.2.2         there are no Patents owned by any Third Party that, to City’s actual knowledge, would be infringed by City’s practice of the Licensed Technology in performance of the Research Plan;

 

10.2.3         it has not received notice of any claims, and there are no judgments or settlements against or owed by City or, to the actual knowledge of City, any pending or threatened claims or litigation, in each case relating to the Licensed Technology;

 

10.2.4         it is the owner of, or has a license to, the Licensed Patents;

 

10.2.5         it has no actual knowledge that any of the Licensed Patents are invalid or unenforceable;

 

10.2.6         it is not, itself or with or through any Affiliate or Third Party, researching, Developing, Manufacturing or Commercializing: (a) any products that inhibit the expression of Complement Factor 3, other than as specified under this Agreement; (b) any Competing Research Product in the Field; or (c) any product to treat retinal disease through intravitreal injection;

 

10.2.7         it has the resources and ability to perform its obligations hereunder with reasonable skill and care, with qualified personnel, in a professional and workmanlike manner, and following the best practices in the industry, and in compliance with all applicable Laws; and

 

10.2.8         it has not granted any right or license to any Third Party relating to any of the Licensed Technology that would conflict with the license granted under Section 3.2.

 

10.3         City Covenants. City shall not grant any right or license to any Third Party relating to any of the Licensed Technology that would conflict with the license granted under Section 3.2. City covenants and agrees that will perform its obligations hereunder with reasonable skill and care, with qualified personnel, in a professional and workmanlike manner, following the best practices in the industry, and in compliance with all applicable Laws.

 

 

10.4         Disclaimer. Except as otherwise expressly set forth in this Agreement, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY THAT ANY PATENTS ARE VALID OR ENFORCEABLE, AND EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Except as otherwise expressly set forth in this Agreement, all Materials are provided “AS IS” without any other representation or warranty of any kind. Without limiting the generality of the foregoing, except as otherwise expressly set forth in this Agreement, each Party disclaims any warranties with regards to: (a) the success of any study or test commenced under this Agreement, (b) the safety or usefulness for any purpose of the technology or materials it provides or discovers under this Agreement, and (c) the validity, enforceability, or non-infringement of any intellectual property rights or technology it provides or licenses to the other Party under this Agreement.

 

Article 11
INDEMNIFICATION

 

11.1         B+L. Subject to Section 11.3, B+L shall defend, indemnify and hold City and its Affiliates and its and their respective officers, directors, shareholders, employees, agents, representatives, successors and permitted assigns (“City Indemnitees”), at B+L’s cost and expense, harmless from and against any and all Third Party claims, suits or demands (“Third Party Claims”) arising out of or in connection with: [***]. Notwithstanding the preceding sentence, B+L shall have no obligation with respect to Third Party Claims to the extent they are (a) attributable to any of the circumstances set forth in Section 11.2, or (b) attributable to the negligence or willful misconduct of the City Indemnitees.

 

11.2         City. Subject to Section 11.3, City shall defend, indemnify and hold B+L and its Affiliates and its and their respective officers, directors, shareholders, employees, agents, representatives, successors and permitted assigns (“B+L Indemnitees”), at City’s cost and expense, harmless from and against any and all Third Party Claims arising out of or in connection with [***]. Notwithstanding the preceding sentence, City shall have no obligation with respect to Third Party Claims to the extent they are (a) subject to indemnification by B+L pursuant to Section 11.1 above, or (b) attributable to the negligence or willful misconduct of the B+L Indemnitees.

 

11.3         Indemnification Procedures.

 

11.3.1         Indemnification Claims. A claim to which indemnification applies under Section 11.1 or Section 11.2 will be referred to as an “Indemnification Claim.”

 

11.3.2         Notice. If any Person or Persons (collectively, the “Indemnitee”) intends to claim indemnification under this Article 11 the Indemnitee will notify the other Party (the “Indemnitor”) in writing promptly upon becoming aware of any claim that may be an Indemnification Claim; provided, however, that failure of the Indemnitee to give such notice will not relieve the Indemnitor of its indemnification obligation under this Article 11, except and only to the extent that the Indemnitor is actually prejudiced as a result of such failure to give notice. Each claim notice will describe in reasonable detail the basis for such claim (the “Claim Basis”) and specify the amount or the estimated amount of Third Party Claims actually incurred or paid by the Indemnitee as a result of the Claim Basis, to the extent ascertainable.

 

 

11.3.3         Defense of Indemnification Claims. By delivering notice to the Indemnitee within [***] after delivery of notice described in Section 11.3.2, the Indemnitor may assume and control, with the sole power to direct, the defense of the Indemnification Claim at its own expense with counsel selected by the Indemnitor and reasonably acceptable to the Indemnitee. If the Indemnitor does not assume control of the defense of the Indemnification Claim as described in this Section 11.3.3, the Indemnitee will control such defense at Indemnitor’s expense (subject to Section 11.1 and Section 11.2). The Party not controlling such defense may participate therein at its own expense. The Party controlling the defense of an Indemnification Claim will keep the other Party advised of the status of such Indemnification Claim and the defense thereof and will reasonably consider recommendations made by the other Party with respect thereto. The other Party will cooperate fully with the Party controlling such defense and will make available all pertinent information under its control, which information will be subject to Article 7, and cause its employees to be available in a deposition, hearing or trial.

 

11.3.4         Resolution of Indemnification Claims. Neither the Indemnitor nor the Indemnitee will admit fault on behalf of the other Party without the written consent of such other Party. The Indemnitee will not settle or compromise an Indemnification Claim without the prior written consent of the Indemnitor. The Indemnitor will not settle or compromise an Indemnification Claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnitee from all liability with respect thereto or that imposes any liability or obligation on the Indemnitee for which the Indemnitee is not indemnified under this Agreement, without the prior written consent of the Indemnitee.

 

11.4         Insurance. Each Party shall have and maintain, at its sole cost and expense, an adequate liability insurance policy (including product liability insurance) obtained from a reputable insurer to protect against potential liabilities and risk arising out of activities to be performed under this Agreement and any agreement related hereto and upon such terms (including coverages and deductible limits) as are customary in the pharmaceutical industry generally for the activities to be conducted by such Party under this Agreement. [***]. B+L shall continue to maintain such liability insurance policy for as long as B+L or any of its Affiliates or Sublicensees continues to make, use or sell a Licensed Product under this Agreement and thereafter for a period of [***], if the coverage is under a claims-made policy. This Section 11.4 shall not create any limitation on the Parties’ liability under this Agreement. Such insurance information shall be kept in confidence in the same manner as any other Confidential Information disclosed by the Parties hereunder.

 

11.5         Limitation of Liability; Consequential Damages. EXCEPT FOR BREACHES OF CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 7, OR EACH PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 11.1 OR SECTION 11.2, IN NO EVENT SHALL EITHER PARTY OR THEIR AFFILIATES BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, RELIANCE, PUNITIVE, OR CONSEQUENTIAL DAMAGES, OR LOST OR IMPUTED PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, UNDER THIS AGREEMENT, WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY), INDEMNITY OR CONTRIBUTION, AND IRRESPECTIVE OF WHETHER THAT PARTY OR ANY REPRESENTATIVE OF THAT PARTY HAS BEEN ADVISED OF, OR OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY OF, ANY SUCH LOSS OR DAMAGE.

 

 

Article 12
MISCELLANEOUS

 

12.1         Assignment. Neither Party may assign this Agreement or any rights hereunder without the prior written consent of the other Party, except that a Party may make such an assignment without the other Party’s consent, in whole or in part, to an Affiliate or to a successor to all or substantially all of the business to which this Agreement relates. Further, each Party shall have the right to cause the performance by an Affiliate of some or all of its obligations hereunder, without the prior written consent of the other Party; provided, however, such Party will be responsible and liable for any and all acts or omissions of any such Affiliate which, if such action or omission was by such Party, would constitute a breach of the terms and conditions hereof. In all cases, the assigning Party shall provide the other Party with prompt notice of any such assignment and the permitted assignee shall assume the obligations of the assigning Party hereunder in writing. No assignment of this Agreement shall act as a novation or release of either Party from responsibility for the performance of any accrued obligations.

 

12.2         Governing Law. This Agreement and any dispute or claim arising out of or in connection with it (whether contractual or non-contractual in nature such as claims in tort, from breach of statute or regulation or otherwise) shall be governed by and construed in accordance with the Laws of the State of New York, excluding any conflicts or choice of Law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive Law of another jurisdiction. Notwithstanding the foregoing, any dispute with respect to infringement, validity, or enforceability of any Patent shall be governed by and construed and enforced in accordance with the Laws of the jurisdiction in which such Patent is issued or published.

 

 

12.3         Consent to Jurisdiction. Other than as expressly set out herein, each Party irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action, or other proceeding arising out of this Agreement or the transactions contemplated thereby. Other than as expressly set out herein, each Party agrees to commence any such action, suit, or proceeding in the United States District Court for the Southern District of New York or if such suit, action, or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each Party further agrees that service of any process, summons, notice, or document by U.S. registered mail or internationally recognized overnight courier service to such Party’s respective address set forth in Section 12.12 shall be effective service of process for any action, suit, or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 12.3. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit, or proceeding arising out of this Agreement in the United States District Court for the Southern District of New York (or, if applicable, the Supreme Court of the State of New York), and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit, or proceeding brought in any such court has been brought in an inconvenient forum. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

12.4         Force Majeure. Neither Party shall be liable to the other for any failure or delay in the fulfillment of its obligations under this Agreement (other than the payment of monies due and owing to a Party under this Agreement), when any such failure or delay is caused by fire, flood, earthquakes, explosions, sabotage, terrorism, civil commotions, riots, invasions, wars, peril of the sea or requirements of Governmental Authorities (each, a “Force Majeure Event”). In the event that either Party is prevented from discharging its obligations under this Agreement on account of a Force Majeure Event, the performing Party shall promptly notify the other Party, and such other Party shall use good faith efforts to discharge its obligations, even if in a partial or compromised manner.

 

12.5         No Debarred Personnel. Each Party agrees that it and its Affiliates and Sublicensees, as applicable, shall not use, during the Term, the services of any employee, consultant, contractor or clinical investigator that has been debarred by the FDA or any other Governmental Authority or that is the subject of debarment proceedings by the FDA or any other Governmental Authority. If a Party becomes aware that it or its Affiliates or Sublicensees, as applicable, has breached the foregoing obligation, it shall immediately (i) notify the other Party in writing and provide full details of the circumstances and extent of such breach and (ii) promptly replace the relevant employee, consultant, contractor or clinical investigator with a suitably qualified replacement that has not been debarred by the FDA or any other Governmental Authority or that is not the subject of debarment proceedings by the FDA or any other Governmental Authority.

 

 

12.6         Expenses. Except as otherwise expressly provided herein or mutually agreed, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Party incurring such costs and expenses.

 

12.7         No Agency. Nothing herein contained shall be deemed to create an agency, joint venture, amalgamation, partnership or similar relationship between City and B+L. Notwithstanding any of the provisions of this Agreement, neither Party shall at any time enter into, incur, or hold itself out to Third Parties as having authority to enter into or incur, on behalf of the other Party, any commitment, expense, or liability whatsoever, and all contracts, expenses and liabilities undertaken or incurred by one Party in connection with or relating to the Development, Manufacture or Commercialization of Licensed Product shall be undertaken, incurred or paid exclusively by that Party, and not as an agent or representative of the other Party.

 

12.8         No Third Party Beneficiaries. The warranties and agreements contained in this Agreement are for the sole benefit of the Parties, and in B+L’s case, B+L’s Affiliates, and their respective successors and permitted assigns, and they shall not be construed as conferring any rights to any other Persons other than, with respect to the Parties’ obligations in Sections 11.1 and 11.2, the other Persons expressly referenced as Indemnitees thereunder.

 

12.9         Entire Agreement; Amendment. This Agreement (including all schedules and exhibits hereto) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements or understandings, oral or written, with respect to such matters. The Parties acknowledge that this Agreement has not been entered into wholly or partly in reliance on, nor has either party been given, any warranty, statement, promise or representation by the other or on its behalf other than as expressly set out in this Agreement. This Agreement may be amended or modified only by a writing signed by both Parties.

 

12.10       Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties. To the fullest extent permitted by applicable Law, each Party hereby waives any provision of law that would render any provision hereof illegal, invalid or unenforceable in any respect.

 

12.11       Extension; Waiver. At any time, either City or B+L may (a) with respect to obligations owed to it or the performance of other acts for its benefit, extend the time for the performance of such obligations or such other acts to be performed hereunder by the other, (b) waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the conditions to the obligations of the other contained herein. Any agreement on the part of either Party to any such extension or waiver shall be valid only if set forth in an instrument executed by such Party. No such waiver shall be operative as a waiver of any other subsequent requirement of this Agreement. The failure of any Party to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

 

 

12.12       Notices. All communications required to be made under this Agreement shall be effective upon receipt, and shall be sent to the addresses set out below, or to such other addresses as may be designated by one Party to the other by notice pursuant hereto, by (a) internationally recognized overnight courier; (b) prepaid registered or certified US mail, return receipt requested; or (c) facsimile transmission or other electronic means of communication (including email) with confirmation by letter sent by the close of business on or before the next following Business Day at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such Party as follows:

 

If to City, as follows:

 

City Therapeutics, Inc.
399 Binney Street
Cambridge, MA 02142
Attention: Sebastian Trousil, Chief Operating Officer

 

With a copy (which shall not constitute notice) to:

 

Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
3570 Carmel Mountain Road
San Diego, CA 92130
Attention: Kirt W. Shuldberg, esq. and Brendan C. McCarthy, esq.

 

If to B+L, as follows:

 

Bausch + Lomb Ireland Limited
3013 Citywest Business Campus
Dublin 34, Ireland
Attention: Director
[***]

 

with a copy (which shall not constitute notice) to:

 

Bausch & Lomb Americas Inc.
400 Somerset Corporate Boulevard
Bridgewater, NJ 08807
Attention: General Counsel
[***]

 

 

12.13       Further Assurances. Each Party shall perform all further acts and things and execute and deliver such further documents as may be necessary or as the other Party may reasonably require to implement or give effect to this Agreement.

 

12.14       No Strict Construction. This Agreement shall be construed as if it were drafted jointly by the Parties.

 

12.15       Headings. The headings herein are for convenience purposes only and shall not be used to interpret any of the provisions hereof.

 

12.16       Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall be deemed to constitute one and the same instrument. An executed signature page of this Agreement delivered by facsimile transmission or by electronic mail in “portable document format” (“.pdf”) shall be as effective as an original executed signature page.

 

12.17       Non-Exclusive Remedies. The remedies set forth in this Agreement shall be in addition to, and shall not be to the exclusion of, any other remedies available to the Parties at Law, in equity or under this Agreement.

 

[Signature page follows.]

 

 

IN WITNESS WHEREOF this Agreement has been signed by the duly authorized representatives of the Parties as of the Effective Date.

 

	CITY THERAPEUTICS, INC.
	By:	/s/ John Maraganore
	Name:	John Maraganore
	Title:	Executive Chair
	BAUSCH + LOMB IRELAND LIMITED
	By:	/s/ Olive McDaid
	Name:	Olive McDaid
	Title:	Director

 

[Signature Page to Research Collaboration and License Agreement]

 

 

SCHEDULE 1.142

 

RESEARCH PLAN

 

[***]

 

Confidential and Proprietary

 

 

SCHEDULE 2.9

 

PRE-CLINICAL DATA PACKAGE

 

[***]

 

 

EXHIBIT 6.2

 

FORM OF NOTE PURCHASE AGREEMENT,

INCLUDING CONVERTIBLE PROMISSORY NOTE

 

[***]

 

 

SCHEDULE 10.2.1

 

LICENSED PATENTS

 

[***]

 

 

Exhibit 10.12

 

All provisions are subject to addition, elimination or revision by either Party. All provisions, communications and discussions are tentative until execution of a written agreement by both Parties.

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

 

EXCLUSIVE LICENSE AGREEMENT AGT. NO. A2024-0103

 

This Exclusive License Agreement (the “Agreement”) is made this 30th day of October, 2023 (the “Effective Date”) by and between the Ohio State Innovation Foundation, with an address at 1524 North High Street, Columbus, OH 43201 (hereinafter, “OSIF”) and City Therapeutics, Inc., with an address at 188 E. Blaine St., Suite 125, Seattle, WA 98102 (hereinafter, “Licensee”); collectively, “Parties”, or singly, “Party”.

 

WHEREAS, OSIF, the technology transfer function for The Ohio State University (“OSU”), owns, controls or has the right to license the Patent Rights;

 

WHEREAS, OSIF desires to have the Patent Rights developed and used for the benefit of the public; and

 

WHEREAS, Licensee desires to license the Patent Rights to develop and commercialize Licensed Products under the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the Parties hereby agree as follows:

 

1. Definitions.

 

“Affiliate” means any entity that: (a) directly or indirectly owns or controls; (b) is owned or controlled by; or (c) is under common ownership or control with another entity; where “ownership” and “control” mean: (i) possession, or the right to possession, of at least fifty percent (>=50%) of the voting stock of the entity; (ii) the power to direct the management and policies of the entity; (iii) the power to appoint or remove a majority of the board of directors of the entity; or (iv) the right to receive at least fifty percent (>=50%) of the profits or earnings of the entity. While an entity is entitled to the rights of an Affiliate under this Agreement for only the period of time the entity qualifies as an Affiliate under this definition, all obligations under this Agreement that accrued to the entity while an Affiliate shall survive until fulfilled even though the entity no longer qualifies as an Affiliate.

 

“Confidential Information” means all Licensee Information or OSIF Information, as applicable, in each case that is provided by the applicable Party (“Discloser”) to the other Party (“Recipient”) but excluding information: (a) was already in possession of Recipient (or when Recipient is OSIF, in its possession or that of OSU) when provided by Discloser, as shown by competent evidence, other than from an individual affiliated with both Parties; (b) is now, or becomes in the future, public knowledge other than through a violation of this Agreement; (c) is independently developed by individual(s) not affiliated with both Parties and without knowledge of or access to the Confidential Information, as shown by contemporaneously written records; or (d) is lawfully obtained without restriction from a third party who did not obtain the information directly or indirectly from Discloser (or when the Discloser is OSIF, from OSIF or OSU) or another individual affiliated with both Parties.

 

 

“Contract Period” means each of the three-month periods ending on March 31, June 30, September 30, and December 31 of each Contract Year.

 

“Combination Product” means a product consisting of a Licensed Product packaged, bundled, or otherwise combined for sale with one or more other products or technology (“Other Components“) and sold for a single price.

 

“Contract Year” means each 12-month period ending on December 31.

 

“Designee” means [***].

 

“Equity Financing” means a cash investment in a bona fide financing for capital raising purposes in exchange for any equity securities or securities exchangeable or convertible into equity securities including, without limitation, any capital stock (common or preferred) in Licensee.

 

“Field of Use” means [***].

 

“Fully-Diluted” means (i) the total number of shares of common stock of Licensee outstanding, assuming full conversion of all issued and outstanding securities convertible or exchangeable into common stock of Licensee, and the exercise of all then outstanding options (whether then vested or not), warrants, convertible notes and SAFEs or other instruments convertible into common stock of Licensee, whether or not then exercisable, exchangeable, or convertible; and (ii) the number of unissued but reserved shares of common stock of Licensee that have been authorized or reserved for issuance or award under Licensee’s stock option plan pool or other equity compensation plan.

 

“Government” means any agency, department or other unit of the United States of America or the State of Ohio.

 

“including” means including, but without limitation.

 

“Licensed Product” means any product or process that is Covered in whole or in part by a Valid Claim and/or whose manufacture or use is Covered in whole or in part by a Valid Claim. “Covered,” with respect to a product or process and a Valid Claim, means that the manufacture, use, sale, offering for sale, or importation of such product or process would, but for ownership of or a license to the relevant Patent Rights, either (i) in the case of any claim of an unexpired issued or granted Patent Rights, infringe a Valid Claim in the country in which the activity occurs, or (ii) in the case of any pending Valid Claim of Patent Rights, would infringe a Valid Claim of the Patent Rights if such pending claim was in an issued patent in the country in which the activity occurs.

 

“Licensee Information” means information Licensee is required to provide OSIF under this Agreement (and any information OSIF obtains in an Examination of Licensee or its Sublicensees).

 

“Major Market” means [***].

 

“Net Sales” means [***].

 

In the case of any Combination Product sold in a given country in the Territory, Net Sales for the purpose of determining royalties and sales milestone events of the Combination Product in such country will be calculated by [***].

 

“Non-Royalty Sublicensing Consideration” means the gross amount of consideration received by Licensee or its Affiliate in exchange for the grant of a sublicense under the Patent Rights but excluding: [***].

 

 

“Optioned Related Work” means a Related Work that Licensee elects to include under this Agreement in accordance with Section 2.6.

 

“OSIF Information” means information contained in unpublished patent applications for the Patent Rights that OSIF intends to file and any information provided by OSIF in connection with this Agreement. Notwithstanding the foregoing, no technical or scientific information or inventions shall be deemed OSIF Information under this Agreement except what is contained in such unpublished patent applications.

 

“Patent Rights” means all OSIF’s rights in all: (a) patents and/or patent applications listed in Appendix 1, all patent applications claiming an invention disclosed in any of the Technology Disclosures listed in Appendix 1, all patent applications claiming an Optioned Related Work, and all patent applications claiming Ohio State Subject Inventions or Joint Subject Inventions (as such terms are defined in the Sponsored Research Agreement entered into by and between The Ohio State University and Licensee on or around even date herewith; (b) patent applications that claim priority thereto, including all divisionals, continuations and continuations-in-part (but only to the extent of the subject matter that is fully disclosed and enabled by subsection (a) to satisfy 35 U.S.C. §112); (c) patents issuing on subsections (a) and/or (b); (d) reissues, reexaminations, extensions and supplementary protection certificates referencing any of the foregoing subsections; and (e) all foreign equivalents of any of the foregoing.

 

“Payment Deadline” means [***].

 

“Phase 1 Clinical Trial” means, as to a specific Licensed Product (whether as a monotherapy or in combination with one or more other products), a study as described in 21 C.F.R. § 312.21(a); or a similar clinical study in a country other than the United States.

 

“Phase 2 Clinical Trial” means, as to a specific Licensed Product (whether as a monotherapy or in combination with one or more other products), a study in humans designed with the principal purpose of determining initial efficacy and dosing of such Licensed Product in patients for the indication(s) being studied as described in 21 C.F.R. § 312.21(b); or a similar clinical study in a country other than the United States.

 

“Phase 3 Clinical Trial” means, as to a specific Licensed Product (whether as a monotherapy or in combination with one or more other products), a lawful study in humans of the efficacy and safety of such Licensed Product, which is prospectively designed to demonstrate statistically whether such Licensed Product is effective and safe for use in a particular indication in a manner sufficient to file an application to obtain Regulatory Approval to market and sell that Licensed Product in the United States or another country for the indication being investigated by the study, as described in 21 C.F.R. § 312.21(c); or a similar clinical study in a country other than the United States.

 

“Regulatory Approval” in a particular country or jurisdiction means all approvals (including any applicable governmental and reimbursement approvals), licenses, registrations, and authorizations of any federal, national, multinational, state, provincial or local regulatory authority, department, bureau and other governmental entity that are necessary for the marketing and sale of a Licensed Product in a country or jurisdiction.

 

“Related Work(s)” means a patentable invention created by at least one (1) inventor of the Patent Rights that (i) has application within the Field of Use; (ii) is not otherwise obligated to a third party in a way that would prevent the license to Licensee hereunder; and (iii) is disclosed to OSIF within one (1) years of the Effective Date.

 

 

“Sublicense Agreement” means any agreement or arrangement pursuant to which Licensee or its Affiliates whether directly or through multiple tiers, grants a third party a license under the Patent Rights to make, use, offer for sale, sell, and import a Licensed Product; regardless of whether the agreement or arrangement requires or is captioned as a license or sublicense under the Patent Rights. A “Direct Sublicense Agreement” means a Sublicense Agreement pursuant to which Licensee or its Affiliates grant such a license directly to a third party (and not via a third party sublicensing to another third party as an additional tier).

 

“Sublicensee” means any third party that enters into a Sublicense Agreement with Licensee , its Affiliate or its sublicensees. A “Direct Sublicensee” shall mean a third party that enters into a Sublicense Agreement with Licensee or its Affiliate.

 

“Territory” means [***].

 

“Valid Claim” means a pending or issued and unexpired claim of the Patent Rights so long as the claim: (a) has not been irrevocably abandoned or declared to be invalid through no fault of Licensee in a non-appealable decision of a court or other government agency of competent jurisdiction; or (b) is not a claim of a patent application that is still pending more than [***] years after its earliest priority date (for clarity, such claim shall become a Valid Claim if actually issued).

 

2.

License Grant and Commercialization.

 

2.1

Grant. Subject to the terms and conditions of this Agreement and Licensee’s compliance therewith, OSIF grants to Licensee and its Affiliates (but only those Affiliates to which Licensee notifies OSIF it is extending the license) and Licensee accepts a non-transferable, except as provided in Section 16, and royalty-bearing exclusive license under Patent Rights in the Field of Use in the Territory to make, have made, use, sell, offer for sale and import Licensed Product and otherwise practice under the Patent Rights in the Field of Use in the Territory.

 

On behalf of itself and OSU, OSIF reserves the right to [***].

 

Nothing contained in this Agreement or a Party’s performance hereunder shall be construed as conferring, by implication, estoppel or otherwise, upon Licensee, its Affiliates, its Sublicensees, any party in privity therewith or any customer thereof, any right, title or interest under any intellectual or tangible property right at any time, except for those rights under the Patent Rights expressly granted in Section 2.1. OSIF reserves all rights, titles and interests not expressly granted in Section 2.1 Nothing herein shall be construed as a sale of the Patent Rights. Licensee agrees not to practice the Patent Rights outside the Field of Use or outside the Territory.

 

2.2

Sublicensing. Subject to the terms and conditions of this Agreement and Licensee’s, and its Affiliates’ compliance therewith, Licensee may grant Sublicenses under the Patent Rights without the consent of OSIF, through multiple tiers.

 

(a)

Each Sublicense Agreement shall: (i) be in writing; and (ii) consistent with the scope of Patent Rights granted to Licensee hereunder; and each Direct Sublicense shall include a right of termination by Licensee in the event that Sublicensee acts in any manner that would constitute a material breach of this Agreement if such action or inaction were that of Licensee.

 

 

(b)

Licensee shall deliver to OSIF a copy of each Sublicense Agreement granted and all modifications or terminations thereof, within [***] following the applicable execution, modification or termination; provided, however, that Licensee may redact from such copy sensitive or confidential information that is not reasonably necessary for OSIF to monitor Licensee’s compliance with the terms of this Agreement. Notwithstanding, any redacted Sublicense Agreement and all modifications or terminations shall not redact information that is necessary to allow OSIF to reasonably assess whether Licensee is in compliance with its obligations under the Agreement and to verify amounts payable under this Agreement in connection with a sublicense.

 

(c)

Notwithstanding any Sublicense Agreement, Licensee shall remain liable to OSIF for all of Licensee’s duties and obligations contained in this Agreement and Sublicensee’s breach of its Sublicense Agreement that would cause Licensee to be in noncompliance with this Agreement.

 

2.3

Government Rights. Licensee understands that Patent Rights may have been conceived or first actually reduced to practice, or during the Term may be first actually reduced to practice, under a funding agreement with a Government and, if so, that Government has certain rights relative thereto. This Agreement is limited by and made subject to the Government’s rights under any such agreement and under any applicable Government’s law or regulation, including 35 U.S.C. §200 et seq. (“Bayh-Dole Act”). To the extent that there is a conflict between any such agreement, such applicable law or regulation and this Agreement, the terms and conditions of such Government agreement, and/or applicable law or regulation, shall prevail. Licensee agrees to comply and permit OSIF to comply with the Bayh-Dole Act, including to provide the reporting required, and unless waived pursuant to the Bayh-Dole Act to substantially manufacture Licensed Products and products produced through the use of Licensed Products in the United States to the extent required by the Bayh-Dole Act.

 

 

2.4

Diligent Commercialization. Licensee shall be required to use Commercially Reasonable Efforts to achieve Regulatory Approval in a Major Market for a Licensed Product and, after achieving Regulatory Approval, to commercialize such Licensed Product. Without limiting the foregoing, Licensee shall, at a minimum achieve (by itself or through its Affiliates or Sublicensees) the milestone events stated below (the “Diligence Milestones”):

 

#	Diligence Milestone		Deadline
1	[***]		[***]
2	[***]		[***]
3	[***]		[***]
4	[***]		[***]
5	[***]		[***]
6		[***]	[***]
7	[***]		[***]
8		[***]	[***]

 

[***]

 

[***]

 

(a)

In addition to the foregoing milestones, Licensee (or its Affiliates, or Sublicensees) shall use Commercially Reasonable Efforts (as defined below) to obtain Regulatory Approval of a Licensed Product in a Major Market, and thereafter, to commercialize the applicable Licensed Product. “Commercially Reasonable Efforts” means, [***]

 

(b)

[***]

 

(c)

[***]

 

(d)

[***]

 

(e)

[***]

 

2.5

No Use of OSU Resources. [***].

 

 

2.6

Related Works Option. OSIF will attempt to identify and disclose each Related Work, if any, to Licensee. Upon disclosure of a Related Work by OSIF to Licensee, Licensee shall have [***] exclusive option (an “Option”) to notify OSIF to amend this Agreement to include Related Works.

 

3.

Compensation.

 

3.1

Royalties. On a Licensed Product-by-Licensed Product basis, by each Payment Deadline, Licensee shall pay OSIF non-refundable and non-creditable running royalties as follows:

 

(a)

[***]) in Net Sales of such Licensed Product in such Contract Year; and

 

(b)

[***] of Net Sales of such Licensed Product [***] in such Contract Year;

 

(collectively the “Royalties”).

 

If Licensee, its Affiliates, or Sublicensees pay royalties to one or more third parties to obtain a license to intellectual property rights necessary to make, have made, use, sell, offer for sale, or import Licensed Products, Licensee may credit [***] such third-party payments against royalties owed to OSIF hereunder, provided that [***]

 

3.2

Minimum Annual Royalties. Beginning with the Contract Year following the first commercial sale of a Licensed Product that has received Regulatory Approval in a Major Market and for Contract Year thereafter during the Term, Licensee shall pay OSIF a non-refundable minimum annual royalty of [***], due by such Contract Year’s Payment Deadline (each the “Minimum Annual Royalty”).

 

Payment of the Minimum Annual Royalty shall be credited toward Royalties due in the Contract Year to which the payment corresponds.

 

3.3

Milestone Fees. On a Licensed Product-by-Licensed Product basis, Licensee shall pay OSIF the following amounts within [***] of achievement of each corresponding Payment Milestone (as such term is used in the column of the table below) achieved by with respect to such Licensed Product, according to the following (each a “Milestone Fee” and, collectively the “Milestone Fees”):

 

#	Payment Milestone	Milestone Fee
1	[***]	[***]
2	[***]	[***]
3	[***]	[***]
4	[***]	[***]
5	[***]	[***]

 

 

 

Each of the foregoing milestones shall be paid no more than once for a Licensed Product and, for clarity, the aggregate amount of milestone payments shall not exceed $4,200,000 for each Licensed Product. [***]

 

[***]

 

3.4

Sublicense Fees. For clarity, Net Sales by Affiliates and Sublicensees shall be subject to royalties payable to OSIF as provided in Section 3.1. Also, within [***] of receiving any Non-Royalty Sublicensing Consideration, Licensee shall pay OSIF a percentage of such Non-Royalty Sublicensing Consideration (each a “Sublicense Fee” and, collectively, the “Sublicensee Fees”). Such percentage shall be determined as follows on a Sublicense Agreement-by- Sublicense Agreement basis at the time such Sublicense Agreement is entered into:

 

(a)

[***]of Non-Royalty Sublicensing Consideration under a Sublicense Agreement executed [***];

 

(b)

[***]of Non-Royalty Sublicensing Consideration under a Sublicense Agreement executed [***];

 

(c)

[***] of Non-Royalty Sublicensing Consideration under a Sublicense Agreement executed [***]; or

 

 

(d)

[***] of Non-Royalty Sublicensing Consideration under a Sublicense Agreement executed [***].

 

If Licensee receives Non-Royalty Sublicensing Consideration for the achievement of a milestone for which Licensee must also pay OSIF a milestone fee in accordance with Section 3.3, then Licensee’s Sublicensee Fee for such Non-Royalty Sublicensing Consideration shall be reduced by the amount of such Milestone Fee actually paid to OSIF by Licensee

 

3.5

Equity Consideration. On the Effective Date, conditioned upon execution by the Licensee, OSIF and Designee of a Stock Issuance Agreement in the form attached hereto as Appendix 5 (the “Stock Issuance Agreement”), Licensee shall issue to Designee equity securities in the form of shares of common stock (“Equity Securities”) constituting five percent (5%) of the ownership of Licensee on a Fully-Diluted basis (such fully-diluted percentage, the “Applicable Percentage”). Such Equity Securities shall be delivered to Designee in a certificate, affidavit, or other applicable form duly signed by the Licensee or, via an electronic stock certificate such as through Carta. All shares issued to Designee under this Section 3.5 will be considered fully paid and non-assessable.

 

3.6

Anti-Dilution. As equity protection, Licensee shall issue to Designee (without cost) additional Equity Securities sufficient for Designee to preserve its Applicable Percentage basis until Licensee has obtained paid in capital from Equity Financings (i.e., cash contributed by investors through direct purchase of equity securities from Licensee) of at least eight million dollars ($8,000,000.00) (“Equity Financing Threshold”).

 

[***]

 

[***]

 

3.7

Document Review Reimbursement

 

Within [***] after Licensee’s receipt of an invoice from OSIF on or after the Effective Date, Licensee shall reimburse OSIF for up to [***] in aggregate costs and expenses associated with [***]. “Document Review Reimbursement”. Without limitation, failure to strictly comply with Section 3.7 shall be considered a payment default under Section 9.3(a).

 

4.

Reports and Plans.

 

4.1

Reports and Plans. Utilizing the report forms in Appendices 2 and 3, incorporated herein by reference, or other report forms that provide substantially similar information, Licensee shall provide to the attention of OSIF’s payment and reporting contact stated in Appendix 4: (a) [***]. If no payments are due in any Contract Period, then Licensee shall submit the report so stating. The obligations in this Section 4 are in addition to and not in lieu of the other reporting obligations in this Agreement. Notwithstanding the foregoing, Licensee shall have no obligation to provide Appendix 3B until after first Regulatory Approval of a Licensed Product.

 

 

5.

Licensee Information. The capitalization table set forth as Appendix 6 shows all outstanding and reserved equity securities and convertible notes of Licensee as of the date hereof on a Fully-Diluted basis. Upon the consummation of any Equity Financing or at OSIF’s request, Licensee shall provide an updated capitalization table along with a certification from a responsible officer of Licensee certifying the table’s completeness and accuracy. Additionally, so long as OSIF or OSIF’s Designee owns any equity in the Licensee, and without limitation to Section 6.5, OSIF shall be entitled to examine the books and records of the Licensee as OSIF may reasonably request at reasonable times concerning the general status of the Licensee’s financial condition and operations, provided that access to highly confidential proprietary information and facilities need not be provided and that Licensee shall have no obligation to grant such access beyond what Delaware law, including but not limited to DGCL § 220, requires a company provide to its shareholders. Notwithstanding, OSIF shall receive quarterly and annual financial statements upon which they are made available to other shareholders of the Licensee holding common stock of the Licensee (and not any preferred shares). If no financial statements for the last fiscal year have been sent to common shareholders, the Licensee shall, upon the written request of OSIF, deliver or mail to OSIF within [***] thereafter the annual financial statements or, at Licensee’s option, the Licensee’s most recent 409A results.  Notwithstanding the foregoing, this Section shall not apply after a public offering of any of Licensee’s securities.

 

 

6.

Payment, Records, and Audits.

