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Table of Contents

As filed with the Securities and Exchange Commission on March 5, 2014

Registration No. 333-            


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Adamas Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  42-1560076
(I.R.S. Employer
Identification Number)

2200 Powell Street, Suite 220
Emeryville, CA 94608
(510) 450-3500

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Gregory Went, Ph.D.
Chief Executive Officer and Chairman of the Board of Directors
Adamas Pharmaceuticals, Inc.
2200 Powell Street, Suite 220
Emeryville, CA 94608
(510) 450-3500
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Robert L. Jones
Kenneth L. Guernsey
Danielle E. Naftulin
Cooley LLP
3175 Hanover Street
Palo Alto, CA 94304
(650) 843-5000

 

Bruce K. Dallas
Davis Polk & Wardwell LLP
1600 El Camino Real
Menlo Park, CA 94025
(650) 752-2000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.     o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee(3)

 

Common Stock, $0.001 par value per share

  $69,000,000   $8,887.20

 

(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)
Includes offering price of any additional shares that the underwriters have the over-allotment option to purchase.

(3)
Calculated pursuant to Rule 457(o) under the Securities Act of 1933, as amended, based on an estimate of the proposed maximum aggregate offering price.



           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 5, 2014.

PRELIMINARY PROSPECTUS

                    Shares

LOGO

Adamas Pharmaceuticals, Inc.

Common Stock



        This is the initial public offering of shares of common stock of Adamas Pharmaceuticals, Inc. Prior to this offering, there has been no public market for our common stock. The initial public offering price of the common stock is expected to be between $             and $             per share. We will apply to list our common stock on the NASDAQ Global Market under the symbol "ADMS."

        The underwriters have an option to purchase a maximum of             additional shares to cover over-allotments.

        We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012, and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

         Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 10.

 
  Price to
Public
  Underwriting
Discounts and
Commissions(1)
  Proceeds to
Adamas
 
Per Share   $     $     $    
Total   $     $     $    

(1)
See "Underwriting" beginning on page 138 for additional information regarding underwriting compensation.

        Delivery of the shares of common stock will be made on or about             , 2014.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse   Piper Jaffray

William Blair

 

Needham & Company

   

The date of this prospectus is             , 2014


Table of Contents


TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    10  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

    42  

MARKET, INDUSTRY AND OTHER DATA

    44  

USE OF PROCEEDS

    45  

DIVIDEND POLICY

    46  

CAPITALIZATION

    47  

DILUTION

    50  

SELECTED CONSOLIDATED FINANCIAL DATA

    53  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    55  

BUSINESS

    66  

MANAGEMENT

    95  

EXECUTIVE COMPENSATION

    104  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    116  

PRINCIPAL STOCKHOLDERS

    123  

DESCRIPTION OF CAPITAL STOCK

    127  

SHARES ELIGIBLE FOR FUTURE SALE

    132  

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

    134  

UNDERWRITING

    138  

LEGAL MATTERS

    142  

EXPERTS

    142  

WHERE YOU CAN FIND MORE INFORMATION

    142  

INDEX TO FINANCIAL STATEMENTS

    F-1  



        Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of its date regardless of the time of delivery of this prospectus or of any sale of common stock.

        Through and including                , 2014 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

        Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus or any such free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free writing prospectus applicable to that jurisdiction.


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PROSPECTUS SUMMARY

         This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding to invest in our common stock, you should read this entire prospectus carefully, including the sections of this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes. Unless the context otherwise requires, references in this prospectus to the "company," "Adamas," "we," "us" and "our" refer to Adamas Pharmaceuticals, Inc.

Adamas Pharmaceuticals, Inc.

        We are a specialty pharmaceutical company driven to improve the lives of those affected by chronic disorders of the central nervous system, or CNS. We achieve this by enhancing the pharmacokinetic profiles of approved drugs to create novel therapeutics for use alone and in fixed-dose combination products. We are developing our lead wholly owned product candidate, ADS-5102, for a complication of Parkinson's disease known as levodopa induced dyskinesia, or LID, and as a treatment for chronic behavioral symptoms associated with traumatic brain injury, or TBI. We have successfully completed a Phase 2/3 clinical trial in which patients receiving ADS-5102 had a statistically significant 43% reduction in LID from baseline, and we intend to initiate a Phase 3 registration trial of ADS-5102 in LID in 2014. Our late-stage therapeutics portfolio also includes an NDA-submitted fixed-dose combination product candidate, MDX-8704, being co-developed with Forest Laboratories, Inc., or Forest, for the treatment of moderate to severe dementia associated with Alzheimer's disease, and an approved controlled-release product, Namenda XR®, which Forest developed and is marketing in the United States under a license from us. We plan to commercialize our wholly owned product candidates, if approved, by developing a specialty CNS sales force to reach high volume prescribing neurologists and psychiatrists in the United States.

Our market opportunity

        We estimate that approximately 36 million people in the United States suffer from chronic CNS disorders such as Alzheimer's disease, Parkinson's disease, TBI, epilepsy, psychosis and depression. CNS diseases are frequently treated with multiple medications having different mechanisms of action with the goal of maximizing symptomatic benefits for patients. Existing CNS drugs often require frequent dosing and may have tolerability issues that limit the amount of the drug that can be taken each day. We believe that many CNS disorders could be better treated if the concentrations of existing CNS drugs as a function of time, or the pharmacokinetic profiles, are altered to enhance tolerability and efficacy and if these enhanced drugs are then combined with other existing CNS drugs to improve and streamline the management of these complicated conditions.

Our strategy

        Our goal is to build an independent, CNS-focused specialty pharmaceutical company that creates and commercializes novel therapeutics that address significant unmet clinical needs. This goal is supported by a product development strategy that allows us to discover, patent, develop and commercialize novel therapeutics in a capital efficient manner. Our integrated process combines the following elements:

    Market attractiveness.   We identify approved products that are sub-optimally utilized but, with pharmacokinetic enhancements, can significantly improve the treatment of chronic CNS conditions.

    Intellectual property.   We seek to discover novel pharmacokinetic and pharmacodynamic relationships and to obtain patent protection for a range of dose strengths, pharmacokinetic

 

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      profiles, timing of administration and drug combinations as opposed to protecting just specific formulations.

    Regulatory pathways.   We intend to use the regulatory pathway provided by Section 505(b)(2) of the U.S. Food, Drug and Cosmetic Act, or FDCA, to pursue approval for novel therapeutics based on existing drugs with less time and expense than are typically associated with the standard new drug approval pathway.

    Research and development.   We have developed a core competency in identifying, formulating and manufacturing controlled-release drug products utilizing coated pellet technology.

        We are implementing our strategy by focusing on the following key objectives:

    Obtain FDA approval of ADS-5102 for LID;

    Develop ADS-5102 for the treatment of additional CNS indications;

    Commercialize ADS-5102 by developing a specialty sales force;

    Develop additional novel therapeutics based on existing CNS drugs; and

    Support Forest in the NDA review and anticipated commercialization of MDX-8704.

Our therapeutics portfolio

        Our initial product and product candidates are based on pharmacokinetic enhancements of two approved CNS drugs, amantadine and memantine, which belong to a class of drugs known as aminoadamantanes. We selected aminoadamantanes as our initial area of focus because they have the ability to modulate multiple neurotransmitter systems, which are the molecular pathways that control brain function, and we believe aminoadamantanes potentially have broader therapeutic utility than previously realized.

        The following table describes our therapeutics portfolio:

Product and Product Candidates
  Target Indication(s)   Development Status   Commercial Rights
  Wholly Owned

ADS-5102

 

Levodopa-Induced Dyskinesia

 

Phase 3

 

Adamas, worldwide
Amantadine   Traumatic Brain Injury   Phase 2/3 ready   Adamas, worldwide
    Undetermined   Phase 2/3 planning   Adamas, worldwide

ADS-8800 series
ADS-5102 based combination therapies

 

Undetermined

 

Research, Phase 2/3 planning

 

Adamas, worldwide

ADS-9000 series
Undetermined

 

Undetermined

 

Research

 

Adamas, worldwide

 

 

 

 

 

 

 
  Partnered

Namenda XR
Memantine

 

Moderate to severe Alzheimer's dementia

 

Marketed

 

U.S.-only; licensed to Forest

MDX-8704
Memantine/Donepezil

 

Moderate to severe Alzheimer's dementia

 

NDA submitted

 

U.S.-only; licensed to Forest

        Wholly owned product candidates.     Our most advanced wholly owned product candidate is ADS-5102, a once-nightly, high dose, controlled-release version of amantadine designed to address

 

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many of the limitations of immediate-release amantadine. In patients taking ADS-5102, the amantadine plasma concentration achieved from the early morning through mid-day is approximately two-times that reached following administration of immediate-release amantadine, providing substantial benefit to patients as they engage in their daily activities. Further, the lower concentrations occurs in the evening, reducing the negative impact of amantadine's sleep-related side effects. We are developing ADS-5102 initially for treatment of LID. LID is a movement disorder that frequently occurs in patients with Parkinson's disease after long-term treatment with levodopa, the most widely-used drug for Parkinson's disease. Patients with LID suffer from involuntary non-purposeful movements and reduced control over voluntary movements. We estimate that in 2011 approximately 260,000 Parkinson's disease patients in the United States suffered from motor complications as a result of levodopa therapy and approximately 140,000 of these patients suffered from LID. There are no drugs for the treatment of LID that have been approved for marketing in the United States or Europe. As a result, clinicians typically manage LID by decreasing the dose of levodopa, which can exacerbate symptoms of the underlying Parkinson's disease.

        We selected LID as the initial indication for ADS-5102 based on results seen in investigator initiated clinical studies of amantadine and in established preclinical models. In our recently completed Phase 2/3 clinical study, ADS-5102 met its primary endpoint, reduction of LID, and several key secondary endpoints. If our anticipated Phase 3 registration trial of ADS-5102 is successful, we anticipate submitting a New Drug Application, or NDA, to the U.S. Food and Drug Administration, or FDA, for ADS-5102 in the first half of 2016. Amantadine has shown promising results in several other CNS indications, and we expect to initiate in late 2014 a Phase 2/3 study of ADS-5102 in a second CNS indication, possibly for the treatment of chronic behavioral symptoms associated with TBI. We anticipate initiating additional Phase 2/3 studies of ADS-5102 in one or more other indications by the end of 2015.

        We are investigating and will potentially develop additional products, our ADS-8800 series, based on combining ADS-5102 with approved CNS drugs. Each combination will be designed to provide clinical benefits in specific indications where it appears that including ADS-5102 in combination therapy can address a significant unmet clinical need. Furthermore, we believe our product development strategy is broadly applicable to addressing limitations of CNS drugs whose pharmacokinetic profiles limit dosing, and we intend to initiate additional programs, our ADS-9000 series, in this area in 2015.

        We intend to use the regulatory pathway provided by Section 505(b)(2) of the FDCA to obtain approval for ADS-5102 and our other wholly-owned product candidates. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. We believe this approach will be more time and capital efficient than the Section 505(b)(1) pathway typically used for new chemical entities.

        Partnered product and product candidate.     Under our license agreement, Forest currently sells one product, Namenda XR, a treatment for moderate to severe dementia associated with Alzheimer's disease. Namenda XR, a controlled-release version of the approved CNS drug memantine, was launched in the United States in June 2013 and is part of Forest's $1.5 billion Namenda franchise. In addition, Forest and we are co-developing MDX-8704, a once-daily fixed-dose combination of Namenda XR and the FDA-approved CNS drug donepezil, for the treatment of moderate to severe dementia associated with Alzheimer's disease. Forest submitted an NDA to the FDA for MDX-8704 in February 2014 and will be responsible for marketing MDX-8704 in the United States if approved. We received from Forest a $65 million upfront payment in November 2012 and two $20 million development milestone payments in the fourth quarter of 2013 related to the completion of studies that support Forest's NDA filing for MDX-8704. We are eligible to receive up to an additional $55 million in payments based on the achievement of certain regulatory milestones prior to and including the first

 

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FDA approval of MDX-8704 and royalty payments related to sales of Namenda XR commencing in June 2018 and to sales of MDX-8704 commencing five years after its commercial launch in the United States.

Our management team

        We are led by a team of executives and directors with significant experience in drug discovery, development and commercialization. In addition to co-founding Adamas, our chief executive officer co-founded CuraGen Corporation (acquired by Celldex Therapeutics, Inc.), and other members of our management team have held senior positions at Syntex, Bayer, Tularik and Elan. Members of our executive team have played leading roles in the development and commercialization of multiple significant drugs in a wide range of therapeutic areas. Our board of directors brings substantial, relevant experience in reimbursement, drug development and commercialization.

Financial overview

        We have developed our current portfolio of late stage therapeutics in a capital efficient manner. As of December 31, 2013, we had raised a total of $87 million from equity financings, had received $105 million from our collaboration with Forest, had recognized $5 million in revenue from other sources and had $86 million in cash and cash equivalents and no debt obligations.

Risk factors

        Our business is subject to numerous risks, as more fully described in the section entitled "Risk Factors" immediately following this prospectus summary. You should read these risk factors before you invest in our common stock. In particular, these risks include, but are not limited to, the following:

    Our success depends heavily on the approval and successful commercialization of our lead wholly owned product candidate, ADS-5102, as well as Forest's successful commercialization of Namenda XR and, if approved, MDX-8704;

    We do not directly market any products, expect to incur substantial and increasing losses for the foreseeable future and had an accumulated deficit as of December 31, 2013 of $20.6 million;

    If clinical studies of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA, we will be unable to commercialize our product candidates;

    If significant adverse side effects associated with a product or product candidate are identified during development or after approval, we may need to abandon development of a product candidate or cease marketing a product.

    If we are unable to obtain favorable coverage, reimbursement and formulary placement decisions from third-party payors, our financial results will be adversely affected;

    Our business will suffer if other manufacturers are able to obtain approval for generic or other competing versions of current and future products in our therapeutic portfolio, such as the possible result of the eight challenges from generic manufacturers relating to Abbreviated New Drug Applications seeking approval for generic versions of Namenda XR;

    Our business may be adversely affected if we are unable to obtain and maintain effective intellectual property rights or others claim that we infringe their intellectual property rights, such as the pending patent infringement lawsuit brought by Teva Pharmaceuticals USA, Inc. and Mayne Pharma against Forest relating to Namenda XR;

 

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    Our product candidates require a complex manufacturing process and have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial scale and maintaining commercial production;

    Our operating results may fluctuate significantly, are difficult to predict and could fall below expectations; and

    We may need additional funds to support our operations, and such funding may not be available on acceptable terms or at all.

Corporate Information

        We were incorporated in Delaware in November 2000 under the name NeuroMolecular, Inc. In December 2004, we changed our name to NeuroMolecular Pharmaceuticals, Inc., and in July 2007 we changed our name to Adamas Pharmaceuticals, Inc. Our principal executive offices are located at 2200 Powell Street, Suite 220, Emeryville, California 94608, and our telephone number is (510) 450-3500. Our website address is www.adamaspharma.com . The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.

Implications of being an emerging growth company

        As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

    being permitted to present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

    not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

    reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

    exemptions from the requirement to hold a nonbinding advisory vote on executive compensation and to obtain stockholder approval of any golden parachute payments not previously approved.

        We may use these provisions until the last day of our fiscal year following the fifth anniversary of the closing of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue exceeds $1 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

        We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

        The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

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The Offering

Common stock offered

              shares

Common stock to be outstanding immediately after this offering

 

            shares

Underwriters' option to purchase additional shares

 

The underwriters have a thirty-day option to purchase up to                additional shares of common stock as described in "Underwriting."

Use of proceeds

 

We estimate that the net proceeds from the issuance of our common stock in this offering will be approximately $             million, or approximately $             million if the underwriters exercise in full their over-allotment option to purchase additional shares, assuming an initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

 

We intend to use all of the net proceeds from this offering, along with our other capital resources, to fund ongoing development of our product candidates, including ADS-5102, for commercialization activities related to any wholly owned, approved product candidate, including developing a specialty CNS sales force, and for working capital and other general corporate purposes. We may also use a portion of the net proceeds to acquire or license other products, businesses or technologies, although we have no present commitments for any such acquisitions or licenses. See "Use of Proceeds" for additional information.

Risk factors

 

See "Risk Factors" beginning on page 10 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Proposed NASDAQ Global Market symbol

 

"ADMS"

        The number of shares of our common stock to be outstanding after this offering is based on 6,474,216 shares of our common stock outstanding as of December 31, 2013 and excludes the following:

    1,777,850 shares of our common stock issuable upon the exercise of stock options outstanding as of December 31, 2013 at a weighted-average exercise price of $2.89 per share;

    1,576,582 shares of common stock reserved for future issuance under our 2014 equity incentive plan, or 2014 Plan, which will become effective upon the date the registration statement of which this prospectus forms a part is declared effective (including 886,218 shares of common stock reserved for issuance under our 2007 Stock Plan, or 2007 Plan, as of December 31, 2013, which shares will be added to the shares reserved under the 2014 Plan upon its effectiveness) plus up to 1,777,850 additional shares that may be added to the 2014 Plan upon the expiration, termination, forfeiture or other reacquisition of any shares of common stock issuable upon the

 

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      exercise of stock options outstanding under the 2007 Plan or our 2002 Employee, Director and Consultant Stock Plan, or 2002 Plan, and any automatic increases in the number of shares of common stock reserved for future issuance under the 2014 Plan;

    131,381 shares of our common stock reserved for future issuance under our 2014                        Employee Stock Purchase Plan, which will become effective upon the date the registration statement of which this prospectus forms a part is declared effective, plus any automatic increases in the number of shares of common stock reserved for future issuance under the 2014 Employee Stock Purchase Plan; and

    106,639 shares of our common stock issuable upon the exercise of warrants to purchase common stock outstanding at December 31, 2013 at a weighted-average exercise price of $6.28 per share.