 

6.1

Payments. All amounts referred to in this Agreement are expressed in U.S. dollars without deductions for taxes, assessments, fees, or charges of any kind. All payments to OSIF shall be made in U.S. dollars by check or wire transfer (Licensee to pay all wire or other transfer fees) payable to Ohio State Innovation Foundation as stated in Appendix 4. Licensee may not make any tax withholdings from payments to OSIF.

 

6.2

Sales Outside the U.S. If any currency conversion shall be required in connection with the calculation of payments hereunder, such conversion shall be made using the rate used by Licensee for its financial reporting purposes in accordance with U.S. Generally Accepted Accounting Principles (or foreign equivalent).

 

6.3

Late Payments. Amounts not subject to a good faith dispute that are not paid when due shall accrue a late charge from the due date until payment is received by OSIF, at a rate equal to [***] (or the maximum allowed by law, if less). Acceptance of late payments does not negate or waive any other right or remedy to which OSIF may be entitled.

 

6.4

Records. For a period of [***] after the Contract Period to which the records pertain, Licensee agrees that it, Affiliates and Sublicensees shall keep complete and accurate records pertaining to any consideration relating to this Agreement (including payments made by Sublicensees to Licensee or its Affiliates), including [***], in sufficient detail to enable payments or securities due hereunder to be determined and audited.

 

6.5

Auditing. An independent public accountant selected by OSIF and reasonably acceptable to Licensee, shall be permitted, [***], to periodically examine and/or audit the records required by Section 6.4 (“Examination”) during regular business hours, at Licensee’s and/or its Sublicensee’s place of business, on [***] advance notice, to verify any payment or report relating to this Agreement (including payments made by Sublicensees to Licensee or its Affiliates). For each Sublicensee, Licensee shall obtain such Examination rights for OSIF and itself. If Licensee conducts an Examination of Sublicensee’s records, Licensee shall furnish to OSIF a copy of the findings from such Examination and OSIF shall then have no right to audit such Sublicensee for the period covered by Licensee’s audit. No more than one Examination of Licensee and each Sublicensee shall be conducted under this Section 6.5 in any twelve month period. If any amounts due to OSIF have been underpaid as of the date of the Examination, then Licensee shall immediately pay OSIF the amount of such underpayment plus accrued interest due in accordance with Section 6.3. If the amount of underpayment is equal to or greater than [***] of the total amount due for the records so examined, Licensee shall also reimburse OSIF the costs of such Examination and any collection actions taken. Such Examinations may, at OSIF’s sole discretion, consist of a self-audit conducted by Licensee and/or Sublicensee at their respective expense and certified in writing by an authorized officer of Licensee and/or Sublicensee. For all purposes of the foregoing and without limitation, a “Big 4” accounting firm compensated on a non-contingency basis shall be deemed reasonably acceptable to Licensee.

 

 

7.

Intellectual Property Management.

 

7.1

Past Patent Expenses. Within [***] after Licensee’s receipt of an invoice from OSIF on or after the Effective Date, Licensee shall reimburse OSIF for [***].

 

7.2

Ongoing Patent Expenses. Licensee shall pay all out-of-pocket expenses associated with prosecuting and maintaining the Patent Rights incurred on or after the Effective Date within [***] after Licensee’s receipt of each invoice from OSIF. Notwithstanding the foregoing, from time to time, OSIF may require Licensee to pre-pay such expenses reasonably predicted within [***] for certain Patent Rights upon written request, including for nationalization of the Patent Rights. [***].

 

7.3

Responsibility & Coordination. In its discretion, OSIF shall control the preparation, prosecution, defense and maintenance of the Patent Rights using counsel of its choosing. So long as Licensee is not in default of Section 7.2, OSIF shall instruct such patent counsel to provide copies of all material documents it receives from, or submits to patent offices regarding the Patent Rights in the Field of Use and Territory. OSIF will use best efforts provide Licensee such documents reasonably in advance of any due date to review and provide comments, and OSIF shall reasonably consider Licensee’s comments when timely provided. OSIF shall not abandon prosecution of any last pending U.S. or foreign patent application without first notifying Licensee of OSIF’s intention and reason therefore at least [***] prior to any bar date and providing Licensee with reasonable opportunity to assume responsibility for prosecution and maintenance of such patents and patent applications. [***].

 

7.4

Foreign Filings. In addition to the U.S., the Patent Rights shall, subject to applicable bar dates and Licensee’s compliance with Section 7.2, be pursued in such foreign countries as Licensee so designates in writing to OSIF in sufficient time to reasonably enable the preparation of such additional filings (in no event [***] prior to any deadline), and in those foreign countries in which OSIF has filed applications prior to the Effective Date. If Licensee does not choose to pursue patent rights in a particular foreign country and OSIF chooses to do so, Licensee shall so notify OSIF, and thereafter said patent application or patent shall no longer be included in the Patent Rights and Licensee shall have no further rights thereto. For clarity, OSIF shall control all decisions relating to applying for a Unitary Patent at the European Patent Office.

 

7.5

Withdrawal from Paying Patent Costs. If at any time Licensee wishes to cease paying for any costs for a particular Patent Right, including for patent prosecution in a particular jurisdiction, Licensee must give OSIF at [***] prior written notice and Licensee shall continue to be obligated under Section 7.2 for costs and expenses incurred during said notice period. Thereafter, said patent application or patent shall no longer be included in the Patent Rights for such jurisdiction and Licensee shall have no further rights thereto.

 

 

8.

Infringement and Litigation.

 

8.1

Enforcement. In the event that Licensee or its Affiliate(s), or Sublicensee(s) believe there is infringement of any Patent Rights under this Agreement which is to its substantial detriment, Licensee will provide OSIF with notification and reasonable evidence of such infringement. Licensee shall have the first right to enforce the Patent Rights in the Field of Use against potential infringers (“Enforcement Action”). Upon request by Licensee, OSIF will provide Licensee with such assistance and information as may be useful to Licensee in connection with an Enforcement Action (if Licensee reimburses OSIF for OSIF’s reasonable out-of-pocket expenses in connection therewith). [***].

 

If OSIF notifies Licensee of infringement of the Patent Rights, and Licensee does not take action to enforce such Patent Rights within [***] after such notice, then OSIF may enforce the Patent Rights against such infringers and Licensee will provide OSIF with such assistance and information as may be reasonably useful to OSIF in connection with an action (if OSIF reimburses Licensee for Licensee’s reasonable out-of-pocket expenses in connection therewith).

 

8.2

[***]In any infringement suit or dispute regarding the Patent Rights, the Parties agree to cooperate fully with each other in a reasonable manner. [***].

 

(a)

[***]

 

(b)

[***]

 

 

[***]

 

9.

Term and Termination.

 

9.1

Term. Unless earlier terminated as provided herein, the term of this Agreement shall commence on the Effective Date and continue until the expiration of the last to expire of the Patent Rights (“Term”).

 

9.2

Termination by Licensee. Licensee, at its option, may terminate this Agreement by providing OSIF written notice stating its reason for termination, and such termination shall become effective [***] after receipt of such notice by OSIF.

 

9.3

Termination by OSIF. OSIF, at its option, may immediately terminate this Agreement upon delivery of written notice to Licensee of OSIF’s decision to terminate, if any of the following occur:

 

(a)

Licensee has failed to make any payment when due under this Agreement, and does not make the required payment within [***] after delivery of written notice thereof from OSIF;

 

(b)

Licensee is in breach of any non-payment provision of this Agreement, and does not cure such breach within [***] after delivery of written notice from OSIF; or

 

(c)

To the extent not prohibited by applicable law, Licensee or its Affiliate or Sublicensee initiates any proceeding or action to challenge the validity, enforceability, or ownership or scope of one or more of the Patent Rights, or intentionally assists a third party in pursuing such a proceeding or action, and, in each case, does not withdraw such proceeding or action (or, in the case of a challenge by a Sublicensee, Licensee does not terminate the corresponding Sublicense) within [***] after OSIF’s notice thereof. For clarity, a proceeding or action (e.g., an action for a declaratory judgment) with solely respect to whether a claim Covers a certain activity shall not be deemed a challenge to the scope of the Patent Rights.

 

9.4

Other Conditions of Termination. This Agreement shall terminate:

 

(a)

[***] upon OSIF giving written notice to Licensee, unless prohibited by applicable law, if: (i) Licensee is judicially declared bankrupt; (ii) Licensee’s Board of Directors elects to liquidate its assets or dissolve its business, in each case, without a successor to which this Agreement is assigned; (iii) Licensee makes an assignment for the benefit of creditors; or (iv) if the business of Licensee is otherwise placed in the hands of a receiver, assignee or trustee, whether by voluntary act of Licensee or otherwise and such placement by involuntary act of Licensee is not dismissed within [***]; or

 

(b)

At any time by mutual written agreement between Licensee and OSIF. For clarity, a decision to sell all Licensee’s assets relating to this Agreement to a third party shall not be deemed a liquidation of assets that give rise to termination pursuant to Section 9.4(b) above.

 

 

9.5

Effect of Termination. If this Agreement:

 

(a)

Is terminated, then all Direct Sublicense Agreements (and all Sublicense Agreements under such Direct Sublicense Agreement) shall remain in effect provided that: (i) the applicable Direct Sublicensee agrees to assume all obligations of Licensee under this Agreement with respect to the activities of such Direct Sublicensee (and its Sublicensees) and agrees that OSIF shall have the same termination rights with respect to such Direct Sublicensee as it had with Licensee; and (ii) if the Agreement was terminated for Licensee’s breach and such breach is reasonably curable by Sublicensee (e.g., payment of any amount), Sublicensee cures such breach [***] of such termination;

 

(b)

Is terminated, then, except as necessary to give effect to the foregoing paragraph, all rights granted under this Agreement [***] revert to OSIF, and Licensee shall have no rights to practice under the Patent Rights, including making, having made, distributing, having distributed, using, providing, selling, offering to sell, leasing, loaning and importing any Licensed Products after the effective date of termination;

 

(c)

Is terminated or expires, then Licensee [***] shall tender payment of all accrued payments due to OSIF as of the effective date of termination or expiration, including payment of all unreimbursed costs and expenses incurred under Section 7 prior to the effective date of termination or expiration upon receipt of invoice therefor, and render a final report covering the subject matter described in Section 4 and 5; in each case regardless of whether otherwise due hereunder

 

(d)

Is terminated or expires, then nothing in this Agreement shall be construed to release either Party from any liability that matured (including payment obligations that accrued) prior to the effective date of termination or expiration; and

 

(e)

Is terminated or expires, then this provision Section 9.5(e) and the provisions of Sections 1 (Definitions), 8.2 (Cooperation between OSIF and Licensee), 10 (Confidentiality), 12.2 (OSIF Disclaimers), 13 (Limit of Liability), 14 (Indemnification Obligation), 15 (Insurance Requirements), 18 (Use of Name), 19 (Notices), and 20 (General Provisions) shall survive any termination or expiration of this Agreement until their purposes are fulfilled. In addition, the provisions of Sections 3 (Compensation), 4 (Reports and Plans), 6 (Payment, Records and Audits), and 7 (Intellectual Property Management) shall survive with respect to all activities and payment obligations accruing prior to the termination or expiration of this Agreement (provided, however, that for the avoidance of doubt, the provisions of Section 3.6 shall not survive to include any Equity Financings that occur after termination or expiration off this Agreement). In addition, the termination or expiration of this Agreement shall by itself have no effect on the equity issued to OSIF or Designee pursuant to the terms hereof.

 

 

10.

Confidentiality.

 

10.1

Treatment of Confidential Information. Recipient shall use reasonable care to safeguard the confidentiality of the Discloser’s Confidential Information and shall not provide any of the Discloser’s Confidential Information to third parties nor use the Discloser’s Confidential Information other than as permitted below. For clarity, and notwithstanding anything to the contrary in any other Agreement between the Parties or between OSU and Licensee, nothing restricts Licensee from using or disclosing any information contained in any Technology Disclosures except to the extent this Agreement expressly restricts the use of OSIF Information.

 

10.2

Right to Disclose.

 

(a)

Licensee consents to OSIF disclosing Licensee’s Confidential Information to OSU, and other third parties to the extent it is reasonably necessary to fulfill its obligations or exercise its rights under this Agreement, on the condition OSIF has confidentiality obligations and non-use restrictions at least as stringent as those on OSIF hereunder with OSU and/or such third parties.

 

(b)

To the extent it is reasonably necessary to fulfill its obligations or exercise its rights under this Agreement, Licensee may disclose OSIF Confidential Information on the condition that the party to whom it provides the OSIF Confidential Information has agreed to terms and conditions of confidentiality and non-use at least as stringent as those on Licensee herein. In no event shall Licensee or anyone receiving OSIF’s Confidential Information from Licensee use OSIF’s Confidential Information in a manner detrimental to OSIF, OSU or their respective rights.

 

(c)

If Recipient is required by law, regulation, or court order to disclose any of the Discloser’s Confidential Information, then it may do so provided it had promptly notified Discloser and had reasonably assisted Discloser, if needed, for Discloser to try to obtain a protective order or other remedy of Discloser’s election and expense.

 

(d)

Notwithstanding anything to the contrary, neither Party is obligated to maintain the existence of this Agreement as Confidential Information.

 

10.3

Surviving Obligations. All Confidential Information of the other party shall be returned or destruction certified at the end of the Term, at Discloser’s election, provided that Recipient shall be permitted to retain one copy of the Confidential Information in its legal function in order to verify its compliance hereunder and electronic records maintained for archival purposes need not be destroyed. The Parties’ confidentiality and non-use obligations under this Agreement shall survive the expiration or termination of this Agreement and shall continue for a period of [***] thereafter.

 

10.4

Injunctive Relief. In addition to and not in lieu of any other rights or remedies, Discloser may seek specific performance, injunctive and other equitable relief as a remedy for any breach or threatened breach of this Section 10 without showing actual monetary damages in connection therewith.

 

 

11.

Export Compliance. Without limiting Section 12.3(c), Licensee shall observe all applicable United States and foreign laws and regulations with respect to the research, development, manufacture, marketing and transfer of Licensed Products and related technical data, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulation and hereby represents and covenants that Licensee: (a) is neither a national of, nor controlled by a national of, any country to which the United States prohibits the export or re-export of goods, services, or technology; (b) is not a person specifically designated as ineligible to export from the United States or deal in U.S. origin goods, services, or technologies; (c) shall not export or re-export, directly or indirectly, any goods, services, or technology to any country or person (including juridical persons) to which the United States prohibits the export of goods, technology or services; and (d) in the event that a United States government license or authorization is required for an export or re-export of goods, services, or technology (including technical information acquired from OSIF under this Agreement and/or any products created by using such technical information or any part thereof), shall obtain any necessary United States government license or other authorization prior to undertaking the export or re-export. Without limitation, Licensee shall require a provision in Sublicense Agreement, substantially similar to this Section 11, requiring that Sublicensees comply with all then-current applicable export laws and regulations and other applicable laws and regulations.

 

12.

Representations and Disclaimers.

 

12.1

OSIF Representations. Except for the rights, if any, of the Government, OSIF represents and warrants to Licensee that to the knowledge of OSIF: (a) OSIF is the owner or agent of the entire right, title, and interest in and to Patent Rights; (b) OSIF has the right to grant the license(s) hereunder; and, (c) OSIF has not knowingly granted and shall not knowingly grant licenses or other rights under the Patent Rights that are in conflict with the terms and conditions in this Agreement.

 

12.2

OSIF Disclaimers. EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 12.1, LICENSEE UNDERSTANDS AND AGREES THAT OSIF MAKES NO OTHER REPRESENTATIONS OR WARRANTIES AND OSIF, ON BEHALF OF ITSELF AND OSU, EXPRESSLY DISCLAIM ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, STATUTORY, IMPLIED OR OTHERWISE, INCLUDING AS TO THE LICENSED PRODUCTS, THE OPERABILITY OR FITNESS FOR ANY USE OR PARTICULAR PURPOSE, MERCHANTABILITY, SAFETY, EFFICACY, APPROVABILITY BY REGULATORY AUTHORITIES, TIME AND COST OF DEVELOPMENT, PATENTABILITY, NONINFRINGEMENT, BREADTH OF PATENT RIGHTS, WHETHER ANY CLAIM WILL ISSUE OR IS VALID, AND AS TO WHETHER THERE ARE ANY PATENTS NOW HELD, OR WHICH MAY BECOME HELD, BY ANY ENTITY THAT MIGHT BE REQUIRED FOR THE PRACTICE OF PATENT RIGHTS.

 

12.3

Licensee Representation. Licensee represents and warrants that: (a) Licensee has: (i) not been induced in any way by OSIF or its employees to enter into this Agreement; (ii) been given an opportunity to conduct sufficient due diligence with respect to all items and issues pertaining to this Agreement; (iii) adequate knowledge and expertise to conduct the due diligence; and (iv) accepted all risks inherent herein; (b) it is a duly organized and validly existing entity in good standing under the laws of its jurisdiction of organization, and has all necessary corporate or other appropriate power and authority to execute, deliver and perform its obligations hereunder; (c) it shall comply with all applicable international, national, or local laws and regulations in its performance under this Agreement, including export control laws; (d) it shall diligently pursue the development, manufacture, and sale of Licensed Products throughout the Term to the extent set forth in Section 2.4; and (e)) it shall continue to maintain throughout the Term and beyond insurance coverage as set forth in Section 15.

 

 

13.

Limit of Liability. IN NO EVENT SHALL OSIF, OSU OR THEIR RESPECTIVE AFFILIATES, OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, STUDENTS, TRUSTEES, AGENTS OR INDEPENDENT CONTRACTORS IN THEIR CAPACITY FOR OSIF OR OSU OR SUCH AFFILIATE, BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, OR PUNITIVE DAMAGES, INCLUDING DAMAGES FOR LOSS OF PROFITS OR REVENUE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR PATENT RIGHTS, REGARDLESS OF WHETHER ANY SUCH PARTY KNOWS OR SHOULD KNOW OF THE POSSIBILITY OF SUCH DAMAGES. OTHER THAN FOR LIABILITIES AGAINST LICENSEE FOR WHICH IT PROVIDES INDEMNIFICATION (SECTION 14) OR FOR MISUSE, MISAPPROPRIATION OR INFRINGEMENT OF OSIF’S INTELLECTUAL PROPERTY RIGHTS, LICENSEE SHALL NOT BE LIABLE TO OSIF FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS OR REVENUE) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF WHETHER LICENSEE KNOWS OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES.

 

14.

Indemnification Obligation. Licensee agrees to hold harmless, defend and indemnify OSIF, OSU, their respective Affiliates, and their respective officers, directors, employees, students, inventors, trustees, agents, and independent contractors (“Indemnified Parties”) from and against any liabilities, damages, causes of action, suits, judgments, liens, penalties, fines, losses, costs and expenses, including reasonable attorneys’ fees and other expenses of litigation, resulting from claims or demands brought by third parties (collectively “Liabilities”) against an Indemnified Party on account of any injury or death of persons, damage to property, or any other damage or loss arising out of or in connection with this Agreement, and/or the exercise or practice of the rights granted hereunder by or under authority of Licensee and/or Sublicensee, or third party person or entity having a Licensed Product; provided, however, Licensee shall have no responsibility or obligation under this Section 14 to the extent of Liabilities caused solely by the gross negligence or willful misconduct by OSIF. OSIF shall: (a) promptly notify Licensee of the Liability, (b) grant Licensee control of defense or settlement of such Liability, and (c) provide Licensee with reasonable assistance, at Licensee’s request, in the defense or settlement of such Liability, subject to Licensee reimbursing the OSIF for all reasonable out-of-pocket expenses incurred in providing such assistance. Licensee will not make any settlement regarding OSIF without the consent of OSIF, approval of which will not be unreasonably withheld.

 

15.

Insurance Requirements. Prior to any Licensed Product being used, including for the purpose of obtaining regulatory approval, or offered for sale by Licensee or Sublicensee, and for a period of [***] after this Agreement expires or is terminated, Licensee shall, at its sole cost and expense, procure and maintain commercial general liability insurance in commercially reasonable and appropriate amounts for the Licensed Product to ensure its obligations under this Agreement. Licensee shall use commercially reasonable efforts to have OSIF, OSU and their respective Affiliates, officers, directors and employees named as additional insureds. Such commercial general liability insurance shall provide, without limitation: (a) product liability coverage; (b) broad form contractual liability coverage for Licensee’s indemnification under this Agreement; and (c) coverage for abatement and/or litigation costs. Upon request by OSIF, Licensee shall provide OSIF with written evidence of such insurance. Additionally, Licensee shall provide OSIF with advance written notice of at least [***] prior to Licensee cancelling, not renewing, or materially changing such insurance.

 

 

16.

Assignment. This Agreement is not assignable by a Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, provided, however, that Licensee may assign this Agreement without the prior written consent of OSIF in connection with the sale of all or substantially all of its stock, business or assets to which this Agreement relates.

 

17.

Patent Markings. Licensee agrees that all Licensed Products shall be marked as permitted in accordance with each country’s patent marking laws, including Title 35, U.S. Code, in the United States.

 

18.

Use of Name. Licensee shall not use the name, trademarks or other marks of OSIF or OSU without the advance written consent of OSIF and OSU. OSIF and OSU may use Licensee’s name for annual reports, brochures, website and internal reports without prior consent.

 

19.

Notices. Any notice or other communication of the Parties required or permitted to be given or made under this Agreement shall be in writing and shall be deemed effective on the date received when sent in a manner that provides confirmation or acknowledgement of delivery and received at the applicable address set forth in Appendix 4, incorporated herein by reference. Notices required under this Agreement may be delivered via E-mail provided such notice is confirmed in writing as indicated. Late payment notices are sufficiently delivered via E-mail only.

 

20.

General Provisions.

 

20.1

Binding Effect. This Agreement is binding upon the Parties hereto, their respective executors, administrators, heirs, assigns and successors in interest and inures to the benefit of the Parties and their permitted successors and assigns. Conveyances made in contravention with the terms of this Agreement shall be null and void.

 

20.2

Construction of Agreement. Both Parties agree that any ambiguity in this Agreement shall not be construed more favorably toward one Party than the other Party, regardless of which Party primarily drafted this Agreement. Headings are for the convenience of the Parties and do not impart independent meaning to this Agreement.

 

20.3

Counterparts and Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. A Party may evidence its execution and delivery of this Agreement by transmission of a signed copy of this Agreement via facsimile or email.

 

20.4

Registration of Licenses. Licensee agrees to register and give required notice concerning this Agreement, at its expense, in each country where an obligation exists under law to so register or give notice and shall reasonably consider OSIF’s comments regarding redaction.

 

20.5

Governing Law; Jurisdiction. This Agreement shall be construed and enforced in accordance with laws of the State of Ohio, without regard to choice of law and conflicts of law principles.

 

 

20.6

Modification. Any modification of this Agreement shall be effective only if it is in writing and signed by duly authorized representatives of both Parties.

 

20.7

Severability. If any provision hereof is invalid, illegal or unenforceable in any jurisdiction, the Parties hereto shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties, and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the Parties hereto as nearly as may be possible. Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such other provisions in any other jurisdiction, so long as the essential essence of this Agreement remains enforceable.

 

20.8

Third Party Beneficiaries. Nothing in this Agreement shall be interpreted as placing the Parties in an employment, partnership, joint venture or agency relationship and neither Party shall have the right or authority to obligate or bind the other Party on its behalf. Nothing in this Agreement, express or implied, is intended to confer any benefits, rights or remedies on any entity, other than the Parties, OSU, and their permitted successors and assigns.

 

20.9

Waiver. Neither Party shall be deemed to have waived any of its rights under this Agreement unless the waiver is in writing and signed by such Party. No delay or omission of a Party in exercising or enforcing a right or remedy under this Agreement shall operate as a waiver thereof.

 

20.10

Good Faith and Fair Dealing. The Parties shall perform their respective obligations and exercise their rights under this Agreement in good faith and with fair dealing, including, but not limited to, the granting of Sublicense Agreements under Section 2.2 of this Agreement and payment of compensation under Article 3 of this Agreement.

 

20.11

Entire Agreement. This Agreement constitutes the entire agreement between the Parties regarding the subject matter hereof, and supersedes all prior written or verbal agreements, representations and understandings relative to such matters.

 

IN WITNESS WHEREOF, the Parties hereto have caused their duly authorized representatives to execute this Agreement.

 

Ohio State Innovation Foundation			City Therapeutics, Inc.
BY:	/s/ Kevin Taylor		BY:	/s/ Ari Nowacek
NAME:	Kevin Taylor		NAME:	Ari Nowacek
TITLE:	President		TITLE:	President
DATE:	11/03/2023		DATE:	11/02/2023

 

 

APPENDIX 1

 

Description of Patent Rights

 

[***]

 

 

APPENDIX 2A

 

ANNUAL REPORT

 

[***]

 

 

Appendix 2B

 

OSIF FUNDING SOURCE &
EMPLOYMENT SURVEY AS OF
____ (FISCAL YEAR END)

 

[***]

 

 

Appendix 3A

 

Milestone Report

 

[***]

 

 

Appendix 3B

 

Royalty Report

 

[***]

 

 

Appendix 4

 

Contact Information

 

[***]

 

 

Appendix 5

 

Stock Issuance Agreement

 

[***]

 

 

Appendix 6

 

Capitalization Table as of the Effective Date

 

[***]

 

 

AMENDMENT NO. 1 TO LICENSE AGREEMENT

 

This Amendment No. 1 to the License Agreement (“Amendment”), having an effective date of February 8, 2024 (“Amendment Effective Date”), is made and entered by and between Ohio State Innovation Foundation, located at Mount Hall, 1st Floor, 1050 Carmack Rd Columbus, OH 43210 (“OSIF”) and City Therapeutics, Inc., with an address at 188 E. Blaine St., Suite 125, Seattle, WA 98102 (“Licensee”), (individually “Party” or together “the Parties”).

 

BACKGROUND

 

WHEREAS, OSIF and Licensee entered into an Exclusive License Agreement dated October 30, 2023, OSIF agreement No. A2024-0103 (the “License Agreement”); and

 

WHEREAS, OSIF and Licensee would like to amend and modify the License Agreement as identified below and such amendment shall be incorporated as part of the License Agreement.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.

Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the License Agreement.

 

2.

The following Patent Rights are hereby added to Appendix 1:

 

[***]

 

3.

The following Technology Disclosures are hereby added to Appendix 1:

 

[***]

 

4.

Within [***] after Licensee’s receipt of an invoice from OSIF, Licensee shall reimburse OSIF for all out-of-pocket expenses associated with the filing of [***].

 

5.

Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute an agreement, notwithstanding that all parties are not signatories to the same counterpart. Facsimile, documents executed, scanned and transmitted electronically and electronic signatures, including portable document format (“.pdf”), shall be deemed original documents for purposes of this Agreement, including the signature pages, and all matters related thereto, with such facsimile, scanned and electronic signatures having the same legal effect as original signatures.

 

6.

Continued Force and Effect. Except as provided in this Amendment, all terms, conditions, and provisions of the License Agreement shall remain and continue in full force and effect as provided therein.

 

 

7.

IN WITNESS WHEREOF, the parties hereto have entered into this Amendment effective as of the Amendment Effective Date.

 

OHIO STATE INNOVATION FOUNDATION			CITY THERAPEUTICS, INC.
By:	/s/ Kevin Taylor		By:	/s/ Ari Nowacek
Name:	Kevin Taylor		Name:	Ari Nowacek
Title:	President		Title:	President
Date:	02/09/2024		Date:	02/09/2024

 

 

AMENDMENT NO. 2 TO EXCLUSIVE LICENSE AGREEMENT
AGT. NO. A2025-1883

 

This Amendment No. 2 to the Exclusive License Agreement (“Amendment No. 2”) is made this 3rd day of April 2025 (“Amendment No.2 Effective Date”) by and between Ohio State Innovation Foundation, located at Energy Advancement and Innovation Center, 2281 Kenny Rd., Suite 210, Columbus, OH 43210 (“OSIF”) and City Therapeutics, Inc., with an address at 399 Binney Street, Cambridge, MA 02142 (hereinafter “Licensee”), collectively, the “Parties”, or singly, “Party”.

 

BACKGROUND

 

WHEREAS, OSIF and Licensee entered into an Exclusive License Agreement dated October 30, 2023 which was subsequently amended on February 8, 2024 (the “License Agreement”); and

 

WHEREAS, OSIF and Licensee would like to amend and modify the License Agreement as identified below and such amendment shall be incorporated as part of the License Agreement.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.

Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the License Agreement.

 

2.

The following Patent Rights are hereby added to Appendix 1:

 

[***]

 

3.

The following Technology Disclosures are hereby added to Appendix 1:

 

[***]

 

4.

Within [***] after Licensee’s receipt of an invoice from OSIF, Licensee shall reimburse OSIF for all out-of-pocket expenses associated with the filing of [***].

 

5.

Counterparts. This Amendment No. 2 may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute an agreement, notwithstanding that all parties are not signatories to the same counterpart.

 

6.

Continued Force and Effect. Except as provided in this Amendment No. 2, all terms, conditions, and provisions of the License Agreement shall remain and continue in full force and effect as provided therein.

 

IN WITNESS WHEREOF, the Parties hereto have entered this Amendment No. 2 effective as of the Amendment No. 2 Effective Date.

 

OHIO STATE INNOVATION FOUNDATION			CITY THERAPEUTICS, INC.
BY:	/s/ Kevin Taylor		BY:	/s/ Ari Nowacek
NAME:	Kevin Taylor		NAME:	Ari Nowacek
TITLE:	President		TITLE:	President
DATE:	04/11/2025		DATE:	04/11/2025

 

 

AMENDMENT NO. 3 TO EXCLUSIVE LICENSE
AGREEMENT

 

This Amendment No. 3 to the License Agreement (“Amendment No. 3”) is made this 13th day of May 2025 (“Amendment No. 3 Effective Date”) by and between Ohio State Innovation Foundation, located at Energy Advancement and Innovation Center, Room 210, 2281 Kenny Road Columbus, OH 43210 (“OSIF”) and City Therapeutics, Inc., with an address at 399 Binney Street, Cambridge, MA 02142 (hereinafter “Licensee”), collectively, the “Parties”, or singly, “Party”.

 

BACKGROUND

 

WHEREAS, OSIF and Licensee entered into an Exclusive License Agreement (AGT. NO. A2024-0103) dated October 30, 2023 which was subsequently amended on February 8, 2024 and April 3, 2025 (the “License Agreement”); and

 

WHEREAS, OSIF and Licensee would like to amend and modify the License Agreement as identified below and such amendment shall be incorporated as part of the License Agreement.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.

Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the License Agreement.

 

2.

The following Patent Rights are hereby added to Appendix 1:

 

[***]

 

3.

The following Technology Disclosures are hereby added to Appendix 1:

 

[***]

 

4.

Within [***] after Licensee’s receipt of an invoice from OSIF, Licensee shall reimburse OSIF for all out-of-pocket expenses associated with the filing of [***].

 

5.

Counterparts. This Amendment No. 3 may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute an agreement, notwithstanding that all parties are not signatories to the same counterpart.

 

6.

Continued Force and Effect. Except as provided in this Amendment No. 3, all terms, conditions, and provisions of the License Agreement shall remain and continue in full force and effect as provided therein.

 

IN WITNESS WHEREOF, the Parties hereto have entered this Amendment No. 3 effective as of the Amendment No. 3 Effective Date.

 

OHIO STATE INNOVATION FOUNDATION			CITY THERAPEUTICS, INC.
BY:	/s/ Kevin Taylor		BY:	/s/ Ari Nowacek
NAME:	Kevin Taylor		NAME:	Ari Nowacek
TITLE:	President		TITLE:	SVP Corporate Development
DATE:	05/21/2025		DATE:	05/21/2025

 

 

AMENDMENT NO. 4 TO EXCLUSIVE LICENSE
AGREEMENT

 

This Amendment No. 4 to the License Agreement (“Amendment No. 4”) is made this 4th day of July 2025 (“Amendment No.4 Effective Date”) by and between Ohio State Innovation Foundation, located at Energy Advancement and Innovation Center, Room 210, 2281 Kenny Road Columbus, OH 43210 (“OSIF”) and City Therapeutics, Inc., with an address at 399 Binney Street, Cambridge, MA 02142 (hereinafter “Licensee”), collectively, the “Parties”, or singly, “Party”.

 

BACKGROUND

 

WHEREAS, OSIF and Licensee entered into an Exclusive License Agreement (AGT. NO. A2024-0103) dated October 30, 2023 which was subsequently amended on February 8, 2024, April 3, 2025, and May 13, 2025 (the “License Agreement”); and

 

WHEREAS, OSIF and Licensee would like to amend and modify the License Agreement as identified below and such amendment shall be incorporated as part of the License Agreement.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.

Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the License Agreement.

 

2.

The following Patent Rights are hereby added to Appendix 1:

 

[***]

 

3.

The following Technology Disclosures are hereby added to Appendix 1:

 

[***]

 

4.

Within [***] after Licensee’s receipt of an invoice from OSIF, Licensee shall reimburse OSIF for all out-of-pocket expenses associated with the filing of [***]. Current out-of-pocket expenses associated with the filing of [***] are estimated to be [***] as of Amendment No.4 Effective Date.

 

5.

Counterparts. This Amendment No. 4 may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute an agreement, notwithstanding that all parties are not signatories to the same counterpart.

 

6.

Continued Force and Effect. Except as provided in this Amendment No. 4, all terms, conditions, and provisions of the License Agreement shall remain and in full force and effect as provided therein.

 

IN WITNESS WHEREOF, the Parties hereto have entered this Amendment No. 4 effective as of the Amendment No. 4 Effective Date.

 

OHIO STATE INNOVATION FOUNDATION			CITY THERAPEUTICS, INC.
BY:	/s/ Kevin Taylor		BY:	/s/ Ari Nowacek
NAME:	Kevin Taylor		NAME:	Ari Nowacek
TITLE:	President		TITLE:	SVP Corporate Development
DATE:	07/08/2025		DATE:	07/08/2025

 

 

AMENDMENT NO. 5 TO EXCLUSIVE LICENSE AGREEMENT

 

This Amendment No. 5 to the License Agreement (“Amendment No. 5”) is made this 26^th day of August 2025 (“Amendment No. 5 Effective Date”) by and between Ohio State Innovation Foundation, located at Energy Advancement and Innovation Center, Room 210 2281 Kenny Road Columbus, OH 43210 (“OSIF”) and City Therapeutics, Inc., with an address at 399 Binney Street, Cambridge, MA 02142 (hereinafter “Licensee”), collectively, the “Parties”, or singly, “Party”.

 

BACKGROUND

 

WHEREAS, OSIF and Licensee entered into an Exclusive License Agreement (AGT. NO. A2024-0103) dated October 30, 2023 which was subsequently amended on February 8, 2024, April 3, 2025, May 13, 2025, and July 4, 2025 (the “License Agreement”); and

 

WHEREAS, OSIF and Licensee would like to amend and modify the License Agreement as identified below and such amendment shall be incorporated as part of the License Agreement.

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.

Definitions. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the License Agreement.

 

2.

The following Patent Rights are hereby added to Appendix 1:   [***]

 

3.

The following Technology Disclosures are hereby added to Appendix 1:   [***]

 

 

4.

Within [***] after Licensee’s receipt of an invoice from OSIF, Licensee shall reimburse OSIF for all out-of-pocket expenses associated with the filing of [***].

 

5.

Counterparts. This Amendment No. 5 may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute an agreement, notwithstanding that all parties are not signatories to the same counterpart.

 

6.

Continued Force and Effect. Except as provided in this Amendment No. 5, all terms, conditions, and provisions of the License Agreement shall remain and continue in full force and effect as provided therein.

 

IN WITNESS WHEREOF, the Parties hereto have entered this Amendment No. 5 effective as of the Amendment No. 5 Effective Date.

 

OHIO STATE INNOVATION FOUNDATION			CITY THERAPEUTICS, INC.
BY:	/s/ Kevin Taylor		BY:	/s/ Ari Nowacek
NAME:	Kevin Taylor		NAME:	Ari Nowacek
TITLE:	President		TITLE:	SVP Corporate Development
DATE:	08/28/2025		DATE:	08/27/2025

 

 

Exhibit 10.13

 

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”) between City Therapeutics, Inc., a Delaware corporation (“Company”) and the counterparty identified in the signature block below (“Consultant”) is effective as of, and this document memorializes the agreement that the parties have had since, the first day of Consultant’s Services (defined below) to the Company (regardless of the execution date hereof). The parties agree as follows:

 

1.            Services; Payment; No Violation of Rights or Obligations. Consultant agrees to undertake and complete the Services (as defined in Exhibit A) in accordance with and on the schedule specified in Exhibit A. As the only consideration due to Consultant regarding the subject matter of this Agreement, Company will pay Consultant as (and only as) expressly stated in Exhibit A. Unless otherwise specifically agreed upon by Company in writing (and notwithstanding any other provision of this Agreement), all Services will be performed by and only by Consultant. Consultant agrees that it will not violate any agreement with or rights of any third party or, except as expressly authorized by Company in writing hereafter, use or disclose at any time Consultant’s own or any third party’s confidential information or intellectual property in connection with the Services or otherwise for or on behalf of Company.

 

2.            Ownership; Rights; Proprietary Information; Publicity.

 

a.            Company shall own solely and exclusively and in perpetuity all right, title and interest (including patent rights, copyright rights, trade secret rights, mask work rights, trademark rights, sui generis database rights and all other rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), works of authorship, mask works, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by Consultant in connection with the Services or any Proprietary Information (defined below) (collectively, “Inventions”) and Consultant will promptly disclose and provide all Inventions to Company. Consultant hereby makes and agrees to make all assignments necessary to accomplish the foregoing ownership. Consultant shall further assist Company, at Company’s expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce and defend any rights purported to be assigned. Consultant hereby irrevocably designates and appoints Company as its agents and attorneys-in-fact to act for and on Consultant’s behalf to execute and file any document and to do all other lawfully permitted acts to further the foregoing with the same legal force and effect as if executed by Consultant. Consultant hereby confirms that the rights that vest with the Company in relation to the Inventions shall not be deemed to lapse if the Company does not exercise the rights for any period.

 

 

b.            Consultant agrees that all Inventions and all other business, technical and financial information (including, without limitation, the identity of and information relating to Company’s customers or employees) that Consultant or anyone acting on Consultant’s behalf develops, learns or obtains in connection with the Services or that are received by or for Company in confidence, constitute “Proprietary Information.” Consultant will hold in confidence and not disclose or, except in performing the Services, use any Proprietary Information. However, Consultant shall not be obligated under this paragraph with respect to information Consultant can document is or becomes readily publicly available without restriction through no fault of Consultant. Furthermore, Consultant understands that this Agreement does not affect Consultant’s immunity under 18 USC Sections 1833(b) (1) or (2), which read as follows:

 

(1) An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

 

(2) An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

 

Upon termination or as otherwise requested by Company, Consultant will promptly return to Company all items and copies containing or embodying Proprietary Information, except that Consultant may keep its personal copies of its compensation records and this Agreement.

 

c.            As additional protection for Proprietary Information, Consultant agrees that during the period over which it is to be providing the Services Consultant will not directly or indirectly encourage or solicit any employee or consultant of Company to leave Company for any reason. Without limiting the foregoing, Consultant may perform services for other persons, provided that such services do not represent a conflict of interest or a breach of Consultant’s obligation under this Agreement or otherwise.

 

d.            To the extent allowed by law, Section 2.a and any license granted to Company hereunder includes all rights of paternity, integrity, disclosure and withdrawal and any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like. Furthermore, Consultant agrees that notwithstanding any rights of publicity, privacy or otherwise (whether or not statutory) anywhere in the world, in exchange for the sufficient compensation set forth herein, Company may and is hereby authorized to use Consultant’s name in connection with promotion of Company’s business, products and services and to allow others to do so. To the extent any of the foregoing is ineffective under applicable law, Consultant hereby provides any and all ratifications and consents necessary to accomplish the purposes of the foregoing to the extent possible. Consultant will confirm any such ratifications and consents from time to time as requested by Company.

 

e.            If any part of the Services or Inventions or information or other intellectual property provided hereunder is based on, incorporates, or is an improvement or derivative of, or cannot be reasonably and fully made, used, reproduced, distributed, modified, commercialized or otherwise exploited (collectively, “Exploit” or “Exploitation”) without using or violating technology or intellectual property rights owned by or licensed to Consultant and not assigned hereunder, Consultant hereby grants Company and its successors a perpetual, irrevocable, worldwide royalty-free, nonexclusive, sublicensable right and license to fully Exploit and exercise all such technology and intellectual property rights in support of Company’s exercise or Exploitation of the Services, Inventions, other intellectual property or other work performed or provided hereunder or any assigned rights (including any modifications, improvements and derivatives of any of the foregoing).

 

 

3.            Termination. Either party may terminate this Agreement upon ten (10) days’ written notice; provided that any termination of this Agreement by the Company shall require prior approval from the Company’s Board of Directors. Sections 2 (subject to the limitations set forth in Section 2.c) through 7 of this Agreement and any remedies for breach of this Agreement shall survive any termination or expiration. Company may communicate the obligations contained in this Agreement to any other (or potential) client or employer of Consultant.

 

4.            Relationship of the Parties; Independent Contractor; No Employee Benefits. Notwithstanding any provision hereof, Consultant is an independent contractor and is not an employee, agent, partner or joint venturer of Company and shall not bind nor attempt to bind Company to any contract. Consultant shall accept any directions issued by Company pertaining to the goals to be attained and the results to be achieved by Consultant, but Consultant shall be solely responsible for the manner and hours in which the Services are performed under this Agreement. Consultant shall not be eligible to participate in any of Company’s employee benefit plans, fringe benefit programs, group insurance arrangements or similar programs. Company shall not provide workers’ compensation, disability insurance, Social Security or unemployment compensation coverage or any other statutory benefit to Consultant. Consultant shall comply at Consultant’s expense with all applicable provisions of workers’ compensation laws, unemployment compensation laws, federal Social Security law, the Fair Labor Standards Act, federal, state and local income tax laws, and all other applicable federal, state and local laws, regulations and codes relating to terms and conditions of employment required to be fulfilled by employers or independent contractors.

 

5.            Assignment. This Agreement and the services contemplated hereunder are personal to Consultant and Consultant shall not have the right or ability to assign, transfer or subcontract any rights or obligations under this Agreement without the written consent of Company. Any attempt to do so shall be void. Company may fully assign and transfer this Agreement in whole or part.

 

6.            Notice. All notices under this Agreement shall be in writing and shall be deemed given when personally delivered, or three days after being sent by prepaid certified or registered U.S. mail to the address of the party to be noticed as set forth herein or to such other address as such party last provided to the other by written notice.

 

7.            Miscellaneous. Any breach of Section 2 will cause irreparable harm to Company for which damages would not be an adequate remedy, and therefore, Company will be entitled to injunctive relief with respect thereto in addition to any other remedies. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. No changes, additions, modifications or waivers to this Agreement will be effective unless in writing and signed by both parties. In the event that any provision of this Agreement shall be determined to be illegal or unenforceable, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the conflicts of laws provisions thereof. In any action or proceeding to enforce rights under this Agreement, the prevailing party will be entitled to recover costs and attorneys’ fees. Headings herein are for convenience of reference only and shall in no way affect interpretation of the Agreement. This Agreement represents the entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect to the subject matter hereof.

 

 

JOHN MARAGANORE			CITY THERAPEUTICS, INC.
(Consultant)
By:	/s/ John Maraganore		By:	/s/ Ari Nowacek
Name:	John Maraganore		Name:	Ari Nowacek
Date:	August 14, 2023		Title:	President
			Date:	August 14, 2023

 

 

EXHIBIT A

 

SERVICES

 

The services are as follows (and also include any other work consultant performs for the Company or related to the Company’s actual or proposed business, research or development):

 

·

Consultant will oversee and/or assist with the financial, operational, and business development needs of the Company.

 

EQUITY

 

Subject to the approval of Company’s Board of Directors or Compensation Committee, Consultant will be granted 750,000 shares of the Company’s Common Stock, and the purchase price per share will be equal to the fair market value per share on the date the stock is granted. The stock grant will be subject to the terms and conditions of the applicable of Stock Purchase Agreement to be approved by Company’s Board of Directors. Consultant will vest in in 25% of the shares after 12 months of continuous service and the remainder shall vest in equal monthly installments over the next 36 months of continuous service thereafter, as described in the applicable Stock Purchase Agreement. In addition, if (a) the Company is subject to a change in control before Consultant’s service terminates and (b) Consultant is subject to an involuntary termination within 12 months after the change in control, Consultant’s unvested shares shall vest. Consultant will also be entitled to reimbursement for expenses for which Consultant has received prior approval from Company.

 

EXPENSES

 

Expense reimbursement (1) limited to reasonable telephone and travel expenses authorized in writing by Company in advance, and (2) payable fifteen (15) days after itemized invoice and delivery of receipts.

 

 

 

Exhibit 10.14 

 

City Therapeutics, Inc.

 

November 10, 2023

 

John Maraganore

 

via email

 

Dear John,

 

The Board of Directors (the “Board”) of City Therapeutics, Inc. (the “Company”) is pleased to offer you a position as a member and the executive chair of the Board. This position will be effective, and contingent upon, (i) your execution of this letter, and (ii) the approval of the Board in due course. We appreciate your willingness to serve the Company in this position and we look forward to your valuable contributions to the Board and the Company. Capitalized terms used in this letter and not otherwise defined shall be as defined in Exhibit A.

 

Subject to the approval of the Board, and upon the closing of the Company’s Series A preferred stock financing (the “Series A Financing”) and the Company’s receipt of a 409A valuation thereafter, you will be granted an option to purchase that number of shares of the Company’s Common Stock that, when added to the number of shares of Company Common Stock that you have otherwise been issued, equals 5.00% of the Company’s Fully-Diluted Capitalization, calculated as of immediately following the Series A Financing (the “Top-Up Option”). The exercise price per share of the Top-Up Option will be determined by the Board when the Top-Up Option is granted. The Top-Up Option will be subject to the terms and conditions applicable to options granted under the Company’s 2023 Stock Plan (the “Plan”) and the applicable Stock Option Agreement. In addition, you will be eligible to be considered for additional equity grants in the future at the discretion of the Board.

 

The Company’s Common Stock underlying the Top-Up Option will be subject to the Company’s right of repurchase in the event that you depart your service to the Company before the shares are vested. Your shares will vest according to the following schedule: you will vest in 25% of the Top-Up Option shares after 12 months of continuous service from the closing of the Series A Financing and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. In addition, you will immediately vest in your remaining unvested Top-Up Option shares (if applicable) if you are subject to an Involuntary Termination.

 

You will be paid a cash retainer of $200,000 annual compensation, subject to any tax withholding obligations and paid in accordance with the Company’s regular payroll (the “Annual Retainer”). We will also reimburse you for reasonable expenses that you incur in connection with your services to the Company, including travel and attendance at meetings of the Board, or committees of the Board.

 

 

We plan to have at least one scheduled Board meeting every quarter. As a Board member, you are responsible for attending these scheduled meetings in person or, in the instances where in person attendance is not possible, by teleconference or videoconference.

 

In connection with your services to the Company, we expect that proprietary data and technical, business and financial information of the Company (“Confidential Information”) will be disclosed to you. To the extent that Confidential Information is not publicly known or not otherwise previously known by you without an obligation of confidentiality, you agree (during the term of your service and thereafter) not to use (except in connection with your services to the Company) or disclose Confidential Information to any third party and to take reasonable steps to maintain the confidential nature of all Confidential Information.

 

As a precautionary matter and to avoid any conflicts of interest, we ask you to refrain, while you are a member of the Board, from providing advice or otherwise providing services to any competitor of the Company. In addition, we ask that you inform the Board of any potential or actual, direct or indirect, conflict of interest that you think exists or may arise because of your relationship with the Company, so that we may come to a quick and mutually agreeable resolution. By signing this letter agreement, you also represent and warrant that you have no contractual commitments or other legal obligations to a third party that would prohibit you from performing your duties for the Company.

 

While you are a member of the Board, the Company will maintain directors and officers liability insurance with commercially reasonable terms and coverage limits. You will be insured under this policy and may see a copy of the policy upon request.

 

As part of our overall responsibilities, the Company and the Company’s stockholders reserve the right to remove any individual from the Board at any time in accordance with the provisions of applicable law, and subject to the terms of the Company’s Voting Agreement. You, of course, may also terminate your relationship with Company at any time. When you cease to be a member of the Board (whether at our request or your election), you must return all Confidential Information to the Company.

 

This letter agreement supersedes and replace any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitute the complete agreement between you and the Company regarding the subject matter set forth herein. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company. The terms of this letter agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this letter agreement or arising out of, related to, or in any way connected with, this letter agreement, your employment with the Company or any other relationship between you and the Company (the “Disputes”) will be governed by Delaware law, excluding laws relating to conflicts or choice of law. You and the Company submit to the exclusive personal jurisdiction of the federal and state courts located in Delaware in connection with any Dispute or any claim related to any Dispute.

 

We are excited about you joining as executive chair of our Board and look forward to working with you to help make the Company a success. You may indicate your agreement with these terms and accept this offer by signing and dating this letter agreement and returning it to me.

 

[Signature Page Follows]

 

 

Very truly yours,
City Therapeutics, Inc.
By:	/s/ Ari Nowacek
Name:	Ari Nowacek
Title:	President

I have read and accept this offer:
Signature:	/s/ John Maraganore
Name:	John Maraganore
Date:	November 10, 2023

 

 

Exhibit A – Definitions

 

“Cause” shall mean:

 

(a)            An unauthorized use or disclosure by you of the Company’s confidential information or trade secrets, which use or disclosure causes material harm to the Company;

 

(b)            A material breach by you of any agreement between the you and the Company that remains uncured 30 days after written notice thereof;

 

(c)            A material and repeated failure by you to comply with the Company’s written policies or rules that remains uncured 30 days after written notice thereof;

 

(d)            Your conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof;

 

(e)            Your gross negligence or willful misconduct;

 

(f)            A continuing failure by you to perform assigned duties after receiving written notification of such failure from the Board of Directors; or

 

(g)            A failure by you to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested your cooperation.

 

“Fully-Diluted Capitalization” means all shares of capital stock of the Company issued and outstanding, assuming conversion or exercise of all outstanding convertible securities, rights, options and warrants and shares of Common Stock reserved for issuance under the Plan.

 

“Involuntary Termination” shall mean the termination of your Service by reason of: (a) your involuntary separation from Service for reasons other than Cause or (b) your Resignation for Good Reason.

 

“Resignation for Good Reason” means your resignation from Service within 12 months after one of the following conditions has come into existence without your consent:

 

(a)            A reduction of your Annual Retainer by 10% or more without your consent;

 

(b)            A material diminution of your authority, duties or responsibilities; or

 

(c)            A breach by the Company of the terms of this letter.

 

A Resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 90 days after the condition comes into existence and the Company fails to remedy the condition within 30 days after receiving your written notice.

 

“Service” shall mean service as a director of the Company.

 

 

AMENDMENT NO. 1 TO THE

OFFER LETTER

 

This Amendment No. 1 to the Offer Letter (the “Amendment”) is entered into by and between City Therapeutics, Inc., a Delaware corporation (the “Company”) and John Maraganore (“you”), effective as of            April 17          , 2024 (the “Effective Date”).

 

WHEREAS, you and the Company previously entered into that Board Offer Letter, dated November 10, 2023 (the “Offer Letter”), which governs the terms of your position on the Company’s Board of Directors; and

 

WHEREAS, in connection with the Company’s Series A financing and to further induce the investors to purchase shares of the Company’s Series A Preferred Stock, you and the Company now wish to amend the Offer Letter.

 

NOW, THEREFORE, in consideration of the promises and conditions contained herein, the undersigned parties agree as follows:

 

1.                  The second paragraph (beginning with “Subject to the approval of the Board” is hereby amended and restated as follows:

 

“Subject to the approval of the Board, and upon the closing of the Company’s Series A preferred stock financing (the “Series A Financing”) and the Company’s receipt of a 409A valuation thereafter, you will be granted an option to purchase that number of shares of the Company’s Common Stock that, when added to the number of shares of Company stock that you otherwise have purchased or been issued, equals 5.00% of the Company’s Fully-Diluted Capitalization, calculated as of immediately following the Series A Financing (the “Top-Up Option”). The exercise price per share of the Top-Up Option will be determined by the Board when the Top-Up Option is granted. The Top-Up Option will be subject to the terms and conditions applicable to options granted under the Company’s 2023 Stock Plan (the “Plan”) and the applicable Stock Option Agreement. In addition, you will be eligible to be considered for additional equity grants in the future at the discretion of the Board.”

 

2.                  Miscellaneous. Except as otherwise set forth above, all of the terms of the Offer Letter shall remain and continue in full force and effect. This Amendment and the Offer Letter, including the exhibits attached thereto, constitute the complete agreement between you and the Company, contain all of the terms of your employment with the Company, and supersede any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company. This Amendment can only be amended or modified in a written agreement signed by both you and a duly authorized officer of the Company (other than you). This Amendment may be executed in two counterparts, each of which will be deemed an original, but both of which together will constitute one and the same instrument.

 

[Remainder of Page Left Intentionally Blank]

 

 

Please indicate your agreement with the above terms by signing below.

 

	Very truly yours,
	City Therapeutics, Inc.
	By:	/s/ Ari Nowacek
	Name: Ari Nowacek
	Title: President

 

I have read and accept this Amendment to my offer letter:

 

/s/ John Maraganore
John Maraganore
Date:	4/15/24

 

 

 

Exhibit 10.15

 

City Therapeutics, Inc.

 

November 9, 2024

 

Andrew Orth

 

Dear Andy:

 

City Therapeutics, Inc. (the “Company”) is pleased to offer you employment on the following terms:

 

1.             Position. Your title will be President and Chief Executive Officer, and you will report to the Company’s Board of Directors (the “Board”). This is a full-time position. While you serve as Chief Executive Officer, you will also serve on the Board. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. By signing this letter agreement, you confirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

 

2.             Cash Compensation. The Company will pay you a starting salary at the rate of $475,000 per year, payable in accordance with the Company’s standard payroll schedule. This salary will be subject to adjustment pursuant to the Company’s employee compensation policies in effect from time to time. In addition, you will be eligible to be considered for an incentive bonus for each fiscal year of the Company. The bonus (if any) will be awarded based on objective or subjective criteria approved by the Board. Your target bonus will be equal to 45% of your annual base salary. Any bonus for the fiscal year in which your employment begins will be prorated, based on the number of days you are employed by the Company during that fiscal year. Any bonus for a fiscal year will be paid within 2½ months after the close of that fiscal year, but only if you are still employed by the Company at the time of payment. The determinations of the Board with respect to your bonus will be final and binding.

 

3.             Stock Options. Subject to the approval of the Board, you will be awarded four option grants for a total of 1,370,000 shares of the Company’s Common Stock (the “Options”) as follows:

 

(a)            The first grant will represent 860,000 shares of your total Options and be subject to time-based vesting (the “Time-Based Option”). You will vest in 25% of the shares subject to the Time-Based Option after 12 months of continuous service from your start date with the Company, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement.

 

(b)            The second grant will represent 368,000 shares of your total Options and be subject to performance-based vesting (the “First Performance-Based Option”).  The shares subject to the First Performance-Based Option will vest immediately upon the Company’s first approval of an investigational new drug application (“IND”) or IND equivalent for any program under development, subject to your continuous service from your start date through the date of such approval and as described in the applicable Stock Option Agreement.

 

 

Andy Orth

November 9, 2024

Page 2

 

(c)            The third grant will represent 71,000 shares of your total Options and be subject to performance-based vesting (the “Second Performance-Based Option”).  The shares subject to the Second Performance-Based Option will vest immediately upon the closing of an initial public offering of the Company resulting in at least $150,000,000 of gross proceeds to the Company at a pre-money valuation for the Company of at least $500,000,000 (the “Qualified IPO”), subject to your continuous service from your start date through the closing date of the Qualified IPO and as described in the applicable Stock Option Agreement.

 

(d)            The fourth grant will represent 71,000 shares of your total Options and be subject to performance-based vesting (the “Third Performance-Based Option”).  The shares subject to the Third Performance-Based Option will vest immediately upon Successful Completion of a clinical trial that: (a) has a stated efficacy end point; (b) conducted by the Company; and (c) uses a drug candidate originated by the Company as the investigational drug product, subject to your continuous service from your start date through the date of such completion and as described in the applicable Stock Option Agreement. “Successful Completion” means, with respect to a clinical trial for a product and indication, completion of all patient enrollment, treatment and testing for such clinical trial in accordance with its applicable processes and delivery to the Company of the final report(s) for such clinical trial, where the results of such clinical trial are determined by the Board to be sufficient to progress the investigational product to the next phase of clinical testing in humans for such indication.

 

The Options will be subject to the terms and conditions applicable to options granted under the Company’s 2023 Stock Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreements. The exercise price per share of the Options will be determined by the Board when the Option is granted. You will immediately vest in your remaining unvested Option shares if (a) the Company is subject to a Change in Control before your service with the Company terminates and (b) you are subject to an Involuntary Termination upon or within 12 months after that Change in Control.

 

4.              Employee Benefits. As a regular employee of the Company, you will be eligible to participate in a number of Company-sponsored benefits available to other employees of the Company, subject to the terms and conditions of such benefit plans. In addition, you will be entitled to paid time-off in accordance with the Company’s PTO policy, as in effect from time to time.

 

5.              Severance Benefits. In the event you are subject to an Involuntary Termination, provided you satisfy the conditions described in Section 5(c) below, you will be entitled to the following benefits:

 

(a)            Salary Continuation. The Company will continue to pay your base salary for a period of 9 months after your Separation. Your base salary will be paid at the rate in effect at the time of your Separation and in accordance with the Company’s standard payroll procedures. The salary continuation payments will commence within 60 days after your Separation and, once they commence, will include any unpaid amounts accrued from the date of your Separation. However, if the 60-day period described in the preceding sentence spans two calendar years, then the payments will in any event begin in the second calendar year.

 

 

Andy Orth

November 9, 2024

Page 3

 

(b)            COBRA. Provided you elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following your Separation, the Company will pay the same portion of your monthly premium under COBRA as it pays for active employees and their eligible dependents until the earliest of (i) the close of the 9- month period following your Separation, (ii) the expiration of your continuation coverage under COBRA or (iii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment.

 

(c)            Conditions. This Section 5 will not apply unless you (i) have returned all Company property in your possession, (ii) have resigned as an officer and member of the Boards of Directors of the Company and all of its subsidiaries, to the extent applicable, and (iii) have executed a general release of all claims that you may have against the Company or persons affiliated with the Company. The release must be in the form reasonably prescribed by the Company, without alterations. You must execute and return the release on or before the date specified by the Company in the prescribed form (the “Release Deadline”). The Release Deadline will in no event be later than 50 days after your Separation. If you fail to return the release on or before the Release Deadline, or if you revoke the release, then you will not be entitled to the benefits described in this Section 5.

 

6.              Proprietary Information and Inventions Agreement. Like all Company employees, you will be required, as a condition of your employment with the Company, to sign the Company’s standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

7.              Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).

 

8.              Tax Matters.

 

(a)            Withholding. All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.

 

(b)            Section 409A. The payments and benefits provided for under this letter agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any ambiguity arising under this letter agreement shall be interpreted in a manner consistent with that intent. Nonetheless, to the extent any payment or benefit provided under this letter agreement is deemed to be nonqualified deferred compensation that is subject to Section 409A of the Code, and if the Company determines that you are a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of your Separation, then any such payment(s), to the extent they are subject to Section 409A of the Code, will be made or commence, as applicable, on the first business day following (i) expiration of the six-month period measured from your Separation or (ii) the date of your death, with any payment installments that otherwise would have been paid prior to such date paid in a lump sum at that time. In addition, for purposes of Section 409A of the Code, each salary continuation payment under Section 5(a) is hereby designated as a separate payment.

 

 

Andy Orth

November 9, 2024

Page 4

 

(c)            Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or its Board related to tax liabilities arising from your compensation.

 

9.              Interpretation, Amendment and Enforcement. This letter agreement and Exhibit A supersede and replace any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitute the complete agreement between you and the Company regarding the subject matter set forth herein. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company.

 

10.            Definitions.

 

“Cause” means any of the following by you: (a) participation in or commission of any act that would constitute a felony or a crime involving fraud, dishonesty, or moral turpitude under the laws of the United States or any state thereof; (b) violation of any federal or state law or regulation applicable to the Company’s business that could result in material harm to the company or its operations; (c) material violation of any agreement between you and the Company, any Company policy, or any statutory duty owed to the Company or its stockholders; (d) an act of gross misconduct or of clear and material insubordination; (e) commission or attempted commission of, or participation in, a fraud or act of dishonesty against the Company; or (f)  any unauthorized act that results in material harm to the Company’s business.

 

“Change in Control” means (a) the consummation of a merger or consolidation of the Company with or into another entity, (b) a sale of all or substantially all of the assets of the Company or (c) the dissolution, liquidation or winding up of the Company. The foregoing notwithstanding, a merger or consolidation of the Company does not constitute a “Change in Control” if immediately after the merger or consolidation a majority of the voting power of the capital stock of the continuing or surviving entity, or any direct or indirect parent corporation of the continuing or surviving entity, will be owned by the persons who were the Company’s stockholders immediately prior to the merger or consolidation in substantially the same proportions as their ownership of the voting power of the Company’s capital stock immediately prior to the merger or consolidation.

 

 

Andy Orth

November 9, 2024

Page 5

 

“Involuntary Termination” means either (a) your Termination Without Cause or (b) your Resignation for Good Reason.

 

“Resignation for Good Reason” means a Separation as a result of your resignation within 12 months after one of the following conditions has come into existence without your consent:

 

(a)            A reduction of your base salary by 10% or more without your consent; or

 

(b)            A material diminution of your authority, duties or responsibilities.

 

A Resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 90 days after the condition comes into existence and the Company fails to remedy the condition within 30 days after receiving your written notice.

 

“Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.

 

“Termination Without Cause” means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).

 

* * * * *

 

 

Andy Orth

November 9, 2024

Page 6

 

We hope that you will accept our offer to join the Company. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed duplicate original of this letter agreement and the enclosed Proprietary Information and Inventions Agreement and returning them to me. This offer, if not accepted, will expire at the close of business on [November 15, 2024]. As required by law, your employment with the Company is contingent upon your providing legal proof of your identity and authorization to work in the United States. Your employment is also contingent upon your starting work with the Company on or before January 1, 2025 (such date, the “Start Date”).

 

	Very truly yours,
	City Therapeutics Inc.
	By:	/s/ John Maraganore
	Name: John Maraganore
	Title: President

 

I have read and accept this employment offer:

 

/s/ Andy Orth
Signature of Employee
Dated:	November 13, 2024

 

Attachment

 

Exhibit A: Proprietary Information and Inventions Agreement

 

 

 

Exhibit 10.16

 

City Therapeutics, Inc.

 

March 21, 2025

 

Baisong Mei, MD, PhD

 

Dear Baisong:

 

City Therapeutics, Inc. (the “Company”) is pleased to offer you employment on the following terms:

 

1.         Position. Your initial title will be Chief Medical Officer, and you will initially report to Andrew Orth, the Company’s Chief Executive Officer. This is a full-time position. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. By signing this letter agreement, you confirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

 

2.         Cash Compensation. The Company will pay you a starting salary at the rate of $475,000 per year, payable in accordance with the Company’s standard payroll schedule. This salary will be subject to adjustment pursuant to the Company’s employee compensation policies in effect from time to time. In addition, you will be eligible to be considered for an incentive bonus for each fiscal year of the Company. The bonus (if any) will be awarded based on objective or subjective criteria established by the Company’s Chief Executive Officer and approved by the Company’s Board of Directors. Your target bonus will be equal to 35% of your annual base salary. Any bonus for the fiscal year in which your employment begins will be prorated, based on the number of days you are employed by the Company during that fiscal year. Any bonus for a fiscal year will be paid within 2½ months after the close of that fiscal year, but only if you are still employed by the Company at the time of payment. The determinations of the Company’s Board of Directors with respect to your bonus will be final and binding.

 

3.         Sign-On Bonus. The Company will pay you a sign-on bonus of $50,000 (the “Sign-On Bonus”), less all applicable withholding and payroll taxes and other deductions required by law. The Sign-On Bonus shall be paid within 30 days following the Start Date (as defined below), provided that you are still employed by the Company at the time of such payment. If your employment is terminated within one year of the Start Date for any reason other than an Involuntary Termination then you agree that you shall pay the Company 100% of the Sign-On Bonus.

 

 

Baisong Mei, MD, PhD

March 21, 2025

Page 2

 

4.          Stock Options. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be awarded two option grants for a total of 328,400 shares of the Company’s Common Stock (the “Options”). One of the Options will represent 229,880 shares and be subject to time-based vesting (the “Time-Based Option”), a second one will represent 98,520 shares and be subject to performance-based vesting (the “Performance-Based Option”). The exercise price per share of the Options will be determined by the Board of Directors or the Compensation Committee when the Option is granted. The Options will be subject to the terms and conditions applicable to options granted under the Company’s 2023 Stock Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreements. You will vest in 25% of the shares subject to the Time-Based Option after 12 months of continuous service from your start date with the Company, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. The shares subject to the Performance-Based Option will vest immediately upon the completion of the first human proof of concept clinical trial for a City Therapeutics product that demonstrates >80% knockdown and acceptable tolerability, in each case, as determined by the Board, subject to your continuous service from your start date through the date of such approval and as described in the applicable Stock Option Agreement. You will immediately vest in your remaining unvested Option shares if (a) the Company is subject to a Change in Control before your service with the Company terminates and (b) you are subject to an Involuntary Termination upon or within 12 months after that Change in Control.

 

5.         Employee Benefits. As a regular employee of the Company, you will be eligible to participate in a number of Company-sponsored benefits available to other employees of the Company, subject to the terms and conditions of such benefit plans. In addition, you will be entitled to paid time-off in accordance with the Company’s PTO policy, as in effect from time to time.

 

6.         Severance Benefits. In the event you are subject to an Involuntary Termination, provided you satisfy the conditions described in Section 6(c) below, you will be entitled to the following benefits:

 

(a)        Salary Continuation. The Company will continue to pay your base salary for a period of 9 months after your Separation. Your base salary will be paid at the rate in effect at the time of your Separation and in accordance with the Company’s standard payroll procedures. The salary continuation payments will commence within 60 days after your Separation and, once they commence, will include any unpaid amounts accrued from the date of your Separation. However, if the 60-day period described in the preceding sentence spans two calendar years, then the payments will in any event begin in the second calendar year.

 

(b)        COBRA. Provided you elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following your Separation, the Company will pay the same portion of your monthly premium under COBRA as it pays for active employees and their eligible dependents until the earliest of (i) the close of the 9-month period following your Separation, (ii) the expiration of your continuation coverage under COBRA or (iii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment.

 

(c)        Conditions. This Section 6 will not apply unless you (i) have returned all Company property in your possession, (ii) have resigned as an officer and member of the Boards of Directors of the Company and all of its subsidiaries, to the extent applicable, and (iii) have executed a general release of all claims that you may have against the Company or persons affiliated with the Company. The release must be in the form reasonably prescribed by the Company, without alterations. You must execute and return the release on or before the date specified by the Company in the prescribed form (the “Release Deadline”). The Release Deadline will in no event be later than 50 days after your Separation. If you fail to return the release on or before the Release Deadline, or if you revoke the release, then you will not be entitled to the benefits described in this Section 6.

 

 

Baisong Mei, MD, PhD

March 21, 2025

Page 3

  

7.         Proprietary Information and Inventions Agreement. Like all Company employees, you will be required, as a condition of your employment with the Company, to sign the Company’s standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

8.          Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).

 

9.          Tax Matters.

 

(a)        Withholding. All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.

 

(b)        Section 409A. The payments and benefits provided for under this letter agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any ambiguity arising under this letter agreement shall be interpreted in a manner consistent with that intent. Nonetheless, to the extent any payment or benefit provided under this letter agreement is deemed to be nonqualified deferred compensation that is subject to Section 409A of the Code, and if the Company determines that you are a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of your Separation, then any such payment(s), to the extent they are subject to Section 409A of the Code, will be made or commence, as applicable, on the first business day following (i) expiration of the six-month period measured from your Separation or (ii) the date of your death, with any payment installments that otherwise would have been paid prior to such date paid in a lump sum at that time. In addition, for purposes of Section 409A of the Code, each salary continuation payment under Section 6(a) is hereby designated as a separate payment.

 

(c)        Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or its Board of Directors related to tax liabilities arising from your compensation.

 

 

Baisong Mei, MD, PhD

March 21, 2025

Page 4

 

10.       Interpretation, Amendment and Enforcement. This letter agreement and Exhibit A supersede and replace any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitute the complete agreement between you and the Company regarding the subject matter set forth herein. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company.

 

11.        Definitions.

 

“Cause” means any of the following by you: (a) participation in or commission of any act that would constitute a felony or a crime involving fraud, dishonesty, or moral turpitude under the laws of the United States or any state thereof; (b) violation of any federal or state law or regulation applicable to the Company’s business that could result in material harm to the company or its operations; (c) material violation of any agreement between you and the Company, any Company policy, or any statutory duty owed to the Company or its stockholders; (d) an act of gross misconduct or of clear and material insubordination; (e) commission or attempted commission of, or participation in, a fraud or act of dishonesty against the Company; or (f) any unauthorized act that results in material harm to the Company’s business.

 

“Change in Control” means (a) the consummation of a merger or consolidation of the Company with or into another entity, (b) a sale of all or substantially all of the assets of the Company or (c) the dissolution, liquidation or winding up of the Company. The foregoing notwithstanding, a merger or consolidation of the Company does not constitute a “Change in Control” if immediately after the merger or consolidation a majority of the voting power of the capital stock of the continuing or surviving entity, or any direct or indirect parent corporation of the continuing or surviving entity, will be owned by the persons who were the Company’s stockholders immediately prior to the merger or consolidation in substantially the same proportions as their ownership of the voting power of the Company’s capital stock immediately prior to the merger or consolidation.

 

“Involuntary Termination” means either (a) your Termination Without Cause or (b) your Resignation for Good Reason.

 

“Resignation for Good Reason” means a Separation as a result of your resignation within 12 months after one of the following conditions has come into existence without your consent:

 

(a)        A reduction of your base salary by 10% or more without your consent; or

 

(b)        A material diminution of your authority, duties or responsibilities;

 

 

Baisong Mei, MD, PhD 

March 21, 2025 

Page 5

 

A Resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 90 days after the condition comes into existence and the Company fails to remedy the condition within 30 days after receiving your written notice.

 

“Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.

 

“Termination Without Cause” means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).

 

* * * * *

 

 

Baisong Mei, MD, PhD

March 21, 2025

Page 6

 

We hope that you will accept our offer to join the Company. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed duplicate original of this letter agreement and the enclosed Proprietary Information and Inventions Agreement and returning them to me. This offer, if not accepted, will expire at the close of business on March 25, 2025. As required by law, your employment with the Company is contingent upon your providing legal proof of your identity and authorization to work in the United States. Your employment is also contingent upon your starting work with the Company on or before March 31, 2025 (such date, the “Start Date”).

 

			Very truly yours,
			City Therapeutics Inc.
			By:	/s/ Andrew Orth
				Andrew Orth, Chief Executive Officer
I have read and accept this employment offer:
/s/ Baisong Mei
Signature of Employee
Dated:	March 21, 2025

 

Attachment

 

Exhibit A: Proprietary Information and Inventions Agreement

 

 

 

Exhibit 10.17

 

City Therapeutics, Inc.

 

May 8^th , 2024

 

Tracy Zimmermann

 

Dear Tracy:

 

City Therapeutics, Inc. (the “Company”) is pleased to offer you employment on the following terms:

 

1.            Position. Your initial title will be Chief Scientific Officer, and you will initially report to the Company’s President and Chief Executive Officer. This is a full-time position. While you render services to the Company, you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) that would create a conflict of interest with the Company. By signing this letter agreement, you confirm to the Company that you have no contractual commitments or other legal obligations that would prohibit you from performing your duties for the Company.