        Unless otherwise indicated, all information in this prospectus reflects and assumes the following:

    the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 1,716,452 shares of our common stock immediately prior to the closing of this offering;

    the issuance of                shares of our common stock upon conversion of the Series AA preferred stock issuable upon the net exercise of warrants to purchase 311,330 shares of Series AA preferred stock with an exercise price of $7.6089 per share and assuming a fair market value of $            per share, the midpoint of the price range set forth on the cover page of this prospectus, immediately prior to the closing of this offering;

    the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the closing of this offering; and

    no exercise of the underwriters' over-allotment option to purchase additional shares of our common stock.

 

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Summary Consolidated Financial Data

        The following tables summarize our consolidated financial data and should be read together with the sections in this prospectus entitled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

        We have derived the consolidated statements of operations data for the years ended December 31, 2012 and 2013 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that should be expected in the future.

 
  Year Ended
December 31,
 
 
  2012   2013  
 
  (in thousands, except
per share data)

 

Consolidated Statements of Operations Data:

             

Revenue

  $ 37,471   $ 71,095  
           

Operating expenses

             

Research and development

    9,192     7,410  

General and administrative

    8,330     6,667  
           

Total operating expenses

    17,522     14,077  
           

Income from operations

    19,949     57,018  

Interest and other income (expense), net

    (1,537 )   (4,818 )

Interest expense

    (376 )   (88 )
           

Income before income taxes

    18,036     52,112  

Income tax expense

    (300 )   (1,191 )
           

Net income

  $ 17,736   $ 50,921  
           
           

Net income attributable to common stockholders(1)

             

Basic

  $ 11,441   $ 33,068  
           
           

Diluted

  $ 11,596   $ 35,353  
           
           

Net income per share attributable to common stockholders(1)

             

Basic

  $ 2.41   $ 6.96  
           
           

Diluted

  $ 2.34   $ 5.99  
           
           

Weighted average number of shares used in computing net income attributable to common stockholders(1)

             

Basic

    4,744     4,753  
           
           

Diluted

    4,962     5,903  
           
           
(1)
See Notes 2 and 14 to our consolidated financial statements for a description of the method used to compute basic and diluted net income per share.

 

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  December 31, 2013  
 
  Actual   Pro
Forma(1)
  Pro Forma
As
Adjusted(2)(3)
 
 
  (in thousands)
 
 
  (unaudited)
 

Balance sheet data:

                   

Cash and cash equivalents

  $ 85,612   $ 85,612   $    

Working capital

    81,790     81,790        

Total assets

    86,216     86,216        

Warrant liability

    6,232            

Convertible preferred stock

    19,149            

Total stockholders' equity

  $ 56,605   $ 81,986   $    

(1)
The pro forma column reflects the filing of our amended and restated certificate of incorporation, the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 1,716,452 shares of common stock immediately prior to the closing of this offering and the reclassification to additional paid-in capital of our preferred stock warrant liability in connection with the automatic net exercise of our outstanding warrants to purchase shares of preferred stock, and subsequent conversion of preferred stock into common stock immediately prior to the closing of this offering.

(2)
The pro forma as adjusted column reflects the pro forma adjustments described in footnote (1) above and the sale by us of            shares of common stock in this offering at an assumed initial public offering price of $        per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

(3)
A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) each of the cash and cash equivalents, working capital, total assets and total stockholders' equity (deficit) by $        , $        , $        and $        , respectively, assuming the number of shares offered by us as stated on the cover page of this prospectus remains unchanged and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders' equity by $        , $        , $        and $        , respectively, assuming the assumed initial public offering price of $        per share remains the same, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

 

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RISK FACTORS

         Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this prospectus, including our financial statements and notes thereto, before you invest in our common stock. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

Risks related to our financial condition and need for additional capital

Although we reported net income for 2012 and 2013, we incurred significant losses in prior years and expect to incur substantial losses in the future.

        We are a clinical-stage specialty pharmaceutical company and do not currently directly market any products. We currently exclusively license U.S. patent rights for one approved product, Namenda XR, to a wholly owned subsidiary of Forest Laboratories, Inc., or Forest, and Forest markets Namenda XR in the United States, but we do not currently receive royalties on the sales of that product. We continue to incur significant research and development and general and administrative expenses related to our product candidates and our operations. Although we reported net income for 2012 and 2013, this was almost entirely due to milestone payments we received pursuant to our license agreement with Forest. We incurred significant operating losses in 2011 and prior years and expect to incur substantial and increasing losses for the foreseeable future. As of December 31, 2013, we had an accumulated deficit of $20.6 million.

        To date, we have financed our operations primarily through private placements of our convertible preferred stock, our collaboration with Forest and, to a lesser extent, government grants, venture debt and with the benefit of tax credits made available under a federal stimulus program supporting drug development. We have devoted substantially all of our efforts to research and development, including clinical studies, but have not completed development of any product candidates. We anticipate that our expenses will increase substantially as we:

        To be profitable in the future, we or our current and future potential collaboration partners must succeed in developing and commercializing products with significant market potential. This will require us or our partners to be successful in a range of activities, including advancing product candidates, completing clinical studies of product candidates, obtaining regulatory approval for those product candidates and manufacturing, marketing and selling those products for which regulatory approval is obtained. We or our partners may not succeed in these activities and, as a result, we may never generate revenue that is sufficient to be profitable in the future. In the near term, our only anticipated

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source of significant revenue is from certain milestone payments under our license agreement with Forest. We will not be entitled to receive any royalty payments with respect to sales of Namenda XR until June 2018, and with respect to sales of our partnered product candidate, MDX-8704, until five years after its commercial launch in the United States, assuming it is approved and launched.

        Although we reported net income for 2012 and 2013, this was primarily due to the recognition of revenue pursuant to our license agreement with Forest. Even if we attain profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to achieve sustained profitability would depress the value of our stock and could impair our ability to raise capital, expand our business, diversify our product candidates, market our product candidates, if approved, or continue our operations.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.

        Our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. Our sole anticipated source of significant revenue in the near term is from certain milestone payments under our license agreement with Forest. Accordingly, our revenue will depend on the achievement of these milestones as well as any potential future collaboration and license agreements and sales of our product candidates, if approved. Upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one period to the next. Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including:

        The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price

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decline could occur even when we have met any previously publicly stated revenue and/or earnings guidance we may provide.

We may need additional funds and, if we cannot raise additional capital when needed, we may have to curtail or cease operations.

        We are seeking to advance multiple product candidates through the research and clinical development process. The completion of the development and the potential commercialization of our product candidates, should they receive approval, will require substantial funds. As of December 31, 2013, we had approximately $85.6 million in cash and cash equivalents. We believe that our available cash and cash equivalents will be sufficient to fund our anticipated level of operations for at least the next 12 months, but there can be no assurance that this will be the case. Our future financing requirements will depend on many factors, some of which are beyond our control, including:

        We do not have any committed external source of funds or other support for our development efforts other than our license agreement with Forest which may be terminated by Forest upon delivery of notice. Until we can generate sufficient product and royalty revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. Additional financing may not be available to us when we need it or it may not be available on favorable terms. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend one or more of our clinical studies or research and development programs or our commercialization efforts.

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Risks related to the development and commercialization of our current and future products

Our success depends heavily on the approval and successful commercialization of ADS-5102, the U.S. approval and successful U.S. commercialization by Forest of MDX-8704 and the successful U.S. commercialization by Forest of Namenda XR. If we are unable to successfully commercialize ADS-5102 or Forest is unable to successfully commercialize MDX-8704 or Namenda XR in the U.S., or either we or Forest experience significant delays in doing so, our business will be materially harmed.

        We have invested a significant portion of our efforts and financial resources into the development of ADS-5102, an oral once-nightly controlled-release version of the FDA-approved drug amantadine, and MDX-8704, a fixed-dose combination of the FDA-approved drugs memantine and donepezil. MDX-8704 has been exclusively licensed to Forest in the United States. In addition, we have granted Forest a royalty-bearing license under certain of our patents to commercialize Namenda XR, a controlled-release version of memantine, in the United States. Our ability to generate product and royalty revenue will depend heavily on the successful development, regulatory approval and eventual commercialization of ADS-5102 and MDX-8704 and successful commercialization of Namenda XR. Under the terms of our license agreement with Forest, we will not be entitled to receive royalty payments on the sale of Namenda XR until June 2018 or on the sale of MDX-8704 until five years after it is launched, assuming it is approved and launched. The success of these drugs will depend on numerous factors, including:

        If we or Forest do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

If clinical studies of our product candidates fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA or similar regulatory authorities outside the United States or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

        Before obtaining regulatory approval for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of our product candidates in humans. Clinical studies are expensive, are difficult to design and implement, can take many years to complete and are uncertain as to outcome. A failure of one or more of our clinical studies could occur at any stage of testing. The outcome of preclinical testing and early clinical studies may not be predictive of the success of later clinical studies, and interim results of a clinical study do not necessarily predict final results. For example, the successful result of our Phase 2/3 study of ADS-5102 for the treatment

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of LID, including the lack of difference from placebo in the incidence of sleep-related adverse events, may not be repeated in our anticipated Phase 3 registration trial.

        We may experience numerous unforeseen events during, or as a result of, clinical studies that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including that:

        If we are required to conduct additional clinical studies or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical studies or other testing of our product candidates, if the results of these studies or tests are not positive or are only modestly positive or if there are safety concerns, we may:

        Our product development costs will increase if we experience delays in testing or approvals. Significant clinical study delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which would impair our ability to commercialize our product candidates and harm our business and results of operations.

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Even if clinical studies demonstrate statistically significant efficacy and acceptable safety for a product, the FDA or similar regulatory authorities outside the United States may not approve it for marketing.

        Forest has completed the clinical trials that it and we believe are necessary to support the submission to the FDA of a New Drug Application, or NDA, for MDX-8704 for the treatment of moderate to severe dementia in Alzheimer's disease patients. Forest submitted an NDA to the FDA for MDX-8704 in February 2014. We believe those trials indicated that a single dose of MDX-8704 is bioequivalent to separate doses of Namenda XR and donepezil and that MDX-8704 exhibits the same bioavailability whether administered after fasting, after a meal or when sprinkled on apple sauce. We expect to initiate a Phase 3 registration trial of ADS-5102 in 2014 for LID and, if the trial is successful, intend to submit an NDA for ADS-5102 in that indication. It is possible that the FDA may not consider the results of these studies to be sufficient for approval of the product candidates in their proposed indications. If the FDA were to require Forest or us to conduct additional studies of MDX-8704 or ADS-5102 to obtain approval for the product candidates in their currently contemplated indications, our business and financial results would be materially adversely affected.

If generic manufacturers use litigation and regulatory means to obtain approval for generic versions of products on which our future revenue depends, our business will suffer.

        Under the U.S. Food, Drug and Cosmetic Act, or FDCA, the FDA can approve an Abbreviated New Drug Application, or ANDA, for a generic version of a branded drug without the ANDA applicant undertaking the clinical testing necessary to obtain approval to market a new drug. In place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating that its product has the same active ingredient(s) and is bioequivalent to the branded product, in addition to any data necessary to establish that any difference in strength, dosage form, inactive ingredients, or delivery mechanism does not result in different safety or efficacy profiles, as compared to the reference drug.

        The FDCA requires that an applicant for approval of a generic form of a branded drug certify either that its generic product does not infringe any of the patents listed by the owner of the branded drug in the Approved Drug Products with Therapeutic Equivalence Evaluations , also known as the Orange Book, or that those patents are not enforceable. This process is known as a paragraph IV challenge. Upon receipt of the paragraph IV notice, the owner has 45 days to bring a patent infringement suit in federal district court against the company seeking ANDA approval of a product covered by one of the owner's patents. The discovery, trial and appeals process in such suits can take several years. If this type of suit is commenced, the FDCA provides a 30-month stay on the FDA's approval of the competitor's application. This type of litigation is often time-consuming and costly and may result in generic competition if the patents at issue are not upheld or if the generic competitor is found not to infringe the owner's patents. If the litigation is resolved in favor of the ANDA applicant or the challenged patent expires during the 30-month stay period, the stay is lifted and the FDA may thereafter approve the application based on the standards for approval of ANDAs.

        For example, in December 2013 and January 2014, we received notice that eight companies had submitted ANDAs to the FDA requesting permission to manufacture and market generic versions of Namenda XR, on which we are entitled to receive royalties from Forest beginning in June 2018. In the notices, these companies allege that the patents associated with Namenda XR, one of which is owned by Forest and others of which are owned by us and licensed by us exclusively to Forest in the United States, are invalid, unenforceable or will not be infringed by the companies' manufacture, use or sale of generic versions of Namenda XR. In January and February 2014, we and Forest filed lawsuits against these companies for infringement of the relevant patents. Because these lawsuits were filed within the requisite 45-day period provided in the FDCA, there are stays preventing FDA approval of the ANDAs for 30 months or until a court decision adverse to the patents. The 30-month stay for these ANDAs will expire beginning in June 2016.

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        For various strategic and commercial reasons, manufacturers of generic medications frequently file ANDAs shortly after FDA approval of a branded drug regardless of the perceived strength and validity of the patents associated with such product. Based on these past practices, we believe it is likely that one or more such generic manufacturers will file ANDAs with respect to MDX-8704 and ADS-5102, if they are approved by the FDA, prior to the expiration of the patents related to those compounds.

        The filing of an ANDA as described above with respect to any of our products could have an adverse impact on our stock price. Moreover, if any such ANDAs were to be approved and the patents covering the relevant products were not upheld in litigation, or if a generic competitor is found not to infringe these patents, the resulting generic competition would negatively affect our business, financial condition and results of operations.

Any product candidate that we are able to commercialize may become subject to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform initiatives, thereby harming our business.

        The regulations that govern marketing approvals, pricing, coverage and reimbursement for new therapeutic products vary widely from country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country. In particular, in many countries, including many major European markets, therapies that are based on existing generic drugs, such as Namenda XR (memantine) and ADS-5102 (amantadine), or combinations of existing generic drugs, such as MDX-8704, generally are not well-reimbursed. As a result, we anticipate that the commercial success of Namenda XR, ADS-5102 and MDX-8704 will be largely dependent on success in the U.S. market.

        Our ability to commercialize any products successfully in the United States will depend in part on the extent to which coverage and reimbursement for these products becomes available from third-party payors, including government health administration authorities, such as those that administer the Medicare and Medicaid programs, and private health insurers. Third-party payors decide which medications they will cover and establish reimbursement levels. A primary trend in the U.S. healthcare industry is cost containment. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot assure you that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. If coverage and reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop and Forest may be unable to successfully market Namenda XR or MDX-8704.

        There may be significant delays in obtaining coverage and reimbursement for approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices for products

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may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. In the United States, private third-party payors often rely upon Medicare coverage and reimbursement policies and payment limitations in setting their own coverage and reimbursement policies. Our inability to promptly obtain coverage, reimbursement and profitable payment rates from both government funded and private payors for new products that we develop, or products developed or marketed by Forest under our license agreement, could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

If serious adverse side effects are identified during the development of ADS-5102 or any other product candidates, we may need to abandon our development of that product candidate.

        Our product candidate ADS-5102, along with our other earlier stage product candidates, are still in clinical or pre-clinical development. The risk of failure during development is high. It is impossible to predict when or if any of our product candidates will prove safe and tolerable enough to receive regulatory approval. For example, amantadine, the active pharmaceutical ingredient in ADS-5102, carries the risk of blurred vision, dizziness, lightheadedness, faintness, trouble sleeping, depression or anxiety, hallucinations, swelling of the hands, legs, or feet, difficulty urinating, shortness of breath and rash. These side effects may be the cause of the relatively low rate of acceptance of amantadine by physicians and patients. Although we believe our controlled-release version of amantadine has reduced the risks of these side effects thereby enabling higher doses, there can be no assurance that our proposed Phase 3 registration trial or future studies in other indications will not fail due to safety or tolerability issues. In such an event, we might need to abandon development of ADS-5102 entirely or for certain indications. If we are forced to abandon development of our product candidates, our business, results of operations and financial condition will be harmed.

Safety issues with Namenda XR, MDX-8704 or ADS-5102, or the parent drugs or other components of Namenda XR, MDX-8704 or ADS-5102, or with approved products of third parties that are similar to Namenda XR, MDX-8704 or ADS-5102, could decrease the potential sales of Namenda XR, MDX-8704 or ADS-5102 or give rise to delays in the regulatory approval process, restrictions on labeling or product withdrawal.