 

2.            Cash Compensation. The Company will pay you a starting salary at the rate of $480,000 per year, payable in accordance with the Company’s standard payroll schedule. This salary will be subject to adjustment pursuant to the Company’s employee compensation policies in effect from time to time. In addition, you will be eligible to be considered for an incentive bonus for each fiscal year of the Company. The bonus (if any) will be awarded based on objective or subjective criteria established by the Company’s Chief Executive Officer and approved by the Company’s Board of Directors. Your target bonus will be equal to 35% of your annual base salary. Any bonus for the fiscal year in which your employment begins will be prorated, based on the number of days you are employed by the Company during that fiscal year. Any bonus for a fiscal year will be paid within 2½ months after the close of that fiscal year, but only if you are still employed by the Company at the time of payment. The determinations of the Company’s Board of Directors with respect to your bonus will be final and binding.

 

3.            Sign-On Bonus. The Company will pay you a sign-on bonus of $80,000 (the “Sign-On Bonus”), less all applicable withholding and payroll taxes and other deductions required by law. The Sign-On Bonus shall be paid within thirty (30) days following the Start Date (as defined below); provided that, you are still employed by the Company at the time of such payment. If your employment is terminated within one (1) year of the Start Date for any reason other than an Involuntary Termination then you agree that you shall pay the Company one hundred percent (100%) of the Sign-On Bonus.

 

4.            Stock Options. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be awarded three option grants for a total of 408,891 shares of the Company’s Common Stock (the “Options”), which together represent 1.5% of the fully diluted shares of the Company on a pro forma basis assuming the final expected closing of the sale and issuance by the Company of shares of Series A preferred stock pursuant to the Series A Preferred Stock Purchase Agreement of the Company dated as of April 17, 2024. One of the Options will represent 228,979 shares and be subject to time-based vesting (the “Time-Based Option”), a second one will represent 98,134 shares and be subject to performance-based vesting (the “First Performance-Based Option”) and the third one will represent 81,778 shares and be subject to performance-based vesting (the “Second Performance-Based Option”).  The exercise price per share of the Options will be determined by the Board of Directors or the Compensation Committee when the Option is granted. The Options will be subject to the terms and conditions applicable to options granted under the Company’s 2023 Stock Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreements. You will vest in 25% of the shares subject to the Time-Based Option after 12 months of continuous service from your start date with the Company, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. The shares subject to the First Performance-Based Option will vest immediately upon the Company’s first approval of an investigational new drug application (“IND”) or IND equivalent for any program under development, subject to your continuous service from your start date through the date of such approval and as described in the applicable Stock Option Agreement. The shares subject to the Second Performance-Based Option will vest immediately upon first human POC data. You will immediately vest in your remaining unvested Option shares if (a) the Company is subject to a Change in Control before your service with the Company terminates and (b) you are subject to an Involuntary Termination upon or within 12 months after that Change in Control.

 

 

Tracy Zimmermann

May 8^th, 2024

Page 2

 

5.            Employee Benefits. As a regular employee of the Company, you will be eligible to participate in a number of Company-sponsored benefits available to other employees of the Company, subject to the terms and conditions of such benefit plans. In addition, you will be entitled to paid time-off in accordance with the Company’s PTO policy, as in effect from time to time.

 

6.            Severance Benefits. In the event you are subject to an Involuntary Termination, provided you satisfy the conditions described in Section 6(c) below, you will be entitled to the following benefits:

 

(a)           Salary Continuation. The Company will continue to pay your base salary for a period of 9 months after your Separation. Your base salary will be paid at the rate in effect at the time of your Separation and in accordance with the Company’s standard payroll procedures. The salary continuation payments will commence within 60 days after your Separation and, once they commence, will include any unpaid amounts accrued from the date of your Separation. However, if the 60-day period described in the preceding sentence spans two calendar years, then the payments will in any event begin in the second calendar year.

 

(b)           COBRA. Provided you elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) following your Separation, the Company will pay the same portion of your monthly premium under COBRA as it pays for active employees and their eligible dependents until the earliest of (i) the close of the 9- month period following your Separation, (ii) the expiration of your continuation coverage under COBRA or (iii) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment.

 

(c)           Conditions. This Section 6 will not apply unless you (i) have returned all Company property in your possession, (ii) have resigned as an officer and member of the Boards of Directors of the Company and all of its subsidiaries, to the extent applicable, and (iii) have executed a general release of all claims that you may have against the Company or persons affiliated with the Company. The release must be in the form reasonably prescribed by the Company, without alterations. You must execute and return the release on or before the date specified by the Company in the prescribed form (the “Release Deadline”). The Release Deadline will in no event be later than 50 days after your Separation. If you fail to return the release on or before the Release Deadline, or if you revoke the release, then you will not be entitled to the benefits described in this Section 6.

 

 

Tracy Zimmermann

May 8^th, 2024

Page 3

 

7.            Proprietary Information and Inventions Agreement. Like all Company employees, you will be required, as a condition of your employment with the Company, to sign the Company’s standard Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

8.            Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and a duly authorized officer of the Company (other than you).

 

9.            Tax Matters.

 

(a)           Withholding. All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.

 

(b)          Section 409A. The payments and benefits provided for under this letter agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and any ambiguity arising under this letter agreement shall be interpreted in a manner consistent with that intent. Nonetheless, to the extent any payment or benefit provided under this letter agreement is deemed to be nonqualified deferred compensation that is subject to Section 409A of the Code, and if the Company determines that you are a “specified employee” under Section 409A(a)(2)(B)(i) of the Code at the time of your Separation, then any such payment(s), to the extent they are subject to Section 409A of the Code, will be made or commence, as applicable, on the first business day following (i) expiration of the six-month period measured from your Separation or (ii) the date of your death, with any payment installments that otherwise would have been paid prior to such date paid in a lump sum at that time. In addition, for purposes of Section 409A of the Code, each salary continuation payment under Section 6(a) is hereby designated as a separate payment.

 

 

Tracy Zimmermann

May 8^th, 2024

Page 4

 

(c)           Tax Advice. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make any claim against the Company or its Board of Directors related to tax liabilities arising from your compensation.

  

10.           Interpretation, Amendment and Enforcement. This letter agreement and Exhibit A supersede and replace any prior agreements, representations or understandings (whether written, oral, implied or otherwise) between you and the Company and constitute the complete agreement between you and the Company regarding the subject matter set forth herein. This letter agreement may not be amended or modified, except by an express written agreement signed by both you and a duly authorized officer of the Company.

 

11.           Definitions.

 

“Cause” means any of the following by you: (a) participation in or commission of any act that would constitute a felony or a crime involving fraud, dishonesty, or moral turpitude under the laws of the United States or any state thereof; (b) violation of any federal or state law or regulation applicable to the Company’s business that could result in material harm to the company or its operations; (c) material violation of any agreement between you and the Company, any Company policy, or any statutory duty owed to the Company or its stockholders; (d) an act of gross misconduct or of clear and material insubordination; (e) commission or attempted commission of, or participation in, a fraud or act of dishonesty against the Company; or (f)  any unauthorized act that results in material harm to the Company’s business.

 

“Change in Control” means (a) the consummation of a merger or consolidation of the Company with or into another entity, (b) a sale of all or substantially all of the assets of the Company or (c) the dissolution, liquidation or winding up of the Company. The foregoing notwithstanding, a merger or consolidation of the Company does not constitute a “Change in Control” if immediately after the merger or consolidation a majority of the voting power of the capital stock of the continuing or surviving entity, or any direct or indirect parent corporation of the continuing or surviving entity, will be owned by the persons who were the Company’s stockholders immediately prior to the merger or consolidation in substantially the same proportions as their ownership of the voting power of the Company’s capital stock immediately prior to the merger or consolidation.

 

“Involuntary Termination” means either (a) your Termination Without Cause or (b) your Resignation for Good Reason.

 

“Resignation for Good Reason” means a Separation as a result of your resignation within 12 months after one of the following conditions has come into existence without your consent:

 

(a)            A reduction of your base salary by 10% or more without your consent; or

 

 

Tracy Zimmermann

May 8^th, 2024

Page 5

 

(b)            A material diminution of your authority, duties or responsibilities;

 

A Resignation for Good Reason will not be deemed to have occurred unless you give the Company written notice of the condition within 90 days after the condition comes into existence and the Company fails to remedy the condition within 30 days after receiving your written notice.

 

“Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.

 

“Termination Without Cause” means a Separation as a result of a termination of your employment by the Company without Cause, provided you are willing and able to continue performing services within the meaning of Treasury Regulation 1.409A-1(n)(1).

 

* * * * *

 

 

Tracy Zimmermann

May 8^th, 2024

Page 6

 

We hope that you will accept our offer to join the Company. You may indicate your agreement with these terms and accept this offer by signing and dating both the enclosed duplicate original of this letter agreement and the enclosed Proprietary Information and Inventions Agreement and returning them to me. This offer, if not accepted, will expire at the close of business on May 13^th, 2024. As required by law, your employment with the Company is contingent upon your providing legal proof of your identity and authorization to work in the United States. Your employment is also contingent upon your starting work with the Company on or before June 3^rd, 2024 (such date, the “Start Date”).

 

			Very truly yours,
			City Therapeutics Inc.
			By:	/s/ Ari Nowacek
			Title:	President
I have read and accept this employment offer:
/s/ Tracy Zimmermann
Signature of Employee
Dated:	May 13, 2024

 

Attachment

 

Exhibit A: Proprietary Information and Inventions Agreement

 

 

 

Exhibit 10.18

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (this “Lease”) is made this 19 day of December, 2023 (the “Effective Date”), between ARE-MA REGION NO. 58, LLC, a Delaware limited liability company (“Landlord”), and CITY THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

 

BASIC LEASE PROVISIONS

 

Address of Building:		399 Binney Street, Cambridge, Massachusetts
Premises:		Those portions of the Building in the Project consisting of (a) a portion of the first floor of the Building, commonly known as Suite 100, containing approximately 25,860 rentable square feet (the “First Floor Premises”), (b) a portion of the lower level floor of the Building, commonly known as Suite 001, containing approximately 4,640 rentable square feet (the “Lower Level Premises”), and (c) a portion of the penthouse floor of the Building, commonly known as Room 400 (the “Penthouse  Premises”), containing approximately 690 rentable square feet of mechanical space, all as determined by Landlord, all as shown on Exhibit A.
Building:		The building in the Project currently known and numbered as 399 Binney Street, Cambridge, Massachusetts, and located on the real property owned by Landlord and described on Exhibit B (the “Property”).
Project:		The project commonly known as One Kendall Square, located on the Property and property owned by affiliates of Landlord and operated as a single mixed-use complex.
Base Rent:		Initially, $112.00 per rentable square foot of the Premises per year, subject to adjustment pursuant to Section 4 hereof.
Rentable Area of Premises:		31,190 sq. ft.
Rentable Area of Building:		165,398 sq. ft.
Rentable Area of Project:		815,501 sq. ft.
Tenant’s Share of Operating Expenses of Building:		18.86%
Building’s Share of Operating Expenses of Project:		20.28%
Security Deposit:		$1,455,533.33
Rent Adjustment Percentage:		3%
Base Term:		Beginning on the Commencement Date and ending 63 months from the first day of the first full month following the Commencement Date. For clarity, if the Commencement Date occurs on the first day of a month, the expiration of the Base Term shall be measured from that date. If the Commencement Date occurs on a day other than the first day of a month, the expiration of the Base Term shall be measured from the first day of the following month.
Permitted Use:		Research and development laboratory, pilot manufacturing, general office and other related uses consistent with the character of the Project and otherwise in compliance with the provisions of Section 7 hereof.

 

 

Address for Rent Payment:	Landlord’s Notice Address:
To be provided	26 North Euclid Avenue
Prior to Commencement Date	Pasadena, CA 91101
	Attention: Corporate Secretary
	Email: legalnotice@are.com

 

Tenant’s Notice Address	Tenant’s Notice Address
Prior to Commencement Date:	After Commencement Date:
188 E. Blaine Street, Suite 125	399 Binney Street, Suite 100
Seattle, WA 98102-3983	Cambridge, MA 02139
Attention: Chief Operating Officer	Attention: Chief Operating Officer
Email: [***]	Email: [***]

 

The following Exhibits and Addenda are attached hereto and incorporated herein by this reference:

 

x EXHIBIT A – PREMISES DESCRIPTION	x EXHIBIT B – DESCRIPTION OF PROJECT
x EXHIBIT C – WORK LETTER	x EXHIBIT D – COMMENCEMENT DATE
x EXHIBIT E – RULES AND REGULATIONS	x EXHIBIT F – TENANT’S PERSONAL PROPERTY
x EXHIBIT G – LANDLORD’S EQUIPMENT	x EXHIBIT H – CONTROL AREAS
x EXHIBIT I – BILL OF SALE

 

1.             Lease of Premises. Upon and subject to all of the terms and conditions hereof, Landlord hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord. The portions of the Project that are for the non-exclusive use of tenants of the Project are collectively referred to herein as the “Common Areas.” The Common Areas shall include, without limitation, any amenities now or hereafter located in, on or otherwise serving the Project, if any, as may exist from time to time (as determined by Landlord, in Landlord’s sole and absolute discretion) and made available, except for temporary interruptions and/or Force Majeure (as defined in Section 34), for use by Tenant and one or more other tenants of the Project and/or third parties (each, a “Project Amenity” and collectively, the “Project Amenities”), which Project Amenities may include a scientific amenity center. Landlord reserves the right to modify Common Areas, provided that such modifications do not materially adversely affect Tenant’s use of the Premises for the Permitted Use. From and after the Commencement Date through the expiration of the Term, Tenant shall have access to the Building and the Premises and the loading dock and freight elevator located in the Building, 24 hours a day, 7 days a week, except in the case of emergencies, as the result of Legal Requirements, the performance by Landlord of any installation, maintenance or repairs for which Landlord is responsible under this Lease, and otherwise subject to the terms of this Lease.

 

2.              Delivery; Acceptance of Premises; Commencement Date. So long as Tenant has delivered the Letter of Credit required pursuant to Section 6 and a certificate of insurance reflecting the insurance coverage required to be maintained by Tenant under Section 17, the “Commencement Date” shall be the date that is 1 business day after the mutual execution and delivery of this Lease by Landlord and Tenant. Upon request of Landlord, Tenant shall execute and deliver a written acknowledgment of the Commencement Date, and the expiration date of the Term when such are established in the form of the “Acknowledgement of Commencement Date” attached to this Lease as Exhibit D; provided, however, Tenant’s failure to execute and deliver such acknowledgment shall not affect Landlord’s rights hereunder. The “Term” of this Lease shall be the Base Term, as defined in the Basic Lease Provisions and the Extension Term which Tenant may elect pursuant to Section 4 hereof.

 

Following the Commencement Date, Landlord shall perform certain improvements in the Premises requested by Tenant and approved by Landlord pursuant to the Work Letter attached hereto as Exhibit C (the “Tenant Improvements”). Tenant acknowledges that Landlord shall require access to portions of the Premises after the Commencement Date in order to construct the Tenant Improvements. Landlord and its contractors and agents shall have the right to enter the Premises to complete the Tenant Improvements, and Tenant shall cooperate with Landlord in connection with the same. Such access to construct the Tenant Improvements shall be pursuant to a mutually agreeable schedule. Tenant acknowledges that Landlord’s completion of the Tenant Improvements may temporarily adversely affect Tenant’s use and occupancy of the Premises. Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s use of the Premises for the Permitted Use in connection with its performance of the Tenant Improvements. Tenant waives all claims against Landlord for rent abatement in connection with the Tenant Improvements. Tenant shall have no right to seek damages (including abatement of Base Rent) or to cancel or terminate this Lease because of the Tenant Improvements.

 

 

During the Term, Tenant shall have the right to use the office furniture, lab benches, casework and lab equipment identified on Exhibit G attached hereto (“Landlord’s FF&E”). Prior to the Commencement Date, Tenant shall notify Landlord in writing if there is any Landlord’s FF&E that Tenant does not want to use during the Term. Landlord, at its sole cost and expense, agrees to remove of any unwanted Landlord’s FF&E from the Premises within 30 days after the Commencement Date. Tenant shall have no right to remove any of Landlord’s FF&E from the Premises, and Landlord’s FF&E which will remain in the Premises shall be returned to Landlord at the expiration or earlier termination of the Term in substantially the same condition as received by Tenant, except for ordinary wear and tear and casualty.

 

Concurrent with the mutual execution and delivery of this Lease by the parties, Landlord shall execute a bill of sale in the form attached to this Lease as Exhibit I (“Bill of Sale”) transferring the laboratory equipment listed on Schedule 1 to the Bill of Sale (the “Transferred Lab Equipment”) to Tenant as of the Commencement Date in consideration for $1.00. To the extent that there remain any existing warranties with respect to the Transferred Lab Equipment, Landlord shall use commercially reasonably efforts to transfer such existing warranties to Tenant. Tenant shall be responsible for the repair and maintenance of the Transferred Lab Equipment and Tenant shall be responsible for removing the Transferred Lab Equipment from the Premises at the expiration or earlier termination of the Term in accordance with the terms of Section 28.

 

Except as set forth in the Work Letter (including, without limitation, Section 3(b) of the Work Letter) and as otherwise expressly set forth in this Lease (including, without limitation, the provisions of the immediately succeeding paragraph): (i) Tenant shall accept the Premises in their condition as of the Commencement Date; (ii) Landlord shall have no obligation for any defects in the Premises; and (iii) Tenant’s taking possession of the Premises shall be conclusive evidence that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken. Any occupancy of the Premises by Tenant before the Commencement Date shall be subject to all of the terms and conditions of this Lease, including the obligation to pay Base Rent and Operating Expenses.

 

Landlord shall, at its sole cost and expense (which shall not constitute an Operating Expense), be responsible for any repairs that are required to be made to the Building Systems (as defined in Section 13) serving the Premises of which Tenant notifies Landlord in writing within 60 calendar days after the Commencement Date, unless Tenant or any Tenant Party was responsible for the cause of such repair, in which case Tenant shall pay the cost.

 

Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Project, and/or the suitability of the Premises or the Project for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises or the Project are suitable for the Permitted Use. This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof and supersedes any and all prior representations, inducements, promises, agreements, understandings and negotiations that are not contained herein. Landlord in executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments and agreements contained herein.

 

 

3.             Rent.

 

(a)           Base Rent. Base Rent for the month in which Commencement Date occurs (or, if the Commencement Date does not occur on the first day of a calendar month, Base Rent for the first full calendar month following the Commencement Date) and the Security Deposit shall be due and payable concurrently with Tenant’s delivery of an executed copy of this Lease to Landlord. Tenant shall pay to Landlord (or to such other party as Landlord may from time to time specify in writing) in advance, without demand, abatement, deduction or set-off (except as otherwise expressly set forth in this Lease), monthly installments of Base Rent on or before the first day of each calendar month during the Term hereof after the Commencement Date, in lawful money of the United States of America, to the physical address designated by Landlord or by federally insured electronic fund transfer (“EFT”) via wire transfer, Society for Worldwide Interbank Financial Communications (SWIFT) or automated clearing house (ACH) pursuant to the instructions provided by Landlord. Payments of Base Rent for any fractional calendar month shall be prorated. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any Rent (as defined in Section 5) due hereunder except for any abatement as may be expressly provided in this Lease.

 

Notwithstanding anything contained herein to the contrary, so long as Tenant is not in Default pursuant to the provisions of Section 20 hereof, Base Rent shall be abated for the months of January, February and March 2024 (the “Abatement Period”). For the avoidance of doubt, Tenant shall be required to pay Operating Expenses and all other amounts payable under the Lease during the Abatement Period.

 

(b)           Additional Rent. In addition to Base Rent, Tenant agrees to pay to Landlord as additional rent (“Additional Rent”): (i) commencing on the Commencement Date, Tenant’s Share of “Operating Expenses” (as defined in Section 5), and (ii) any and all other amounts Tenant assumes or agrees to pay under the provisions of this Lease, including, without limitation, any and all other sums that may become due by reason of any default of Tenant or failure to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, after any applicable notice and cure period. Tenant shall pay to Landlord (or to such other party as Landlord may from time to time specify in writing) any and all Additional Rent to the physical address designated by Landlord for the payment of Base Rent or by federally insured EFT via wire, SWIFT or ACH pursuant to the instructions provided by Landlord.

 

4.             Base Rent Adjustments. Base Rent shall be increased on each annual anniversary of the Commencement Date (provided, however, that if the Commencement Date occurs on a day other than the first day of a calendar month, then Base Rent shall be increased on each annual anniversary of the first day of the first full calendar month immediately following the Commencement Date) (each an “Adjustment Date”) by multiplying the Base Rent payable immediately before such Adjustment Date by the Rent Adjustment Percentage and adding the resulting amount to the Base Rent payable immediately before such Adjustment Date. Base Rent, as so adjusted, shall thereafter be due as provided herein. Base Rent adjustments for any fractional calendar month shall be prorated.

 

5.             Operating Expense Payments. Landlord shall deliver to Tenant a written estimate of Operating Expenses for each calendar year during the Term (the “Annual Estimate”), which may be revised by Landlord from time to time during such calendar year. Commencing on the Commencement Date, and continuing thereafter on the first day of each month during the Term, Tenant shall pay Landlord an amount equal to 1/12th of Tenant’s Share of the Annual Estimate. Payments for any fractional calendar month shall be prorated.

 

 

The term “Operating Expenses” means all costs and expenses of any kind or description whatsoever incurred or accrued each calendar year by Landlord with respect to the Building (including the Building’s Share of all costs and expenses of any kind or description incurred or accrued by Landlord with respect to the Project which are not specific to the Building) including, without limitation, (i) Taxes (as defined in Section 9), (ii) the cost of upgrades to the Building or Project or enhanced services provided at the Building and/or Project which are intended to encourage social distancing, promote and protect health and physical well-being and/or intended to limit the spread of Infectious Conditions (as defined in Section 26), (iii) the cost of the Project Amenities (including, without limitation, reimbursement by Landlord to affiliates of Landlord for market rent paid by such affiliates to Landlord for Project Amenities space, commercially reasonable reduced rent, commercially reasonable subsidies or other commercially reasonable concessions which Landlord may provide in connection with the Project Amenities), (iv) transportation services (including the Shuttle Service Costs (as defined in Section 43(p))), (v) the cost of repairs, improvements and replacements, provided that to the extent that such repairs, improvements and/or replacements are deemed by Landlord in accordance with sound real estate accounting principles to be capital in nature (each, a “Capital Expenditure”), such costs shall be amortized over the lesser of 10 years and the useful life of such Capital Expenditure, and (vi) the costs of Landlord’s third party property manager or, if there is no third party property manager, administration rent in the amount of 3% of Base Rent (provided that during the Abatement Period and the Additional Abatement Period, Tenant shall nonetheless be required to pay administration rent each month equal to the amount of the administration rent that Tenant would have been required to pay in the absence of there being an Abatement Period), excluding only:

 

(a)           the original construction costs of the Project and renovation prior to the Commencement Date and costs of correcting defects in such original construction or renovation;

 

(b)           capital expenditures for expansion of the Project;

 

(c)           interest and principal payments paid to the Holder of a Mortgage (as defined in Section 27), debts of Landlord, financing costs and amortization of funds borrowed by Landlord, whether secured or unsecured and all payments of base rent (but not taxes or operating expenses) under any ground lease or other underlying lease of all or any portion of the Project;

 

(d)           depreciation of the Project (except for capital improvements, the cost of which are includable in Operating Expenses);

 

(e)           marketing, advertising, legal and space planning expenses and leasing commissions and other costs and expenses incurred in procuring and leasing space to tenants for the Project, including any leasing office maintained in the Project, free rent and construction allowances for tenants;

 

(f)            legal and other expenses incurred in the negotiation or enforcement of leases;

 

(g)           costs (including permit, license and inspection fees) incurred in completing, fixturing, improving, renovating, painting, redecorating or other work, which Landlord pays for or performs for other tenants within their premises, and costs of correcting defects in such work;

 

(h)           costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by Tenant or other tenants of the Project, whether or not actually paid;

 

(i)            salaries, wages, benefits and other compensation paid to officers and employees of Landlord who are not assigned in whole or in part to the operation, management, maintenance or repair of the Project;

 

(j)            costs incurred for off-site offices or facilities maintained in connection with the management, operation, engineering, Utility and/or security services provided to the Project and other properties owned by Landlord or affiliates of Landlord, in excess of the Project’s share of such costs as proportionately allocated among the Project and such other properties owned by Landlord or affiliates of Landlord;

 

(k)           general organizational, administrative and overhead costs relating to maintaining Landlord’s existence, either as a corporation, partnership, or other entity, including general corporate, legal (including “in-house” legal) and accounting expenses;

 

(l)            costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu thereof) incurred in connection with disputes with tenants, other occupants, or prospective tenants, and costs and expenses, including legal fees, incurred in connection with negotiations or disputes with employees, consultants, management agents, leasing agents, purchasers or mortgagees of the Building;

 

 

(m)          costs incurred by Landlord due to the violation by Landlord, its employees, agents or contractors or any tenant of the terms and conditions of any lease of space in the Project or any Legal Requirement (as defined in Section 7);

 

(n)           penalties, fines or interest incurred as a result of Landlord’s inability or failure to make payment of Taxes and/or to file any tax or informational returns when due, or from Landlord’s failure to make any payment of Taxes required to be made by Landlord hereunder before delinquency;

 

(o)           overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Project to the extent the same exceeds the costs of such goods and/or services rendered by unaffiliated third parties on a competitive basis;

 

(p)          costs of Landlord’s charitable or political contributions, or of fine art maintained at the Project;

 

(q)           costs in connection with services (including electricity), items or other benefits of a type which are not standard for the Project and which are not available to Tenant without specific charges therefor, but which are provided to another tenant or occupant of the Project, whether or not such other tenant or occupant is specifically charged therefor by Landlord;

 

(r)            costs incurred in the sale or refinancing of the Project;

 

(s)           net income taxes of Landlord or the owner of any interest in the Project (except to the extent such net income taxes are in substitution for any Taxes payable hereunder), franchise, capital stock, gift, estate or inheritance taxes or any federal, state or local documentary taxes imposed against the Project or any portion thereof or interest therein;

 

(t)            any expenses otherwise includable within Operating Expenses to the extent actually reimbursed by persons other than tenants of the Project under leases for space in the Project;

 

(u)           costs, fines or penalties resulting from the gross negligence or willful misconduct of Landlord;

 

(v)           cost of repairs or other work necessitated by fire, windstorm or other similar casualty (except for insurance deductibles);

 

(w)          costs or expenses occasioned by a Taking (as defined in Section 19) that are recovered by Landlord in any condemnation awards;

 

(x)           Operating Expense reserves (other than reserves for Taxes for the then-current year); and

 

(y)          any costs incurred to remove, study, test or remediate any Hazardous Materials (as defined in Section 30) in or about the Building or the Project for which Tenant is not responsible under this Lease.

 

Landlord shall not be entitled to collect Operating Expenses from the tenants of the Project in excess of 100% of the total Operating Expenses actually incurred or accrued by Landlord.

 

In addition, notwithstanding anything to the contrary contained in this Lease, Operating Expenses incurred or accrued by Landlord with respect to any capital improvements that are reasonably expected by Landlord to reduce overall Operating Expenses (for example, without limitation, by reducing energy usage at the Project) (the “Energy Savings Costs”) shall be amortized over a period of years equal to the least of (A) 10 years, (B) the useful life of such capital items, and (C) the quotient of (i) the Energy Savings Costs, divided by (ii) the annual amount of Operating Expenses reasonably expected by Landlord to be saved as a result of such capital improvements.

 

 

Within 90 days after the end of each calendar year (or such longer period as may be reasonably required), Landlord shall furnish to Tenant a statement (an “Annual Statement”) showing in reasonable detail: (a) the total and Tenant’s Share of actual Operating Expenses for the previous calendar year, and (b) the total of Tenant’s payments in respect of Operating Expenses for such year. If Tenant’s Share of actual Operating Expenses for such year exceeds Tenant’s payments of Operating Expenses for such year, the excess shall be due and payable by Tenant as Additional Rent within 30 days after delivery of such Annual Statement to Tenant. If Tenant’s payments of Operating Expenses for such year exceed Tenant’s Share of actual Operating Expenses for such year Landlord shall pay the excess to Tenant within 30 days after delivery of such Annual Statement, except that after the expiration, or earlier termination of the Term or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. Landlord’s and Tenant’s obligations to pay any overpayments or deficiencies due pursuant to this paragraph shall survive the expiration or earlier termination of this Lease.

 

The Annual Statement shall be final and binding upon Tenant unless Tenant, within 60 days after Tenant’s receipt thereof, notifies Landlord in writing that Tenant desires to examine Landlord’s records relating to Tenant’s Share of Operating Expenses set forth in the Annual Statement. If Tenant so notifies Landlord of such election to examine Landlord’s records, then, within 30 days following Landlord’s receipt of notice from Tenant, Landlord will provide Tenant with access to Landlord’s books and records (which may be provided in an electronic format or through a file sharing stile to which Landlord shall give Tenant access) relating to the operation of the Project for the calendar year reflected in such Annual Statement (the “Expense Information”). Thereafter, the Annual Statement shall be final and binding on Tenant unless Tenant, within 60 days after Landlord’s delivery to Tenant of the Expense Information, delivers written notice to Landlord that Tenant reasonably and in good faith questions or contests the accuracy of the Annual Statement (a “Contest Notice”). Tenant’s Contest Notice shall identify the items in the Annual Statement being contested by Tenant. If Landlord and Tenant cannot thereafter agree upon the amount of Tenant’s Share of Operating Expenses, then Tenant shall have the right, to be commenced within 60 days after Tenant’s delivery of a Contest Notice to Landlord, to have a regionally or nationally recognized independent public accounting firm selected by Tenant, working pursuant to a fee arrangement other than a contingent fee (at Tenant’s sole cost and expense) and approved by Landlord (which approval shall not be unreasonably withheld or delayed), audit and/or review the Expense Information for the year in question (the “Independent Review”). The results of any such Independent Review shall be binding on Landlord and Tenant. If the Independent Review shows that the payments actually made by Tenant with respect to Operating Expenses for the calendar year in question exceeded Tenant’s Share of Operating Expenses for such calendar year, Landlord shall at Landlord’s option either (i) credit the excess amount to the next succeeding installments of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days after delivery of such statement, except that after the expiration or earlier termination of this Lease or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. If the Independent Review shows that Tenant’s payments with respect to Operating Expenses for such calendar year were less than Tenant’s Share of Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30 days after delivery of such statement. If the Independent Review shows that Tenant has overpaid with respect to Operating Expenses by more than 5% then Landlord shall reimburse Tenant for all costs incurred by Tenant for the Independent Review. Operating Expenses for the calendar years in which Tenant’s obligation to share therein begins and ends shall be prorated.

 

Notwithstanding anything set forth herein to the contrary, if the Building is not at least 95% occupied on average during any year of the Term, Tenant’s Share of Operating Expenses for such year with respect to Variable Operating Expenses shall be computed as though the Building had been 95% occupied on average during such year. “Variable Operating Expenses” shall mean those Operating Expenses which vary by occupancy including, without limitation, electricity, trash removal and other Utilities (as defined in Section 11).

 

 

“Tenant’s Share” shall be the percentage set forth on the first page of this Lease as “Tenant’s Share of Operating Expenses of Building,” and “Building’s Share” shall be the percentage set forth on the first page of this Lease as “Building’s Share of Operating Expenses of Project,” each as may be reasonably adjusted by Landlord for changes in the physical size of the Premises, Building and/or Project occurring thereafter. Landlord may equitably increase Tenant’s Share for any Operating Expenses that relate to any item of expense or cost (1) equitably and reasonably allocated only to the Premises or the Building, (2) equitably and reasonably allocated to only a portion of the Building or Project that includes the Premises, or (3) a greater proportion of which is equitably and reasonably allocated to the Premises, or a portion of the Building or Project that includes the Premises, as reasonably determined by Landlord. Landlord may equitably increase the Building’s Share for any Operating Expenses that relate to any items of expense or cost (A) equitably and reasonably allocated to only the Building or a portion of the Project that includes the Building, or (B) a greater proportion of which is equitably and reasonably allocated to the Building or a portion of the Project that includes the Building, as reasonably determined by Landlord. Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to Landlord hereunder are collectively referred to herein as “Rent.”

 

6.            Security Deposit. Concurrently with Tenant’s delivery of an executed copy of this Lease to Landlord, Tenant shall deliver to Landlord a security deposit (the “Security Deposit”) for the performance of all of Tenant’s obligations hereunder in the Security Deposit Amount set forth in the Basic Lease Provisions, which Security Deposit shall be in the form of an unconditional and irrevocable letter of credit (the “Letter of Credit”): (i) in form and substance reasonably satisfactory to Landlord, (ii) naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw upon it up to the face amount thereof at any time from time to time by delivering to the issuer notice that Landlord is entitled to draw thereunder, (iv) issued by an FDIC-insured financial institution reasonably satisfactory to Landlord, and (v) redeemable by presentation of a sight draft in either the Commonwealth of Massachusetts or the State of California. The Security Deposit shall be held by Landlord as security for the performance of Tenant’s obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon each occurrence of a Default (as defined in Section 20), Landlord may use all or any part of the Security Deposit to pay delinquent payments due under this Lease, future rent damages, and the cost of any damage, injury, expense or liability caused by such Default, without prejudice to any other remedy provided herein or provided by law. Landlord’s right to use the Security Deposit under this Section 6 includes the right to use the Security Deposit to pay future rent damages following the termination of this Lease pursuant to Section 21(c) below. Upon any draw down on the Letter of Credit pursuant to this paragraph, Tenant shall deliver to Landlord, within 5 days after written demand from Landlord, a new Letter of Credit complying with all of the requirements hereof (a “Replacement Letter of Credit”) for the full Security Deposit Amount set forth in the Basic Lease Provisions. Tenant hereby waives the provisions of any law, now or hereafter in force, including, without limitation, California Civil Code Section 1950.7, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant. Landlord’s obligation respecting the Security Deposit is that of a debtor, not a trustee, and no interest shall accrue thereon. Upon bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior to the filing of such proceedings. If Tenant shall fully perform every provision of this Lease to be performed by Tenant, the Security Deposit, or any balance thereof (i.e., after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease), shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within 90 days after the expiration or earlier termination of this Lease.

 

Tenant shall deliver a Replacement Letter of Credit to Landlord at least 30 days before the stated expiration date of any then current Letter of Credit for the full Security Deposit Amount set forth in the Basic Lease Provisions. If Tenant does not provide Landlord with a Replacement Letter of Credit as required pursuant to the immediately preceding sentence, Landlord shall have the right to draw the full amount of the current Letter of Credit and hold the funds drawn in cash without obligation for interest thereon as the Security Deposit until Tenant delivers a Replacement Letter of Credit to Landlord, at which time Landlord shall refund the amount of the previously drawn Letter of Credit less any amount applied under this Lease.

 

 

If at any time during the Term the issuer of the Letter of Credit is declared insolvent or is placed into receivership by the FDIC or any other Governmental Authority, or if the issuer is downgraded by S&P/Moody’s (if the issuer is credit-rated) or the issuer’s 5-year Credit Default Swap spread (as quoted, and if available on Bloomberg Professional Services) goes above 250 bps at any point during the Term, then following the delivery of written notice from Landlord to Tenant, (x) Landlord shall have the right to immediately draw the full amount of the existing Letter of Credit and hold the funds drawn in cash without obligation for interest thereon as the Security Deposit, and (y) Tenant shall have 30 days to deliver a Replacement Letter of Credit to Landlord. If Landlord is unable to draw on the existing Letter of Credit as provide for in clause (x) above then, within 3 days after Landlord’s delivery of written request to Tenant, Tenant shall deliver to Landlord cash in the Security Deposit Amount as an interim Security Deposit until Tenant delivers a Replacement Letter of Credit to Landlord. Upon Tenant’s delivery of a Replacement Letter of Credit to Landlord, Landlord shall refund to Tenant the amount of the cash Security Deposit to Tenant less any amount applied under this Lease.

 

If Landlord transfers its interest in the Project or this Lease, Landlord shall transfer any Security Deposit then held by Landlord to such transferee of Landlord’s interest. Upon such transfer, Landlord shall have no further obligation with respect to the Security Deposit, and Tenant’s right to the return of the Security Deposit shall apply solely against Landlord’s transferee.

 

7.             Use.

 

(a)           Generally. The Premises shall be used solely for the Permitted Use set forth in the Basic Lease Provisions, and in compliance with all laws, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises, and to the use and occupancy thereof, including, without limitation, the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq. (together with the regulations promulgated pursuant thereto, “ADA”) (collectively, “Legal Requirements” and each, a “Legal Requirement”). Tenant shall, upon 5 days’ written notice from Landlord, discontinue any use of the Premises that is declared by any Governmental Authority (as defined in Section 9) having jurisdiction to be a violation of a Legal Requirement. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant’s or Landlord’s insurance, increase the insurance risk, or cause the disallowance of any sprinkler or other credits. Tenant shall not permit any part of the Premises to be used as a “place of public accommodation”, as defined in the ADA or any similar legal requirement. Tenant shall reimburse Landlord promptly upon demand for any additional premium charged for any such insurance policy by reason of Tenant’s failure to comply with the provisions of this Section or otherwise caused by Tenant’s use and/or occupancy of the Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commit or permit waste, overload the floor or structure of the Premises, subject the Premises to use that would damage the Premises or obstruct or interfere with the rights of Landlord or other tenants or occupants of the Project, including conducting or giving notice of any auction, liquidation, or going out of business sale on the Premises, or using or allowing the Premises to be used for any unlawful purpose. Tenant shall cause any equipment or machinery to be installed in the Premises so as to reasonably prevent sounds or vibrations from the Premises from extending into Common Areas, or other space in the Project. Tenant shall not place any machinery or equipment which would overload the floor in or upon the Premises or transport or move such items through the Common Areas of the Project or in the Project elevators without the prior written consent of Landlord. Except as may be provided under the Work Letter, Tenant shall not, without the prior written consent of Landlord, use the Premises in any manner that will require ventilation, air exchange, heating, gas, steam, electricity or water beyond the existing capacity of the Project as proportionately allocated to the Premises based upon Tenant’s Share as usually furnished for the Permitted Use. Tenant acknowledges that Landlord’s business operations are proprietary to Landlord. Absent prior written consent from Landlord, Tenant shall hold confidential and will not disclose to third parties, and shall require Tenant Parties to hold confidential and not disclose to third parties, information concerning Landlord’s business operations, including but not limited to information regarding the systems, controls, equipment, programming, vendors, tenants, and specialized amenities of Landlord.

 

 

(b)          Compliance. Landlord shall be responsible for the compliance of the Common Areas of the Project with Legal Requirements (including the ADA) as of the Commencement Date. Commencing on the Commencement Date, Landlord shall, as an Operating Expense (to the extent such Legal Requirement is generally applicable to similar buildings in the area in which the Project is located) or at Tenant’s expense (to the extent such Legal Requirement is triggered by reason of Tenant’s, as compared to other tenants of the Project, particular use of the Premises or Tenant’s Alterations) make any alterations or modifications to the Common Areas or the exterior of the Building that are required by Legal Requirements. Except as otherwise expressly provided in the 2 immediately preceding sentences, Tenant, at its sole expense, shall make any alterations or modifications to the interior of the Premises that are required by Legal Requirements (including, without limitation, compliance of the Premises with the ADA) related to Tenant’s use or occupancy of the Premises. Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for any and all Claims (as defined in Section 16) arising out of or in connection with Legal Requirements, and Tenant shall indemnify, defend, hold and save Landlord harmless from and against any and all Claims arising out of or in connection with any failure of the Premises to comply with any Legal Requirement.

 

(c)           Sustainability. Tenant acknowledges that Landlord may, but shall not be obligated to, seek to obtain Leadership in Energy and Environmental Design (LEED), WELL Building Standard, or other similar “green” certification with respect to the Project and/or the Premises, and Tenant agrees to reasonably cooperate with Landlord, and to provide such information and/or documentation as Landlord may reasonably request, in connection therewith.

 

(d)           AUL. The property known as One Kendall Square, which includes the Premises, is subject to the following Notices of Activity and Use Limitation (“AUL”): The AUL recorded on February 12, 2021 with the South Middlesex Registry Of Deeds in Book 76959, Page 254; and (ii) the AUL recorded on May 8, 2023 with the South Middlesex Registry District of the Land Court as Document Number 1936716. Both AULs are incorporated herein in full by reference. Tenant confirms receipt of a copy of both AULs.

 

8.            Holding Over. If Tenant remains in possession of the Premises after the expiration or earlier termination of the Term without the express written consent of Landlord, (A) Tenant shall become a tenant at sufferance upon the terms of this Lease except that the monthly rental shall (i) for the first 60 days of such holdover, be equal to 150% of Base Rent in effect during the last 30 days of the Term, plus Tenant’s Share of Operating Expenses and all other amounts payable by Tenant under this Lease, and (ii) for any period of holdover in excess of 60 days, be equal to 200% of Base Rent in effect during the last 30 days of the Term, plus Tenant’s Share of Operating Expenses and all other amounts payable by Tenant under this Lease, and (B) if Tenant holds over for a period in excess of 60 days, Tenant shall be responsible for all damages suffered by Landlord resulting from or occasioned by Tenant’s holding over, including consequential damages. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Section 8 shall not be construed as consent for Tenant to retain possession of the Premises. Acceptance by Landlord of Rent after the expiration of the Term or earlier termination of this Lease shall not result in a renewal or reinstatement of this Lease.

 

 

9.            Taxes. Landlord shall pay, as part of Operating Expenses, all taxes, levies, fees, assessments and governmental charges of any kind, existing as of the Commencement Date or thereafter enacted relating to the Project, Building and/or Premises (collectively referred to as “Taxes”), imposed by any federal, state, regional, municipal, local or other governmental authority or agency, including, without limitation, quasi-public agencies (collectively, “Governmental Authority”) during the Term, including, without limitation, all Taxes: (i) imposed on or measured by or based, in whole or in part, on rent payable to (or gross receipts received by) Landlord under this Lease and/or from the rental by Landlord of the Building, the Property or the Project or any portion thereof, or (ii) based on the square footage, assessed value or other measure or evaluation of any kind of the Building, the Property or the Project, or (iii) assessed or imposed by or on the operation or maintenance of any portion of the Building, the Property or the Project, including parking, or (iv) assessed or imposed by, or at the direction of, or resulting from Legal Requirements, or interpretations thereof, promulgated by any Governmental Authority, or (v) imposed as a license or other fee, charge, tax, or assessment on Landlord’s business or occupation of leasing space in the Building, the Property or the Project. Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens securing Taxes. Taxes shall not include any net income taxes imposed on Landlord except to the extent such net income taxes are in substitution for any Taxes payable hereunder. If Landlord secures an abatement or refund of Taxes for the Project, to the extent that Tenant paid Tenant’s Share of Taxes for the period with respect to which such abatement or refund applies, Tenant shall receive Tenant’s Share of such abatement or refund (i.e., the net amount after paying all reasonable costs and expenses of securing the abatement or refund, including reasonably attorneys’ fees) as a credit to be applied by Landlord against Operating Expenses next coming due (or, if no further Operating Expenses are due from Tenant under this Lease, and Tenant is not in Default under this Lease, a cash payment to Tenant). If any such Tax is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Operating Expenses hereunder shall also include the cost of tax monitoring services provided to Landlord with respect to the Building, Property or Project. Tenant shall pay, prior to delinquency, any and all Taxes levied or assessed against any personal property or trade fixtures placed by Tenant in the Premises, whether levied or assessed against Landlord or Tenant. If any Taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s property, or if the assessed valuation of the Building, the Property or the Project is increased by a value attributable to improvements in or alterations to the Premises, whether owned by Landlord or Tenant and regardless of whether affixed to the real property so as to become a part thereof, higher than the base valuation on which Landlord from time-to-time allocates Taxes to all tenants in the Building, the Property or the Project, or portion thereof which the Premises are a part, Landlord shall have the right, but not the obligation, to pay such Taxes. Landlord’s determination of any excess assessed valuation shall be binding and conclusive, absent manifest error. The amount of any such payment by Landlord shall constitute Additional Rent due from Tenant to Landlord immediately upon demand.

 

10.           Parking and PTDM.

 

(a)          Parking and Monthly Parking Charge. Subject to all applicable Legal Requirements, Force Majeure, a Taking (as defined in Section 19 below), the exercise by Landlord of its rights hereunder, commencing on the Commencement Date, Tenant shall be allocated and required to pay Monthly Parking Charges (as defined below), in common with other tenants of the Project, to use 0.9 vehicle parking spaces per 1,000 rentable square feet of the Premises (“Tenant’s Parking Allocation”) in the parking facility located at the One Kendall Square Garage (the “OKS Garage”), to park in those areas designated for non-reserved parking, subject in each case to Landlord’s rules and regulations. Landlord may allocate parking spaces among Tenant and other tenants in the Project pro rata as described above if Landlord determines that such parking facilities are becoming crowded. Landlord shall not be responsible for enforcing Tenant’s parking rights against any third parties, including other tenants of the Project. If, during the Term, Tenant delivers written notice to Landlord requesting additional parking spaces and Landlord determines that the additional parking spaces desired by Tenant are available for use by Tenant (“Additional Parking Spaces”), Landlord shall notify Tenant in writing and Tenant shall commence using and paying the Monthly Parking Charge for such Additional Parking Spaces immediately following Landlord’s delivery of such written notice to Tenant that such Additional Parking Spaces are available for Tenant’s use; provided, however, that Tenant’s right to use any such Additional Parking Spaces shall be on a month-to-month basis only. The “Monthly Parking Charge” shall mean the market rate monthly charge therefor designated by Landlord, adjusted reasonably and no more frequently than once in any 12-month period, based upon the rates charged by comparable parking facilities in the vicinity of the Project, which as of the Commencement Date is anticipated to equal $450.00 per parking space per month.

 

 

(b)          Parking and Transportation Demand Management. Tenant shall, at Tenant’s sole expense, for so long as a parking and traffic demand management plan approved by the City of Cambridge (as amended from time to time, the “PTDM”), is applicable to the Project, comply with the PTDM as applicable to the Project, including without limitation, as applicable (i) offer to subsidize mass transit monthly passes for all of its employees who work in the Premises in accordance with the terms set forth in the PTDM; (ii) implement a Commuter Choice Program and the MBTA’s Corporate Pass Plan; (iii) discourage single-occupant vehicle (“SOV”) use by its employees; (iv) promote alternative modes of transportation and use of alternative work hours; (v) at Landlord’s request, meet with Landlord and/or its representatives no more frequently than quarterly to discuss transportation programs and initiatives; (vi) participate in annual surveys, monitoring transportation programs and initiatives at the Campus, and, without limitation, achieve a sixty (60%) percent response rate for patron surveys; (vii) cooperate with Landlord in connection with transportation programs and initiatives promulgated pursuant to the PTDM; (viii) provide alternative work programs (such as telecommuting, flex-time and compressed work weeks) to its employees in order to reduce traffic impacts in Cambridge during peak commuter hours; (ix) offer an emergency ride home (“ERH”) through the Charles River Transportation Management Association (“CRTMA”), or have its own ERH program, for all employees who commute by non-SOV mode at least 3 days a week and who are eligible to park in the parking spaces in the parking facility described above; (x) cooperate with the Cambridge Office of Workforce Development to expand employment opportunities for Cambridge residents; (xi) become a member of the CRTMA and cause the EZ Ride shuttle service to service the Building; (xii) in the event that the single occupancy vehicle and traffic generation modal split limits of the PTDM are exceeded, charge each user of a parking space the market rate for parking in Kendall Square/East Cambridge therefor; (xiii) comply with the requirements of any other parking and traffic demand management plan to which Tenant may be a party from time to time; (xiv) designate an employee transportation coordinator for the Building; and (xv) otherwise cooperate with Landlord in encouraging employees to seek alternate modes of transportation.

 

11.           Utilities, Services.

 

(a)           Generally. Landlord shall provide or cause to be provided to the Premises, subject to the terms of this Section 11, (i) water, (ii) electricity (including lights and plugs), (iii) heat, ventilation and air conditioning (collectively, “HVAC”), (iv) power, and (v) sewer (collectively, “Utilities”). Landlord shall pay, as Operating Expenses or subject to Tenant’s direct reimbursement obligation as provided for below, for all Utilities used on the Premises, all maintenance charges for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any Governmental Authority or Utility provider, and any Taxes, penalties, surcharges or similar charges thereon. The Premises shall be separately metered or check-metered for electrical consumption. Tenant shall be responsible for all telephone and data wiring throughout the Premises. Landlord may cause, at Landlord’s expense (except to the extent necessary as a result of Tenant’s disproportionate use of Utilities in which case Tenant shall pay the cost), any other Utilities to be separately metered or charged directly to Tenant by the provider. Commencing on the Commencement Date, Tenant shall pay directly to the Utility provider, prior to delinquency, any separately metered Utilities and services (which may include, among other Utilities and services, telephone and internet service) which may be furnished to Tenant or the Premises during the Term. Commencing on the Commencement Date, Tenant shall pay, as part of Operating Expenses, its share of all charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of Utilities from any cause whatsoever shall result in eviction or constructive eviction of Tenant, termination of this Lease or, except as otherwise provided in the immediately following paragraph, the abatement of Rent. Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use.

 

Notwithstanding anything to the contrary set forth herein, if (i) a stoppage of a Utility Service (as defined below) to the Premises shall occur and such stoppage is due solely to the gross negligence or willful misconduct of Landlord and not due in any part to any act or omission on the part of Tenant or any Tenant Party or any matter beyond Landlord’s reasonable control (any such stoppage of a Utility Service being hereinafter referred to as a “Service Interruption”), and (ii) such Service Interruption continues for more than 5 consecutive business days after Landlord shall have received written notice thereof from Tenant, and (iii) as a result of such Service Interruption, the conduct of Tenant’s normal operations in the Premises are materially and adversely affected, then there shall be an abatement of one day’s Base Rent for each day during which such Service Interruption continues after such 5 business day period; provided, however, that if any part of the Premises is reasonably useable for Tenant’s normal business operations or if Tenant conducts all or any part of its operations in any portion of the Premises notwithstanding such Service Interruption, then the amount of each daily abatement of Base Rent shall only be proportionate to the nature and extent of the interruption of Tenant’s normal operations or ability to use the Premises. The rights granted to Tenant under this paragraph shall be Tenant’s sole and exclusive remedy resulting from a failure of Landlord to provide services, and Landlord shall not otherwise be liable for any loss or damage suffered or sustained by Tenant resulting from any failure or cessation of services. For purposes hereof, the term “Utility Service” shall mean the following services: HVAC service, water, sewer and electricity, but in each case only to the extent that Landlord has an obligation to provide same to Tenant under this Lease.

 

 

(b)          Janitorial. Landlord shall, as part of Operating Expenses, provide or cause to be provided with respect to the Common Areas only, refuse and trash collection and janitorial services. Tenant shall be responsible for contracting directly with a vendor reasonably acceptable to Landlord and paying for its own janitorial services for the Premises.

 

(c)           Emergency Generator. Landlord’s sole obligation for either providing emergency generators or providing emergency back-up power to Tenant shall be: (i) to provide emergency generators with not less than the capacity of the emergency generators serving the Building as of the Commencement Date, and (ii) to contract with a third party to maintain the emergency generators as per the manufacturer’s standard maintenance guidelines. Except as otherwise provided in the immediately preceding sentence, Landlord shall have no obligation to provide Tenant with operational emergency generators or back-up power or to supervise, oversee or confirm that the third party maintaining the emergency generators is maintaining the generators as per the manufacturer’s standard guidelines or otherwise. During any period of replacement, repair or maintenance of the emergency generators when the emergency generators are not operational, including any delays thereto due to the inability to obtain parts or replacement equipment, Landlord shall have no obligation to provide Tenant with an alternative back-up generator or generators or alternative sources of back-up power. Tenant expressly acknowledges and agrees that Landlord does not guaranty that such emergency generators will be operational at all times or that emergency power will be available to the Premises when needed. Landlord shall, upon Tenant’s written request (not more frequently than once per calendar year), make available for Tenant’s inspection the maintenance contract and maintenance records for the emergency generators for the 12 month period immediately preceding Landlord’s receipt of Tenant’s written request.

 

(d)          Acid Neutralization System. Landlord shall provide Tenant with non-exclusive access to the acid neutralization system existing as of the Commencement Date (“Acid Neutralization System”) pursuant to the terms and conditions of this Lease. Tenant acknowledges and agrees that the Acid Neutralization System shall be shared with other tenants of the Building. Tenant shall pay its share of ongoing operation costs of the Acid Neutralization System as an Operating Expense, as allocated by Landlord among Tenant and other user tenants on a pro rata basis, with Tenant’s share based on the ratio of the rentable square footage of the Premises to the sum of the rentable square footages of the Premises and the premises of all other user tenants. Landlord’s sole obligations for providing the Acid Neutralization System, or any acid neutralization system facilities, to Tenant shall be (the “Acid Neutralization Obligations”) to (i) use reasonable efforts to obtain and maintain the permit required from the Massachusetts Water Resources Authority for discharge through the Acid Neutralization System (the “Discharge Permit”), provided that Tenant reasonably cooperates with Landlord and provides all information and documents reasonably necessary in connection with the Discharge Permit; and (ii) contract with a third party to maintain the Acid Neutralization System as operating as per the manufacturer’s standard maintenance guidelines. Notwithstanding anything herein to the contrary, if the Acid Neutralization System must be replaced and the cost thereof is not included in such third party maintenance contract, then, Landlord shall replace the Acid Neutralization System, it being acknowledged, however, that Tenant shall be responsible for its share of all costs incurred in connection therewith as an Operating Expense, as provided in Section 5 above.

 

 

Tenant shall be solely responsible for the use of the Acid Neutralization System by Tenant, its employees, any contractors, sublessees, invitees or any party other than Landlord or Landlord’s contractors, and Tenant shall be jointly and severally responsible for the use of the Acid Neutralization System with the other user tenants, except in the event that Tenant can prove to Landlord’s reasonable satisfaction that neither Tenant nor any Tenant party caused, contributed to or exacerbated the matter for which Tenant would otherwise be jointly or severally responsible but for this exception. Tenant shall use, and cause other parties under its control or for which it is responsible to use, the Acid Neutralization System in accordance with this Lease and in accordance with all applicable Legal Requirements, the Discharge Permit and any permits and approvals from Governmental Authorities for or applicable to Tenant’s use of the Acid Neutralization System. Tenant shall not take any action or make any omission that would result in a violation of the Discharge Permit or any other permit or Legal Requirements applicable to the Acid Neutralization System. Tenant’s compliance with applicable permits and Legal Requirements shall include but not be limited to posting signs at all sinks located in the Premises containing applicable notices regarding the use of sink drains for the disposal of chemicals and other Hazardous Materials. Tenant shall maintain a chemical management plan prohibiting the improper discharge or disposal of chemicals. Tenant shall train all laboratory personnel in the Premises on the proper disposal of chemicals and other Hazardous Materials. Landlord reserves the right, at any time and from time to time, to require reasonable limitations and restrictions on discharges by Tenant to the Acid Neutralization System as Landlord may reasonably determine to be necessary for the operation of the Acid Neutralization System. Landlord and its contractors and consultants shall be permitted to perform periodic sampling of all substances regulated under permits applicable to the Acid Neutralization System, including without limitation the discharge permit issued by the Massachusetts Water Resources Authority (“MWRA”), or as otherwise deemed appropriate by Landlord in its sole discretion. Landlord and its contractors and consultants shall be permitted to perform periodic inspections of the Acid Neutralization System and the discharge points and connections thereto located in the Premises. If requested by Landlord based on conditions pertaining to the Acid Neutralization System, Tenant shall promptly provide updates to its Hazardous Materials List (as defined in Section 30(b) below) to Landlord. Tenant shall promptly notify Landlord of any changes in the flow volume or properties that could impact the operation of the Acid Neutralization System or compliance with applicable permits or Legal Requirements, including without limitation a discharge known or reasonably believed to be non-compliant, changes in Tenant’s operations in the Premises and addition of new equipment by Tenant such as cage washers, glass washers or autoclaves.

 

 

The scope of the Decommissioning and HazMat Closure Plan (as defined in Section 28 of this Lease) shall include all actions for the proper cleaning, decommissioning and cessation of Tenant’s use of the Acid Neutralization System, and all requirements under this Lease for the surrender of the Premises shall also apply to Tenant’s cessation of use of the Acid Neutralization System, in each case whether at Lease expiration, termination or prior thereto (but Tenant shall not be required to complete the decommissioning of the Acid Neutralization System if other tenants or occupants will continue to use the same after the expiration or earlier termination of this Lease, nor shall Tenant be responsible for or bear any costs of decommissioning arising from the use of the Acid Neutralization System by any party other than Tenant; it being agreed that if multiple tenants use the Acid Neutralization System, then Landlord shall be responsible for completing the decommissioning thereof, and Tenant shall pay to Landlord within thirty (30) days after invoice therefor Tenant’s share of the reasonable, actual costs of decommissioning based on the ratio of the rentable square footage of the Premises to the rentable square footage of the Premises and the premises of all other user tenants). The obligations of Tenant under this Lease with respect to the Acid Neutralization System shall be joint and several with such other tenants as aforesaid, except in the event that Tenant can prove to Landlord’s reasonable satisfaction that neither Tenant nor any Tenant Party caused, contributed to or exacerbated the matter for which Tenant would otherwise be jointly and severally responsible but for this exception. Without in any way limiting the Acid Neutralization Obligations, except for contracting with a third party to maintain the Acid Neutralization System as per the manufacturer’s standard maintenance guidelines, Landlord shall have no obligation to provide Tenant with operational emergency or back-up acid neutralization facilities or to supervise, oversee or confirm that the third party maintaining the Acid Neutralization System is maintaining such system as per the manufacturer’s standard guidelines or otherwise. Landlord shall, upon written request from Tenant (not more frequently than once per calendar year), make available for Tenant’s inspection the maintenance contract and maintenance records for the Acid Neutralization System for the 12 month period immediately preceding Landlord’s receipt of Tenant’s written request. During any period of replacement, repair or maintenance of the Acid Neutralization System when such system is not operational, including any delays thereto due to the inability to obtain parts or replacement equipment, Landlord shall have no obligation to provide Tenant with an alternative back-up system or facilities. Tenant expressly acknowledges and agrees that Landlord does not guaranty that such Acid Neutralization System will be operational at all times or that such system will be available to the Premises when needed. Without in any way limiting the Acid Neutralization Obligations, in no event shall Landlord be liable to Tenant or any other party for any damages of any type, whether actual or consequential, suffered by Tenant or any such other person in the event that the Acid Neutralization System or back-up system, if any, or any replacement thereof fails or does not operate in a manner that meets Tenant’s requirements.

 

 

(e)           Energy Usage Data. Tenant agrees to provide Landlord with access to Tenant’s water and energy usage data on a monthly basis, either by providing Tenant’s applicable utility login credentials to Landlord’s designated online portal, or by another delivery method reasonably agreed to by Landlord and Tenant. The costs and expenses incurred by Landlord in connection with receiving and analyzing such water and energy usage data (including, without limitation, as may be required pursuant to applicable Legal Requirements) shall be included as part of Operating Expenses.

 

12.          Alterations and Tenant’s Property. Any alterations, additions, or improvements made to the Premises by or on behalf of Tenant, including additional locks or bolts of any kind or nature upon any doors or windows in the Premises, but excluding installation, removal or realignment of furniture systems (other than removal of furniture systems owned or paid for by Landlord) not involving any modifications to the structure or connections (other than by ordinary plugs or jacks) to Building Systems (as defined in Section 13) (“Alterations”) shall be subject to Landlord’s prior written consent, which may be given or withheld in Landlord’s sole discretion if any such Alteration affects the Building structure or Building Systems and shall not be otherwise unreasonably withheld. Tenant may construct nonstructural, cosmetic Alterations in the Premises without Landlord’s prior approval if the aggregate cost of all such work in any 12 month period does not exceed $50,000 (a “Notice-Only Alteration”), provided Tenant notifies Landlord in writing of such intended Notice-Only Alteration, and such notice shall be accompanied by plans and specifications (to the extent plans and specifications are customarily prepared in connection with the type of Alteration reflected in such notice), work contracts and such other information concerning the nature and cost of the Notice-Only Alteration as may be reasonably requested by Landlord, which notice and accompanying materials shall be delivered to Landlord not less than 10 business days in advance of any proposed construction. If Landlord approves any Alterations, Landlord may impose such reasonable conditions on Tenant in connection with the commencement, performance and completion of such Alterations as Landlord may deem appropriate in Landlord’s sole and absolute discretion. Any request for approval shall be in writing, delivered not less than 15 business days in advance of any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts and such other information concerning the nature and cost of the alterations as may be reasonably requested by Landlord, including the identities and mailing addresses of all persons performing work or supplying materials. Landlord’s right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to ensure that such plans and specifications or construction comply with applicable Legal Requirements. Tenant shall pay to Landlord, as Additional Rent, within 10 days after written demand from Landlord, an amount equal to the reasonable out-of-pocket costs incurred by Landlord with respect to each Alteration to cover Landlord’s overhead and expenses for plan review, coordination, scheduling and supervision. Before Tenant begins any Alteration, Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any expense incurred by Landlord by reason of faulty work done by Tenant or its contractors, delays caused by such work, or inadequate cleanup.

 

Upon Landlord’s written request, Tenant shall furnish security or make other arrangements satisfactory to Landlord to assure payment for the completion of all Alterations work free and clear of liens, and shall provide (and cause each contractor or subcontractor to provide) certificates of insurance for workers’ compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and subcontractors who did the work and final lien waivers from all such contractors and subcontractors; and (ii) “as built” plans for any such Alteration.

 

 

Except for Removable Installations (as hereinafter defined), all Installations (as hereinafter defined) shall be and shall remain the property of Landlord during the Term and following the expiration or earlier termination of the Term, shall not be removed by Tenant at any time during the Term, and shall remain upon and be surrendered with the Premises as a part thereof. Notwithstanding the foregoing, Landlord may, at the time its approval of any such Installation is requested, notify Tenant that Landlord requires that Tenant remove such Installation upon the expiration or earlier termination of the Term, in which event Tenant shall remove such Installation in accordance with the immediately succeeding sentence. Upon the expiration or earlier termination of the Term, Tenant shall remove (i) all wires, cables or similar equipment which Tenant has installed in the Premises or in the risers or plenums of the Building, (ii) any Installations for which Landlord has given Tenant notice of removal in accordance with the immediately preceding sentence, and (iii) all of Tenant’s Property (as hereinafter defined), and Tenant shall restore and repair any damage caused by or occasioned as a result of such removal, including, without limitation, capping off all such connections behind the walls of the Premises and repairing any holes. During any restoration period beyond the expiration or earlier termination of the Term, Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant. If Landlord is requested by Tenant or any lender, lessor or other person or entity claiming an interest in any of Tenant’s Property to waive any lien Landlord may have against any of Tenant’s Property, and Landlord consents to such waiver, then Landlord shall be entitled to reimbursement from Tenant for its actual, reasonable out-of-pocket costs incurred in connection with the preparation and negotiation of each such waiver of lien.

 

For purposes of this Lease, (x) “Removable Installations” means any items listed on Exhibit F attached hereto and any items agreed by Landlord in writing to be included on Exhibit F in the future, (y) “Tenant’s Property” means Removable Installations (which, for the avoidance of doubt, shall include the Transferred Lab Equipment) and, other than Installations, any personal property or equipment of Tenant that may be removed without material damage to the Premises, and (z) “Installations” means all property of any kind paid for with the TI Fund, all Alterations, all fixtures, and all partitions, hardware, built-in machinery, built-in casework and cabinets and other similar additions, equipment, property and improvements built into the Premises so as to become an integral part of the Premises, including, without limitation, fume hoods which penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical equipment and systems, and any power generator and transfer switch.

 

Tenant shall not be required to remove or restore the Tenant Improvements at the expiration or earlier termination of the Lease, so long as such Tenant Improvements constitute “standard” laboratory and office improvements, as reasonably determined by Landlord, nor shall Tenant have the right to remove the Tenant Improvements at any time except as otherwise contemplated pursuant to this Section 12. For the avoidance of doubt, the Transferred Lab Equipment shall be the property of Tenant at all times during the Term and Tenant shall be required to remove the Transferred Lab Equipment from the Premises at the expiration of earlier termination of the Term.

 

13.          Landlord’s Repairs. Landlord, as an Operating Expense, shall maintain (a) all of the structural, exterior, parking and other Common Areas of the Project, and (b) all Building systems serving the Premises and other portions of the Project including, without limitation, HVAC, plumbing, fire sprinklers (“Building Systems”), in good repair, reasonable wear and tear and, subject to the provisions of the penultimate paragraph of Section 17, uninsured losses and damages caused by Tenant, or by any of Tenant’s assignees, sublessees, licensees, agents, servants, employees, invitees and contractors (or any of Tenant’s assignees, sublessees and/or licensees respective agents, servants, employees, invitees and contractors) (collectively, “Tenant Parties”) excluded. Subject to the provisions of the penultimate paragraph of Section 17, losses and damages caused by Tenant or any Tenant Party shall be repaired by Landlord, to the extent not covered by insurance (unless Landlord failed to maintain insurance otherwise required to be maintained by Landlord under this Lease), at Tenant’s sole cost and expense. Landlord reserves the right to stop Building Systems services when necessary (i) by reason of accident or emergency, or (ii) for planned repairs, alterations or improvements, which are, in the commercially reasonable judgment of Landlord, necessary to be made, until such repairs, alterations or improvements shall have been completed. Landlord shall have no responsibility or liability for failure to supply Building Systems services during any such period of interruption; provided, however, that Landlord shall, except in case of emergency, give Tenant 24 hours advance notice of any planned stoppage of Building Systems services for routine maintenance, repairs, alterations or improvements. Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s operations in the Premises during any such planned stoppages of Building Systems services. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this paragraph upon becoming aware of the need for such repair, after which Landlord shall make a commercially reasonable effort to effect such repair within a commercially reasonable period of time taking into account the nature of the repair. Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after Tenant’s written notice of the need for such repairs or maintenance. Tenant waives its rights under any state or local law to terminate this Lease or to make such repairs at Landlord’s expense and agrees that the parties’ respective rights with respect to such matters shall be solely as set forth herein. Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall be controlled by Section 18.

 

 

14.           Tenant’s Repairs. Subject to Section 13 hereof, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of the Premises, including, without limitation, entries, doors, ceilings, non-structural components of windows, interior walls, the interior side of demising walls and any mechanical systems or equipment exclusively serving the Premises. Should Tenant fail to make any such repair or replacement or fail to maintain the Premises, Landlord shall give Tenant a reasonably detailed written notice of such failure. If Tenant fails to commence cure of such failure within 30 days of Landlord’s delivery of such written notice to Tenant, and thereafter diligently prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant within 10 business days after Landlord’s delivery to Tenant of Landlord’s demand therefor (which demand shall contain a commercially reasonable breakdown of any costs incurred by Landlord in connection with such work); provided, however, that if such failure by Tenant creates or could create an emergency, Landlord may immediately commence cure of such failure and shall thereafter be entitled to recover the costs of such cure from Tenant. Subject to Sections 17 and 18, Tenant shall bear the full uninsured cost of any repair or replacement to any part of the Project that results from damage caused by Tenant or any Tenant Party and any repair that benefits only the Premises.

 

15.           Mechanic’s Liens. Tenant shall fully discharge of record from title or from the public record, by bond or otherwise, any mechanic’s lien filed against the Premises or against the Project for work claimed to have been done for, or materials claimed to have been furnished to, Tenant within 10 days after Tenant receives notice of the filing thereof, at Tenant’s sole cost and shall otherwise keep the Premises and the Project free from any liens arising out of work performed, materials furnished or obligations incurred by Tenant. Should Tenant fail to fully discharge of record any lien described herein, Landlord shall have the right, but not the obligation, to pay such claim or post a bond or otherwise provide security to eliminate the lien as a claim against title to the Project and the costs incurred by Landlord in connection therewith shall be immediately due from Tenant as Additional Rent. If Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code Financing Statement filed as a matter of public record by any lessor or creditor of Tenant will upon its face or by exhibit thereto indicate that such Financing Statement is applicable only to removable personal property of Tenant located within the Premises. In no event shall the address of the Project be furnished on the statement without qualifying language as to applicability of the lien only to removable personal property, located in the suite number designated to the Premises in the Basic Lease Provisions.

 

16.           Indemnification. Tenant hereby indemnifies and agrees to defend, save and hold Landlord, its officers, directors, employees, managers, members, partners, agents, sub-agents, affiliates and lease signators (collectively, “Landlord Indemnified Parties”) harmless from and against any and all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or judgments, and all reasonable expenses incurred in investigating or resisting the same (including, without limitation, reasonable attorneys’ fees, charges and disbursements and costs of suit) (collectively, “Claims”) for injury or death to persons or damage to property occurring within or about the Premises or the Project arising directly or indirectly out of the use or occupancy of the Premises or the Project by Tenant or any Tenant Parties (including, without limitation, any act, omission or neglect by Tenant or any Tenant’s Parties in or about the Premises or at the Project) or a breach or default by Tenant in the performance of any of its obligations hereunder, except to the extent caused by the willful misconduct or negligence of Landlord Indemnified Parties. Landlord shall not be liable to Tenant for, and Tenant assumes all risk of damage to, personal property (including, without limitation, loss of records kept within the Premises). Tenant further waives any and all Claims for injury to Tenant’s business or loss of income relating to any such damage or destruction of personal property (including, without limitation, any loss of records). Landlord shall not be liable for any damages arising from any act, omission or neglect of any tenant in the Project or of any other third party. The provisions of this Section 16 shall survive the expiration or earlier termination of the Lease.

 

 

17.          Insurance. Landlord shall maintain all risk property and, if applicable, sprinkler damage insurance covering the full replacement cost of the Project. Landlord shall further procure and maintain commercial general liability insurance with a single loss limit of not less than $3,000,000 for bodily injury and property damage with respect to the Project. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary, including, but not limited to, flood, environmental hazard and earthquake, loss or failure of building equipment, errors and omissions, rental loss during the period of repair or rebuilding, workers’ compensation insurance and fidelity bonds for employees employed to perform services and insurance for any improvements installed by Tenant or that are in addition to the standard improvements customarily furnished by Landlord without regard to whether or not such are made a part of the Project. All such insurance shall be included as part of the Operating Expenses. The Building and the Property may be included in a blanket policy (in which case the cost of such insurance allocable to the Building and the Property will be determined by Landlord based upon the insurer’s cost calculations). Tenant shall also reimburse Landlord for any increased premiums or additional insurance that Landlord reasonably deems necessary as a result of Tenant’s use of the Premises.

 

Tenant, at its sole cost and expense, shall maintain during the Term: all risk property insurance with business interruption and extra expense coverage, covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense; workers’ compensation insurance with no less than the minimum limits required by law; employer’s liability insurance with employers liability limits of $1,000,000 bodily injury by accident – each accident, $1,000,000 bodily injury by disease – policy limit, and $1,000,000 bodily injury by disease – each employee; and commercial general liability insurance, with a minimum limit of not less than $2,000,000 per occurrence for bodily injury and property damage with respect to the Premises. The commercial general liability insurance maintained by Tenant shall name Alexandria Real Estate Equities, Inc., and Landlord, its officers, directors, employees, managers, agents, sub-agents, constituent entities and lease signators (collectively, “Landlord Insured Parties”), as additional insureds; insure on an occurrence and not a claims-made basis; be issued by insurance companies which have a rating of not less than policyholder rating of A and financial category rating of at least Class X in “Best’s Insurance Guide”; shall not be cancelable for nonpayment of premium unless 30 days prior written notice shall have been given to Landlord from the insurer; not contain a hostile fire exclusion; contain a contractual liability endorsement; and provide primary coverage to Landlord Insured Parties (any policy issued to Landlord Insured Parties providing duplicate or similar coverage shall be deemed excess over Tenant’s policies, regardless of limits). Certificates of insurance showing the limits of coverage required hereunder and showing the Landlord Insured Parties as an additional insureds, shall be delivered to Landlord by Tenant (i) concurrent with Tenant’s delivery to Landlord of a copy of this Lease executed by Tenant, and (ii) prior to each renewal of said insurance. Tenant’s policy may be a “blanket policy” with an aggregate per location endorsement which specifically provides that the amount of insurance shall not be prejudiced by other losses covered by the policy. Tenant shall, at least 5 days prior to the expiration of such policies, furnish Landlord with renewal certificates.