        Discovery of previously unknown problems, or increased focus on a known problem, with an approved product may result in restrictions on its permissible uses, including withdrawal of the medicine from the market. The label for Namenda XR lists potential side effects such as headache, diarrhea and dizziness, and side effects have been observed in clinical trial subjects taking MDX-8704 and ADS-5102, such as constipation, dizziness, hallucination, dry mouth, fall, confusion, headache, nausea and weakness in the case of ADS-5102 and dizziness, headache and diarrhea in the case of MDX-8704.

        If we or others identify additional undesirable side effects caused by Namenda XR, or by MDX-8704 and ADS-5102 after approval:

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        Any of these events could prevent us from achieving or maintaining market acceptance of the affected product and could substantially increase our commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from its sale.

        Namenda XR, MDX-8704 or ADS-5102 may also be affected by the safety and tolerability of their parent drugs or drugs with similar mechanisms of action. Although memantine, which is a component of Namenda XR and MDX-8704, donepezil, which is a component MDX-8704, and amantadine, which is a component of ADS-5102, have been used in patients for many years, newly observed toxicities or worsening of known toxicities, in preclinical studies of, or in patients receiving, memantine, donepezil, or amantadine, or reconsideration of known toxicities of compounds in the setting of new indications, could result in increased regulatory scrutiny of our products and product candidates. The FDA has substantial discretion in the NDA approval process and may refuse to approve any application if the FDA concludes that the risk/benefit analysis of a potential drug treatment for a specific indication does not warrant approval. Thus, although the parent drug for, or a drug related to, one of our product candidates may be approved by the FDA in a particular indication, the FDA may conclude that our product candidate's risk/benefit profile does not warrant approval in a different indication, and the FDA may refuse to approve our product candidate. Such conclusion and refusal would prevent us from developing and commercializing our product candidates and severely harm our business and financial condition.

        Following consumption, Namenda XR, MDX-8704 and ADS-5102 first are broken down by the body's natural metabolic processes and then release the active drug and other breakdown substances. While these breakdown substances are generally regarded as safe, it is possible that there could be unexpected toxicity associated with them that will cause Namenda XR, MDX-8704 or ADS-5102 to be poorly tolerated by, or toxic to, humans. Any unexpected toxicity of, or suboptimal tolerance to, the product or product candidates could reduce their sales of approved products and delay or prevent commercialization of our product candidates.

        In addition, problems with approved products marketed by third parties that utilize the same therapeutic target or that belong to the same therapeutic class as memantine, amantadine or donepezil could adversely affect the commercialization of Namenda XR, MDX-8704 and ADS-5102. For example, the product withdrawals of Vioxx from Merck and Bextra from Pfizer due to safety issues have caused other drugs that have the same therapeutic target, such as Celebrex from Pfizer, to receive additional scrutiny from regulatory authorities.

The marketing of ADS-5102 and MDX-8704, if approved, will be limited to use for the treatment of specific indications, and if we or Forest want to expand the indications for which these product candidates may be marketed, additional regulatory approvals will need to be obtained, which may not be granted.

        We are currently seeking regulatory approval of ADS-5102 for the treatment of LID, and Forest is seeking regulatory approval of MDX-8704 for the treatment of moderate to severe dementia related to Alzheimer's disease. If these product candidates are approved, the FDA will restrict our and Forest's ability to market or advertise the products for other indications, which could limit physician and patient adoption. We or Forest may attempt to develop, promote and commercialize new treatment indications and protocols for the products in the future, but we cannot predict when or if the clearances required to do so will be received. In addition, we would be required to conduct additional clinical trials or studies to support approvals for additional indications for ADS-5102, which would be time consuming and expensive, and may produce results that do not support regulatory approvals. If we do not obtain additional regulatory approvals, our ability to expand our business will be limited.

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If our product candidates are approved for marketing, and we are found to have improperly promoted off-label uses, or if physicians misuse our products or use our products off-label, we may become subject to prohibitions on the sale or marketing of our products, significant fines, penalties, and sanctions, product liability claims, and our image and reputation within the industry and marketplace could be harmed.

        The FDA and other regulatory agencies strictly regulate the marketing and promotional claims that are made about drug products, such as ADS-5102 and MDX-8704, if approved. In particular, a product may not be promoted for uses or indications that are not approved by the FDA or such other regulatory agencies as reflected in the product's approved labeling. For example, if we receive marketing approval for ADS-5102 for the treatment of LID, the first indication we are pursuing, we cannot prevent physicians from using our ADS-5102 products on their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses prior to FDA approval for an additional indication, we may receive warning letters and become subject to significant liability, which would materially harm our business. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business. In addition, management's attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to FDA prohibitions on the sale or marketing of our products or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry.

        Physicians may also misuse our products, potentially leading to adverse results, side effects or injury, which may lead to product liability claims. If our products are misused, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert management's attention from our core business, be expensive to defend and result in sizable damage awards against us that may not be covered by insurance. Furthermore, the use of our products for indications other than those cleared by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients. Any of these events could harm our business and results of operations and cause our stock price to decline.

We currently have no sales or distribution personnel and only limited marketing capabilities. If we are unable to develop a sales and marketing and distribution capability, we will not be successful in commercializing ADS-5102 or other future approved products.

        We do not have a significant sales or marketing infrastructure and have no experience in the sale, marketing or distribution of therapeutic products. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. We expect that the primary focus of our commercialization efforts will be the United States, and we intend to develop our own sales force to commercialize ADS-5102 and our other wholly-owned future approved products in the United States. Commercialization of ADS-5102 and other future approved products outside of the United States, to the extent pursued, is likely to require collaboration with a third party.

        There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

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        In addition, our existing arrangements for the commercialization of Namenda XR and MDX-8704 may not be successful and we also may not be successful entering into new arrangements with third parties to sell and market our future approved products or may be unable to do so on terms that are favorable to us. We have and will in the future be likely to have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively and could damage our reputation. If we underestimate the size of sales force required to market our products, our commercialization efforts will be adversely affected. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our future approved products.

Our future products may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

        Our future products may fail to gain sufficient market acceptance by physicians, hospital administrators, patients, healthcare payors and others in the medical community. The degree of market acceptance of our products, after being approved for commercial sale, will depend on a number of factors, including:

        For example, the absence of approved therapeutics to treat LID may require us to educate healthcare providers and patients about LID.

Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial scale.

        Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, lot consistency and timely availability of raw materials. Even if we could otherwise obtain regulatory approval for any product candidate, there is no assurance that our manufacturer will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand. If our manufacturer is unable to produce sufficient quantities of the approved product for commercialization, our commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects.

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Our product candidates and Namenda XR are complex to manufacture, and manufacturing disruptions may occur.

        Our product candidates and Namenda XR all include controlled-released versions of existing drugs, and some are combinations of existing drugs. The manufacture of controlled-release versions of existing drugs or combinations of existing drugs is substantially more complex than the manufacture of the immediate-release version of a drug alone. Even after the manufacturing process for a controlled-release or combination product has been scaled to commercial levels and numerous commercial lots have been produced, manufacturing disruptions may occur. Such problems may prevent the production of lots that meet the specifications required for sale of the product and may be difficult and expensive to resolve. For example, in November 2013, Forest recalled three packaged lots of Namenda XR because Forest's dissolution testing revealed a failure to meet specification throughout shelf life. If any such issues were to arise with respect to our product candidates or future products, if any, or if Forest's sales of Namenda XR or MDX-8704 were to be negatively impacted by such issues our business, financial results or stock price could be adversely affected.

Delays in the enrollment of patients in any of our clinical trials could increase our development costs and delay completion of the study.

        We may not be able to initiate or continue clinical studies for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these studies as required by the FDA or other regulatory authorities. Location and enrollment of eligible patients may be adversely affected by, for example, our inability to locate and activate clinical study sites at a satisfactory pace to meet our planned timetables. Even if we are able to enroll a sufficient number of patients in our clinical studies, if the pace of enrollment is slower than we expect, the development costs for our product candidates may increase and the completion of our studies may be delayed or our studies could become too expensive to complete. The study design for our Phase 3 trial of ADS-5102 for the treatment of LID is placebo controlled, meaning that a portion of patients will not receive treatment that may help control the symptoms of their Parkinson's disease. Because these symptoms are uncomfortable, a relatively long study period may make it more difficult to enroll and retain patients in the trial.

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

        The development and commercialization of new therapeutic products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect to any products that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. For example, in the market for Alzheimer's disease treatments, Namenda XR and MDX-8704 compete or will compete with generic products such as galatamine, rivastigmine and donepezil as well as branded products such as the Exelon patch (Novartis) and Aricept 23 mg (Eisai). ADS-5102, if approved, may face competition from various drugs approved to treatment Parkinson's disease, though not LID, such as Azilect (Teva), Requip XL (GlaxoSmithKline), Mirapex ER (Boehringer Ingelheim), Neupro Patch (UCB), Comtan (Novartis) and Stalevo (Novartis). ADS-5102 may also face competition from generic versions of amantadine and from other controlled-release versions of amantadine that may be in development. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. Many of these competitors are attempting to develop therapeutics for our target indications. In addition, many of our competitors are large pharmaceutical

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companies that will have a greater ability to reduce prices for their competing drugs in an effort to gain market share and undermine the value proposition that we might otherwise be able to offer to payors.

        Many of our competitors, including a number of large pharmaceutical companies that compete directly with us, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies and products complementary to, or necessary for, our programs.

Product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

        We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical studies and will face an even greater risk upon commercial sale of any products that are ultimately approved. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

        We currently hold $10.0 million in product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability or associated costs that may arise.

We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

        Because we have limited financial and managerial resources, we focus on research programs and product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products.

        If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing

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or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights.

Risks related to our reliance on third parties

We have entered into a license agreement with Forest with respect to MDX-8704 and Namenda XR, and may enter into additional license or collaboration agreements. These arrangements may place the development of these product candidates outside our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us, and if our collaborations are not successful, these product candidates may not reach their full market potential.

        In November 2012, we entered into a license agreement with Forest pursuant to which we granted Forest a co-exclusive right to develop and an exclusive right to commercialize fixed-dose memantine-donepezil products, such as MDX-8704, in the United States, and granted Forest a license covering controlled-release versions of memantine, such as Namenda XR. Under the terms of the license agreement, Forest substantially controls the commercialization of these products. Collaborations involving our current or future products, such as our agreement with Forest, are subject to numerous risks, which may include that:

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        On February 18, 2014, Actavis plc and Forest announced the acquisition of Forest by Actavis. We cannot predict whether this acquisition will have an impact on our business or on the license agreement with Forest.

We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of these trials.

        We do not independently conduct clinical studies of our product candidates. We rely on third parties, such as contract research organizations, or CROs, clinical data management organizations, medical institutions and clinical investigators to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, the FDA requires us to comply with standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical studies to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of patients in clinical studies are protected, even though we are not in control of these processes. These third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

        We also rely on other third parties to store and distribute supplies for our clinical studies. Any performance failure on the part of our existing or future distributors could delay clinical development or regulatory approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

We rely on third-party contract manufacturing organizations to manufacture and supply our product candidates for us. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers. We may also face delays in the development and commercialization of our product candidates.

        We currently have limited experience in, and we do not own facilities for, clinical-scale manufacturing of our product candidates and we rely upon third-party contract manufacturing organizations to manufacture and supply drug product for our clinical studies. The manufacture of pharmaceutical products in compliance with the FDA's current good manufacturing practices, or cGMPs, requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced cGMP requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to provide study drugs in our clinical trials would be jeopardized. Any delay or interruption in the supply of clinical study materials could delay the completion of our clinical studies, increase the costs associated with maintaining our clinical study programs and, depending upon the period of delay,

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require us to commence new studies at significant additional expense or terminate the studies completely.

        All manufacturers of our product candidates must comply with cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Manufacturers of our product candidates may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have little control over our manufacturers' compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers' failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical studies, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or impair our reputation.

        We currently rely on single source suppliers for each of our product candidates under a development agreement. We do not have a long-term supply agreement in place. Although we believe alternative sources of supply exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers, which would adversely affect our business. New suppliers of any product candidate would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing the product candidate. Obtaining the necessary FDA approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.

Risks related to the operation of our business

Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel.

        We are highly dependent on our chief executive officer and the other members of our executive and scientific teams. Our executives may terminate their employment with us at any time. The loss of the services of any of these people could impede the achievement of our research, development and commercialization objectives. We maintain "key person" insurance for our chief executive officer but not for any other executives or employees. Any insurance proceeds we may receive under this "key person" insurance would not adequately compensate us for the loss of our chief executive officer's services.

        Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

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We expect to expand our development, regulatory and sales and marketing capabilities, and, as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

        As of December 31, 2013, we had 22 employees. Over the next several years, we expect to experience significant growth in the number of our employees and the scope of our operations, particularly in sales and marketing. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

We are an "emerging growth company," and we cannot be certain whether the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, which was enacted in April 2012. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may suffer or be more volatile.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

        Our operations could be subject to earthquakes, power shortages, telecommunications failures, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our corporate headquarters is located in California and certain clinical sites for our product candidates, operations of our existing and future partners and suppliers are or will be located in California near major earthquake faults and fire zones. The ultimate impact on us, our significant partners, suppliers and our general infrastructure of being located near major earthquake faults and fire zones and being consolidated in certain geographical areas is unknown, but our operations and financial condition could suffer in the event of a major earthquake, fire or other natural or manmade disaster.

        If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business. If any product candidates that we may develop are approved for commercialization outside the United

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States, we will be subject to additional risks related to entering into international business relationships, including:

Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our drug development programs.

        Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical study data from completed or ongoing clinical studies for any of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.

Risks related to intellectual property

Our ability to successfully commercialize our technology and products may be materially adversely affected if we are unable to obtain and maintain effective intellectual property rights for our technologies and product candidates.

        Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and products. In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain or enforce the patents, covering technology or products that we license to third parties or that we may license from third parties. Therefore, we cannot be certain that these patents and applications will be prosecuted and

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enforced in a manner consistent with the best interests of our business. In addition, if third parties who license patents to us or from us fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated.

        We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part. In addition, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technologies or from developing competing products and technologies.

        The patent position of specialty pharmaceutical and biotechnology companies generally is highly uncertain and involves complex legal and factual questions for which many legal principles remain unresolved. In recent years patent rights have been the subject of significant litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued in the United States or in other jurisdictions which protect our technology or products or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. In addition, the United States Patent and Trademark Office, or USPTO, might require that the term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights is highly uncertain.

        Recent or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. In March 2013, under the recently enacted Leahy-Smith America Invents Act, or America Invents Act, the United States moved from a "first to invent" to a "first-to-file" system. Under a "first-to-file" system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. The America Invents Act includes a number of other significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted, redefine prior art and establish a new post-grant review system. The effects of these changes are currently unclear as the USPTO only recently developed new regulations and procedures in connection with the America Invents Act and many of the substantive changes to patent law, including the "first-to-file" provisions, only became effective in March 2013. In addition, the courts have yet to address any of these provisions and the applicability of the act and new regulations on specific patents discussed herein have not been determined and would need to be reviewed. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition. We may become involved in opposition, interference, derivation, inter partes review or other proceedings challenging our patent rights or the patent rights of others, and

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the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

        Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in the patent claims of our owned or licensed patents being narrowed, invalidated or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage.

We may not be able to protect our intellectual property rights throughout the world.

        Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as in the United States. These products may compete with our product candidates in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products against third parties in violation of our proprietary rights generally. The initiation of proceedings by third parties to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

        The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent prosecution process and following the issuance of a patent. Our failure to comply with such requirements could result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case if our patent were in force.

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We may become involved in lawsuits or other proceedings to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

        Competitors may infringe or otherwise violate our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we or our licensees may be required to file infringement claims, which can be expensive and time-consuming. For example, in January and February 2014, we and Forest filed patent infringement lawsuits, under Forest's patents and patents owned by us and licensed to Forest, against eight manufacturers of generic pharmaceuticals that have filed ANDAs with the FDA seeking approval to manufacture and sell generic versions of Namenda XR. We anticipate that the prosecution of the lawsuits will require a significant amount of time and attention of our chief executive officer and other senior executives. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in the Forest litigation or any other litigation or proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Such a result could limit our ability to prevent others from using or commercializing similar or identical technology and products, limit our ability to prevent others from launching generic versions of our products and could limit the duration of patent protection for our products, all of which could have a material adverse effect on our business. A successful challenge to our patents could reduce or eliminate our right to receive royalties from Forest. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings alleging that we or our collaborators are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

        Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and to use our proprietary technologies without infringing, misappropriating or otherwise violating the proprietary rights or intellectual property of third parties. We or our collaborators may become party to, or be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference, derivation, re-examination, inter partes review, post-grant review, opposition or similar proceedings before the USPTO and its foreign counterparts. The costs of these proceedings could be substantial, and the proceedings may result in a loss of such intellectual property rights. Some of our competitors may be able to sustain the costs of complex patent disputes and litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any disputes or litigation could adversely affect our ability to raise the funds necessary to continue our operations. Third parties may assert infringement claims against us or our collaborators based on existing patents or patents that may be granted in the future. For example, in December 2013 Teva Pharmaceuticals USA and Mayne Pharma International jointly initiated a lawsuit against Forest alleging that the manufacture and commercialization of Namenda XR by Forest infringes the plaintiffs' U.S. patent. Under our license agreement with Forest we are obliged to indemnify Forest under certain circumstances and our royalty entitlements may also be reduced. Our indemnification obligation to Forest, while subject to customary limitations, has no monetary cap, and our right to receive royalties from Forest may be eliminated in any calendar quarter in which certain third party generic competition exists. If we or our collaborators are found to infringe a third-party's intellectual property rights, we could be required to obtain a license from such third-party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease

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commercializing the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties can have a similar negative impact on our business.