 

 

In each instance where insurance is to name Landlord as an additional insured, Tenant shall upon written request of Landlord also designate and furnish certificates so evidencing Landlord as additional insured to: (i) any lender of Landlord holding a security interest in the Building, the Property or the Project or any portion thereof, (ii) the landlord under any lease wherein Landlord is tenant of the real property on which the Building, the Property or the Project is located, if the interest of Landlord is or shall become that of a tenant under a ground or other underlying lease rather than that of a fee owner, and/or (iii) any management company retained by Landlord to manage the Project.

 

The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, and their respective officers, directors, employees, managers, agents, invitees and contractors (“Related Parties”), in connection with any loss or damage thereby insured against (or required to be insured against pursuant to this Lease). Neither party nor its respective Related Parties shall be liable to the other for loss or damage caused by any risk insured against under property insurance required to be maintained hereunder, and each party waives any claims against the other party, and its respective Related Parties, for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its respective Related Parties shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises, the Building, the Property or the Project from any cause whatsoever. If the foregoing waivers shall contravene any law with respect to exculpatory agreements, the liability of Landlord or Tenant shall be deemed not released but shall be secondary to the other’s insurer.

 

 

Landlord may require insurance policy limits to be raised to conform with requirements of any Holder of a Mortgage encumbering the Project or any portion thereof and/or to bring coverage limits to levels then being generally required of new tenants within the Project; provided, however, that the increased amount of coverage is consistent with coverage amounts then being required by institutional owners of similar projects with tenants occupying similar size premises in the geographical area in which the Project is located.

 

18.          Restoration. If, at any time during the Term, the Project or the Premises are damaged or destroyed by a fire or other casualty, Landlord shall notify Tenant within 60 days after discovery of such damage as to the amount of time Landlord reasonably estimates it will take to restore the Project or the Premises, as applicable (the “Restoration Period”). If the Restoration Period is estimated to exceed 12 months after discovery of the damage (the “Maximum Restoration Period”), Landlord may, in such notice, elect to terminate this Lease as of the date that is 75 days after the date of discovery of such damage or destruction; provided, however, that notwithstanding Landlord’s election to restore, Tenant may elect to terminate this Lease by written notice to Landlord delivered within 10 business days of receipt of a notice from Landlord estimating a Restoration Period for the Premises longer than the Maximum Restoration Period. Unless either Landlord or Tenant so elects to terminate this Lease, Landlord shall, subject to receipt of sufficient insurance proceeds (with any deductible to be treated as a current Operating Expense), promptly restore the Premises (excluding the improvements installed by Tenant or by Landlord and paid for by Tenant), subject to delays arising from the collection of insurance proceeds, from Force Majeure events or as needed to obtain any license, clearance or other authorization of any kind required to enter into and restore the Premises issued by any Governmental Authority having jurisdiction over the use, storage, handling, treatment, generation, release, disposal, removal or remediation of Hazardous Materials (as defined in Section 30) in, on or about the Premises (collectively referred to herein as “Hazardous Materials Clearances”); provided, however, that if repair or restoration of the Premises is not substantially complete as of the end of the Maximum Restoration Period or, if longer, the Restoration Period, Landlord may, in its sole and absolute discretion, elect (by delivery of written notice to Tenant) not to proceed with such repair and restoration, or Tenant may by written notice to Landlord delivered within 10 days of the expiration of the Maximum Restoration Period or, if longer, the Restoration Period, elect to terminate this Lease, in which event Landlord shall be relieved of its obligation to make such repairs or restoration and this Lease shall terminate as of the date that is 75 days after the later of: (i) discovery of such damage or destruction, or (ii) the date all required Hazardous Materials Clearances are obtained, but Landlord shall retain any Rent paid and the right to any Rent payable by Tenant prior to such election by Landlord or Tenant.

 

Promptly following the date that Landlord makes the Premises available to Tenant for Tenant’s repairs and/or restoration, Tenant shall, at Tenant’s expense, promptly perform, subject to delays arising from the collection of insurance proceeds, from Force Majeure events or to obtain Hazardous Material Clearances, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease. Notwithstanding the foregoing, either Landlord or Tenant may terminate this Lease upon written notice to the other if the Premises are damaged during the last year of the Term and Landlord reasonably estimates that it will take more than 2 months to repair such damage; provided, however, that such notice is delivered within 10 business days after the date that Landlord provides Tenant with written notice of the estimated Restoration Period, or if insurance proceeds are not available for such restoration. Rent shall be abated from the date all required Hazardous Material Clearances are obtained until the Premises are repaired and restored, in the proportion that the area of the Premises, if any, that is not usable by Tenant bears to the total area of the Premises, unless Landlord provides Tenant with other space during the period of repair that is suitable for the temporary conduct of Tenant’s business. If no Hazardous Material Clearances are required to be obtained by Tenant with respect to the Premises, rent abatement shall commence on the date of discovery of the damage or destruction. Such abatement shall be the sole remedy of Tenant, and except as provided in this Section 18, Tenant waives any right to terminate this Lease by reason of damage or casualty loss.

 

 

The provisions of this Lease, including this Section 18, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, or any other portion of the Building, the Property or the Project, and any statute or regulation that is now or may hereafter be in effect shall have no application to this Lease or any damage or destruction to all or any part of the Premises or any other portion of the Building, the Property or the Project, the parties hereto expressly agreeing that this Section 18 sets forth their entire understanding and agreement with respect to such matters.

 

19.          Condemnation. If the whole or any material part of the Premises, the Building, the Property or the Project is taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking would in Landlord’s reasonable judgment either prevent or materially interfere with Tenant’s use of the Premises or materially interfere with or impair Landlord’s ownership or operation of the Building or the Property, then upon written notice by Landlord this Lease shall terminate and Rent shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, Landlord shall promptly restore the Premises, Building and Property as nearly as is commercially reasonable under the circumstances to their condition prior to such partial Taking and the rentable square footage of the Building, the rentable square footage of the Premises, Tenant’s Share of Operating Expenses, the Building’s Share of the Project and the Rent payable hereunder during the unexpired Term shall be reduced to such extent as may be fair and reasonable under the circumstances. Upon any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord’s award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses, relocation expenses and damage to Tenant’s personal property, if a separate award for such items is made to Tenant. Tenant hereby waives any and all rights it might otherwise have pursuant to any provision of state law to terminate this Lease upon a partial Taking of the Premises, the Building, the Property or the Project.

 

20.           Events of Default. Each of the following events shall be a default (“Default”) by Tenant under this Lease:

 

(a)           Payment Defaults. Tenant shall fail to pay any installment of Rent or any other payment hereunder when due; provided, however, that Landlord shall give Tenant notice and an opportunity to cure any failure to pay Rent within 3 business days of any such notice not more than once in any 12 month period and Tenant agrees that such notice shall be in lieu of and not in addition to, or shall be deemed to be, any notice required by law.

 

(b)           Insurance. Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shall be reduced or materially changed, or Landlord shall receive a notice of nonrenewal of any such insurance and Tenant shall fail to obtain replacement insurance at least 5 days before the expiration of the current coverage.

 

(c)           Abandonment. Tenant shall abandon the Premises. Tenant shall not be deemed to have abandoned the Premises if Tenant provides Landlord with reasonable advance notice prior to vacating and, at the time of vacating the Premises, (i) Tenant completes Tenant’s obligations under the Decommissioning and HazMat Closure Plan in compliance with Section 28, (ii) Tenant has obtained the release of the Premises of all Hazardous Materials Clearances and the Premises are free from any residual impact from the Tenant HazMat Operations and provides reasonably detailed documentation to Landlord confirming such matters, (iii) Tenant has made reasonable arrangements with Landlord for the security of the Premises for the balance of the Term, and (iv) Tenant continues during the balance of the Term to satisfy and perform all of Tenant’s obligations under this Lease as they come due.

 

 

(d)           Improper Transfer. Tenant shall assign, sublease or otherwise transfer or attempt to transfer all or any portion of Tenant’s interest in this Lease or the Premises except as expressly permitted herein, or Tenant’s interest in this Lease shall be attached, executed upon, or otherwise judicially seized and such action is not released within 90 days of the action.

 

(e)           Liens. Tenant shall fail to discharge or otherwise obtain the release of any lien placed upon the Premises in violation of this Lease within the time period required pursuant to Section 15 of this Lease.

 

(f)            Insolvency Events. Tenant or any guarantor or surety of Tenant’s obligations hereunder shall: (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “Proceeding for Relief”); (C) become the subject of any Proceeding for Relief that is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).

 

(g)           Estoppel Certificate or Subordination Agreement. Tenant fails to execute any document required from Tenant under Sections 23 or 27 within 5 business days after a second notice requesting such document.

 

(h)           Financial Information. Tenant fails to provide any financial information required to be delivered by Tenant to Landlord pursuant to Section 43(c) following written request from Landlord, within 5 business days after a second notice requesting such financial information.

 

(i)            Other Defaults. Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Section 20, and, except as otherwise expressly provided herein, such failure shall continue for a period of 30 days after written notice thereof from Landlord to Tenant.

 

Any notice given under Section 20(i) hereof shall: (i) specify the alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice; provided that if the nature of Tenant’s default pursuant to Section 20(i) is such that it cannot be cured by the payment of money and reasonably requires more than 30 days to cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said 30 day period and thereafter diligently prosecutes the same to completion; provided, however, that such cure shall be completed no later than 60 days from the date of Landlord’s notice.

 

21.           Landlord’s Remedies.

 

(a)           Payment By Landlord; Interest. Upon a Default by Tenant hereunder, Landlord may, without waiving or releasing any obligation of Tenant hereunder, make such payment or perform such act. All sums so paid or incurred by Landlord, together with interest thereon, from the date such sums were paid or incurred, at the annual rate equal to 12% per annum or the highest rate permitted by law (the “Default Rate”), whichever is less, shall be payable to Landlord on demand as Additional Rent. Nothing herein shall be construed to create or impose a duty on Landlord to mitigate any damages resulting from Tenant’s Default hereunder.

 

 

(b)           Late Payment Rent. Late payment by Tenant to Landlord of Rent and other sums due will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will beextremely difficult and impracticable to ascertain. Such costs include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord under any Mortgage covering the Premises. Therefore, if any installment of Rent due from Tenant is not received by Landlord within 5 days after the date such payment is due, Tenant shall pay to Landlord an additional sum of 6% of the overdue Rent as a late charge. Notwithstanding the foregoing, before assessing a late charge the first time in any calendar year, Landlord shall provide Tenant written notice of the delinquency and will waive the right if Tenant pays such delinquency within 5 days thereafter. The parties agree that this late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. In addition to the late charge, Rent not paid when due shall bear interest at the Default Rate from the 5th day after the date due until paid.

 

(c)           Remedies. Upon the occurrence of a Default, Landlord, at its option, without further notice or demand to Tenant, shall have in addition to all other rights and remedies provided in this Lease, at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever (except as otherwise expressly provided in Section 21(c)(v) with respect to Landlord’s Lump Sum Election). No cure in whole or in part of such Default by Tenant after Landlord has taken any action beyond giving Tenant notice of such Default to pursue any remedy provided for herein (including retaining counsel to file an action or otherwise pursue any remedies) shall in any way affect Landlord’s right to pursue such remedy or any other remedy provided Landlord herein or under law or in equity, unless Landlord, in its sole discretion, elects to waive such Default.

 

(i)             This Lease and the Term and estate hereby granted are subject to the limitation that whenever a Default shall have happened and be continuing, Landlord shall have the right, at its election, then or thereafter while any such Default shall continue and notwithstanding the fact that Landlord may have some other remedy hereunder or at law or in equity, to give Tenant written notice of Landlord’s intention to terminate this Lease on a date specified in such notice, which date shall be not less than 5 business days after the giving of such notice, and upon the date so specified, this Lease and the estate hereby granted shall expire and terminate with the same force and effect as if the date specified in such notice were the date hereinbefore fixed for the expiration of this Lease, and all rights of Tenant hereunder shall expire and terminate, and Tenant shall be liable as hereinafter in this Section 21(c) provided. If any such notice is given, Landlord shall have, on such date so specified, the right of re-entry and possession of the Premises and the right to remove all persons and property therefrom and to store such property in a warehouse or elsewhere at the risk and expense, and for the account, of Tenant. Should Landlord elect to re-enter as herein provided or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, subject to Section 21(c)(ii) from time to time re-let the Premises or any part thereof for such term or terms and at such rental or rentals and upon such terms and conditions as Landlord may deem advisable, with the right to make commercially reasonable alterations in and repairs to the Premises.

 

(ii)            Landlord shall be deemed to have satisfied any obligation to mitigate its damages by hiring an experienced commercial real estate broker to market the Premises and directing such broker to advertise and show the Premises to prospective tenants.

 

(iii)           In the event of any termination of this Lease as in this Section 21 provided or as required or permitted by law or in equity, Tenant shall forthwith quit and surrender the Premises to Landlord, and Landlord may, without further notice, enter upon, re-enter, possess and repossess the same by summary proceedings, ejectment or otherwise, and again have, repossess and enjoy the same free of any rights of Tenant, and in any such event Tenant and no person claiming through or under Tenant by virtue of any law or an order of any court shall be entitled to possession or to remain in possession of the Premises.

 

 

(iv)           If this Lease is terminated or if Landlord shall re-enter the Premises as aforesaid, or in the event of the termination of this Lease, or of re-entry, by or under any proceeding or action or any provision of law by reason of a Default by Tenant, Tenant covenants and agrees forthwith to pay and be liable for, on the days originally fixed in this Lease for the payment thereof, amounts equal to the installments of Base Rent and all Additional Rent as they would, under the terms of this Lease become due if this Lease had not been terminated or if Landlord had not entered or re-entered, as aforesaid, and whether the Premises be relet or remain vacant, in whole or in part, or for a period less than the remainder of the Term, or for the whole thereof, but in the event that the Premises be relet by Landlord, Tenant shall be entitled to a credit in the net amount of rent and other charges received by Landlord in reletting, after deduction of all of Landlord’s expenses incurred in reletting the Premises (including, without limitation, tenant improvement, demising and remodeling costs, brokerage fees and the like), and in collecting the rent in connection therewith, in the following manner: Amounts received by Landlord after reletting, if any, shall first be applied against such Landlord’s expenses, until the same are recovered, and until such recovery, Tenant shall pay, as of each day when a payment would fall due under this Lease, the amount which Tenant is obligated to pay under the terms of this Lease (Tenant’s liability prior to any such reletting and such recovery by Landlord no in any way to be diminished as a result of the fact that such reletting might be for a rent higher than the rent provided for in this Lease); when and if such expenses have been completely recovered by Landlord, the amounts received from reletting by Landlord as have not previously been applied shall be credited against Tenant’s obligations as of each day when a payment would fall due under this Lease, and only the net amount thereof shall be payable by Tenant. Further, Tenant shall not be entitled to any credit of any kind for any period after the date when the Term of this Lease is scheduled to expire according to its terms.

 

Actions, proceedings or suits for the recovery of damages, whether liquidated or other damages, under this Lease, or any installments thereof, may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the Term of this Lease would have expired if it had not been terminated hereunder.

 

(v)            In addition, Landlord, at its election, notwithstanding any other provision of this Lease, by written notice to Tenant (the “Lump Sum Election”), shall be entitled to recover from Tenant, as and for liquidated damages, at any time following any termination of this Lease, a lump sum payment representing, at the time of Landlord’s written notice of its Lump Sum Election, the sum of:

 

(A)            the then present value (calculated in accordance with accepted financial practice using as the discount rate the yield to maturity on United States Treasury Notes as set forth below) of the amount of unpaid Base Rent and Additional Rent that would have been payable pursuant to this Lease for the remainder of the Term following Landlord’s Lump Sum Election if this Lease had not been terminated, and

 

(B)            all other damages and expenses (including attorneys’ fees and expenses), if any, which Landlord shall have sustained by reason of the breach of any provision of this Lease; less

 

(C)            the then present value (calculated in accordance with accepted financial practice using as the discount rate the yield to maturity on United States Treasury Notes as set forth below) of the aggregate net fair market rent plus additional charges payable for the Premises (if less than the then present value of Base Rent and Additional Rent that would have been payable pursuant to this Lease) for the remainder of the Term following Landlord’s Lump Sum Election, calculated as of the date of Landlord’s Lump Sum Election, and taking into account reasonable estimates of the future costs to relet any then vacant portions of the Premises (except to the extent that Tenant has actually paid such costs pursuant to this Section 21) in order to calculate the net rental revenue that Landlord may expect to obtain for the Premises for the balance of the Term.

 

 

Landlord’s recovery under its Lump Sum Election shall be in addition to Tenant’s obligations to pay Base Rent and Additional Rent due and costs incurred prior to the date of Landlord’s Lump Sum Election, and in lieu of any Base Rent and Additional Rent which would otherwise have been due under this Section from and after the date of Landlord’s Lump Sum Election. The yield to maturity on United States Treasury Notes having a maturity date that is nearest the date that would have been the last day of the Term of this Lease, as reported in the Wall Street Journal or a comparable publication if it ceases to publish such yields, shall be used in calculating present values for purposes of Landlord’s Lump Sum Election. For the purposes of this Section, if Landlord makes the Lump Sum Election to recover liquidated damages in accordance with this Section, the total Additional Rent shall be computed based upon Landlord’s reasonable estimate of Tenant’s Share of Operating Expenses and other Additional Rent for each 12-month period in what would have been the remainder of the Term of this Lease and any part thereof at the end of such remainder of the Term, but in no event less than the amounts therefor payable for the twelve (12) calendar months (or if less than twelve (12) calendar months have elapsed since the date hereof, the partial year) immediately preceding the date of Landlord’s Lump Sum Election. Amounts of Tenant’s Share of Operating Expenses and any other Additional Rent for any partial year at the beginning of the Term or at the end of what would have been the remainder of the Term shall be prorated.

 

(vi)           Nothing herein contained shall limit or prejudice the right of Landlord, in any bankruptcy or insolvency proceeding, to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any bankruptcy or insolvency proceedings, or to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law, whether such amount shall be greater or less than the excess referred to above.

 

(vii)          Nothing in this Section 21 shall be deemed to affect the right of either party to indemnifications pursuant to this Lease.

 

(viii)         If Landlord terminates this Lease upon the occurrence of a Default, Tenant will quit and surrender the Premises to Landlord or its agents, and Landlord may, without further notice, enter upon, re-enter and repossess the Premises by summary proceedings, ejectment or otherwise. The words “enter”, “re-enter”, and “re-entry” are not restricted to their technical legal meanings.

 

(ix)            If Tenant shall be in Default in the observance or performance of any provision of this Lease, and an action shall be brought for the enforcement thereof in which it shall be determined that Tenant was in Default, Tenant shall pay to Landlord all reasonable, out of pocket fees, costs and other expenses which may become payable as a result thereof or in connection therewith, including reasonable attorneys’ fees and expenses.

 

(x)             If Default by Tenant shall occur in the keeping, observance or performance of any covenant, agreement, term, provision or condition herein contained, Landlord, without thereby waiving such Default, may perform the same for the account and at the expense of Tenant (a) immediately or at any time thereafter and with only such notice, if any, as may be practicable under the circumstances in the case of an emergency or in case such Default will result in a violation of any legal or insurance requirements, or in the imposition of any lien against all or any portion of the Premises or the Project not discharged, released or bonded over to Landlord’s satisfaction by Tenant within the time period required pursuant to Section 15 of this Lease, and (b) in any other case if such Default continues after any applicable notice and cure period provided in Section 20. All reasonable costs and expenses incurred by Landlord in connection with any such performance by it for the account of Tenant and also all reasonable costs and expenses, including attorneys’ fees and disbursements incurred by Landlord in any action or proceeding (including any summary dispossess proceeding) brought by Landlord to enforce any obligation of Tenant under this Lease and/or right of Landlord in or to the Premises, shall be paid by Tenant to Landlord within 10 days after demand.

 

 

(xi)            Independent of the exercise of any other remedy of Landlord hereunder or under applicable law, Landlord may conduct an environmental test of the Premises as generally described in Section 30(d).

 

(xii)           Landlord shall have the right to suspend funding of any TI Allowance or the performance of the Tenant Improvements during any period that Tenant is Default under this Lease. Once the Default has been cured, Landlord shall resume funding of the TI Allowance and the performance of the Tenant Improvements.

 

(xiii)          In the event that Tenant is in breach or Default under this Lease, whether or not Landlord exercises its right to terminate or any other remedy, Tenant shall reimburse Landlord upon demand for any out of pocket costs and expenses that Landlord may incur in connection with any such breach or Default, as provided in this Section 21(c). Such costs shall include legal fees and costs incurred for the negotiation of a settlement, enforcement of rights or otherwise. Tenant shall also indemnify Landlord against and hold Landlord harmless from all costs, expenses, demands and liability, including without limitation, reasonable legal fees and costs Landlord shall incur if Landlord shall become or be made a party to any claim or action instituted by Tenant against any third party, by any third party against Tenant or by or against any person holding any interest under or using the Premises by license of or agreement with Tenant.

 

Except as otherwise provided in this Section 21, no right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and every right and remedy shall be cumulative and in addition to any other legal or equitable right or remedy given hereunder, or now or hereafter existing. No waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressly so made in writing by Landlord expressly waiving such provision. Landlord shall be entitled, to the extent permitted by law, to seek injunctive relief in case of the violation, or attempted or threatened violation, of any provision of this Lease, or to seek a decree compelling observance or performance of any provision of this Lease, or to seek any other legal or equitable remedy.

 

22.           Assignment and Subletting.

 

(a)           General Prohibition. Without Landlord’s prior written consent subject to and on the conditions described in this Section 22, Tenant shall not, directly or indirectly, voluntarily or by operation of law, assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises, and any attempt to do any of the foregoing shall be void and of no effect. If Tenant is a corporation, partnership or limited liability company, the shares or other ownership interests thereof that are not actively traded upon a stock exchange or in the over-the-counter market, a transfer or series of transfers whereby 25% or more of the issued and outstanding shares or other ownership interests of such corporation are, or voting control is, transferred (but excepting transfers upon deaths of individual owners) from a person or persons or entity or entities that were owners thereof at time of execution of this Lease to persons or entities who were not owners of shares or other ownership interests of the corporation, partnership or limited liability company at time of execution of this Lease, shall be deemed an assignment of this Lease requiring the consent of Landlord as provided in this Section 22. Notwithstanding the foregoing, Tenant shall have the right to obtain financing from institutional investors (including venture capital funding and corporate partners) which regularly invest in private biotechnology companies or undergo a public offering which results in a change in control of Tenant without such change of control constituting an assignment under this Section 22 requiring Landlord consent, provided that (i) Tenant notifies Landlord in writing of the financing at least 5 business days prior to the closing of the financing, and (ii) provided that in no event shall such financing result in a change in use of the Premises from the use contemplated by Tenant at the commencement of the Term.

 

 

 

(b)            Permitted Transfers. If Tenant desires to assign, sublease, hypothecate or otherwise transfer this Lease or sublet the Premises other than pursuant to a Permitted Assignment (as defined below), then at least 15 business days, but not more than 60 business days, before the date Tenant desires the assignment or sublease to be effective (the “Assignment Date”), Tenant shall give Landlord a notice (the “Assignment Notice”) containing such information about the proposed assignee or sublessee, including the proposed use of the Premises and any Hazardous Materials proposed to be used, stored handled, treated, generated in or released or disposed of from the Premises, the Assignment Date, any relationship between Tenant and the proposed assignee or sublessee, and all material terms and conditions of the proposed assignment or sublease, including a copy of any proposed assignment or sublease in its final form, and such other information as Landlord may deem reasonably necessary or appropriate to its consideration whether to grant its consent. Landlord may, by giving written notice to Tenant within 15 business days after receipt of the Assignment Notice: (i) grant such consent, (ii) refuse such consent, in its reasonable discretion; or (iii) with respect to any proposed assignment or transfer of this Lease, or with respect to any proposed subletting for substantially the remainder of the Term of more than 50% of the Premises, terminate this Lease with respect to the space described in the Assignment Notice as of the Assignment Date (an “Assignment Termination”). Among other reasons, it shall be reasonable for Landlord to withhold its consent in any of these instances: (1) the proposed assignee or subtenant is a governmental agency; (2) in Landlord’s reasonable judgment, the use of the Premises by the proposed assignee or subtenant would entail any alterations that would lessen the value of the leasehold improvements in the Premises, or would require increased services by Landlord; (3) in Landlord’s reasonable judgment, the proposed assignee or subtenant is engaged in areas of scientific research or other business concerns that are controversial; (4) in Landlord’s reasonable judgment, the proposed assignee or subtenant lacks the creditworthiness to support the financial obligations it will incur under the proposed assignment or sublease; (5) in Landlord’s reasonable judgment, the character, reputation, or business of the proposed assignee or subtenant is inconsistent with the desired tenant-mix or the quality of other tenancies in the Project or is inconsistent with the type and quality of the nature of the Building; (6) Landlord or an affiliate of Landlord has received from any prior landlord to the proposed assignee or subtenant a negative report concerning such prior landlord’s experience with the proposed assignee or subtenant; (7) Landlord or an affiliate of Landlord has experienced previous defaults by or is in litigation with the proposed assignee or subtenant; (8) the use of the Premises by the proposed assignee or subtenant will violate any applicable Legal Requirement; (9) the proposed assignee or subtenant, or any entity that, directly or indirectly, controls, is controlled by, or is under common control with the proposed assignee or subtenant, is then an occupant of the Project; (10) the proposed assignee or subtenant is an entity with whom Landlord is then negotiating to lease space in the Project; or (11) the assignment or sublease is prohibited by the Holder of a Mortgage encumbering all or a portion of the Project. If Landlord delivers notice of its election to exercise an Assignment Termination, Tenant shall have the right to withdraw such Assignment Notice by written notice to Landlord of such election within 5 business days after Landlord’s notice electing to exercise the Assignment Termination. If Tenant withdraws such Assignment Notice, this Lease shall continue in full force and effect. If Tenant does not withdraw such Assignment Notice, this Lease, and the term and estate herein granted, shall terminate as of the Assignment Date with respect to the space described in such Assignment Notice. No failure of Landlord to exercise any such option to terminate this Lease, or to deliver a timely notice in response to the Assignment Notice, shall be deemed to be Landlord’s consent to the proposed assignment, sublease or other transfer. Tenant shall pay to Landlord a fee equal to Two Thousand Five Hundred Dollars ($2,500) in connection with its consideration of any Assignment Notice and/or its preparation or review of any consent documents. Notwithstanding the foregoing, Landlord’s consent to an assignment of this Lease or a subletting of any portion of the Premises to any entity controlling, controlled by or under common control with Tenant (a “Control Permitted Assignment”) shall not be required, provided that Tenant and any assignee or sublessee shall execute a reasonable form of acknowledgment of assignment or sublease, as applicable, acceptable to Landlord on or before the effective date of the Control Permitted Assignment. In addition, Tenant shall have the right to assign this Lease, upon 30 days prior written notice to Landlord but without obtaining Landlord’s prior written consent, to a corporation or other entity which is a successor-in-interest to Tenant, by way of merger, consolidation or corporate reorganization, or by the purchase of all or substantially all of the assets or the ownership interests of Tenant provided that (i) such merger or consolidation, or such acquisition or assumption, as the case may be, is for a good business purpose and not principally for the purpose of transferring this Lease, and (ii) the net worth (as determined in accordance with generally accepted accounting principles (“GAAP”)) of the assignee is not less than the greater of the net worth (as determined in accordance with GAAP) of Tenant as of (A) the Commencement Date, or (B) as of the date of Tenant’s most current quarterly or annual financial statements, and (iii) if the then-current Tenant is not the surviving entity, then on or before the effective date of the Corporate Permitted Assignment, Tenant and the assignee shall execute a reasonable form of acknowledgment of assignment acceptable to Landlord pursuant to which, among other things, such assignee shall agree to assume all of the terms, covenants and conditions of this Lease, and the assignee shall deliver a certificate of insurance to Landlord satisfying the Tenant’s insurance requirements under Section 17 (a “Corporate Permitted Assignment”). Control Permitted Assignments and Corporate Permitted Assignments are hereinafter referred to as “Permitted Assignments.”

 

 

(c)            Additional Conditions. As a condition to any such assignment or subletting, whether or not Landlord’s consent is required, Landlord may require:

 

(i)             that any assignee or subtenant agree, in writing at the time of such assignment or subletting, that if Landlord gives such party notice that Tenant is in default under this Lease, such party shall thereafter make all payments otherwise due Tenant directly to Landlord, which payments will be received by Landlord without any liability except to credit such payment against those due under this Lease, and any such third party shall agree to attorn to Landlord or its successors and assigns should this Lease be terminated for any reason; provided, however, in no event shall Landlord or its successors or assigns be obligated to accept such attornment; and

 

(ii)            A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true and correct, which the proposed assignee or sublessee intends to use, store, handle, treat, generate in or release or dispose of from the Premises, together with copies of all documents relating to such use, storage, handling, treatment, generation, release or disposal of Hazardous Materials by the proposed assignee or subtenant in the Premises or on the Project, prior to the proposed assignment or subletting, including, without limitation: permits; approvals; reports and correspondence; storage and management plans; plans relating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Landlord has given its written consent to do so, which consent may be withheld in Landlord’s sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks. Neither Tenant nor any such proposed assignee or subtenant is required, however, to provide Landlord with any portion(s) of the such documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities.

 

(d)            No Release of Tenant, Sharing of Excess Rents. Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at all times remain fully and primarily responsible and liable for the payment of Rent and for compliance with all of Tenant’s other obligations under this Lease. If the rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto in any form) exceeds the sum of the Base Rent and Operating Expenses payable under this Lease with respect to the applicable portion of the Premises (excluding however, any Rent payable under this Section) and the design and construction of improvements, reasonable and customary brokerage fees, reasonable legal costs, and reasonable rent abatement periods (collectively, the “Sublease/Assignment Costs”) directly related to and required pursuant to the terms of any such sublease or assignment (“Excess Rents”), then Tenant shall be bound and obligated to pay Landlord as Additional Rent hereunder 50% of such Excess Rent within 10 business days following receipt thereof by Tenant. For the purpose of calculating Excess Rents, the Sublease Assignment Costs shall be amortized on a straight-lined basis over the term of the applicable sublease or assignment. If Tenant shall sublet the Premises or any part thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent from any such subletting, and Landlord or a receiver for Tenant appointed on Landlord’s application, may collect such rent and apply it toward Tenant’s obligations under this Lease; except that, until the occurrence of a Default, Tenant shall have the right to collect such rent.

 

(e) No Waiver. The consent by Landlord to an assignment or subletting shall not relieve Tenant or any assignees of this Lease or any sublessees of the Premises from obtaining the consent of Landlord to any further assignment or subletting nor shall it release Tenant or any assignee or sublessee of Tenant from full and primary liability under this Lease. The acceptance of Rent hereunder, or the acceptance of performance of any other term, covenant, or condition thereof, from any other person or entity shall not be deemed to be a waiver of any of the provisions of this Lease or a consent to any subletting, assignment or other transfer of the Premises.

 

 

(f)             Prior Conduct of Proposed Transferee. Notwithstanding any other provision of this Section 22, if (i) the proposed assignee or sublessee of Tenant has been required by any prior landlord, lender or Governmental Authority to take remedial action in connection with Hazardous Materials contaminating a property, where the contamination resulted from such party’s action or use of the property in question, (ii) the proposed assignee or sublessee is subject to an enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority), or (iii) because of the existence of a pre-existing environmental condition in the vicinity of or underlying the Project, the risk that Landlord would be targeted as a responsible party in connection with the remediation of such pre-existing environmental condition would be materially increased or exacerbated by the proposed use of Hazardous Materials by such proposed assignee or sublessee, Landlord shall have the absolute right to refuse to consent to any assignment or subletting to any such party.

 

23.            Estoppel Certificate. Tenant shall, within 10 business days of written notice from Landlord, execute, acknowledge and deliver a statement in writing in any form reasonably requested by a proposed lender or purchaser, (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which the rental and other charges are paid in advance, if any, (ii) acknowledging that, to Tenant’s actual knowledge, there are not any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iii) setting forth such further information with respect to the status of this Lease or the Premises as may be reasonably requested thereon. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part. Tenant’s failure to deliver such statement within 5 business days after Tenant’s receipt of a second written notice from Landlord shall, at the option of Landlord, constitute a Default under this Lease, and, in any event, shall be conclusive upon Tenant that this Lease is in full force and effect and without modification except as may be represented by Landlord in any certificate prepared by Landlord and delivered to Tenant for execution.

 

24.           Quiet Enjoyment. So long as Tenant is not in Default under this Lease, Tenant shall, subject to the terms of this Lease, at all times during the Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.

 

25.           Prorations. All prorations required or permitted to be made hereunder shall be made on the basis of a 360 day year and 30 day months.

 

26.           Rules and Regulations. Tenant shall, at all times during the Term and any extension thereof, comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Project. Such rules and regulations may include, without limitation, rules and regulations relating to the use of the Project Amenities and/or rules and regulations which are intended to encourage social distancing, promote and protect health and physical well-being within the Building and the Project and/or intended to limit the spread of communicable diseases and/or viruses of any kind or nature that are more virulent than the seasonal flu (collectively, “Infectious Conditions”). The current rules and regulations are attached hereto as Exhibit E. If there is any conflict between such rules and regulations and other provisions of this Lease, the terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project and shall not enforce such rules and regulations in a discriminatory manner.

 

 

27.            Subordination. This Lease and Tenant’s interest and rights hereunder are hereby made and shall be subject and subordinate at all times to the lien of any Mortgage now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant; provided, however that so long as there is no Default pursuant to the provisions of Section 20 hereof, Tenant’s right to possession of the Premises shall not be disturbed by the Holder of any such Mortgage. Tenant agrees, at the election of the Holder of any such Mortgage, to attorn to any such Holder. Tenant agrees within 10 business days after the delivery to Tenant of a written request therefor, to execute, acknowledge and deliver such commercially reasonable instruments, confirming such subordination, and such instruments of attornment as shall be requested by any such Holder, provided any such instruments contain appropriate non-disturbance provisions assuring Tenant’s quiet enjoyment of the Premises as set forth in Section 24 hereof. Tenant’s failure to deliver such statement within 5 business days after Tenant’s receipt of a second written request shall, at the option of Landlord, constitute a Default under this Lease. Notwithstanding the foregoing, any such Holder may at any time subordinate its Mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective dates of execution, delivery or recording and in that event such Holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such Mortgage and had been assigned to such Holder. The term “Mortgage” whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the “Holder” of a Mortgage shall be deemed to include the beneficiary under a deed of trust.