We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.

        In addition to our patented technology and products, we rely upon trade secrets, including unpatented know-how, technology and other proprietary information, to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us. However, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute such agreements, we may be unsuccessful in executing such an agreement with each party who in fact conceives or develops intellectual property that we regard as our own. In addition, it is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement. While to our knowledge the confidentiality of our trade secrets has not been compromised, if the employees, consultants or collaborators that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could be disclosed, misappropriated or otherwise become known or be independently discovered by our competitors. In addition, intellectual property laws in foreign countries may not protect our intellectual property to the same extent as the laws of the United States. If our trade secrets are disclosed or misappropriated, it would harm our ability to protect our rights and adversely affect our business.

We may be subject to claims that our employees have wrongfully used or disclosed intellectual property of their former employers. Intellectual property litigation or proceedings could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

        Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, and we have no knowledge of any instances of wrongful use or disclosure by our employees to date, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of an employee's former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. This type of litigation or proceeding could substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual property related proceedings could adversely affect our ability to compete in the marketplace.

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Risks related to government regulation

The regulatory approval process is expensive, time consuming and uncertain and may prevent us or our collaboration partners from obtaining approvals for the commercialization of some or all of our product candidates.

        The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. Neither we nor our collaboration partners are permitted to market our product candidates in the United States until we receive FDA approval of an NDA. We have not submitted an application or received marketing approval for any of our product candidates. Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including:

        Prior to receiving approval to commercialize any of our product candidates in the United States or abroad, we and our collaboration partners must demonstrate with substantial evidence from well-controlled clinical studies, and to the satisfaction of the FDA and other regulatory authorities abroad, that such product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical studies can be interpreted in different ways. Even if we and our collaboration partners believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. Administering any of our product candidates to humans may produce undesirable side effects, which could interrupt, delay or cause suspension of clinical studies of our product candidates and result in the FDA or other regulatory authorities denying approval of our product candidates for any or all targeted indications.

        FDA approval of an NDA is not guaranteed, and the approval process is expensive and may take several years. The FDA also has substantial discretion in the approval process. Despite the time and expense exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical studies, or perform additional preclinical studies and clinical studies. The number of preclinical studies and clinical studies that will be required for FDA approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address and the regulations applicable to any particular product candidate. The FDA can delay, limit or deny approval of a product candidate for many reasons, including that:

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        If any of our product candidates fails to demonstrate safety and efficacy in clinical studies or does not gain regulatory approval, our business and results of operations will be materially and adversely harmed.

If the FDA does not conclude our product candidates satisfy the requirements for approval under the Section 505(b)(2) regulatory approval pathway, or if the requirements for approval under Section 505(b)(2) are not as we expect, the approval pathway for our products will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in any case may not be successful.

        We are developing our current and future product candidates, including ADS-5102, with the expectation that they will be eligible for approval through the Section 505(b)(2) regulatory pathway. Section 505(b)(2) of the FDCA would allow an NDA to rely in part on data in the public domain or the FDA's prior conclusions regarding the safety and effectiveness of an approved drug product, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that would need to be generated in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we or Forest may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for product approval. If this were to occur, the time and financial resources required to obtain FDA approval for our product candidates, and complications and risks associated with regulatory approval of would likely substantially increase. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway may result in new competitive products reaching the market more quickly than our product candidates, which would adversely impact our competitive position and prospects. Even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this will ultimately lead to accelerated product development or earlier approval for MDX-8704, ADS-5102 or any other product candidate.

Even if we receive regulatory approval for a particular product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.

        Once regulatory approval has been granted for a particular product candidate, the approved product and its manufacturer are subject to continual review by the FDA and/or non-U.S. regulatory authorities. Any regulatory approval that we or our collaboration partners receive for our product candidates may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the FDA and/or non-U.S. regulatory authorities approve any of our product candidates, we will be subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion, tracking and recordkeeping for our products. Further, manufacturers of our drug products are required to comply with cGMP regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Additionally, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture our drug products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a third party discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is

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manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including:

        The regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory compliance, we may not be permitted to market our future products and our business may suffer.

Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.

        We may decide to commercialize ADS-5102, ADS-8704 and other future product candidates outside of the United States. To market our future products in the European Economic Area, or EEA, and many other foreign jurisdictions, we must obtain separate regulatory approvals. Specifically, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA.

        Before granting an MA, the European Medicines Agency or the competent authorities of the member states of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

        We have had limited interactions with foreign regulatory authorities. The approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and even if we file we may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain non-U.S. regulatory approval to market our product candidates in other countries, we may not be able to achieve the financial results we project and our stock price could decline.

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Healthcare reform measures could hinder or prevent our product candidates' commercial success.

        In the United States, there have been and we expect there will continue to be a number of legislative and regulatory changes to the healthcare system that could affect our future revenue and profitability and the future revenue and profitability of our potential customers. Federal and state lawmakers regularly propose and, at times, enact legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For example, one of the most significant healthcare reform measures in decades, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or, collectively, the PPACA, was enacted in 2010. The PPACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of new programs. The PPACA, among other things:

        While the U.S. Supreme Court upheld the constitutionality of most elements of the PPACA in June 2012, other legal challenges are still pending final adjudication in several jurisdictions. In addition, Congress has also proposed a number of legislative initiatives, including possible repeal of the PPACA. At this time, it remains unclear whether there will be any changes made to the PPACA, whether to certain provisions or its entirety. We can provide no assurance that the PPACA, as currently enacted or as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.

        The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may, among other things, adversely affect:

If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

        Certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients' rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The regulations that may affect our ability to operate include:

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        The PPACA, among other things, amended the intent standard of the federal Anti-Kickback Statute and criminal healthcare fraud statutes to a stricter standard such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the PPACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act.

        If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil, criminal and/or administrative penalties, damages, fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations, any of

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which could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these or other laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

Risks related to this offering and ownership of our common stock

Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

        Our stock price is likely to be volatile. The stock market in general and the market for securities of specialty pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. In addition, the clinical development stage of our operations may make it difficult for investors to evaluate the success of our business to date and to assess our future viability. The market price for our common stock may be influenced by many factors, including:

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        These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Additionally, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management's attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could result in a decrease in the market price of our common stock. Immediately after this offering, we will have outstanding                    shares of common stock based on the number of shares outstanding as of December 31, 2013. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares,                     shares are currently restricted as a result of securities laws or lock-up agreements but will be able to be sold after the offering as described in the section of this prospectus entitled "Shares Eligible for Future Sale." Moreover, immediately after this offering, holders of an aggregate of up to            shares of our common stock, including shares of our common stock issuable upon exercise of outstanding warrants, will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders as described in the section of this prospectus entitled "Description of Capital Stock—Registration rights". We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting" section of this prospectus.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

        Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted book value per share of our tangible assets after subtracting our liabilities. As a result, investors purchasing common stock in this offering will incur immediate dilution of $        per share, based on an assumed initial public offering price of $        per share (the mid-point of the price range set forth on the cover page of this prospectus) and our pro forma as adjusted net tangible book value as of December 31, 2013. For more information on the dilution you may suffer as a result of investing in this offering, see the section entitled "Dilution."

        This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering and the exercise of stock options granted to our employees. The exercise of any of these options would result in additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation.

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After this offering, our executive officers, directors and principal stockholders will maintain the ability to control or significantly influence all matters submitted to stockholders for approval.

        Upon the closing of this offering, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock before this offering will, in the aggregate, beneficially own shares representing approximately        % of our common stock. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, will control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, and rules of the SEC and those of NASDAQ Global Market have imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. We estimate the additional costs we will incur as a result of being a public company to be approximately $2 million annually.

        The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, beginning with our annual report on Form 10-K for the fiscal year ended December 31, 2014. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting beginning with our annual report on Form 10-K following the date on which we are no longer an emerging growth company. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the NASDAQ Global Market, the SEC or other regulatory authorities, which would require additional financial and management resources.

        Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the

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Sarbanes-Oxley Act. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.

An active trading market for our common stock may not develop.

        Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. An active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for our stockholders to sell shares purchased in this offering without depressing the market price for the shares or at all, and any such sales may be at a loss.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

        Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could adversely affect our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

        Provisions in our corporate charter and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions include that:

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        Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our stockholders' sole source of gain.

        We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of existing or any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be our stockholders' sole source of gain for the foreseeable future.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

        This prospectus, including the sections titled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Market, Industry and Other Data," "Business" and "Shares Eligible for Future Sale," contains forward-looking statements. In some cases you can identify these statements by forward-looking words, such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "potential," "seek," "expect," "goal," or the negative or plural of these words or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

        These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors." Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

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        You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

        You should read this prospectus and the documents that we reference in this prospectus and have filed with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.

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MARKET, INDUSTRY AND OTHER DATA

        We obtained the industry, market and other data throughout this prospectus from our own internal estimates and research, and from industry publications and research, surveys and studies conducted by other third parties. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.

        Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

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USE OF PROCEEDS

        We estimate that the net proceeds from our issuance and sale of            shares of our common stock in this offering will be approximately $         million, or approximately $         million if the underwriters exercise in full their over-allotment option to purchase additional shares, assuming an initial public offering price of $        per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us.

        A $1.00 increase (decrease) in the assumed initial public offering price of $        per share would increase (decrease) the net proceeds from this offering by approximately $         million, assuming that the number of shares we are offering, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering by approximately $         million, assuming that the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We do not expect that a change in the initial price to the public or the number of shares by these amounts would have a material effect on the use of proceeds from this offering, although it may affect the time at which we may need to seek additional capital.

        As of December 31, 2013, we had cash and cash equivalents of approximately $85.6 million. We intend to use all of the net proceeds from this offering along with our other capital resources, to fund ongoing development of our product candidates, including ADS-5102, for commercialization activities related to any wholly owned approved product, including developing a specialized CNS sales force, and for working capital and other general corporate purposes. We currently estimate that we will use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

        This expected use of the net proceeds from this offering and our existing cash and cash equivalents represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development and commercialization efforts and the status of and results from clinical studies, as well as any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

        Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, interest bearing instruments and U.S. government securities.

        Based on our planned use of the net proceeds from this offering and our existing cash and cash equivalents described above, we expect that such funds will be sufficient to enable us to fund the development of ADS-5102 through commercialization in its first indication. However, it is possible that we will not achieve the progress that we expect because the actual costs and timing of drug development, particularly clinical studies, are difficult to predict, subject to substantial risks and delays and often vary depending on the particular indication and development strategy. We do not expect that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to enable us to fund substantial development of our other product candidates.

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DIVIDEND POLICY

        We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our capital stock. Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Our future ability to pay cash dividends on our capital stock may also be limited by the terms of any future debt or preferred securities.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2013:

        You should read this table together with the sections in this prospectus entitled "Selected Consolidated Financial Data," and "Management's Discussion and Analysis of Financial Condition and

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Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of December 31, 2013  
 
  Actual   Pro Forma   Pro Forma
As
Adjusted(1)
 
 
  (in thousands, except share
and per share data)
(unaudited)

 

Cash and cash equivalents

  $ 85,612   $ 85,612   $    
               
               

Covertible preferred stock warrant liability

    6,232            

Convertible preferred stock, $0.001 par value; 3,350,000 shares authorized and 2,359,587 shares issued and outstanding actual; no shares authorized and no shares issued and outstanding pro forma and pro forma as adjusted

    19,149            

Total stockholders' equity:

   
 
   
 
   
 
 

Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual; 5,000,000 shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted

                   

Common stock, $0.001 par value; 10,000,000 shares authorized, 4,757,764 shares issued and outstanding; 100,000,000 shares authorized pro forma and pro forma as adjusted; 6,474,216 shares issued and outstanding pro forma;            shares issued and outstanding pro forma as adjusted

    14     16        

Additional paid-in capital

    77,163     102,542        

Accumulated deficit

    (20,572 )   (20,572 )      
               

Total stockholders' equity

    56,605     81,986        
               

Total capitalization

  $ 81,986   $ 81,986   $    
               
               

(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by $             million, assuming the number of shares we are offering, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $             million, assuming the assumed initial public offering price per share, as set forth on the cover page of this prospectus, remains the same. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price, number of shares offered and other terms of this offering determined at pricing.

        The outstanding share information in the table above is based on 6,474,216 shares of our common stock outstanding as of December 31, 2013 and excludes the following:

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DILUTION

        If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

        Our historical net tangible book value as of December 31, 2013 was approximately $56.6 million, or $11.90 per share of common stock. Our historical net tangible book value is the amount of our total tangible assets less our liabilities and preferred stock that is not included within equity. Net historical tangible book value per share is our historical net tangible book value divided by the number of shares of common stock outstanding as of December 31, 2013. The pro forma net tangible book value of our common stock as of December 31, 2013 was $         million, or $        per share. Pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding shares of common stock, after giving effect to the pro forma adjustments referenced under "Capitalization."

        After giving effect to (i) the pro forma adjustments referenced under "Capitalization" and (ii) receipt of the net proceeds from our sale of            shares of common stock at an assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2013 would have been approximately $             million, or $            per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $            per share to our existing stockholders and an immediate dilution of $            per share to investors purchasing common stock in this offering.

        The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share

                   $               

Historical net tangible book value per share as of December 31, 2013

  $ 11.90        

Pro forma increase in net tangible book value per share as of December 31, 2013 attributable to the conversion of preferred stock

  $          

Pro forma net tangible book value per share as of December 31, 2013, before giving effect to this offering

  $                                

Pro forma increase in net tangible book value per share attributable to new investors purchasing shares in this offering

                                   
             

Pro forma as adjusted net tangible book value per share after giving effect to this offering

                                   
             

Dilution in pro forma net tangible book value per share to new investors in this offering

                   $               
             
             

        Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) the pro forma as adjusted net tangible book value, after giving effect to this offering, by $            per share and the dilution to new investors by $            per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. If the underwriters' over-allotment option to purchase additional shares in this offering is exercised in full, the pro forma as adjusted net tangible book value, after giving effect to this offering, would be $            per share and the dilution to new investors would be $            per share.

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        We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 shares in the number of shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value by approximately $             million, or $            per share, and the pro forma dilution per share to investors in this offering by $            per share, assuming that the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. The pro forma information discussed above is illustrative only and will change based on the actual initial public offering price, number of shares and other terms of this offering determined at pricing.

        The table below summarizes, as of December 31, 2013, on the pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration, and the average price per share (i) paid to us by our existing stockholders and (ii) to be paid by new investors purchasing our common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and offering expenses payable by us.

 
  Shares Purchased   Total Consideration    
 
 
  Average
Price
 
 
  Number   Percent   Amount    
 

Existing stockholders

    6,474,216       % $                Existing stockholders   $               

New investors

                    New investors   $               
                         

Total

          100 % $               

Total

  $               
                         
                         

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) total consideration paid by new investors by $             million and increase (decrease) the percent of total consideration paid by new investors by        %, assuming the number of shares we are offering, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We may also increase or decrease the number of shares we are offering.

        The number of shares of our common stock reflected in the discussion and tables above is based on 6,474,216 shares of our common stock outstanding as of December 31, 2013, and excludes:

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        Effective as of the date of the effectiveness of the registration statement of which this prospectus forms a part, an aggregate of 3,354,432 shares of our common stock will be reserved for issuance under the 2014 Plan. Furthermore, we may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that any of our options are exercised, new options are issued under our equity incentive plans or we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

        You should read the following selected consolidated financial data together with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus and our consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus. We have derived the consolidated statements of operations data for the years ended December 31, 2012 and 2013 and the consolidated balance sheet data as of December 31, 2012 and 2013 from our audited consolidated financial statements and related notes appearing elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

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  Year Ended
December 31,
 
 
  2012   2013  
 
  (in thousands, except
per share data)

 

Consolidated statements of operations data:

             

Revenue

  $ 37,471   $ 71,095  
           

Operating expenses

             

Research and development

    9,192     7,410  

General and administrative

    8,330     6,667  
           

Total operating expenses

    17,522     14,077  
           

Income from operations

    19,949     57,018  

Interest and other income (expense), net

    (1,537 )   (4,818 )

Interest expense

    (376 )   (88 )
           

Income before income taxes

    18,036     52,112  

Income tax expense

    (300 )   (1,191 )
           

Net income

  $ 17,736   $ 50,921  
           
           

Net income attributable to common stockholders(1)

             

Basic

  $ 11,441   $ 33,068  
           
           

Diluted

  $ 11,596   $ 35,353  
           
           

Net income per share attributable to common stockholders(1)

             

Basic

  $ 2.41   $ 6.96  
           
           

Diluted

  $ 2.34   $ 5.99  
           
           

Weighted average shares number of shares used in computing net income net income attributable to common stockholders(1)

             

Basic

    4,744     4,753  
           
           

Diluted

    4,962     5,903  
           
           
(1)
See Notes 2 and 14 to our consolidated financial statements for a description of the method used to compute basic and diluted net income per share.