 

28.            Surrender. Upon the expiration of the Term or earlier termination of Tenant’s right of possession, Tenant shall surrender the Premises to Landlord in broom swept and clean condition (a) in substantially the same in the same condition the Premises is in following the Substantial Completion of the Tenant Improvements (except for any Alterations or Installations permitted by Landlord to remain in the Premises pursuant to Section 12), subject to ordinary wear and tear and casualty loss and condemnation covered by Sections 18 and 19, (b) with all wires, cables or similar equipment which Tenant has installed in the Premises or in the risers or plenums of the Building removed, (c) free of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, the Premises by any person other than Landlord or any of Landlord’s employees, agents and contractors (collectively, “Tenant HazMat Operations”), and (d) released of all Hazardous Materials Clearances. At least 3 months prior to the surrender of the Premises or such earlier date as Tenant may elect to cease operations at the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by any Governmental Authority) to be taken by Tenant in order to surrender the Premises (including any Installations permitted by Landlord to remain in the Premises) at the expiration or earlier termination of the Term, free from any residual impact from the Tenant HazMat Operations and otherwise released for unrestricted use and occupancy (the “Decommissioning and HazMat Closure Plan”). Such Decommissioning and HazMat Closure Plan shall be accompanied by a current listing of (i) all Hazardous Materials licenses and permits held by or on behalf of any Tenant Party with respect to the Premises, and (ii) all Hazardous Materials used, stored, handled, treated, generated, released or disposed of from the Premises, and shall be subject to the review and approval of Landlord’s environmental consultant. In connection with the review and approval of the Decommissioning and HazMat Closure Plan, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such additional non-proprietary information concerning Tenant HazMat Operations as Landlord shall reasonably request. On or before such surrender, Tenant shall deliver to Landlord evidence that the approved Decommissioning and HazMat Closure Plan shall have been satisfactorily completed and Landlord shall have the right to cause Landlord’s environmental consultant to inspect the Premises and perform such additional procedures as may be deemed reasonably necessary to confirm that the Premises are, as of the effective date of such surrender or early termination of this Lease, free from any residual impact from Tenant HazMat Operations. Tenant shall pay a fee to Landlord in the amount of $5,000 for the review of the Decommissioning and HazMat Closure Plan and Tenant’s implementation of the same by Landlord’s environmental consultant. Landlord shall have the unrestricted right to deliver such Decommissioning and HazMat Closure Plan and any report by Landlord’s environmental consultant with respect to the surrender of the Premises to third parties.

 

 

If Tenant shall fail to prepare or submit a Decommissioning and HazMat Closure Plan approved by Landlord, or if Tenant shall fail to complete the approved Decommissioning and HazMat Closure Plan, or if such Decommissioning and HazMat Closure Plan, whether or not approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat Operations in, on or about the Premises, Landlord shall have the right to take such actions as Landlord may deem reasonable or appropriate to assure that the Premises and the Project are surrendered free from any residual impact from Tenant HazMat Operations, the cost of which actions shall be reimbursed by Tenant as Additional Rent, without regard to the limitation set forth in the first paragraph of this Section 28.

 

Upon the expiration or earlier termination of the Term, Tenant shall immediately return to Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of the Premises furnished to or otherwise procured by Tenant. Any Tenant’s Property, Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and/or disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Term, including the obligations of Tenant under Section 30 hereof, shall survive the expiration or earlier termination of the Term, including, without limitation, indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises.

 

29.            Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

 

30.

Environmental Requirements.

 

(a)            Prohibition/Compliance/Indemnity. Tenant shall not cause or permit any Hazardous Materials (as hereinafter defined) to be brought upon, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises, the Building, the Property or the Project in violation of applicable Environmental Requirements (as hereinafter defined) by Tenant or any Tenant Party. If Tenant breaches the obligation stated in the preceding sentence, or if the presence of Hazardous Materials in the Premises during the Term or any holding over results in contamination of the Premises, the Building, the Property or the Project or any adjacent property or if contamination of the Premises, the Building, the Property or the Project or any adjacent property by Hazardous Materials brought into, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises by anyone other than Landlord and Landlord’s employees, agents and contractors otherwise occurs during the Term or any holding over, Tenant hereby indemnifies and shall defend and hold Landlord, its officers, directors, employees, agents and contractors harmless from any and all actions (including, without limitation, remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising out of or resulting therefrom), costs, claims, damages (including, without limitation, punitive damages and damages based upon diminution in value of the Premises or the Project, or the loss of, or restriction on, use of the Premises or any portion of the Project), expenses (including, without limitation, reasonable attorneys’, consultants’ and experts’ fees, court costs and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury, property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses which arise during or after the Term as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, treatment, remedial, removal, or restoration work required by any federal, state or local Governmental Authority because of Hazardous Materials present in the air, soil or ground water above, on, or under the Premises. Without limiting the foregoing, if the presence of any Hazardous Materials on the Premises, the Building, the Property, the Project or any adjacent property caused or permitted by Tenant or any Tenant Party results in any contamination of the Premises, the Building, the Property, the Project or any adjacent property, Tenant shall promptly take all actions at its sole expense and in accordance with applicable Environmental Requirements as are necessary to return the Premises, the Building, the Property, the Project or any adjacent property to the condition existing prior to the time of such contamination, provided that Landlord’s approval of such action shall first be obtained, which approval shall not unreasonably be withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises, the Building or the Project. Notwithstanding anything to the contrary contained in Section 28 or this Section 30, Tenant shall not be responsible for, and the indemnification and hold harmless obligation set forth in this paragraph shall not apply to (i) contamination in the Premises which Tenant can prove existed in the Premises immediately prior to the Commencement Date, (ii) the presence of any Hazardous Materials in the Premises which Tenant can prove migrated from outside of the Premises into the Premises, or (iii) caused by Landlord or any Landlord’s employees, agents and contractors, unless in any case, the presence of such Hazardous Materials (x) is the result of a breach by Tenant of any of its obligations under this Lease, or (y) was caused, contributed to or exacerbated by Tenant or any Tenant Party.

 

 

(b)            Business. Landlord acknowledges that it is not the intent of this Section 30 to prohibit Tenant from using the Premises for the Permitted Use. Tenant may operate its business according to prudent industry practices so long as the use or presence of Hazardous Materials is strictly and properly monitored according to all then applicable Environmental Requirements. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord prior to the Commencement Date a list identifying each type of Hazardous Materials to be brought upon, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises and setting forth any and all governmental approvals or permits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of such Hazardous Materials on or from the Premises (“Hazardous Materials List”). Upon Landlord’s request (but not more than once per calendar year), or any time that Tenant is required to deliver a Hazardous Materials List to any Governmental Authority (e.g., the fire department) in connection with Tenant’s use or occupancy of the Premises, Tenant shall deliver to Landlord (i) an updated Hazardous Materials List in response to Landlord’s request, or (ii) a copy of any Hazardous Materials List delivered to any Governmental Authority, as applicable. Tenant shall deliver to Landlord true and correct copies of the following documents (the “Haz Mat Documents”) relating to the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials prior to the Commencement Date, or if unavailable at that time, concurrent with the receipt from or submission to a Governmental Authority: permits; approvals; reports and correspondence; storage and management plans, written notice of violations of any applicable Legal Requirements; plans relating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent may be withheld in Landlord’s sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks. Tenant is not required, however, to provide Landlord with any portion(s) of the Haz Mat Documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities. It is not the intent of this Section to provide Landlord with information which could be detrimental to Tenant’s business should such information become possessed by Tenant’s competitors.

 

(c)            Tenant Representation and Warranty. Tenant hereby represents and warrants to Landlord that (i) neither Tenant nor any of its legal predecessors has been required by any prior landlord, lender or Governmental Authority at any time to take remedial action in connection with Hazardous Materials contaminating a property which contamination was permitted by Tenant or such predecessor or resulted from Tenant’s or such predecessor’s action or use of the property in question, and (ii) Tenant is not subject to any enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority). If Landlord determines that this representation and warranty was not true as of the date of this lease, Landlord shall have the right to terminate this Lease in Landlord’s sole and absolute discretion.

 

 

(d)            Testing. Landlord shall have the right to conduct annual tests of the Premises to determine whether any contamination of the Premises, Building, Property or Project has occurred as a result of Tenant’s use. Tenant shall be required to pay the cost of such annual test of the Premises if there is violation of this Section 30 or if contamination for which Tenant is responsible under this Section 30 is identified; provided, however, that if Tenant conducts its own tests of the Premises using third party contractors and test procedures acceptable to Landlord which tests are certified to Landlord, Landlord shall accept such tests in lieu of the annual tests to be paid for by Tenant. In addition, at any time, and from time to time, prior to the expiration or earlier termination of the Term, Landlord shall have the right to conduct appropriate tests of the Premises, the Building, the Property and the Project to determine if contamination has occurred as a result of Tenant’s use of the Premises. In connection with such testing, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such non-proprietary information concerning the use of Hazardous Materials in or about the Premises by Tenant or any Tenant Party. If contamination has occurred for which Tenant is liable under this Section 30, Tenant shall pay all costs to conduct such tests. If no such contamination is found, Landlord shall pay the costs of such tests (which shall not constitute an Operating Expense). Landlord shall provide Tenant with a copy of all third party, non-confidential reports and tests of the Premises made by or on behalf of Landlord during the Term without representation or warranty and subject to a confidentiality agreement. Tenant shall, at its sole cost and expense, promptly and satisfactorily remediate any environmental conditions identified by such testing for which Tenant is responsible under this Section 30 in accordance with all Environmental Requirements. Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord may have against Tenant.

 

(e)            Control Areas. Tenant shall be allowed to utilize the Hazardous Materials inventory within the control area or zone (located within the Premises), as designated by the applicable building code, for chemical use or storage, as shown on Exhibit H.

 

(f)             Storage Tanks. If storage tanks storing Hazardous Materials located on the Premises, the Building, the Property or the Project are used by Tenant or are hereafter placed on the Premises, the Building, the Property or the Project by Tenant, Tenant shall install, use, monitor, operate, maintain, upgrade and manage such storage tanks, maintain appropriate records, obtain and maintain appropriate insurance, implement reporting procedures, properly close any storage tanks, and take or cause to be taken all other actions necessary or required under applicable state and federal Legal Requirements, as such now exists or may hereafter be adopted or amended in connection with the installation, use, maintenance, management, operation, upgrading and closure of such storage tanks. Notwithstanding anything to the contrary contained herein, Tenant shall have no right to use or install any underground storage tanks at the Project.

 

(g)            Tenant’s Obligations. Tenant’s obligations under this Section 30 shall survive the expiration or earlier termination of the Lease. During any period of time after the expiration or earlier termination of this Lease required by Tenant or Landlord to complete the removal from the Premises of any Hazardous Materials (including, without limitation, the release and termination of any licenses or permits restricting the use of the Premises and the completion of the approved Decommissioning and HazMat Closure Plan), Tenant shall continue to pay the full Rent in accordance with this Lease for any portion of the Premises not relet by Landlord in Landlord’s sole discretion, which Rent shall be prorated daily.

 

(h)            Definitions. As used herein, the term “Environmental Requirements” means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any Governmental Authority regulating or relating to health, safety, or environmental conditions on, under, or about the Premises, the Building, the Property or the Project, or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. As used herein, the term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, or regulated by reason of its impact or potential impact on humans, animals and/or the environment under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the Premises by Tenant or any Tenant Party, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

 

 

31.            Tenant’s Remedies/Limitation of Liability. Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary). Upon any default by Landlord, Tenant shall give notice by registered or certified mail to any Holder of a Mortgage covering the Premises and to any landlord of any lease of property in or on which the Premises are located and Tenant shall offer such Holder and/or landlord a reasonable opportunity to cure the default, including time to obtain possession of the Project by power of sale or a judicial action if such should prove necessary to effect a cure; provided Landlord shall have furnished to Tenant in writing the names and addresses of all such persons who are to receive such notices. All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord’s obligations hereunder.

 

Notwithstanding the foregoing, if any claimed Landlord default hereunder will immediately, materially and adversely affect Tenant’s ability to conduct its business in the Premises (a “Material Landlord Default”), Tenant shall, as soon as reasonably practicable, but in any event within 3 business days of obtaining knowledge of such claimed Material Landlord Default, give Landlord written notice of such claim which notice shall specifically state that a Material Landlord Default exists and provide telephonic notice to Tenant’s principal contact with Landlord. Landlord shall then have 2 business days to commence cure of such claimed Material Landlord Default and shall diligently prosecute such cure to completion. If such claimed Material Landlord Default is not a default by Landlord hereunder, Landlord shall be entitled to recover from Tenant, as Additional Rent, any costs incurred by Landlord in connection with such cure in excess of the costs, if any, that Landlord would otherwise have been liable to pay hereunder. If Landlord fails to commence to cure any claimed Material Landlord Default as provided above, Tenant may commence and prosecute such cure to completion provided that it does not affect any Building Systems affecting other tenants, the Building structure or Common Areas, and shall be entitled to recover the reasonable costs of such cure (but not any consequential or other damages) from Landlord by way of reimbursement from Landlord with no right to offset against Rent, to the extent of Landlord’s obligation to cure such claimed Material Landlord Default hereunder, subject to the limitations set forth in the immediately preceding sentence of this paragraph and the other provisions of this Lease.

 

All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term “Landlord” in this Lease shall mean only the owner for the time being of the Premises. Upon the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Term upon each new owner for the duration of such owner’s ownership.

 

32.            Inspection and Access. Landlord and its agents, representatives, and contractors may enter the Premises during business hours on not less than 48 hours advance written notice (except in the case of emergencies in which case no such notice shall be required and such entry may be at any time) for the purpose of effecting any such repairs, inspecting the Premises, showing the Premises to prospective purchasers and, during the last 12 months of the Term, to prospective tenants or for any other business purpose. Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s operations in the Premises in connection with its entry into the Premises under this Section 32. Landlord may grant easements, make public dedications, designate Common Areas and create restrictions on or about the Premises, the Building the Property and the Project, provided that no such easement, dedication, designation or restriction materially, adversely affects Tenant’s use or occupancy of the Premises for the Permitted Use. At Landlord’s request, Tenant shall execute such instruments as may be reasonably necessary for such easements, dedications or restrictions. Tenant shall at all times, except in the case of emergencies, have the right to escort Landlord or its agents, representatives, contractors or guests while the same are in the Premises, provided such escort does not materially and adversely affect Landlord’s access rights hereunder.

 

 

33.            Security. Tenant acknowledges and agrees that security devices and services, if any, while intended to deter crime may not in given instances prevent theft or other criminal acts and that Landlord is not providing any security services with respect to the Premises. Tenant agrees that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises. Tenant shall be solely responsible for the personal safety of Tenant’s officers, employees, agents, contractors, guests and invitees while any such person is in, on or about the Premises and/or the Project. Tenant shall at Tenant’s cost obtain insurance coverage to the extent Tenant desires protection against such criminal acts.

 

Subject to the terms of this Lease including, without limitation, Section 12, Tenant, at Tenant’s sole cost and expense, shall have the right to install and maintain a card access system at all access points to the Premises (“Tenant’s Card Access System”), subject to the following conditions: (i) Tenant’s plans and specifications for the proposed Tenant’s Card Access System shall be subject to Landlord’s prior written approval, which approval will not be unreasonably withheld; provided, however, that Tenant shall coordinate the installation and operation of Tenant’s Card Access System with Landlord to assure that Tenant’s Card Access System may be compatible with the Building’s master systems and equipment; (ii) Landlord shall be provided with keys, codes and/or access cards, as applicable, and means of immediate access to fully exercise all of its entry rights under this Lease with respect to the Premises; and (iii) Tenant shall keep Tenant’s Card Access System in good operating condition and repair and Tenant shall be solely responsible, at Tenant’s sole cost and expense, for the monitoring, operation and removal of Tenant’s Card Access System. Upon the expiration or earlier termination of this Lease, Tenant shall not be required to remove Tenant’s Card Access System. Notwithstanding anything to the contrary, neither Landlord nor any Landlord Indemnified Parties shall be directly or indirectly liable to Tenant, any Tenant Parties or any other person and Tenant hereby waives any and all claims against and releases Landlord and the Landlord Indemnified Parties from any and all claims arising as a consequence of or related to Tenant’s Card Access System, or the failure thereof.

 

34.            Force Majeure. Except for the payment of Rent, neither Landlord nor Tenant shall be held responsible or liable for delays in the performance of its obligations hereunder when caused by, related to, or arising out of acts of God, sinkholes or subsidence, strikes, lockouts, or other labor disputes, embargoes, quarantines, weather, national, regional, or local disasters, calamities, or catastrophes, inability to obtain labor or materials (or reasonable substitutes therefor) at reasonable costs or failure of, or inability to obtain, utilities necessary for performance, governmental restrictions, orders, limitations, regulations, or controls, national emergencies, local, regional or national epidemic or pandemic, delay in issuance or revocation of permits, enemy or hostile governmental action, terrorism, insurrection, riots, civil disturbance or commotion, cyberattacks, ransomware attacks and similar events, fire or other casualty, and other causes or events beyond their reasonable control (“Force Majeure”).

 

35.            Brokers. Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “Broker”) in connection with this transaction and that no Broker brought about this transaction, other than Jones Lang LaSalle and Newmark. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker, other than Jones Lang LaSalle and Newmark, claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction. Landlord shall be responsible for all commissions due to Jones Lang LaSalle and Newmark arising out of the execution of this Lease in accordance with the terms of separate written agreement between Landlord, on the one hand, and Jones Lang LaSalle and Newmark, on the other hand.

 

36.            Limitation on Landlord’s Liability. NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: TENANT’S PERSONAL PROPERTY OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST LANDLORD IN CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY OR ASSETS OF LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM.

 

 

Tenant acknowledges and agrees that measures and/or services implemented at the Project, if any, intended to encourage social distancing, promote and protect health and physical well-being and/or intended to limit the spread of Infectious Conditions, may not prevent the spread of such Infectious Conditions. Neither Landlord nor any Landlord Indemnified Parties shall have any liability and Tenant waives any claims against Landlord and the Landlord Indemnified Parties with respect to any loss, damage or injury in connection with (x) the implementation, or failure of Landlord or any Landlord Indemnified Parties to implement, any measures and/or services at the Project intended to encourage social distancing, promote and protect health and physical well-being and/or intended to limit the spread of Infectious Conditions, or (y) the failure of any measures and/or services implemented at the Project, if any, to limit the spread of any Infectious Conditions.

 

37.            Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in effect to such illegal, invalid or unenforceable clause or provision as shall be legal, valid and enforceable.

 

38.            Signs; Exterior Appearance. Tenant shall not, without the prior written consent of Landlord, which may be granted or withheld in Landlord’s sole discretion: (i) attach any awnings, exterior lights, decorations, balloons, flags, pennants, banners, painting or other projection to any outside wall of the Building or the Project, (ii) use any curtains, blinds, shades or screens other than Landlord’s standard window coverings, (iii) coat or otherwise sunscreen the interior or exterior of any windows, (iv) place any bottles, parcels, or other articles on the window sills, (v) place any equipment, furniture or other items of personal property on any exterior balcony, or (vi) paint, affix or exhibit on any part of the Premises, the Building, the Property or the Project any signs, notices, window or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises. Suite entry signage shall be inscribed, painted or affixed for Tenant by Landlord at the sole cost and expense of Landlord, and shall be of a size, color and type acceptable to Landlord and Tenant’s name and suite number shall be included on the Building lobby directory. Nothing may be placed on the exterior of corridor walls or corridor doors other than Landlord’s standard lettering. The Building lobby directory shall be provided exclusively for the display of the name and location of tenants.

 

 

39.

Right to Expand.

 

(a)            Expansion in the Building. Subject to the rights of existing tenants of the Project and to the terms of this Section 39(a), the first time after the initial leasing of the ROFO Space after the Effective Date to one or more third parties, Tenant shall have a one-time right, but not the obligation, to expand the Premises (the “Right of First Offer”) to include the ROFO Space upon the terms and conditions in this Section 39. For purposes of this Section 39(a), “ROFO Space” shall mean that certain space on the first floor of the Building containing approximately 7,087 rentable square feet, as more particularly described on Exhibit J, to the extent such ROFO Space is not occupied by a tenant or is occupied by a then-existing tenant whose lease is expiring within 36 months or less and such tenant does not wish to renew (whether or not such tenant has a right to renew) its occupancy of such space. Subject to the rights of existing tenants of the Project, The first time after the initial leasing of the ROFO Space after the Effective Date to one or more third parties that all or a portion of the ROFO Space will become available, Landlord shall, at such time as Landlord shall elect so long as Tenant’s rights hereunder are preserved, deliver to Tenant written notice (the “ROFO Notice”) of the availability of such ROFO Space, together with the terms and conditions on which Landlord is prepared to lease Tenant such ROFO Space. Tenant shall be required to exercise its right under this Section 39(a) with respect to all of the ROFO Space described in the ROFO Notice (the “Identified ROFO Space”). Tenant acknowledges and agrees that the term of this Lease with respect to the ROFO Space may not be co-terminous with the term of this Lease with respect to the then-existing Premises. Notwithstanding anything to the contrary contained herein, in no event shall the Work Letter apply to the ROFO Space. Tenant shall have 15 days following receipt of the ROFO Notice to deliver to Landlord written notification of Tenant’s exercise of its Right of First Offer with respect to the Identified ROFO Space (“Exercise Notice”). If Tenant does not deliver an Exercise Notice to Landlord within such 15-day period, then Tenant shall be deemed to have waived its rights under this Section 39(a) to lease the Identified ROFO Space, and Landlord shall have the right to lease the Identified ROFO Space to any third party on any terms and conditions acceptable to Landlord.

 

(b)            Amended Lease. If Tenant timely delivers an Exercise Notice to Landlord, Landlord shall deliver to Tenant a draft lease amendment for Tenant’s lease of the Identified ROFO Space within 15 business days thereafter (“Lease Amendment”). If: (i) Tenant fails to timely deliver an Exercise Notice, or (ii) after the expiration of a period of 15 business days after Landlord’s delivery to Tenant of a Lease Amendment, no lease amendment for the Identified ROFO Space acceptable to both parties each in their reasonable discretion, has been executed, Tenant shall, notwithstanding anything to the contrary contained herein, be deemed to have forever waived its right to lease such Identified ROFO Space and Landlord shall have the right to lease the Identified ROFO Space to any third party on any terms and conditions acceptable to Landlord.

 

(c)             Exceptions. Notwithstanding the above, the Right of First Offer shall, at Landlord’s option, not be in effect and may not be exercised by Tenant:

 

(i)             during any period of time that Tenant is in Default pursuant to the provisions of Section 20 of this Lease (beyond any applicable notice and cure periods); or

 

(ii)

during any period that Tenant is occupying less than 100% of the Premises; or

 

(iii)           if Tenant has been in Default under any provision of this Lease 3 or more times, whether or not the Defaults are cured, during the 12 month period immediately prior to the date on which Tenant seeks to exercise its Right of First Offer.

 

(d)            Termination. The Right of First Offer shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Right of First Offer, if, after such exercise, but prior to the commencement date of the lease of the Identified ROFO Space, (i) Tenant fails to timely cure any Default by Tenant under this Lease beyond any applicable notice and cure periods; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of the Right of First Offer to the date of the commencement of the lease of the Identified ROFO Space, whether or not such Defaults are cured.

 

(e)            Rights Personal. The Right of First Offer is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in this Lease, except that the Right of First Offer may be assigned in connection with any assignment of this Lease constituting a Permitted Assignment, without Landlord’s consent.

 

 

(f)            No Extensions. The period of time within which Tenant’s Right of First Offer may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise its Right of First Offer.

 

 

40.            Right to Extend Term. Tenant shall have the right to extend the Term of this Lease upon the following terms and conditions:

 

(a)            Extension Rights. Only if Tenant exercises its New Lease Termination Right pursuant to Section 41 with respect to only the First Floor Premises and the Penthouse Premises, Tenant shall have 1 right (the “Extension Right”) to extend the term of this Lease with respect to the Lower Level Premises for 36 months (the “Extension Term”) on the same terms and conditions as this Lease (other than with respect to Base Rent and the Work Letter) by giving Landlord written notice of its election to exercise each Extension Right at least 12 months prior, and no earlier than 18 months prior, to the expiration of the Base Term of this Lease.

 

Upon the commencement of any Extension Term, Base Rent shall be payable at the Market Rate (as defined below). Base Rent shall thereafter be adjusted on each annual anniversary of the commencement of such Extension Term by a percentage as determined by Landlord and agreed to by Tenant at the time the Market Rate is determined. As used herein, “Market Rate” shall mean the rate that comparable landlords of comparable buildings have accepted in current transactions from non-equity (i.e., not being offered equity in the buildings) and nonaffiliated tenants of similar financial strength for space of comparable size, quality (including all Tenant Improvements, Alterations and other improvements) and floor height in Class A laboratory/office buildings in the East Cambridge submarket of Boston for a comparable term, with the determination of the Market Rate to take into account all relevant factors, including tenant inducements, views, parking costs, leasing commissions, allowances or concessions, if any. In addition, Landlord may impose a market rent for the parking rights provided hereunder.

 

If, on or before the date which is 270 days prior to the expiration of the Base Term of this Lease, Tenant has not agreed with Landlord’s determination of the Market Rate and the rent escalations during the Extension Term after negotiating in good faith, Tenant shall be deemed to have elected arbitration as described in Section 40(b). Tenant acknowledges and agrees that, if Tenant has elected to exercise the Extension Right by delivering notice to Landlord as required in this Section 40(a), Tenant shall have no right thereafter to rescind or elect not to extend the term of this Lease for the Extension Term.

 

(b)

Arbitration.

 

(i)             Within 10 days of Tenant’s notice to Landlord of its election (or deemed election) to arbitrate Market Rate and escalations, each party shall deliver to the other a proposal containing the Market Rate and escalations that the submitting party believes to be correct (“Extension Proposal”). If either party fails to timely submit an Extension Proposal, the other party’s submitted proposal shall determine the Base Rent and escalations for the Extension Term. If both parties submit Extension Proposals, then Landlord and Tenant shall meet within 7 days after delivery of the last Extension Proposal and make a good faith attempt to mutually appoint a single Arbitrator (and defined below) to determine the Market Rate and escalations. If Landlord and Tenant are unable to agree upon a single Arbitrator, then each shall, by written notice delivered to the other within 10 days after the meeting, select an Arbitrator. If either party fails to timely give notice of its selection for an Arbitrator, the other party’s submitted proposal shall determine the Base Rent for the Extension Term. The 2 Arbitrators so appointed shall, within 5 business days after their appointment, appoint a third Arbitrator. If the 2 Arbitrators so selected cannot agree on the selection of the third Arbitrator within the time above specified, then either party, on behalf of both parties, may request such appointment of such third Arbitrator by application to any state court of general jurisdiction in the jurisdiction in which the Premises are located, upon 10 days prior written notice to the other party of such intent.

 

 

(ii)            The decision of the Arbitrator(s) shall be made within 30 days after the appointment of a single Arbitrator or the third Arbitrator, as applicable. The decision of the single Arbitrator shall be final and binding upon the parties. The average of the two closest Arbitrators in a three Arbitrator panel shall be final and binding upon the parties. Each party shall pay the fees and expenses of the Arbitrator appointed by or on behalf of such party and the fees and expenses of the third Arbitrator shall be borne equally by both parties. If the Market Rate and escalations are not determined by the first day of the Extension Term, then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rent in effect immediately prior to the Extension Term and increased by the Rent Adjustment Percentage until such determination is made. After the determination of the Market Rate and escalations, the parties shall make any necessary adjustments to such payments made by Tenant. Landlord and Tenant shall then execute an amendment recognizing the Market Rate and escalations for the Extension Term.

 

(iii)           An “Arbitrator” shall be any person appointed by or on behalf of either party or appointed pursuant to the provisions hereof and: (i) shall be (A) a member of the American Institute of Real Estate Appraisers with not less than 10 years of experience in the appraisal of improved office and high tech industrial real estate in the greater Boston area, or (B) a licensed commercial real estate broker with not less than 15 years’ experience representing landlords and/or tenants in the leasing of high tech or life sciences space in the greater Boston area, (ii) devoting substantially all of their time to professional appraisal or brokerage work, as applicable, at the time of appointment and (iii) be in all respects impartial and disinterested.

 

(c)            Rights Personal. The Extension Right is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in this Lease, except that the Extension Right may be assigned in connection with any assignment of this Lease constituting a Permitted Assignment, without Landlord’s consent.

 

(d)            Exceptions. Notwithstanding anything set forth above to the contrary, the Extension Right shall, at Landlord’s option, not be in effect and Tenant may not exercise the Extension Right:

 

(i)             during any period of time that Tenant is in Default pursuant to the provisions of Section 20 of this Lease (beyond any applicable notice and cure periods); or

 

(ii)            during any period that Tenant is occupying less than 100% of the Premises; or

 

(iii)           if Tenant has been in default (beyond any applicable notice and cure periods) under any provision of this Lease 3 or more times, whether or not such defaults have been cured, during the 12 month period prior to the date on which Tenant seeks to exercise its Extension Right.

 

(e)            No Extensions. The period of time within which the Extension Right may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Extension Right.

 

(f)             Termination. The Extension Right shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (i) Tenant fails to timely cure any default by Tenant under this Lease (beyond any applicable notice and cure periods); or (ii) Tenant has defaulted (beyond any applicable notice and cure periods) 3 or more times during the period commencing on the date of the exercise of the Extension Right to the date of the commencement of the Extension Term, whether or not such defaults have been cured.

 

 

41.            Early Termination. Subject to the provisions of this Section 41, Tenant shall have the one-time right to terminate the Lease (the “New Lease Termination Right”) with respect to either (a) the entire Premises, or (b) the First Floor Premises and the Penthouse Premises, without payment of a penalty, if, prior to the expiration of the Base Term, Tenant has entered into a new lease (“New Lease”) with Landlord or an affiliate of Landlord (including properties owned via a joint venture)(“Affiliate”) pursuant to which Tenant shall lease space consisting of at least 40,000 rentable square feet in Cambridge or Boston area (“New Premises”), for a term acceptable to Landlord or such Affiliate, as applicable, for such New Premises, and otherwise upon terms and conditions acceptable to Landlord or Affiliate (as applicable) and Tenant, in their respective sole discretion. If Tenant and Landlord or Affiliate (as applicable) enter into a New Lease and Tenant elects to exercise its New Lease Termination Right by delivery of written notice to Landlord (which notice shall identify whether Tenant is electing to exercise its New Lease Termination Right with respect to the entire Premises or only the First Floor Premises and the Penthouse Premises) on or before the mutual execution of the New Lease by Tenant and Landlord or Affiliate (as applicable), then this Lease shall terminate with respect to the applicable portion of the Premises on the date that Tenant commences paying base rent under the New Lease for the New Premises (the “Early Termination Date”). If exercises its New Lease Termination Right with respect to only the First Floor Premises and the Penthouse Premises, then Landlord and Tenant shall, within 30 days after Tenant’s delivery of its notice to Landlord exercising the New Lease Termination Right, enter into an amendment to reflect the surrender of the First Floor Premises and the Penthouse Premises on the Early Termination Date and the continuation. Tenant acknowledges that nothing contained herein shall obligate Landlord or any Affiliate in any way to enter into a New Lease nor shall anything contained herein be construed to grant to Tenant any option or right to lease any space at another property owned by Landlord or any Affiliate. The New Lease Termination Right set forth in this Section 41 shall only apply so long as Landlord or an Affiliate owns the Project.

 

42.            Roof Equipment. Tenant shall have the right at its sole cost and expense, subject to compliance with all Legal Requirements, to install, maintain, and remove on the top of the roof of the Building (based on Tenant’s proportionate share of the space available on the roof) in a location designated by Landlord one or more satellite dishes, microwave dishes, communication antennae, or other equipment (all of which having a diameter and height acceptable to Landlord) for the transmission or reception of communication of signals as Tenant may from time to time desire (collectively, the “Roof Equipment”) on the following terms and conditions:

 

(a)            Requirements. Tenant shall submit to Landlord (i) the plans and specifications for the installation of the Roof Equipment, (ii) copies of all required governmental and quasi-governmental permits, licenses, and authorizations that Tenant will and must obtain at its own expense, with the cooperation of Landlord, if necessary for the installation and operation of the Roof Equipment, and (iii) an insurance policy or certificate of insurance evidencing insurance coverage as required by this Lease and any other insurance as reasonably required by Landlord for the installation and operation of the Roof Equipment. Landlord shall not unreasonably withhold or delay its approval for the installation and operation of the Roof Equipment; provided, however, that Landlord may reasonably withhold its approval if the installation or operation of the Roof Equipment (A) may damage the structural integrity of the Building, (B) may void, terminate, or invalidate any applicable roof warranty, (C) may interfere with any service provided by Landlord or any tenant of the Building, (D) may reduce the leasable space in the Building, or (E) is not properly screened from the viewing public.

 

(b)            No Damage to Roof. If installation of the Roof Equipment requires Tenant to make any roof cuts or perform any other roofing work, such cuts shall only be made to the roof area of the Building in locations acceptable to Landlord and in the manner designated in writing by Landlord; and any such installation work (including any roof cuts or other roofing work) shall be performed by Tenant, at Tenant’s sole cost and expense by a roofing contractor designated by Landlord. If Tenant or its agents shall otherwise cause any damage to the roof during the installation, operation, and removal of the Roof Equipment such damage shall be repaired promptly at Tenant’s expense and the roof shall be restored in the same condition it was in before the damage. Landlord shall not charge Tenant Additional Rent for the installation and use of the Roof Equipment. If, however, Landlord’s insurance premium or Tax assessment increases as a result of the Roof Equipment, Tenant shall pay such increase as Additional Rent within ten (10)  days after receipt of a reasonably detailed invoice from Landlord. Tenant shall not be entitled to any abatement or reduction in the amount of Rent payable under this Lease if for any reason Tenant is unable to use the Roof Equipment. In no event whatsoever shall the installation, operation, maintenance, or removal of the Roof Equipment by Tenant or its agents void, terminate, or invalidate any applicable roof warranty.

 

 

(c)            Protection. The installation, operation, and removal of the Roof Equipment shall be at Tenant’s sole risk. Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all claims, costs, damages, liabilities and expenses (including, but not limited to, attorneys’ fees) of every kind and description that may arise out of or be connected in any way with Tenant’s installation, operation, or removal of the Roof Equipment.

 

(d)            Removal. At the expiration or earlier termination of this Lease or the discontinuance of the use of the Roof Equipment by Tenant, Tenant shall, at its sole cost and expense, remove the Roof Equipment from the Building. Tenant shall leave the portion of the roof where the Roof Equipment was located in good order and repair, reasonable wear and tear excepted. If Tenant does not so remove the Roof Equipment, Tenant hereby authorizes Landlord to remove and dispose of the Roof Equipment and charge Tenant as Additional Rent for all costs and expenses incurred by Landlord in such removal and disposal. Tenant agrees that Landlord shall not be liable for any Roof Equipment or related property disposed of or removed by Landlord.

 

(e)            No Interference. The Roof Equipment shall not interfere with the proper functioning of any telecommunications equipment or devices that have been installed or will be installed by Landlord or for any other tenant or future tenant of the Building. Tenant acknowledges that other tenant(s) may have approval rights over the installation and operation of telecommunications equipment and devices on or about the roof, and that Tenant’s right to install and operate the Roof Equipment is subject and subordinate to the rights of such other tenants. Tenant agrees that any other tenant of the Building that currently has or in the future takes possession of any portion of the Building will be permitted to install such telecommunication equipment that is of a type and frequency that will not cause unreasonable interference to the Roof Equipment.

 

(f)             Relocation. Landlord shall have the right, at Landlord’s cost and expense and after 60 days prior notice to Tenant, to relocate the Roof Equipment to another site on the roof of the Building as long as such site reasonably meets Tenant’s sight line and interference requirements and does not unreasonably interfere with Tenant’s use and operation of the Roof Equipment.

 

(g)            Access. Landlord grants to Tenant the right of ingress and egress on a 24 hour 7 day per week basis to install, operate, and maintain the Roof Equipment. Before receiving access to the roof of the Building, Tenant shall give Landlord at least 24 hours’ advance written or oral notice, except in emergency situations, in which case 2 hours’ advance oral notice shall be given by Tenant. Landlord shall supply Tenant with the name, telephone, and pager numbers of the contact individual(s) responsible for providing access during emergencies.

 

(h)            Appearance. If permissible by Legal Requirements, the Roof Equipment shall be painted the same color as the Building so as to render the Roof Equipment virtually invisible from ground level.

 

(i)             No Assignment. The right of Tenant to use and operate the Roof Equipment shall be personal solely to City Therapeutics, Inc., a Delaware corporation, and (i) no other person or entity shall have any right to use or operate the Roof Equipment, and (ii) Tenant shall not assign, convey, or otherwise transfer to any person or entity any right, title, or interest in all or any portion of the Roof Equipment or the use and operation thereof.