 
  Year Ended
December 31,
 
 
  2012   2013  
 
  (in thousands)
 

Balance sheet data:

             

Cash and cash equivalents

  $ 62,957   $ 85,612  

Working capital

    25,715     81,790  

Total assets

    64,303     86,216  

Warrant liability

    1,706     6,232  

Total liabilities

    40,186     10,462  

Convertible preferred stock

    19,149     19,149  

Total stockholders' equity

    4,968     56,605  

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

         The following discussion and analysis should be read in conjunction with our selected consolidated financial data and the consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of the prospectus contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.

Overview

        We are a specialty pharmaceutical company driven to improve the lives of those affected by chronic disorders of the central nervous system, or CNS. We achieve this by enhancing the pharmacokinetic profiles of proven drugs to create novel therapeutics for use alone and in fixed-dose combination products. We are developing our lead wholly owned product candidate, ADS-5102, for a complication of Parkinson's disease known as levodopa induced dyskinesia, or LID, and as a treatment for chronic behavioral symptoms associated with traumatic brain injury. We have successfully completed a Phase 2/3 clinical study in LID and intend to initiate a Phase 3 registration trial in 2014. Our late-stage therapeutics portfolio also includes an NDA-submitted product candidate, MDX-8704, being co-developed with Forest Laboratories, Inc., or Forest, and an approved product, Namenda XR, which Forest developed and is marketing in the United States under a license from us.

        Prior to November 2012, we were developing ADS-8704, a fixed-dose combination of controlled-release memantine and donepezil. Pursuant to our license agreement with Forest, we exclusively licensed to Forest certain U.S. intellectual property rights relating to controlled-release memantine and therapies including memantine. Forest has continued the ADS-8704 program under the name MDX-8704. Under our license agreement with Forest, we received a $65 million upfront payment in November 2012 and two $20 million milestone payments in the fourth quarter of 2013. We are eligible to receive up to an additional $55 million in payments based upon the achievement of certain regulatory milestones prior to and including the first FDA approval of MDX-8704.

Financial operations overview

Summary

        Our revenue to date has been generated primarily from license and development revenue pursuant to our license agreement with Forest. We have not generated any commercial product revenue. As of December 31, 2013, we had an accumulated deficit of $20.6 million. Although we reported net income for 2012 and 2013, this was primarily due to the recognition of revenue pursuant to our license agreement with Forest. We incurred significant losses prior to 2012 and expect to incur significant and increasing losses in the foreseeable future as we advance our product candidates into later stages of development and, if approved, commercialization. We cannot assure you that we will receive additional collaboration revenue in the future.

        In 2010, we suspended further activities on our influenza product candidate, ADS-8902, due to the expected length of the clinical trial and a change in our strategic focus. At the same time, we entered into an agreement with the National Institute of Allergy and Infectious Diseases, a division of the National Institutes of Health, or NIH, and its subcontractor under which we provided clinical trials supply, protocols, and operational support for further clinical development. We retained the rights to any clinical study data generated by the NIH with respect to clinical studies conducted by the NIH. We have continued to supply clinical operations support through a subcontract with the independent third-party subcontractor.

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        We expect our research and development expenses to increase as we continue to advance our product candidates through clinical development. In addition, if any of our product candidates receive regulatory approval for commercial sale, we expect to incur significant expenses associated with the establishment of a specialty sales force in the United States. Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of expenses incurred or when, or if, we will be able to achieve sustained profitability.

        To date, we have raised an aggregate of $87.2 million through the sale of convertible preferred stock. Under our agreement with Forest we received a non-refundable upfront license fee $65.0 million in 2012, $40.0 million in development milestone fees in 2013 and may receive up to an additional $55.0 million in future regulatory milestone fees. Beginning in 2018 we will be entitled to receive royalties in the low to mid-single digits from Forest for sales of Namenda XR in the United States and, five years after commercial launch, in the low double digits to the mid-teens for sales of MDX-8704 in the United States, if approved. As of December 31, 2013, we had cash and cash equivalents of $85.6 million.

Revenue

        We have not generated any revenue from commercial product sales to date. Our revenue to date has been generated primarily from non-refundable upfront license payments and reimbursements for research and development expenses under our license agreement with Forest. In addition to upfront license payments, we are also entitled to receive milestone and other contingent payments upon the occurrence of specific events. As of December 31, 2013, we had received $40.0 million in development milestone payments.

        The following table summarizes the sources of our revenue for the years ended December 31, 2012 and 2013 (in thousands):

 
  Year Ended
December 31,
 
 
  2012   2013  

Forest:

             

Recognition of upfront license fee

  $ 35,389   $ 29,611  

Recognition of milestone payments

        40,000  

Reimbursement of development expenses

    725     1,093  
           

Forest total

    36,114     70,704  

NIH contracts

   
1,207
   
200
 

Government grants

    150     191  
           

Total revenue

  $ 37,471   $ 71,095  
           
           

        We recognized collaboration revenue of $35.4 million and $69.6 million in 2012 and 2013, respectively, pursuant to our license agreement with Forest. We also recognized revenue from Forest of approximately $0.7 million and $1.1 million in development funding in 2012 and 2013, respectively. We expect that our revenue will continue to fluctuate in future periods.

Research and development expenses

        Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our wholly owned product candidates, as well as the development of product candidates pursuant to our agreement with Forest. We recognize all research and development costs as they are incurred. We began tracking our external costs by project beginning January 1, 2006.

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        Research and development expenses consist of:

        We anticipate our research and development expenses will increase as we initiate a Phase 3 registration trial for ADS-5102, expected in 2014.

        The following table summarizes our research and development expenses incurred during the years ended December 31, 2012 and 2013 and for the period from January 1, 2006, when we began tracking these expenses by project, to December 31, 2013 (in thousands):

 
  Year Ended
December 31,
  For the Period
from
January 1, 2006
to
December 31, 2013
 
 
  2012   2013  

Product candidate

                   

ADS-5102

  $ 3,241   $ 2,497   $ 14,724  

ADS-8704(1)

    3,604     1,306     13,255  

ADS-8902(2)

    949     240     19,925  

Unallocated research and development expenses(3)

    1,398     3,367     22,468  
               

Total research and development expenses

  $ 9,192   $ 7,410   $ 70,372  
               
               

(1)
ADS-8704 includes program costs that we incurred related to the fixed-dose combination drug that was licensed to Forest. Subsequent to the execution of the license agreement Forest assigned the name MDX-8704 to the program in the United States.

(2)
ADS-8902 includes program costs related to our influenza program that was suspended in 2010. The NIH assumed financial responsibility for the ongoing clinical activites through an independent third-party subcontractor. We incur the expenses reflected in the above table in providing clinical operations support to an independent third-party subcontractor for which we are reimbursed.

(3)
Unallocated costs include research and development not allocated to a specific program. In 2013, no employee-related expenses were allocated to ADS-5102.

        The program-specific expenses summarized in the table above include costs directly attributable to our product candidates. We allocate research and development salaries, benefits, stock-based compensation and indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses. The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. We expect our research and development expenses to increase in the future. The process of conducting the necessary clinical research to obtain FDA approval is costly and time consuming. We consider the active management and development of our clinical pipeline to be crucial to our long-term success. The actual probability of success for each product candidate and clinical program may be affected by a variety of factors including but not limited to: the quality of the product candidate, early clinical data, investment in the program, competition,

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manufacturing capability and commercial viability. Furthermore, we have entered into collaborations with CROs and academic third parties to participate in the development and commercialization of our product candidates, and we may enter into additional collaborations in the future. In situations in which third parties have control over the clinical development of a product candidate, the estimated completion dates are largely under the control of such third parties and not under our control. We cannot forecast with any degree of certainty which of our product candidates, if any, will be subject to future collaborations or how such arrangements would affect our development plans or capital requirements. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

General and administrative expenses

        General and administrative expenses consist primarily of personnel costs, facilities costs and other expenses for outside professional services, including legal, intellectual property, human resources, board of directors, audit and accounting services. Personnel costs consist of salaries, benefits and stock-based compensation. We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission, and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administration and professional services.

Interest and other income, net

        Interest and other income, net consists primarily of interest received on our cash and cash equivalents and gains and losses resulting from the remeasurement of our convertible preferred stock warrant liability. We will continue to record adjustments to the estimated fair value of the convertible preferred stock warrants until they are exercised, expired or converted into warrants to purchase shares of our common stock upon the closing of our initial public offering. At that time, we will reclassify the convertible preferred stock warrant liability as additional paid-in capital and we will no longer record any related periodic fair value adjustments.

Interest expense

        Interest expense consists primarily of interest costs related to our borrowings. We had no outstanding borrowings as of December 31, 2013.

Critical accounting policies and significant judgments and estimates

        Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

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Revenue recognition

        We generate revenue from collaboration and license agreements for the development and commercialization of our product candidates. Collaboration and license agreements may include non-refundable upfront payments, partial or complete reimbursement of research and development costs, contingent payments based on the occurrence of specified events under our collaboration arrangements, and royalties on sales of product candidates if they are successfully approved and commercialized. Our performance obligations under the collaborations may include the transfer or license of intellectual property rights, provision of research and development services and related materials and participation on certain development and/or commercialization committees with the collaboration partners. We make judgments that affect the periods over which we recognize revenue. We periodically review our estimated periods of performance based on the progress under each arrangement and account for the impact of any changes in estimated periods of performance on a prospective basis.

        On January 1, 2011, we adopted an accounting standards update that provides guidance on revenue recognition using the milestone method. Payments that are contingent upon achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved. Milestones are defined events that can only be achieved based on our partner's performance and there is substantive uncertainty about whether the event will be achieved at the inception of the arrangement. Events that are contingent only on the passage of time or only on counterparty performance are not considered milestones subject to this guidance.

        Amounts related to research and development funding are recognized as the related services or activities are performed, in accordance with the contract terms. Payments to us are based on the number of full-time equivalent researchers assigned to the collaboration project and the related research and development expenses incurred.

Accrued research and development expenses

        As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which are research and development expenses. This process involves:

        Examples of estimated research and development expenses that we accrue include:

        We base our expense accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under

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some of these contracts depend on factors, such as the successful enrollment of patients and the completion of clinical study milestones. Our service providers invoice us monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

        To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities.

Estimated fair value of convertible preferred warrants

        Freestanding warrants and other similar instruments related to shares that are redeemable are accounted for in accordance with Accounting Standards Codification, or ASC, 480-10, "Distinguishing Liabilities from Equity." Under ASC 480-10, the freestanding warrants that are related to our redeemable convertible preferred stock are classified as liabilities on the balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of other income or expense.

        We adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrants or the completion of a liquidation event, including the completion of an initial public offering, at which time all preferred stock warrants will be converted into warrants to purchase common stock and, accordingly, the liability will be reclassified to equity.

Stock-based compensation

        Stock-based compensation cost is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. We estimate the grant date fair value and the resulting stock-based compensation expense using the Black Scholes option pricing model. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis.

        We account for stock-based compensation arrangements with non-employees using a fair value approach. The fair value of these options is measured using the Black-Scholes option pricing model reflecting an expected life that is assumed to be the remaining contractual life of the option. The compensation costs of these arrangements are subject to remeasurement over the vesting terms as earned.

        We recorded total non-cash stock-based compensation expense of $0.8 million and $0.6 million for the years ended December 31, 2012 and 2013, respectively. At December 31, 2013, we had $5.0 million of total unrecognized employee stock-based compensation expense, net of estimated forfeitures, related to stock option grants. This amount will be recognized as expense over a weighted-average period of 4.55 years. We expect to continue to grant stock options in the future, and, to the extent that we do, our actual stock-based compensation expense recognized in future periods will likely increase.

        The intrinsic value of all outstanding options as of                        , 2014 was approximately $             million based on an assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, of which approximately $             million related to vested options and approximately $             million related to unvested options.

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Determining fair value of stock options

        We determine the fair value of each grant of stock options using the estimated fair value of our common stock and the assumptions set forth below. Each of these inputs is subjective and generally requires significant judgment.

        The fair value of employee stock options was estimated using the following assumptions:

 
  Year Ended December 31,
 
  2012   2013

Expected volatility

  91% - 92%   89% - 100%

Risk-free interest rate

  1.15% - 1.41%   1.45% - 2.48%

Dividend yield

   

Expected term (in years)

  7.00   7.25

        The fair value of non-employee stock options was estimated using the following assumptions:

 
  Year Ended December 31,
 
  2012   2013

Expected volatility

  89% - 92%   88% - 98%

Risk-free interest rate

  0.87% - 1.93%   1.02% - 2.72%

Dividend yield

   

Contractual life (in years)

  6.25 - 10.00   5.25 - 10.00

        Our board of directors intends all options granted to be exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. The estimated fair value of our common stock was determined at each valuation date in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our board of directors, with the assistance of management, developed these valuations using significant judgment and taking into account numerous factors, including developments at our company, market conditions and contemporaneous independent third-party valuations as of December 31, 2012, October 31, 2013, and December 31, 2013.

        For all option grant dates through December 31, 2013, the enterprise value was determined based on a Probability Weighted Expected Return Method, or PWERM, Discounted Cash Flow method, or the OPM backsolve method. The allocation of these enterprise values to each part of our capital structure, including our common stock, was done based on the Option Pricing Method, or OPM. OPM treats the rights of the holders of preferred and common shares as equivalent to call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of preferred shares, as well as their rights to participation and conversion. Thus, the estimated value of the common stock can be determined by estimating the value of its portion of each of these call option rights. The OPM backsolve method derives the implied equity value of a company from a recent transaction involving the company's own securities issued on an arms-length basis. The Discounted Cash Flow method estimates value based on the expectation of future net cash flows, which are then discounted back to the present using a rate of return derived from alternative companies of similar type and risk profile. Under the PWERM the value is estimated based upon analysis of future values for the enterprise under varying scenarios, probabilities are ascribed to these scenarios based on expected future outcomes. Following the closing of this offering, the fair value of our common stock will be determined based on the closing price of our common stock on the NASDAQ Global Market.

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Income taxes

        We file income tax returns in the U.S. federal jurisdiction, California and India. We file U.S. federal income tax returns and California state income tax returns. To date, we have not been audited by the Internal Revenue Service or any state income tax authority.

        We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

        We assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

        As of December 31, 2013, our total deferred tax assets were $9.2 million. The deferred tax assets were primarily comprised of federal and state tax net operating losses and tax credit carryforwards. As of December 31, 2013 we had federal net operating loss carryforwards of approximately $3.5 million available to reduce future taxable income. We also had state net operating loss carryforwards of approximately $73.4 million. The federal net operating loss carryforward begins expiring in 2022, and the state net operating loss carryforward began expiring in 2012. Due to uncertainties surrounding our ability to generate future taxable income to realize these tax assets, a full valuation allowance has been established to offset our deferred tax assets. Utilization of net operating loss carryforward may also be subject to an annual limitation due to the ownership change limitations. These annual limitations may result in the expiration of the net operating loss carryforwards before utilization.

        At December 31, 2013, we also had federal research and development tax credit carryforwards of approximately $1.4 million that will begin expiring in 2030 and state research and development credit carryforwards of approximately $2.2 million that do not expire.

Results of operations

Comparison of the years ended December 31, 2012 and 2013

        The following table summarizes our results of operations for the years ended December 31, 2012 and 2013 (in thousands, except percentages):

 
  Year Ended
December 31,
   
   
 
 
  Increase/
(Decrease)
  % Increase/
(Decrease)
 
 
  2012   2013  

Revenue

  $ 37,471   $ 71,095   $ 33,624     90 %

Research and development

    9,192     7,410     (1,782 )   (19 )%

General and administrative

    8,330     6,667     (1,663 )   (20 )%

Interest and other income (expense), net

    (1,537 )   (4,818 )   3,281     213 %

Interest expense

    (376 )   (88 )   (288 )   NM  

Revenue

        Revenue increased by $33.6 million, to $71.1 million for the year ended December 31, 2013 from $37.5 million for the year ended December 31, 2012. The increase in revenue was due to the upfront license payment, receipt of milestone payments and development funding recognized with respect to our license agreement with Forest. We recognized upfront license and development milestone revenue of $35.4 million and $69.6 million in 2012 and 2013, respectively. Reimbursement of development expenses increased by $0.4 million to $1.1 million for the year ended December 31, 2013 from $0.7 million for the year ended December 31, 2012. The increase was offset by a decrease of $1.0 million in NIH contract revenue for the year ended December 31, 2013.

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Research and development expenses

        Research and development expenses decreased $1.8 million, or 19%, to $7.4 million for the year ended December 31, 2013 from $9.2 million for the year ended December 31, 2012. The decrease in research and development expenses was due to decreased program costs of $2.3 million related to ADS-8704 which we incurred prior to licensing the U.S. rights to the program to Forest in the fourth quarter of 2012. In addition, program expenses for ADS-5102 decreased by $0.7 million due to the completion of a phase 2/3 clinical study in 2013. Program expenses for ADS-8902 decreased by $0.7 million for the year ended December 31, 2013 due to a reduction in the scope of work under our contract with the NIH. These decreases were partially offset by an increase of $1.9 million of expenses that were not unallocated to a specific program.

General and administrative expenses

        General and administrative expenses decreased by $1.7 million, or 20%, to $6.7 million for the year ended December 31, 2013 from $8.3 million for the year ended December 31, 2012. The decrease was primarily related to financial advisory services fees of $1.9 million in relation to the license agreement with Forest incurred in 2012.

Interest and other income (expense), net

        Interest and other income (expense), net increased by $3.3 million or 214%, to $4.8 million for the year ended December 31, 2013 from $1.5 million for the year ended December 31, 2012. The increase was primarily attributed to the remeasurement of preferred stock warrants in 2013 and recognition of the change in fair value.

Interest expense

        Interest expenses decreased by $0.3 million, to $0.1 million for the year ended December 31, 2013 from $0.4 million for the year ended December 31, 2012. Interest expense consists of interest accrued on convertible notes that were issued as part of the March 2012 Series AA Preferred Stock and Notes Payable Financing. This financing is more fully described in Note 5 to our consolidated financial statements.

Liquidity, capital resources and plan of operation

        Since our inception in November 2000, we have funded our operations primarily through proceeds from the sale of convertible preferred stock and warrants, bank debt and the issuance of convertible debt. We have not generated any revenue from the sale of any products. We have incurred losses and generated negative cash flows from operations since inception through 2011. In 2012 and 2013 we recognized a profit and positive cash flow as a result of our license agreement with Forest. As of December 31, 2012 and December 31, 2013, our principal sources of liquidity were our cash and cash equivalents, which totaled $63.0 million and $85.6 million, respectively.

        From inception through December 31, 2013, we have received net proceeds of $87.2 million from the sale of convertible preferred stock and $5.0 million from the issuance of convertible notes and under a term loan. The convertible notes and accrued interest thereon were repaid during 2013.

        In March 2012, we entered into a convertible note, Series AA preferred stock and warrant purchase agreement, or the Purchase Agreement, with various investors, raising proceeds of $9.3 million in a series of closings between March 2012 and November 2012. This financing is more fully described in Note 5 to our consolidated financial statements.

        We believe our existing cash and cash equivalents will be sufficient to fund our projected operating requirements for at least the next 12 months, including operations related to the development of

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ADS-5102 for LID. However, it is possible that we will not achieve the progress that we expect because the actual costs and timing of drug development, particularly clinical studies, are difficult to predict, subject to substantial risks and delays and often vary depending on the particular indication and development strategy.

        The following table summarizes our cash flows for the periods indicated (in thousands):

 
  Year Ended
December 31,
 
 
  2012   2013  

Net cash (used in) provided by:

             

Operating activities

  $ 51,961   $ 26,801  

Investing activities

    (24 )   (167 )

Financing activities

    7,903     (3,979 )

Net increase in cash and cash equivalents

  $ 59,840   $ 22,655  

        Net cash provided by operating activities was $52.0 million for the year ended December 31, 2012 and was primarily attributable to cash received in the fourth quarter of 2012 under our license agreement with Forest. Net cash provided by operating activities was $26.8 million for the year ended December 31, 2013. The primary use of cash was to fund the ongoing clinical study and product development activities related to ADS-5102.

        Net cash used in investing activities amounted to approximately $24,000 and $167,000 for the years ended December 31, 2012 and 2013, respectively, which consisted mainly of property and equipment purchases.

        Net cash provided by financing activities for the year ended December 31, 2012 was approximately $7.9 million consisting of approximately $3.9 million from the sale of Series AA convertible preferred stock and $4.0 million of convertible notes. Net cash used in financing activities amounted to $4.0 million for the year ended December 31, 2013 and consisted primarily of repayment of principal of outstanding convertible notes.

Off-balance sheet arrangements

        Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.

Contractual obligations

        Our future contractual obligations at December 31, 2013 were as follows (in thousands):

 
  Payments due by period  
 
  Less than
1 year
  1 to 3
years
  3 to 5
years
  More than
5 years
  Total  

Contractual obligations:

                               

Operating lease obligations

  $ 228   $ 274   $   $   $ 502  
                       

Total contractual obligations

  $ 228   $ 274   $   $   $ 502  
                       
                       

JOBS Act accounting election

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this

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exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Newly adopted accounting pronouncements

        In February 2013, the FASB issued guidance which addresses the presentation of amounts reclassified from accumulated other comprehensive income. This guidance does not change current financial reporting requirements, instead an entity is required to cross-reference to other required disclosures that provide additional detail about amounts reclassified out of accumulated other comprehensive income. In addition, the guidance requires an entity to present significant amounts reclassified out of accumulated other comprehensive income by line item of net income if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. Adoption of this standard is required for periods beginning after December 15, 2012 for public companies. The amended guidance became effective for us in the first quarter of fiscal year 2013. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Quantitative and qualitative disclosures about market risk

        The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash and cash equivalents in a variety of securities of high credit quality. As of December 31, 2013, we had cash and cash equivalents of $85.6 million consisting of cash and liquid investments deposited in highly rated financial institutions in the United States. A portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However, because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor changes in interest rates.

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BUSINESS

Overview

        We are a specialty pharmaceutical company driven to improve the lives of those affected by chronic disorders of the central nervous system, or CNS. We achieve this by enhancing the pharmacokinetic profiles of approved drugs to create novel therapeutics for use alone and in fixed-dose combination products. We are developing our lead wholly owned product candidate, ADS-5102, for a complication of Parkinson's disease known as levodopa induced dyskinesia, or LID, and as a treatment for chronic behavioral symptoms associated with traumatic brain injury, or TBI. We have successfully completed a Phase 2/3 clinical trial in which patients receiving ADS-5102 had a statistically significant 43% reduction in LID from baseline, and we intend to initiate a Phase 3 registration trial of ADS-5102 in LID in 2014. Our late-stage therapeutics portfolio also includes an NDA-submitted fixed-dose combination product candidate, MDX-8704, being co-developed with Forest Laboratories, Inc., or Forest, and an approved controlled-release product, Namenda XR, which Forest developed and is marketing in the United States under a license from us. We plan to commercialize our wholly owned product candidates, if approved, by developing a specialty CNS sales force to reach high volume prescribing neurologists and psychiatrists in the United States.

        We estimate that approximately 36 million people in the United States suffer from chronic CNS disorders, such as Alzheimer's disease, Parkinson's disease, TBI, epilepsy, psychosis and depression. We believe that many of these disorders could be better treated if existing CNS drugs were pharmacokinetically enhanced and were used alone or in fixed-dose combinations with other existing CNS drugs. Our initial development efforts have yielded a series of patent-protected, controlled-release therapies based on either amantadine or memantine, approved CNS drugs that are part of a class of molecules called aminoadamantanes. We initially focused on aminoadamantanes because they modulate multiple neurotransmitter systems and we believed that by applying our innovative product development strategy we could develop aminoadamantane-based products with broad therapeutic utility. We are implementing this strategy to develop additional product candidates based on ADS-5102, a controlled-release version amantadine. We also intend to develop product candidates based on approved CNS therapeutics outside the aminoadamantane class.

        Our most advanced wholly owned product candidate is ADS-5102, a once-nightly, high dose, controlled-release version of amantadine that we are developing for the treatment of LID. LID is a movement disorder that frequently occurs in patients with Parkinson's disease after long-term treatment with levodopa, the most widely-used drug for Parkinson's disease. Patients with LID suffer from involuntary non-purposeful movements and reduced control over voluntary movements. We estimate that in 2011 approximately 260,000 Parkinson's disease patients in the United States suffered from motor complications as a result of levodopa therapy and approximately 140,000 of these patients suffered from LID. There are no FDA or EMA approved drugs for the treatment of LID. Clinicians typically manage LID by decreasing the dose of levodopa, which can exacerbate symptoms of the underlying Parkinson's disease.

        We selected LID as the initial indication for ADS-5102 based on results seen in investigator initiated clinical studies of amantadine and in established preclinical models. In our recently completed Phase 2/3 clinical study, ADS-5102 met its primary endpoint, reduction of LID, and several key secondary endpoints. If our anticipated Phase 3 registration trial of ADS-5102 is successful, we anticipate submitting a New Drug Application, or NDA, to the U.S. Food and Drug Administration, or FDA, for ADS-5102 in the first half of 2016. Amantadine has shown promising results in multiple other CNS indications, and we expect to initiate in 2014 a Phase 2/3 study of ADS-5102 in a second CNS indication, possibly for the treatment of behavioral symptoms associated with TBI, such as irritability and aggression. We anticipate initiating additional Phase 2/3 studies of ADS-5102 in one or more other indications by the end of 2015.

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        Our memantine-based therapeutics are being developed and commercialized in the United States through our partnership with Forest. Forest currently sells one product that is subject to our license agreement, Namenda XR, a treatment of moderate to severe dementia associated with Alzheimer's disease. Namenda XR, a controlled-release version of the approved CNS drug memantine, was launched in the United States in June of 2013 and is part of Forest's $1.5 billion Namenda franchise. In addition, Forest and we are co-developing MDX-8704, a once-daily fixed-dose combination of Namenda XR and the approved CNS drug donepezil, for the treatment of moderate to severe dementia related to Alzheimer's disease. Forest submitted an NDA to the FDA for MDX-8704 in February 2014 and will be responsible for marketing MDX-8704 in the United States if approved. Under our license agreement with Forest, we received a $65 million upfront payment in November 2012 and two $20 million milestone payments in the fourth quarter of 2013. We are eligible to receive up to an additional $55 million in payments based on the achievement of certain regulatory milestones prior to and including the first FDA approval of MDX-8704.

        We are led by a team of executives and directors with significant experience in drug discovery, development and commercialization. In addition to co-founding Adamas, our CEO co-founded CuraGen Corporation (acquired by Celldex Therapeutics, Inc.), and other members of our management team have held senior positions at Syntex, Bayer, Tularik, and Elan. Members of our executive team have played leading roles in the development and commercialization of multiple significant drugs in a wide range of therapeutic areas. Our board brings substantial, relevant experience in reimbursement, drug development and commercialization.

        We have developed our current portfolio of late stage therapeutics in a capital efficient manner. As of December 31, 2013, we had raised a total of $87 million from equity financings, had received $105 million from our partnership with Forest, had recognized approximately $5 million in revenue from other sources and had $86 million in cash and cash equivalents and no debt obligations. The proceeds from this offering are expected to increase our operational flexibility and enable us to further ADS-5102 in other indications and extend our product development efforts beyond aminoadamantanes.

Our strategy

        Our goal is to build an independent, CNS-focused, specialty pharmaceutical company that improves the lives of patients affected by chronic CNS disorders by enhancing the pharmacokinetic profiles of proven drugs to create novel therapeutics that address significant unmet clinical needs. We intend to achieve this goal by leveraging our existing product development process and focusing on key development objectives.

Product development strategy

        Our strategy is supported by a product development process that allows us to discover, patent, develop and commercialize novel therapeutics in a capital efficient manner. Our integrated process combines a number of capabilities that together allow us to identify, enhance, patent and then develop proprietary controlled-release and fixed-dose combination products. These capabilities include in-depth knowledge of CNS markets and unmet medical needs, pharmacokinetic and pharmacodynamic competencies and regulatory expertise. Our goal is to develop products that are clinically differentiated

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from approved drugs that in turn create significant benefits for patients, caregivers, physicians and payors.

GRAPHIC

        The key elements of this strategy are:

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Strategic focus

        We are implementing our strategy by focusing on the following key objectives:

Our market opportunity

        We estimate that approximately 36 million people in the United States suffer from chronic CNS disorders, such as Alzheimer's disease, Parkinson's disease, TBI, epilepsy, psychosis and depression. We believe that many of these disorders could be better treated if the pharmacokinetic profiles of existing CNS drugs were altered to enhance tolerability and efficacy and if these enhanced drugs were combined with other existing CNS drugs to improve and streamline the management of these complicated conditions.

        CNS diseases are frequently treated with multiple medications having different mechanisms of action with the goal of maximizing symptomatic benefits for patients. Existing CNS drugs often require frequent dosing and may have tolerability issues that limit the amount of the drug that can be taken each day. Onerous side effects due to sub-optimal pharmacokinetic/pharmacodynamic profiles of CNS

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drugs are also common. Several novel controlled-release CNS drugs that address these effects have been introduced, such as Adderall XR (Shire Specialty Pharmaceuticals), Concerta (Janssen Pharmaceuticals), and Wellbutrin XL (GlaxoSmithKline), and we believe many additional opportunities exist. Further, over the past decade, combination therapies have been introduced in a number of non-CNS therapeutic areas, easing the burden associated with complex medical regimens. The New England Journal of Medicine reported in 2011 that sophisticated public health models of adherence to complex medical regimens have validated the clinical relevance of combination therapies in multiple therapeutic areas. We believe there are significant opportunities to develop new fixed-dose combinations of approved CNS medications that address adverse pharmacokinetic/pharmacodynamic effects, improve efficacy and support greater adherence to the complex medical regimens faced by many CNS patients.

Therapeutic approach and portfolio

        We have developed a portfolio of CNS therapeutics addressing significant unmet clinical needs.

Our initial therapeutic approach

        Our initial product and product candidates are based upon pharmacokinetic enhancements of two approved CNS drugs, amantadine and memantine, which belong to a class of drugs known as aminoadamantanes. We selected aminoadamantanes as our initial area of focus because they have the ability to modulate multiple neurotransmitter systems and we believe they potentially have broader therapeutic utility than previously realized. Our pharmacokinetic enhancement strategy demands a deep understanding of the relationship between blood level changes and both efficacy and side effects of these drugs. These insights supported the development of a series of novel controlled-release aminoadamantane product candidates that contain significantly higher dose strengths than immediate-release formulations of the same active pharmaceutical ingredients and can be given once daily, as opposed to multiple times daily.

Our Therapeutics Portfolio

Product and Product Candidates
  Target Indication(s)   Development Status   Commercial Rights
  Wholly Owned

ADS-5102

 

Levodopa-Induced Dyskinesia

 

Phase 3

 

Adamas, worldwide
Amantadine   Traumatic Brain Injury   Phase 2/3 ready   Adamas, worldwide
    Undetermined   Phase 2/3 planning   Adamas, worldwide

ADS-8800 series
ADS-5102 based combination therapies

 

Undetermined

 

Research, Phase 2/3 planning

 

Adamas, worldwide

ADS-9000 series
Undetermined

 

Undetermined

 

Research

 

Adamas, worldwide

 

 

 

 

 

 

 
  Partnered

Namenda XR
Memantine

 

Moderate to severe Alzheimer's dementia

 

Marketed

 

US-only; licensed to Forest

MDX-8704
Memantine/Donepezil

 

Moderate to severe Alzheimer's dementia

 

NDA submitted

 

US-only; licensed to Forest

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Our wholly owned product candidates

        We have a number of wholly owned product candidates that are either in late stage clinical trials or being prepared to begin clinical development using the 505(b)(2) regulatory pathway. The most advanced of these are based on the approved drug amantadine. We also anticipate developing and commercializing product candidates based upon other approved CNS therapies.

ADS-5102

        ADS-5102 is a controlled-release version of the approved drug amantadine that we are developing initially for LID. We selected LID from an extensive list of potential indications supported by the peer review literature based on results seen in both investigator initiated clinical studies and in established preclinical models. Further there is no FDA or EMA approved drug for treating LID despite significant investment by the pharmaceutical industry.

Overview of Parkinson's disease and LID

        Parkinson's disease is a chronic, progressive motor disorder that causes tremors, rigidity, slowed movements and postural instability. The Parkinson's Disease Foundation estimates that there were approximately one million people living with Parkinson's disease in the United States in 2011. We estimate that approximately 687,000 people in the United States have been diagnosed and are being treated for Parkinson's disease. Prevalence of Parkinson's disease increases with age, with approximately 1.6% of people 65 years old or older having the disease compared with 0.3% of people in the general population. As the U.S. population ages the number of people living with Parkinson's disease in the United States is expected to grow at over 3% per year.

        The most commonly prescribed treatments for Parkinson's disease are levodopa-based therapies. Levodopa is converted to dopamine to replace the dopamine loss caused by the disease. It is generally effective in providing at least partial relief from the symptoms of Parkinson's disease but fails to modify the underlying disease process. Patients initially take levodopa therapy approximately three times daily and receive relief from symptoms of Parkinson's disease for much of the day; this period of relief is known as "ON" time. As the effects of levodopa wear off, the symptoms of Parkinson's disease return; this is known as "OFF" time. By properly managing the timing of levodopa administration, patients with early stage Parkinson's disease can largely avoid "OFF" time during the day.

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        The table below defines the various terms that are used to describe the fluctuating symptoms of Parkinson's disease.

Term   Definition
"ON" time   "ON" time refers to periods of adequate control of Parkinson's disease symptoms.

"OFF" time

 

"OFF" time refers to periods of the day when medication is not working well, causing worsening of Parkinson's disease symptoms.

Dyskinesia

 

Involuntary twisting, turning movements and loss of control of voluntary movements.

LID

 

Levodopa induced dyskinesia, which is a side effect of administration of levodopa and occurs during "ON" time.

Troublesome LID

 

LID that interferes with the patient's daily function or causes meaningful discomfort.