 

 

43.            Miscellaneous.

 

(a)            Notices. All notices or other communications between the parties shall be in writing and shall be delivered by (i) reputable overnight guaranty courier, (ii) hand delivery with signature confirming receipt, or (iii) email transmission to the email address set forth in the Basic Lease Provisions for the applicable party, which email includes in the subject line (x) the Project address, (y) Tenant name and (z) “NOTICE UNDER LEASE” in all caps, provided a hard copy of any email notice is also sent the same day by one of the delivery methods provided in sub-sections (i) or (ii) (each, a “Follow Up Notice”). Notices delivered pursuant to the delivery methods provided in sub-sections (i) or (ii) shall be deemed duly given when actually received by the addressee or when delivery thereof is refused by the addressee. Notices delivered via email and sent during the hours of 8:00 a.m. and 3:00 p.m. PST shall be deemed duly given on the day sent; provided, however, that any email notice delivered on a Saturday, Sunday or legal holiday or after 3:00 p.m. PST shall be deemed given on the next day that is not a Saturday, Sunday or legal holiday. For the avoidance of doubt, for an email notice to be effective as provided in the immediately preceding sentence, a Follow Up Notice must be delivered to the addressee of the email notice within 48 hours of the date that the email notice is delivered. If a Follow Up Notice is not received within such 48-hour period, actual notice will be deemed to have been given on the date that the Follow Up Notice is delivered rather than on the date of delivery of the email notice. Notwithstanding anything to the contrary contained herein, notice sent via email shall in no event constitute a notice hereunder if the sender receives notice or otherwise has knowledge that the email notice was not properly transmitted or otherwise received by the addressee. All notices shall be delivered to the parties at their addresses set forth in the Basic Lease Provisions. Landlord and Tenant may from time to time by written notice to the other designate another address for receipt of future notices.

 

(b)            Joint and Several Liability. If and when included within the term “Tenant,” as used in this instrument, there is more than one person or entity, each shall be jointly and severally liable for the obligations of Tenant.

 

(c)            Financial Information. Tenant shall furnish to Landlord true and complete copies of (i) upon Landlord’s written request on an annual basis, Tenant’s most recent unaudited (or, if available, audited) annual financial statements, provided, however, that Tenant shall not be required to deliver to Landlord such annual financial statements for any particular year sooner than the date that is 90 days after the end of each of Tenant’s fiscal years during the Term, (ii) upon Landlord’s written request on a quarterly basis, Tenant’s most recent unaudited quarterly financial statements; provided, however, that Tenant shall not be required to deliver to Landlord such quarterly financial statements for any particular quarter sooner that the date that is 45 days after the end of each of Tenant’s fiscal quarters during the Term, (iii) upon Landlord’s written request from time to time, updated business plans, including cash flow projections and/or pro forma balance sheets and income statements typically provided to or prepared for investors provided, however, that Tenant may redact (or omit) information from such business plans, including cash flow projections and/or pro forma balance sheets and income statements that Tenant deems to constitute a competitive advantage for Tenant (e.g., without limitation, proprietary information about Tenant that could be used by others to put Tenant at a disadvantage, information about targets that Tenant is seeking to acquire or to be acquired by, etc.), (iv) upon Landlord’s written request from time to time, corporate brochures and/or profiles prepared by Tenant for prospective investors, and (v) upon Landlord’s written request from time to time, any other financial information or summaries that Tenant typically provides to its lenders or shareholders. Notwithstanding anything to the contrary contained in this Lease, Landlord’s written request for financial information pursuant to this Section 44(c) may delivered to Tenant via email. So long as Tenant is a “public company” and its financial information is publicly available, then the foregoing delivery requirements of this Section 44(c) shall not apply.

 

Landlord agrees to hold the financial statements and other financial information provided under this section in confidence using at least the same degree of care that Landlord uses to protect its own confidential information of a similar nature; provided, however, that Landlord may disclose such information to Landlord’s auditors, attorneys, consultants, lenders, affiliates, prospective purchasers and investors and other third parties as reasonably required in the ordinary course of Landlord’s operations, provided that Landlord shall request that such parties treat the information as confidential. The obligations of confidentiality hereunder shall not apply to information that was in the public domain at the time it was disclosed to Landlord, entered into the public domain subsequent to the time it was disclosed to Landlord through no fault of Landlord, or was disclosed by Tenant to a third party without any confidentiality restrictions. In addition, Landlord may disclose such information without violating this section to the extent that disclosure is reasonably necessary (x) for Landlord to enforce its rights or defend itself under this Lease; (y) for required submissions to any state or federal regulatory body; or (z) for compliance with a valid order of a court or other governmental body having jurisdiction, or any law, statute, or regulation, provided that, other than in an emergency, before disclosing such information, Landlord shall give Tenant 5 business days’ prior notice of the same to allow Tenant to obtain a protective order or such other judicial relief.

 

 

(d)            Recordation. Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord, Tenant will execute, a memorandum of lease. Notwithstanding the foregoing, upon Tenant’s request and at Tenant’s sole cost and expense, Landlord shall execute and notarize a memorandum of lease prepared by Tenant which memorandum shall contain only the following information and any other additional information that may be required by applicable law: (i) the names of the parties to this Lease, (ii) description of the Premises and the Project, and (iii) the Term. Tenant shall file such memorandum of lease, at Tenant’s sole cost. If Tenant fails, after written request from Landlord, to record a termination of the memorandum on the expiration or earlier termination of this Lease, Tenant shall be responsible for any damages suffered by Landlord (from any cause including, without limitation, resulting from any indemnities or certifications which may be made by Landlord in favor of third parties). The provisions of this Section 43(d) shall survive the expiration or earlier termination of this Lease. Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease.

 

(e)            Interpretation. The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.

 

(f)             Not Binding Until Executed. The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.

 

(g)            Limitations on Interest. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord’s and Tenant’s express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.

 

(h)            Choice of Law. Construction and interpretation of this Lease shall be governed by the internal laws of the state in which the Premises are located, excluding any principles of conflicts of laws.

 

(i)             Time. Time is of the essence as to the performance of Tenant’s obligations under this Lease.

 

(j)             OFAC. Tenant and all beneficial owners of Tenant are currently (a) in compliance with and shall at all times during the Term of this Lease remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the term of this Lease be listed on, the Specially Designated Nationals and Blocked Persons List, Foreign Sanctions Evaders List, or the Sectoral Sanctions Identification List, which are all maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.

 

(k)            Incorporation by Reference. All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. If there is any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.

 

 

(l)             Entire Agreement. This Lease, including the exhibits attached hereto, constitutes the entire agreement between Landlord and Tenant pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations or other agreements, express or implied, made to either party by the other party in connection with the subject matter hereof except as specifically set forth herein.

 

(m)            No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Base Rent or any Additional Rent will be other than on account of the earliest stipulated Base Rent and Additional Rent, nor will any endorsement or statement on any check or letter accompanying a check for payment of any Base Rent or Additional Rent be an accord and satisfaction. Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or to pursue any other remedy provided in this Lease.

 

(n)            Hazardous Activities. Notwithstanding any other provision of this Lease, Landlord, for itself and its employees, agents and contractors, reserves the right to refuse to perform any repairs or services in any portion of the Premises which, pursuant to Tenant’s routine safety guidelines, practices or custom or prudent industry practices, require any form of protective clothing or equipment other than safety glasses. In any such case, Tenant shall contract with parties who are acceptable to Landlord, in Landlord’s reasonable discretion, for all such repairs and services, and Landlord shall, to the extent required, equitably adjust Tenant’s Share of Operating Expenses in respect of such repairs or services to reflect that Landlord is not providing such repairs or services to Tenant.

 

(o)            Redevelopment of Project. Tenant acknowledges that Landlord, in its sole discretion, may from time to time expand, renovate and/or reconfigure the Project as the same may exist from time to time and, in connection therewith or in addition thereto, as the case may be, from time to time without limitation: (a) change the shape, size, location, number and/or extent of any improvements, buildings, structures, lobbies, hallways, entrances, exits, parking and/or parking areas relative to any portion of the Project; (b) modify, eliminate and/or add any buildings, improvements, and parking structure(s) either above or below grade, to the Project, the Common Areas and/or any other portion of the Project and/or make any other changes thereto affecting the same; and (c) make any other changes, additions and/or deletions in any way affecting the Project and/or any portion thereof as Landlord may elect from time to time, including without limitation, additions to and/or deletions from the land comprising the Project, the Common Areas and/or any other portion of the Project. Tenant acknowledges and agrees that construction noise, vibrations and dust associated with normal construction activities in connection with any redevelopment of the Project are to be expected during the course of such construction. Notwithstanding anything to the contrary contained in this Lease, Tenant shall have no right to seek damages (including abatement of Rent) or to cancel or terminate this Lease because of any proposed changes, expansion, renovation or reconfiguration of the Project nor shall Tenant have the right to restrict, inhibit or prohibit any such changes, expansion, renovation or reconfiguration; provided, however, Landlord shall not change the size, dimensions, location or Tenant’s Permitted Use of the Premises. In no event shall such redevelopment work materially adversely affect Tenant’s access to the Premises or Tenant’s use of the Premises for the Permitted Use.

 

(p)            Shuttle Services. Landlord and affiliates of Landlord plan to provide a campus shuttle service for the Project and other buildings in the vicinity of the Project that are owned by affiliates of Landlord (the “Shuttle Service”); provided, however, that neither Landlord nor any affiliate of Landlord shall be obligated to provide the Shuttle Service (or, once the Shuttle Service has commenced, to continue providing the Shuttle Service for any specific period of time) or to cause the Shuttle Service to follow any specific route, make any specific stops, or adhere to any specific schedule or hours of operation. If Landlord and affiliates of Landlord actually commence operation of the Shuttle Service, (i) Landlord shall give Tenant written notice of the date such operation will commence (“Shuttle Services Commencement Date”) and the planned route, stops, schedule, and hours of operation, (ii) Landlord shall permit Tenant’s employees actually employed at the Project to use the Shuttle Service, and (iii) regardless of whether Tenant’s employees use the Shuttle Services, commencing on later to occur of (x) the Shuttle Services Commencement Date, or the Commencement Date, through the earlier of the expiration of the Term or the date that Landlord permanently ceases to provide Shuttle Service, Operating Expenses shall include the cost of provision the Shuttle Service (the “Shuttle Service Costs”). Tenant acknowledges and agrees that Landlord has not made any representations or warranties regarding the commencement or continued availability of the Shuttle Service and that Tenant is not entering into this Lease with an expectation that the Shuttle Service shall commence or continue to be available to Tenant throughout the Term.

 

 

(q)            Counterparts. This Lease may be executed in 2 or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature process complying with the U.S. federal ESIGN Act of 2000) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. Electronic signatures shall be deemed original signatures for purposes of this Lease and all matters related thereto, with such electronic signatures having the same legal effect as original signatures.

 

[ Signatures on next page ]

 

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

 

	TENANT:
	CITY THERAPEUTICS, INC., a Delaware corporation
	By:	/s/ Sebastian Trousil
	Its:	Chief Operating Officer
	x I hereby certify that the signature, name, and title above are my signature, name and title
	LANDLORD:
	ARE-MA REGION NO. 58, LLC,
	a Delaware limited liability company
	By:	Alexandria Real Estate Equities, L.P., a Delaware limited partnership, managing member
		By:	ARE-QRS Corp.,
			a Maryland corporation, general partner
			By:	/s/ Allison Grochola
			Its:	SVP - Real Estate Legal Affairs

 

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE (this “First Amendment”) is made as of June 4, 2025 (the “First Amendment Effective Date”), by and between ARE-MA REGION NO. 58, LLC, a Delaware limited liability company (“Landlord”), and CITY THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

 

RECITALS

 

A.       Landlord and Tenant are parties to that certain Lease Agreement dated as of December 19, 2023, as amended by that certain letter agreement dated December 28, 2023 (as amended, the “Lease”). Pursuant to the Lease, Tenant leases approximately 31,190 rentable square feet consisting of (i) a portion of the first floor of the Building, commonly known as Suite 100, containing approximately 25,860 rentable square feet (the “First Floor Premises”), (ii) a portion of the lower level floor of the Building, commonly known as Suite 001, containing approximately 4,640 rentable square feet (the “Lower Level Premises”), and (iii) a portion of the fourth floor of the Building, commonly known as Suite 400, containing approximately 690 rentable square feet (the “Penthouse Premises”) (collectively, the “Original Premises”) in the building located at 399 Binney Street, Cambridge, Massachusetts (the “Building”). The Original Premises are more particularly described in the Lease. Capitalized terms used herein without definition shall have the meanings defined for such terms in the Lease.

 

B.       The Term of the Lease is scheduled to expire on March 31, 2029 (the “Expiration Date”).

 

C.       Tenant desires to accelerate the Expiration Date of a portion of the Original Premises consisting of the First Floor Premises and the Penthouse Premises (collectively, the “Surrender Premises”), subject to Tenant’s expansion into the Substitute Premises (as defined below).

 

D.       Tenant also desires to expand the size of the Original Premises to include (i) the entire second floor of the Building commonly known as Suite 200, containing approximately 45,939 rentable square feet (the “Suite 200 Premises”) and (ii) a portion of the fourth floor of the Building, commonly known as Suite 401, containing approximately 1,074 rentable square feet (the “Suite 401 Premises”) as more particularly described on Exhibit A attached hereto (collectively, the “Substitute Premises”).

 

E.       Landlord has caused the Project and Building to be re-measured, and as a result, Landlord has determined that (i) the Lower Level Premises contains approximately 4,713 rentable square feet, (ii) the Building contains approximately 171,277 rentable square feet, and (iii) the Project contains approximately 872,277 rentable square feet.

 

F.       Landlord and Tenant desire, subject to the terms and conditions set forth below, to amend the Lease to, among other things, (i) reflect the remeasured rentable area of the Original Premises, Building and Project, (ii) extend the Term of the Lease through September 30, 2031 (the “First Amendment Expiration Date”), (iii) reflect the early termination and surrender of the Surrender Premises, and (iv) expand the size of the Original Premises to include the Substitute Premises.

 

NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, the mutual promises and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.	Substitute Premises. In addition to the Original Premises, commencing on the Substitute Premises Commencement Date (as defined in Section 2 below), Landlord shall lease to Tenant and Tenant shall lease from Landlord the Substitute Premises.

 

 

2.

Delivery of Substitute Premises. Landlord shall use reasonable efforts to deliver the Substitute Premises to Tenant with Landlord’s Work substantially completed and free of personal property (other than Landlord’s FF&E described in Section 10 below) (“Deliver” or “Delivers”) on or before July 1, 2025 (the “Target Substitute Premises Commencement Date”). If Landlord fails to deliver the Substitute Premises by the Target Substitute Premises Commencement Date, Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, and the Lease with respect to the Substitute Premises shall not be void or voidable except as provided herein. Notwithstanding anything to the contrary contained herein, if Landlord fails to Deliver the Substitute Premises to Tenant by October 1, 2025 (as such date may be extended for Force Majeure delays and delays caused by Tenant, the “Initial Abatement Date”), then Base Rent payable with respect to the Substitute Premises shall be abated 1 day for each day after the Initial Abatement Date (as such date may be amended for Force Majeure delays and delays caused by Tenant) that Landlord fails to Deliver the Substitute Premises to Tenant. If Landlord fails to Deliver the Substitute Premises to Tenant by November 1, 2025 (as such date may be extended for Force Majeure delays and delays caused by Tenant, the “Second Abatement Date”), then Base Rent payable with respect to the Substitute Premises shall be abated 2 days for each day after the Second Abatement Date (as such date may be amended for Force Majeure delays and delays caused by Tenant) that Landlord fails to Deliver the Substitute Premises to Tenant.

 

As used herein, the term “Landlord’s Work” means Landlord shall, at its sole cost and expense, (i) cause the Substitute Premises to be professionally cleaned, (ii) repair any broken floor tiles in the lab of the Suite 200 Premises, and (iii) cause the Punch List Items (as defined in the following sentence) to be completed. A representative of Landlord and Tenant shall conduct a joint walk-through of the Substitute Premises at least 30 days prior to the Target Substitute Premises Commencement Date to identify any damage caused by the former tenant, and such parties shall reasonably agree upon and prepare a final list of such items that Landlord agrees to repair (the “Punch List Items”). Landlord will require the existing tenant of the Substitute Premises to leave all existing IT infrastructure, network cabling and wiring, security infrastructure and audiovisual infrastructure (the “Existing Infrastructure and Wiring”) in the Substitute Premises upon such tenant’s surrender of the Substitute Premises. Notwithstanding anything to the contrary contained in the Lease or in this First Amendment, Tenant shall not remove the Existing Infrastructure and Wiring at the expiration or earlier termination of the Term.

 

The “Substitute Premises Commencement Date” shall be the date that Landlord Delivers the Substitute Premises to Tenant with item (i) of Landlord’s Work substantially complete. Tenant acknowledges that the remainder of Landlord’s Work shall be substantially completed within 30 days after the Substitute Premises Commencement Date. Tenant acknowledges that Landlord shall require access to portions of the Substitute Premises after the Substitute Premises Commencement Date in order to perform Landlord’s Work. Landlord and its contractors and agents shall have the right to enter the Substitute Premises to complete Landlord’s Work, and Tenant shall cooperate with Landlord in connection with the same. Tenant acknowledges that Landlord’s completion of Landlord’s Work may temporarily adversely affect Tenant’s use and occupancy of the Substitute Premises. Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s use of the Substitute Premises for the Permitted Use in connection with its performance of Landlord’s Work. Tenant waives all claims against Landlord for rent abatement in connection with Landlord’s Work. Tenant shall have no right to seek damages (including abatement of Base Rent) or to cancel or terminate the Lease because of Landlord’s Work.

 

Landlord and Tenant shall execute and deliver a written acknowledgment of the Substitute Premises Commencement Date in the form of the “Acknowledgement of Substitute Premises Commencement Date” attached hereto as Exhibit B; provided, however, Landlord or Tenant’s failure to execute and deliver such acknowledgment shall not affect either party’s rights hereunder.

 

Landlord shall, at its sole cost and expense (which shall not constitute an Operating Expense), be responsible for any repairs that are required to be made to the Building Systems (as defined in Section 13 of the Lease) serving the Substitute Premises of which Tenant notifies Landlord in writing within 90 calendar days after the Substitute Premises Commencement Date, unless Tenant or any Tenant Party was responsible for the cause of such repair, in which case Tenant shall pay the cost. Landlord shall deliver to Tenant a copy of the decommissioning report prepared by the immediately prior tenant of the Substitute Premises, subject to Landlord’s standard non-reliance letter, prior to the Substitute Premises Commencement Date.

 

 

Except as otherwise expressly set forth in this First Amendment (including without limitation, the completion of Landlord’s Work by Landlord): (i) Tenant shall accept the Substitute Premises in their “as-is” condition as of the Substitute Premises Commencement Date; (ii) Landlord shall have no obligation for any defects in the Substitute Premises; and (iii) Tenant’s taking possession of the Substitute Premises shall be conclusive evidence that Tenant accepts the Substitute Premises and that the Substitute Premises were in good condition at the time possession was taken. Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Substitute Premises, and/or the suitability of the Substitute Premises for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Substitute Premises are suitable for the Permitted Use. Nothing in this paragraph shall limit Landlord’s maintenance and repair obligations under Section 13 of the Lease.

 

3.

Surrender Premises. Landlord and Tenant agree, subject to the terms and conditions set forth in this Section 3, to accelerate the expiration date of the Term of the Lease with respect to the Surrender Premises only from the Expiration Date to the date (as applicable, the “Surrender Premises Termination Date”) that is the earlier of (i) 11:59 p.m. ET on June 30, 2026, provided the Substitute Premises Commencement Date has occurred (the “Surrender Premises Outside Termination Date”), and (ii) such earlier date that Landlord effectuates a termination of the Lease with respect to the Surrender Premises pursuant to the Surrender Premises Accelerated Termination Right (as defined below). Notwithstanding anything to the contrary contained in the Lease, Tenant shall have no further right to extend the Term of the Lease with respect to the Surrender Premises. Notwithstanding anything to the contrary contained in this First Amendment, if Tenant does not surrender the Surrender Premises on or before the Surrender Premises Termination Date in strict accordance with the terms of this First Amendment, the Term of the Lease with respect to the Surrender Premises shall nonetheless terminate on the Surrender Premises Termination Date and the holdover provisions of the Lease shall apply.

 

Notwithstanding anything to the contrary contained in this First Amendment, if Landlord has a signed lease with a replacement tenant for the Surrender Premises, Landlord shall have the right (“Surrender Premises Accelerated Termination Right”), by delivery of not less than three (3) business days’ advance written notice to Tenant which notice may be given on or after the later of (i) July 31, 2025 or (ii) such date which is thirty (30) days following the Substitute Premises Commencement Date (“Surrender Premises Accelerated Termination Notice”), to further accelerate the Surrender Premises Termination Date to a date prior to the Surrender Premises Outside Termination Date, whereupon the Term of the Lease shall automatically terminate with respect to the Surrender Premises on the date specified in such Surrender Premises Accelerated Termination Notice.

 

Tenant shall voluntarily surrender the Surrender Premises on the Surrender Premises Termination Date in accordance with all surrender requirements contained in the Lease and in the condition in which Tenant is required to surrender the Premises as of the Expiration Date. After the Surrender Premises Termination Date, Tenant shall have no further rights of any kind with respect to the Surrender Premises.

 

Landlord and Tenant each agree that the other is excused following the Surrender Premises Termination Date from any further obligations under the Lease with respect to the Surrender Premises, excepting only such obligations under the Lease which are, by their terms, intended to survive termination of the Lease (including, without limitation, those obligations in connection with the reconciliation of Operating Expenses as provided for in the following paragraph) and except as provided for in this First Amendment.

 

 

Notwithstanding any provision in the Lease or in this First Amendment to the contrary, Landlord and Tenant hereby acknowledge and agree that solely with respect to the Surrender Premises, Tenant shall (a) not be required to pay Base Rent, Operating Expenses (including without limitation Utilities and insurance), Monthly Parking Charges or any other monthly obligations related to the period of time commencing on the Substitute Premises Commencement Date through the Surrender Premises Termination Date, except for those obligations in connection with the reconciliation of Operating Expenses for the period of January 1, 2025 through the day prior to the Substitute Premises Commencement Date pursuant to Section 5 of the Lease, (b) not be responsible to Landlord for any other financial obligations under the Lease first arising after July 31, 2025, and (c) not have any repair, replacement or maintenance obligations (pursuant to Section 14 of the Lease) after July 31, 2025, except for any liability arising from or in connection with any entry to the Surrender Premises by employees, agents, contractors or invitees of Tenant acting under the direction of or in concert with Tenant after the Substitute Premises Commencement Date.

 

4.             Premises.

 

a.            Commencing on the Substitute Premises Commencement Date, the terms “Premises” and “Rentable Area of Premises” on page 1 of the Lease shall be deleted in their entirety and replaced with the following:

 

“Premises: Those portions of the Building in the Project consisting of (i) a portion of the first floor of the Building, commonly known as Suite 100, containing approximately 25,860 rentable square feet (the “First Floor Premises”), (ii) a portion of the lower level floor of the Building, commonly known as Suite 001, containing approximately 4,713 rentable square feet (the “Lower Level Premises”), (iii) a portion of the fourth floor of the Building, commonly known as Suite 401, containing approximately 1,074 rentable square feet (the “Suite 401 Premises”), (iv) a portion of the fourth floor of the Building, commonly known as Suite 400, containing approximately 854 rentable square feet (the “Penthouse Premises”), and (v) the entire second floor of the Building commonly known as Suite 200, containing approximately 45,939 rentable square feet, (the “Suite 200 Premises”), all as determined by Landlord, as shown on Exhibit A.”

 

“Rentable Area of Premises: 78,440 sq. ft.”

 

As of the Substitute Premises Commencement Date, Exhibit A attached to the Lease shall be amended to include the Suite 200 Premises and Suite 401 Premises described on Exhibit A attached to this First Amendment.

 

b.            Commencing on the Surrender Premises Termination Date, the terms “Premises” and “Rentable Area of Premises” on page 1 of the Lease shall be deleted in their entirety and replaced with the following:

 

“Premises: Those portions of the Building in the Project consisting of (i) a portion of the lower level floor of the Building, commonly known as Suite 001, containing approximately 4,713 rentable square feet (the “Lower Level Premises”), (ii) a portion of the fourth floor of the Building, commonly known as Suite 401, containing approximately 1,074 rentable square feet (the “Suite 401 Premises”), and (iii) the entire second floor of the Building commonly known as Suite 200, containing approximately 45,939 rentable square feet, (the

“Suite 200 Premises”), all as determined by Landlord, as shown on Exhibit A.”

 

“Rentable Area of Premises: 51,726 sq. ft.”

 

As of the Surrender Premises Termination Date, Exhibit A attached to the Lease shall be amended to exclude the Surrender Premises.

 

 

5.	Building and Project Rentable Area. Notwithstanding anything to the contrary contained in the Lease, as of the Substitute Premises Commencement Date, the defined terms “Rentable Area of Building,” “Rentable Area of Project,” and “Building’s Share of Operating Expenses of

 

Project” set forth in Page 1 of the Lease, are deleted in their entirety and replaced with the following:

 

“Rentable Area of Building: 171,277”

 

“Rentable Area of Project: 872,277”

 

“Building’s Share of Operating Expenses of Project: 19.64%”

 

6.	Base Rent.

 

a.            Surrender Premises. Tenant shall continue paying Base Rent with respect to the Surrender Premises as provided for under the Lease through the calendar day immediately preceding the Substitute Premises Commencement Date. Commencing on the Substitute Premises Commencement Date and continuing through the Surrender Premises Termination Date, as provided in Section 3 above, Base Rent payable with respect to the Surrender Premises shall be abated and Tenant shall have no obligation to pay any Base Rent with respect to the Surrender Premises.

 

b.           Lower Level Premises. Tenant shall continue paying Base Rent with respect to the Lower Level Premises as provided for under the Lease through the First Amendment Expiration Date, subject to adjustment on each Adjustment Date as provided for in Section 4 of the Lease.

 

c.            Substitute Premises. Commencing on the Substitute Premises Commencement Date and continuing through the First Amendment Expiration Date, Tenant shall pay Base Rent with respect to the Substitute Premises (being the Suite 200 Premises and Suite 401 Premises) at the same rate as Tenant is currently paying for the Lower Level Premises under the Lease, subject to adjustment on each Adjustment Date as provided for in Section 4 of the Lease.

 

d.            Free Rent Periods. Notwithstanding anything to the contrary contained in the Lease or in this First Amendment, so long as Tenant is not in default under the Lease beyond any applicable notice and cure periods, Base Rent with respect to the Lower Level Premises and Substitute Premises shall be abated for a total of 3 months, during each of the following periods of time: (i) December 1, 2025 through December 31, 2025, (ii) December 1, 2026 through December 31, 2026 and (iii) December 1, 2027 through December 31, 2027 (each, a “First Amendment Abatement Period”). For the avoidance of doubt, Tenant shall be required to pay Operating Expenses and all other amounts payable under the Lease during each of the First Amendment Abatement Periods.

 

7.	Operating Expenses.

 

a.           Commencing on the Substitute Premises Commencement Date through the calendar day immediately preceding the Surrender Premises Termination Date, the term “Tenant’s Share of Operating Expenses of Building” on page 1 of the Lease is deleted in its entirety and replaced with the following:

 

“Tenant’s Share of Operating Expenses of Building: 45.80%”

 

Notwithstanding the foregoing and for the avoidance of doubt, during the period commencing on the Substitute Premises Commencement Date through the calendar day immediately preceding the Surrender Premises Termination Date, as provided in Section 3, Tenant shall not be required to pay Operating Expenses for the Surrender Premises (such that Tenant shall only be required to pay Tenant’s Share of Operating Expenses of Building equal to 30.20%).

 

 

b.            Commencing on the Surrender Premises Termination Date, the term “Tenant’s Share of Operating Expenses of Building” on page 1 of the Lease is deleted in its entirety and replaced with the following:

 

“Tenant’s Share of Operating Expenses of Building: 30.20%”

 

c.             For the avoidance of doubt, Tenant shall be required to pay Operating Expenses as provided for in the Lease during each First Amendment Abatement Period including, without limitation, administration rent that Tenant would have been required to pay in the absence of there being a First Amendment Abatement Period.

 

8.	Security Deposit. Commencing on the First Amendment Effective Date, the defined term “Security Deposit” on Page 1 of the Lease is deleted in its entirely and replaced with the following:

 

“Security Deposit: $2,384,946.67”

 

Landlord currently holds a Security Deposit of $1,455,533.33 under the Lease. Concurrently with Tenant’s delivery of a signed copy of this First Amendment to Landlord, Tenant shall deliver to Landlord either (a) an amended Letter of Credit which increases the amount of the existing Letter of Credit being held by Landlord to $2,384,946.67, or (b) an additional Letter of Credit in the amount of $929,413.34.

 

If, as of the expiration of 36 months after the Substitute Premises Commencement Date, (x) Tenant is not then in Default under the Lease beyond any applicable notice or cure periods and (y) no assignment of the Lease has occurred (collectively, the “Reduction Requirements”) then, Tenant shall have the right to request that the Security Deposit shall be reduced to an amount equal to $1,442,168.00 (the “Reduced Security Deposit”). If Tenant delivers a written request to Landlord for such reduction of the Security Deposit then, so long as the Reduction Requirements have been and continue to be satisfied, Landlord shall cooperate with Tenant, at no cost, expense or liability to Landlord, to reduce the Letter of Credit then held by Landlord to the amount of the Reduced Security Deposit. If the Security Deposit is reduced as provided in this paragraph, then from and after the date of such reduction, the “Security Deposit” shall be deemed to be the Reduced Security Deposit, for all purposes of the Lease.

 

9.	Term. The Term of the Lease, with respect to the Lower Level Premises and Substitute Premises, shall expire on the First Amendment Expiration Date.

 

10.

Landlord’s FF&E. Exhibit G attached to the Lease is hereby deleted in its entirety and replaced with the list of Landlord’s FF&E identified on Exhibit C attached to this First Amendment. Tenant shall have the right during the Term to provide Landlord with a written list notifying Landlord of any Landlord’s FF&E that Tenant does not want to use, and Landlord shall remove such items at Landlord’s expense.

 

11.

Parking. Notwithstanding anything to the contrary contained in the Lease or in this First Amendment, commencing on the Substitute Premises Commencement Date, Tenant’s Parking Allocation and required Monthly Parking Charges, as set forth in Section 10(a) of the Lease, shall be based on 51,506 rentable square feet of Premises.

 

12.	Control Areas. Exhibit H attached to the Lease is hereby deleted in its entirety and replaced with the Control Areas depicted on Exhibit D attached to this First Amendment.

 

13.	Right to Expand. Section 39 of the Lease is hereby deleted in its entirety and is null and void and of no further force or effect.

 

 

14.

Right to Extend Term. For the avoidance of doubt, Tenant shall continue to have a right to extend the Term of the Lease with respect to the Lower Level Premises pursuant to the terms and conditions of Section 40 of the Lease; provided however, the phrase “First Floor Premises” contained in the first paragraph of Section 40(a) shall be deleted in its entirety and replaced with “Suite 200 Premises”.

 

15.

New Lease Termination Right. For the avoidance of doubt, Tenant shall continue to have the New Lease Termination Right pursuant to the terms and conditions of Section 41 of the Lease; provided however, (i) all instances of the phrase “First Floor Premises” contained in Section 41 shall be deleted in their entirety and replaced with “Suite 200 Premises” and (ii) the number “40,000” in the first sentence of Section 41 shall be deleted in its entirety and replaced with “60,000”.

 

16.

Brokers. Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “Broker”) in connection with the transaction reflected in this First Amendment and that no Broker brought about this transaction, other than JLL and Newmark. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker, other than JLL and Newmark, claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction. Landlord shall be responsible for all commissions due to JLL and Newmark arising out of the execution of this First Amendment in accordance with the terms of separate written agreements between JLL, Newmark and Landlord.

 

17.

OFAC. Tenant and, to Tenant’s actual knowledge, all beneficial owners of Tenant are currently (a) in compliance with and shall at all times during the Term of the Lease remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the Term of the Lease be listed on, the Specially Designated Nationals and Blocked Persons List, Foreign Sanctions Evaders List, or the Sectoral Sanctions Identification List, which are all maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.

 

18.	Miscellaneous.

 

a.            This First Amendment is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This First Amendment may be amended only by an agreement in writing, signed by the parties hereto.

 

b.            This First Amendment is binding upon and shall inure to the benefit of the parties hereto, their respective agents, employees, representatives, officers, directors, divisions, subsidiaries, affiliates, assigns, heirs, successors in interest and shareholders.

 

c.             This First Amendment may be executed in 2 or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature process complying with the U.S. federal ESIGN Act of 2000) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. Electronic signatures shall be deemed original signatures for purposes of this First Amendment and all matters related thereto, with such electronic signatures having the same legal effect as original signatures.

 

d.             Except as amended and/or modified by this First Amendment, the Lease is hereby ratified and confirmed and all other terms of the Lease shall remain in full force and effect, unaltered and unchanged by this First Amendment. In the event of any conflict between the provisions of this First Amendment and the provisions of the Lease, the provisions of this First Amendment shall prevail. Whether or not specifically amended by this First Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this First Amendment.

 

[Signatures are on the next page]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the day and year first above written.

 

LANDLORD:

 

ARE-MA REGION NO. 58, LLC,

a Delaware limited liability company

 

By:

Alexandria Real Estate Equities, L.P., a Delaware limited partnership, managing member

 

By:

ARE-QRS Corp.,

a Maryland corporation, general partner

 

	By:	/s/ Allison Grochola
	Name:	Allison Grochola
	Its:	SVP - Real Estate Legal Affairs

 

TENANT:

 

CITY THERAPEUTICS, INC., a Delaware corporation

 

	By:	/s/ Andy Orth
	Name:	Andy Orth
	Its:	President and CEO

 

x I hereby certify that the signature, name, and title above are my signature, name and title.

 

 

Exhibit 21.1

 

Subsidiaries of City Therapeutics, Inc. 

 

Name		Jurisdiction
City Therapeutics Securities Corporation		Massachusetts

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Registration Statement on Form S-1 of City Therapeutics, Inc. of our report dated July 14, 2026 relating to the financial statements of City Therapeutics, Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts
September 24, 2026

 

 

S-1 S-1 EX-FILING FEES 0002143850 CITY THERAPEUTICS, INC. N/A N/A 0002143850 2026-09-22 2026-09-22 0002143850 1 2026-09-22 2026-09-22 iso4217:USD xbrli:pure xbrli:shares

Calculation of Filing Fee Tables

S-1

CITY THERAPEUTICS, INC.

Table 1: Newly Registered and Carry Forward Securities	☐Not Applicable

		Security Type	Security Class Title	Fee Calculation or Carry Forward Rule	Amount Registered	Proposed Maximum Offering Price Per Unit	Maximum Aggregate Offering Price	Fee Rate	Amount of Registration Fee	Carry Forward Form Type	Carry Forward File Number	Carry Forward Initial Effective Date	Filing Fee Previously Paid in Connection with Unsold Securities to be Carried Forward
Newly Registered Securities
Fees to be Paid	1	Equity	Common Stock, $0.0001 par value per share	457(o)			$ 100,000,000.00	0.0001381	$ 13,810.00
Fees Previously Paid
Carry Forward Securities
Carry Forward Securities
			Total Offering Amounts:				$ 100,000,000.00		$ 13,810.00
			Total Fees Previously Paid:						$ 0.00
			Total Fee Offsets:						$ 0.00
			Net Fee Due:						$ 13,810.00

Offering Note

1	(1) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. (2) Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.

Table 2: Fee Offset Claims and Sources	☑Not Applicable

		Registrant or Filer Name	Form or Filing Type	File Number	Initial Filing Date	Filing Date	Fee Offset Claimed	Security Type Associated with Fee Offset Claimed	Security Title Associated with Fee Offset Claimed	Unsold Securities Associated with Fee Offset Claimed	Unsold Aggregate Offering Amount Associated with Fee Offset Claimed	Fee Paid with Fee Offset Source
Rules 457(b) and 0-11(a)(2)
Fee Offset Claims
Fee Offset Sources
Rule 457(p)
Fee Offset Claims
Fee Offset Sources

Table 3: Combined Prospectuses	☑Not Applicable

	Security Type	Security Class Title	Amount of Securities Previously Registered	Maximum Aggregate Offering Price of Securities Previously Registered	Form Type	File Number	Initial Effective Date