"ON" with troublesome LID

 

Periods of adequate control of Parkinson's disease symptoms but with troublesome LID.

"ON" without troublesome LID

 

Periods of adequate control of Parkinson's disease symptoms without troublesome LID.

        Over time, as Parkinson's disease progresses and dopaminergic neurons further degenerate, most patients require increasing doses of levodopa to achieve equivalent therapeutic benefit. Even with increased doses of levodopa, patients may begin to exhibit unpredictable "OFF" episodes throughout the day. In the later stages of the disease, many patients will suffer from LID. Patients with LID suffer from involuntary non-purposeful movements and reduced control over voluntary movements. The cause of LID is unknown, but it is associated with the pulsatile administration of levodopa treatment, degeneration of key brain structures, the duration of levodopa treatment, total levodopa exposure and other factors. LID can become severely disabling, rendering patients unable to perform routine daily tasks and increasing their risk of falling and social isolation. As Parkinson's disease progresses, the symptoms of LID worsen in frequency and severity. Eventually the total time that a patient spends either "OFF" or "ON" with troublesome LID can become a majority of his or her day. In addition, many Parkinson's disease patients at this stage have difficulty swallowing solid food or pills.

        The chart below illustrates the fluctuating symptoms that an early and a late stage Parkinson's disease patient may experience during a two-dose cycle of levodopa taken during a portion of the waking hours.

GRAPHIC

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        LID can be managed by decreasing the amount of levodopa administered to a patient, but this change can result in an increase in "OFF" time and a decrease in "ON" time. Many patients would rather endure periodic episodes of LID than face unpredictable "OFF" episodes. As a result, these patients will choose to maintain their dose of levodopa even though they will experience times when they are "ON" but suffering from troublesome LID. We estimate that in 2011, approximately 260,000 Parkinson's disease patients in the United States suffered from significant "OFF" time, and approximately 140,000 of these patients suffered from LID.

Limitations of existing approaches to LID

        There are currently no medications for the treatment of LID that are approved for marketing in the United States or Europe. As a result, clinicians often attempt to manage late stage Parkinson's disease symptoms with various approved Parkinson's disease products that are not indicated for LID. These include Azilect (Teva), Requip XL (GSK), Mirapex ER (BI), Neupro Patch (UCB) and Comtan (Novartis). These therapies produce clinically relevant reductions in "OFF" time ranging from 0.7-1.8 hours but not significant increases in "ON" time without troublesome LID. In addition, none of these products reduce LID and some actually increase LID.

        Physicians may also use the immediate-release form of amantadine, which is approved for the treatment of Parkinson's disease, to treat LID. This approach is supported by a number of investigator initiated clinical studies and case studies, which suggest that it may be effective for the treatment of LID. However, these studies were not well-controlled clinical trials that meet evidence-based clinical or regulatory standards.

        In addition to the limited data regarding its effectiveness, we believe that the use of amantadine to treat LID has also been limited by potential side effects at dose levels considered to be effective. The majority of Parkinson's disease patients tolerate twice-daily dosing of 100 mg of amantadine, but often this dosing regimen is insufficient to provide adequate symptom relief. The available literature on amantadine for the treatment of LID indicates that higher doses of amantadine produce a greater reduction in LID symptoms. However, the increased frequency of adverse events at higher doses, in particular CNS events and sleep disturbances, generally limits the use of amantadine at doses greater than 200 mg per day. Immediate-release versions of amantadine are absorbed relatively rapidly by the body with peak concentrations in the blood being reached two to four hours after administration. We believe that the side effects associated with immediate-release amantadine are associated with this rapid rise in concentration within a few hours after dosing.

The Adamas Solution—ADS-5102

        ADS-5102 is a controlled-release version of amantadine that addresses many of the limitations of immediate-release amantadine by allowing higher daily doses of amantadine to be administered once-nightly without a significant increase in side effects. In patients taking ADS-5102, the amantadine plasma concentration achieved in the early morning through mid-day is approximately two-times that reached following administration of immediate-release amantadine, providing symptomatic relief to patients as they engage in their daily activities. Further, the lower concentrations occur in the evening, reducing the potential negative impact of amantadine's sleep-related side effects. In addition, ADS-5102 capsules can be opened to sprinkle the contents on food for use by Parkinson's disease patients who have difficulty swallowing due to their illness.

        In our Phase 2/3 EASED trial, ADS-5102 demonstrated statistically significant improvements when compared to placebo. At the chosen 340 mg dose, the benefits included a 3.8-hour increase in "ON" time without troublesome LID, a 43% reduction in troublesome LID from baseline, a reduction in the functional impact of LID, no worsening of Parkinson's disease symptoms and a trend towards reduction in "OFF" time. Notably, there was no difference from placebo in the incidence of sleep-related adverse

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events. By both increasing "ON" time without troublesome LID and reducing LID, ADS-5102 provides a combination of significant clinical benefits that we believe cannot be achieved with other drugs for Parkinson's disease. While there are a number of approved drugs and certain drug candidates that have been demonstrated to reduce "OFF" time, none have been demonstrated to reduce LID and in most cases actually increase LID. For currently marketed products that increase dopamine, including Azilect, Mirapex ER, Requip XL, Neupro and Comtan, the increase in "ON" time without dyskinesia is reported as 0.8-1.5 hours vs. placebo, the "OFF" time reduction is reported as 0.7-1.8 hours versus placebo and the increase in dyskinesia is reported as 7-10% vs. placebo. For levodopa formulation development products, including Rytary and Duodopa, the increase in "ON" time without dyskinesia is reported as 1.0-1.9 hours versus placebo and the reduction in "OFF" time is reported as 1.1-1.9 hours versus placebo, with no change in LID reported.

Commercialization plan for ADS-5102 in LID

        We intend to commercialize ADS-5102 in the United States, subject to FDA approval, by developing our own sales force and in other markets through distribution agreements and collaborations with CNS-focused pharmaceutical companies. We plan to focus our commercial efforts on the approximately 4,000 neurologists and movement disorder specialists in the United States who are responsible for the treatment of greater than 60% of the patients with late stage Parkinson's disease. As these physician specialists are heavily concentrated in major urban markets, we believe a 30 to 60 member specialty sales force will provide adequate reach and frequency of communication for successful commercialization.

        We will be responsible for negotiating coverage, reimbursement and formulary placement decisions for ADS-5102 in the United States. We believe that if ADS-5102 is approved as the first product indicated in the United States for the treatment of LID, most payors are likely to extend coverage to it and that its placement on payor formularies and the amount of reimbursement will be influenced by the availability and pricing of branded treatments for symptoms of Parkinson's disease, branded treatments for other forms of dyskinesia, generic amantadine and surgical treatments for symptoms of Parkinson's disease.

ADS-5102 development plan for LID

        In December 2013 after completion of our Phase 2/3 study, we had a written interaction with the FDA to discuss the remaining clinical studies required to support the submission of an NDA for ADS-5102 for the treatment of LID. Based on the minutes from that interaction, we believe that we need to conduct additional clinical studies prior to submitting an NDA: a Phase 3 efficacy and safety study and additional single dose/multi-dose relative bioavailability studies in healthy volunteers.

        The Phase 3 study will be a multi-center, randomized, double-blind, placebo-controlled, two-arm parallel group trial. The primary objective of the Phase 3 study will be to evaluate the efficacy of a once-nightly 340 mg dose of ADS-5102 for the treatment of LID in subjects with Parkinson's disease. Secondary objectives will be to evaluate the potential and the safety and tolerability of ADS-5102 in the study population. Secondary outcome measures include "ON" time without troublesome dyskinesia and "OFF" time based on home diaries. We are in the process of finalizing the details of this study with the FDA.

        Prior to completing the Phase 3 study, we intend to hold a pre-NDA meeting with the FDA to determine the contents of the NDA submission for ADS-5102. In addition, prior to submitting the NDA, we intend to meet with regulators in certain markets outside the United States to determine the regulatory pathways for access to those markets.

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ADS-5102 Phase 1 data—pharmacokinetic profile

        Our development of ADS-5102 was driven by the discovery that the side effects of amantadine are not caused primarily by the absolute levels of amantadine in the blood but by the speed at which the maximum concentrations are reached. Immediate-release amantadine is rapidly absorbed by the body with its maximum concentration in the blood being reached in two to four hours. This rapid increase in blood concentration levels is associated with an increased level of CNS side effects. In contrast, the same amount of ADS-5102 is absorbed more slowly with the maximum concentration being achieved many hours later. This slower increase in blood concentration levels is associated with fewer CNS side effects than a more rapid one.

        Because of this improved tolerability due to the novel pharmacokinetic profile, we were able to investigate ADS-5102 in clinical studies at dose strengths from 1.3 to 2.1 times greater than the 100 mg twice-daily dose typically used with immediate-release amantadine.

        Based on our clinical experience, we are developing a 340 mg dose of ADS-5102 to be taken once-nightly at bedtime. The amantadine plasma concentration for this dose of ADS-5102 is expected to occur 12 to 14 hours after being taken and is approximately two times higher than that of a 100 mg dose of immediate-release amantadine taken twice daily. With this regimen, amantadine plasma concentration would be achieved from the early morning through mid-day, providing relief to patients as they engage in their daily activities, and the lowest concentrations would occur in the evening, reducing the potential for sleep-related side effects. The once-nightly dosing regimen may also provide enhanced convenience and compliance as compared to a twice-daily dosing regimen.

        We have completed five Phase 1 pharmacokinetic studies in healthy subjects with two controlled-release versions of amantadine having slightly different release rates. The most frequently occurring adverse events reported in the Phase 1 studies were headache, fatigue, and dizziness, occurring in 5-10% of subjects, and the majority of adverse events were categorized as mild.

ADS-5102 Phase 2/3 data

        In 2013, we completed a successful Phase 2/3 clinical trial of ADS-5102 for the treatment of LID. The EASED trial was designed to investigate the safety and efficacy of three dose levels of ADS-5102 administered once-nightly at bedtime for the treatment of LID in Parkinson's disease. The study enrolled 83 Parkinson's disease patients who were randomized in a 1:1:1:1 ratio to the four treatment groups: placebo, 260 mg ADS-5102, 340 mg ADS-5102 and 420 mg ADS-5102. The table below summarizes the change from baseline compared to placebo for the key efficacy endpoints measured in the study. In the two charts and discussion below relating to ADS-5102, only results with a p-value of 0.05 or less are considered to be statistically significant.

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Outcome Measure   260 mg
ADS-5102
N=19
  340 mg
ADS-5102
N=20
  420 mg
ADS-5102
N=19
 
  LS Mean Treatment Difference vs. Placebo (95% CI)

UDysRS Total Score

  -5.6 (-13.4, 2.2)
p=0.159
  -11.3 (-19.1, -3.5)
p=0.005
  -10.0 (-17.8, -2.2)
p=0.013

ON Time w/o Troublesome LID, hours

 

3.3 (1.1, 5.5)
p=0.004

 

3.0 (0.8, 5.2)
p=0.008

 

2.7 (0.5, 5.0)
p=0.018

OFF Time, hours

 

-1.3 (-2.7, 0.1)
p=0.074

 

-0.9 (-2.3, 0.5)
p=0.199

 

0.1 (-1.4, 1.5)
p=0.934

MDS-UPDRS (Part I, II, III)

 

1.2 (-7.7, 10.1)
p=0.786

 

-2.2 (-11.2, 6.9)
p=0.636

 

1.7 (-7.2, 10.6)
p=0.705

MDS-UPDRS (Part IV, Item 4.2)
—Functional Impact of Dyskinesia

 

-0.8 (-1.4, -0.2)
p=0.014

 

-1.0 (-1.6, -0.4)
p=0.002

 

-1.3 (-2.0, -0.7)
p=<0.001

        The chart below shows the change in the Unified Dyskinesia Rating Scale, or UDysRS, score for each group in the EASED study after 8 weeks:

GRAPHIC

        Both the 340 mg and 420 mg dose levels significantly reduced LID as measured by the change in the UDysRS total score over eight weeks versus placebo, meeting the primary endpoint for the clinical study (p=0.005 and p=0.013, respectively). The magnitude of the change for the 340 mg ADS-5102 group was a 43% reduction versus baseline and a 27% reduction versus placebo.

        In addition, ADS-5102 significantly increased "ON" time without troublesome LID at the 260 mg, 340 mg and 420 mg dose levels from baseline to week eight relative to placebo by 3.3, 3.0 and 2.7 hours per day, respectively, as measured by patient diaries after eight weeks of treatment (Least square means, p=0.004, p=0.008 and p=0.018, respectively). At the 340 mg dose level, "ON" time with troublesome LID was reduced by 3.0 hours per day from baseline relative to placebo (p=0.008) and "OFF" time was reduced by 0.9 hours per day from baseline relative to placebo after 8 weeks of treatment, though this latter result was not statistically significant (p=0.199).

        Based on analysis of the pharmacokinetic, safety and efficacy data from the EASED study, we have selected 340 mg ADS-5102 taken once-nightly as the recommended dose regimen and anticipate using that dose in our Phase 3 trial. We believe that this dose offers the best benefit/risk ratio of the doses we have studied.

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        The chart below shows the average levels of "ON" time without troublesome LID, "ON" time with troublesome LID, "OFF" time, and sleep, recorded by patients in the 340 mg dose group and the placebo group at baseline and after eight weeks of treatment.

GRAPHIC

        Treatment with ADS-5102 did not result in worsening of Parkinson's disease symptoms, as measured by the MDS-UPDRS combined score, a standard measurement of Parkinson's disease related disability. The adverse events reported in this study were typically mild to moderate in severity and consistent with Parkinson's disease and the known amantadine adverse event profile. Five patients had serious adverse events. The most common adverse events, occurring in more than 10% of the subjects or by more than two subjects in any ADS-5102 group, were constipation, dizziness, hallucination, dry mouth, fall, confusional state, headache, nausea and asthenia. Notably, there was no difference from placebo in the incidence of sleep-related adverse events.

ADS-5102 for behavioral symptoms associated with traumatic brain injury

        We are currently evaluating the development of ADS-5102 for the treatment of chronic irritability and aggression arising from traumatic brain injury. Approximately 1.7 million people in the United States experience a TBI annually, and over 3.2 million are estimated to have chronic symptoms associated with TBI. The chronic manifestations of TBI include long-term impairment of cognitive and behavioral functions. In particular, irritability and aggression are highly prevalent in individuals with TBI contributing to social isolation, increased burden of care, disrupted interpersonal relationships and difficulties with full community integration. The diagnosis and management of these long-term effects of TBI are extremely challenging, and there are no FDA-approved treatments for any of the chronic behavioral symptoms associated with TBI.

        A recently completed independent, investigator-initiated, placebo-controlled study indicates that amantadine may reduce irritability and aggression in individuals with TBI. This study, which was led by Dr. Flora Hammond at Indiana University School of Medicine, enrolled seventy-six subjects in a parallel-group, randomized, double-blind, controlled trial of a 100 mg twice daily dose of amantadine (n=38) versus placebo (n=38). In this study, patients receiving amantadine had a statistically significant reduction in irritability and aggression of approximately 40% as compared to patients receiving placebo. Dr. Hammond is in the process of completing a second study on amantadine expected to be released in the first half of 2014.

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        We believe that ADS-5102's characteristics, including once-nightly dosing and possibly a higher tolerated dose, have the potential to make it a better option than immediate-release amantadine for the treatment of chronic irritability and aggression arising from TBI.

Additional indications for ADS-5102

        We intend to continue to review the results of preclinical studies, clinical trials and case reports published in peer reviewed medical journals to evaluate additional potential CNS indications for ADS-5102, including post-concussive syndrome, multiple sclerosis fatigue, Attention Deficit Hyperactivity Disorder, depression, hyperkinetic movement disorders and antipsychotic-induced weight gain. We anticipate that by using the 505(b)(2) regulatory pathway we will be able to initiate the clinical development of ADS-5102 in new indications with a Phase 2/3 study and will not typically need to conduct any Phase 1 studies prior to initiating Phase 2/3 studies. As a result, we retain substantial flexibility in our development plans and are able to respond to new clinical data and changes in the commercial environment. We currently expect to initiate Phase 2/3 studies of ADS-5102 in additional CNS indications by the end of 2014.

ADS-8800 series (ADS-5102-based combination products)

        Using the product development strategy we employed with memantine, we are investigating and will potentially develop additional combination products based upon combining ADS-5102 with second agents. We have identified certain approved CNS drugs that we believe have the potential to be combined with ADS-5102 to treat one or more chronic CNS conditions such as Alzheimer's disease, Parkinson's disease, TBI, epilepsy, psychosis or depression. Each combination will be designed to provide clinical benefits in specific indications where it appears that combination therapy including ADS-5102 can address a significant unmet clinical need. We believe we will be able to use the 505(b)(2) regulatory pathway to initiate clinical development of these product candidates. Additional drug-drug interaction studies to assess the potential for interaction between ADS-5102 and the second agent may be required unless the two agents have been previously studied. We anticipate progressing into Phase 2/3 studies in combination therapies with minimal additional work.

ADS-9000 series

        We believe our product development strategy is broadly applicable to addressing limitations of other CNS drugs whose pharmacokinetic profiles limit dosing and intend to initiate additional programs in 2015. We are currently evaluating several different approved CNS drugs for potential use in a range of CNS indications.

Other wholly owned product candidates

ADS-8704 (outside of the United States only)

        We have retained the rights to develop fixed-dose combinations of controlled-release memantine and donepezil outside of the United States. We are currently evaluating potential development and commercialization pathways for ADS-8704, a fixed-dose combination of our proprietary controlled-release version of memantine and donepezil for the treatment of moderate to severe dementia related to Alzheimer's disease in various non-U.S. markets.

ADS-8902 for severe influenza

        We developed ADS-8902, a triple combination antiviral drug therapy for influenza, which is designed to inhibit viral replication at multiple points in the virus proliferation pathway. ADS-8902 is a proprietary fixed-dose combination product containing three FDA approved products, amantadine, oseltamivir, and ribavirin. The National Institutes of Health, or NIH, is currently conducting a multi-

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center, 520 patient Phase 2/3 trial of amantadine, oseltamivir, and ribavirin for the treatment of severe influenza. The trial was initiated in 2011 and as of February 2014 it had randomized 98 patients. As the rate of enrollment in the trial is heavily dependent on the prevalence and severity of seasonal influenza each year, we have not projected an anticipated completion date for the trial. If the NIH trial is successful, we may seek to license rights to ADS-8902 to pharmaceutical companies for which the treatment of influenza is a commercial focus. In 2010, we suspended further activities on ADS-8902, due to the expected length of the clinical trial and a change in our strategic focus.

Our partnered product and product candidate

        Our memantine-based therapeutics are being developed and commercialized in the United States through our partnership with Forest for the treatment of dementia associated with moderate to severe Alzheimer's disease.

Namenda XR and MDX-8704

        Namenda XR is a controlled-release version of memantine approved in the United States in 2010 for the treatment of moderate to severe dementia related to Alzheimer's disease and is marketed in the United States by our partner Forest. Pursuant to our agreement, we have exclusively licensed to Forest multiple U.S. patents covering Namenda XR.

        MDX-8704 is a once-daily fixed-dose combination of the approved drugs Namenda XR and donepezil that we are co-developing with Forest for the treatment of moderate to severe dementia related to Alzheimer's disease in the United States.

Overview of Alzheimer's disease dementia

        Alzheimer's disease dementia is a progressive neurodegenerative condition that affects over 5 million people in the United States. There is no known cure for Alzheimer's disease or any of the other conditions that cause dementia. Existing pharmaceutical therapies are approved for the treatment of symptoms of the disease; do not alter disease progression. Even if disease modifying therapies are developed and approved, we believe it is likely that there will be a continuing need for symptomatic treatments. In 2013, approximately 3.4 million people in the United States were treated for Alzheimer's disease dementia, an increase of approximately 4% from 2009, and in U.S. sales of pharmaceutical treatments for Alzheimer's disease for the 12 months ended November 30, 2013 were approximately $2.7 billion. We believe that the number of people treated for Alzheimer's disease will continue to increase as the number of elderly people in the United States increases, diagnosis of dementia becomes more common and health care reform improves access to treatments.

Existing treatments for Alzheimer's disease dementia

        The only two classes of drugs approved for the treatment of Alzheimer's disease dementia are acetylcholinesterase inhibitors, or AChEIs, and NMDA receptor antagonists. Donepezil is the leading AChEI and forms of memantine are the only NMDA receptor antagonists approved for Alzheimer's disease. Memantine is currently marketed by Forest in the United States in an immediate-release version under the brand name Namenda and in an controlled-release version under the brand name Namenda XR. Donepezil is sold by Pfizer and Eisai under the brand name Aricept and as a generic drug by a number of manufacturers. Namenda XR is approved for the treatment of moderate to severe dementia related to Alzheimer's disease, and donepezil is approved for the treatment of dementia in patients with mild to severe Alzheimer's disease. In February 2014, Forest announced that effective as of August 15, 2014 it would no longer supply immediate-release Namenda tablets, and that it will focus on Namenda XR and MDX-8704.

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        Both memantine and donepezil are considered to be generally safe and well tolerated. The most common side effects of memantine are headache, diarrhea and dizziness. The most common side effects of donepezil are nausea, diarrhea, not sleeping well, vomiting, muscle cramps, feeling tired and not wanting to eat.

Treatment of moderate to severe Alzheimer's disease dementia with combination therapy

        The concurrent use of memantine and donepezil is a well-established treatment option for patients with moderate to severe dementia related to Alzheimer's disease. The current treatment recommendations from the American Association of Geriatric Psychiatry encourage the use of an AChEI for the treatment of mild Alzheimer's disease and then to add memantine when patients progress to the moderate phase of the disease. Despite this, only approximately 1,400,000 out of 2,500,000 patients with moderate to severe Alzheimer's disease are treated with combination therapy, as shown below.

GRAPHIC

        Concurrent use of memantine and donepezil is supported by clinical data which shows that in patients with moderate to severe Alzheimer's disease, combination therapy resulted in a statistically significant improvement in the Severe-Impairment-Battery, or SIB, a commonly used outcome measure, as compared to treatment with donepezil alone. A second study demonstrated that concurrent use of Namenda XR and an AChEI also demonstrated a statistically significant improvement in the SIB as compared to treatment with donepezil alone.

        Concurrent treatment with memantine and donepezil is generally safe and well tolerated with the most common side effects seen in clinical trials being dizziness, headache and diarrhea. Of these side effects, incidence of dizziness with concurrent treatment is 5% as compared with 1% for treatment with donepezil alone.

The MDX-8704 solution

        We developed MDX-8704, a once-daily fixed-dose combination of Namenda XR and donepezil, to simplify the co-administration of these drugs by a patient or caregiver with the goal of increasing compliance and adherence to the prescribed regimen. Namenda XR exhibits a much lower initial rise in plasma concentration when compared to immediate-release memantine, which we believe is central to its dosing protocol of once-daily administration and at a higher daily dose as compared to immediate-release memantine. By improving the tolerability and formulating a once-daily preparation of memantine, we have enabled a once-daily fixed-dose combination of memantine with donepezil. In addition, MDX-8704 capsules can be opened to sprinkle the contents on apple sauce. Forest plans to make MDX-8704 available in two dose strengths, initially, a combination of 28 mg memantine ER and

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10 mg donepezil and a combination of 14 mg memantine ER and 10 mg donepezil. We believe that MDX-8704 has the potential to be adopted by patients already taking combination therapy as well as moderate to severe patients currently taking donepezil alone.

MDX-8704 development pathway

        Based on formal meetings with the FDA in October 2011 and June 2013, we believe that MDX-8704 can be approved using the shortened development pathway provided by Section 505(b)(2) of the FDCA. The FDA indicated that two additional clinical studies would be required for approval of MDX-8704, including a bioequivalence study and a food-effect/sprinkle study. These studies were conducted by our partner Forest and they demonstrated that MDX-8704 both is bioequivalent to separate doses of Namenda XR and donepezil, and exhibits the same bioavailability whether administered after fasting, after a meal or when sprinkled on apple sauce. Based on these studies, Forest submitted an NDA in February 2014 for MDX-8704 for the treatment of patients with moderate to severe Alzheimer's disease who are already being co-administered memantine, as either Namenda or Namenda XR, and 10 mg donepezil.

        Subject to MDX-8704 receiving this initial approval, Forest anticipates submitting a supplemental application to expand the indication for MDX-8704 to include patients who are on a stable dose of 10 mg donepezil and are ready to initiate treatment with MDX-8704. This supplemental application will include manufacturing information to support two additional MDX-8704 doses, a fixed-dose combination of 7 mg Namenda XR/10 mg donepezil and a fixed-dose combination of 21 mg Namenda XR/10 mg donepezil. These additional dose combinations will allow patients who are receiving a stable dose of 10 mg donepezil but are naïve to Namenda XR to initiate treatment with MDX-8704 while utilizing the same three-step titration that is currently approved for Namenda XR.

Intellectual property

        Our success will significantly depend upon our ability to obtain and maintain patent and other intellectual property and proprietary protection for our drug candidates, including usage, pharmacokinetic, composition-of-matter and formulation patents, as well as patent and other intellectual property and proprietary protection for our novel discoveries and other important technology inventions and know-how. In addition to patents, we rely upon unpatented trade secrets, know-how and continuing technological innovation to develop and maintain our competitive position.

        We seek to protect our proprietary information, in part, by using confidentiality agreements with our commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees and selected consultants. Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages. For more information, please see "Risk factors—Risks related to intellectual property."

        Our current products and product candidates are based on novel discoveries related to the clinical implications of the timing of administration of drugs and pharmacokinetic and pharmacodynamic relationships. These discoveries led us to modify the pharmacokinetic profile of existing drugs in a manner that enables increased tolerability of higher doses as compared to immediate-release versions. We are able to apply these pharmacokinetic and pharmacodynamic insights to the development of novel fixed-dose combination therapeutics, potentially yielding significant clinical benefits. As such, our intellectual property covers the novel pharmacokinetic properties of our formulations and combinations and their methods of use.

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        As of December 31, 2013, we owned 16 issued U.S. patents, seven U.S. patent applications and additional patents and patent applications in other jurisdictions. The patent portfolios for Namenda XR, MDX-8704/ADS-8704, and ADS-5102 as of December 31, 2013 are summarized below:

Namenda XR, MDX-8704 and ADS-8704

        Namenda XR and MDX-8704 are covered by a total of 13 of our issued U.S. patents containing method and compositions claims relating to their pharmacokinetic profile and method claims relating to dosing of memantine. These patents expire as late as 2029 and are exclusively licensed to Forest. We also own additional foreign patents and patent applications covering Namenda XR and ADS-8704.

ADS-5102

        ADS-5102 is currently covered by one issued U.S. method of use patent with claims relating to its pharmacokinetic profile which expires in 2027 and an additional five U.S. patent applications. These patents and patent applications are wholly owned by us and are not subject to any license agreements. We also own additional foreign patent applications covering ADS-5102.

Sales and marketing

        We intend to commercialize ADS-5102 in the United States, subject to FDA approval, by developing our own sales force and in other markets through distribution agreements and collaborations with CNS-focused pharmaceutical companies. We plan to focus our commercial efforts on the approximately 4,000 neurologists and movement disorder specialists who are responsible for the treatment of approximately 60% of the patients in the United States with LID. As these physician specialists are heavily concentrated in major urban markets, we believe a 30 to 60 member specialty sales force will provide adequate reach and frequency of communication for successful commercialization. We intend that the members of our specialty salesforce will have proven experience and be able to effectively communicate the clinical value and pharmacoeconomic advantage of ADS-5102. To complement the specialty sales force, we will recruit experienced sales management, medical marketing and reimbursement professionals to support our commercialization efforts. We believe a targeted sales force will allow us to more effectively compete for future acquisitions and in-licensing opportunities.

License agreement with Forest

        In November 2012, we entered in a license agreement with a wholly owned subsidiary of Forest. Subject to the terms of the license agreement, we granted Forest an exclusive license, with the right to sublicense, under the relevant elements of our intellectual property, to commercialize human therapeutics containing memantine in the United States; a co-exclusive license along with us, with the right to sublicense, to develop and manufacture such products in the United States; and a non-exclusive license, with a right to sublicense, to develop and manufacture (but not commercialize) such products outside of the United States solely in support of the development or commercialization of such products within the United States. The license agreement establishes a joint development committee consisting of representatives from us and Forest to oversee the development of a fixed-dose memantine-donepezil product, such as MDX-8704, in the United States with Forest having final decision making authority with certain restrictions. Forest is required to use commercially reasonable efforts to develop such a product in accordance with development and regulatory plans that we and Forest have mutually agreed upon that may be modified by the joint development committee or by Forest pursuant to the terms of the agreement. Forest is responsible for paying all costs associated with such development and reimburses us on a cost-plus basis for work performed by us at its request in support of the development. In addition, Forest is required at its expense to use commercially reasonable efforts to commercialize fixed-dose memantine-donepezil product in the United States.

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        In connection with the execution of the license agreement, Forest made a non-refundable, upfront payment to us of $65 million. In the fourth quarter of 2013, Forest made two payments to us of $20 million each relating to the satisfaction of certain development milestones. In addition, Forest is required to make aggregate milestone payments to us of up to $55 million upon the occurrence of certain regulatory milestones prior to and including the first FDA approval of a fixed-dose memantine-donepezil product covered by the license agreement. Commencing five years after the initial launch of a fixed-dose memantine-donepezil product in the United States, we are entitled to receive royalties at rates ranging from the low double digits to the mid-teens on the net sales by Forest, its affiliates and any sublicensees of such products in the United States. In addition, commencing in June of 2018, we are entitled to receive low to mid single digit royalties on net sales in the United States by Forest, its affiliates or any of its sublicensees of controlled-release versions of memantine, such as Namenda XR, or any other product covered by the terms of the license agreement. Forest's obligation to pay royalties with respect to fixed-dose memantine-donepezil products continues until the later of (i) 15 years after the commercial launch of the first fixed-dose memantine-donepezil product by Forest in the United States or (ii) the expiration of the Orange Book listed patents for which Forest obtained rights from us covering such product. Forest's obligations to pay royalties with respect to controlled-release versions of memantine or any other product covered by the agreement continue until the expiration of our Orange Book listed patents covering such product. Forest's obligations to pay royalties are subject to reduction in certain circumstances. In addition, Forest shall have no obligation to pay any royalty with respect to any product covered by the license agreement in any quarter in which there is significant competition from generic products, as defined in the agreement, in the United States. If we or our affiliates develop or commercialize the licensed products outside of the United States (other than in Japan) or otherwise enable a third party to do so, and such development or commercialization requires the use of or reference to certain data generated pursuant to the development plan, we will be obligated to make certain payments to Forest.

        The license agreement terminates on a product by product basis upon the expiration of all royalty obligations with respect to each product and terminates in its entirety upon the expiration of all royalty obligations with respect to all products covered by the license agreement. Upon expiration of the license agreement with respect to a product, all licenses and other rights granted to Forest by us with respect to that product become fully paid up and irrevocable. In addition, Forest may terminate the license agreement with respect to fixed-dose memantine-donepezil products by delivering to us notice of its intent to cease development and commercialization of such products.

        If Forest fails to make certain milestone payments to us by specified dates and within five business days after receiving notice from us of such failure again fails to make the required payment, then the license agreement automatically terminates with respect to fixed-dose memantine-donepezil products. Prior to Forest's payment of all of the milestones payments that may become due under the license agreement, we can seek to terminate the license agreement with respect to fixed-dose memantine-donepezil products in the event that Forest has materially breached its obligation to use commercially reasonable efforts to develop those products, subject to customary notice provisions. Otherwise, our remedy for any breach of the license agreement by Forest is to seek damages or equitable relief, not termination of the license agreement. Furthermore, we have no right to terminate the license agreement with respect to controlled-release version of memantine or other products that are not fixed-dose memantine-donepezil products.

Competition

        Our industry is highly competitive and subject to rapid and significant technological change. While we believe that our development experience and scientific knowledge provide us with competitive advantages, we may face competition from large pharmaceutical and biotechnology companies, smaller pharmaceutical and biotechnology companies, specialty pharmaceutical companies, generic drug companies, academic institutions, government agencies and research institutions and others.

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        Many of our competitors may have significantly greater financial, technical and human resources than we have. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop or market products or other novel technologies that are more effective, safer or less costly than any that will be commercialized by us, or obtain regulatory approval for their products more rapidly than we may obtain approval for ours. Our success will be based in part on our ability to identify, develop and manage a portfolio of drugs that are safer, more efficacious and/or more cost-effective than alternative therapies.

ADS-5102

        Currently there are no FDA or EMA drug therapies approved for the treatment of LID. While a number of major pharmaceutical companies, including Merck and Novartis, as well as smaller biopharmaceutical companies have had programs aimed at developing treatments for LID, we believe ADS-5102 is one of the most advanced. Other products in late stage development for Parkinson's disease, include candidates from Impax, Kyowa Hakko, Abbvie, Civitas and other companies. Products approved to treat late stage Parkinson's disease include Azilect (Teva), Requip XL (GlaxoSmithKline), Mirapex ER (Boehringer Ingelheim), Neupro Patch (UCB), Comtan (Novartis) and Stalevo (Novartis) and generic versions of amantadine and other drugs. Physicians may use these drugs to attempt to manage LID. In selective cases for late stage patients, physicians and patients/caregivers will consider neurosurgical intervention such as deep brain stimulation.

Namenda XR/MDX-8704

        In the market for Alzheimer's disease treatments, Namenda XR and MDX-8704 compete or will compete with generic products such as galatamine, rivastigmine and donepezil as well as branded products such as the Exelon patch (Novartis) and Aricept 23 mg (Eisai). In addition, Forest currently markets Namenda, the immediate-release version of memantine, which physicians and patients may favor instead of Namenda XR, the controlled-release version. In addition, generic versions of Namenda may be available in 2015. Several generic manufacturers are currently seeking regulatory approval to market generic versions of Namenda XR and, if MDX-8704 is approved, they may seek to market generic versions of MDX-8704. We are also aware that Lundbeck and other biopharmaceutical companies are developing treatments for Alzheimer's disease that may compete with Namenda XR and MDX-8704. In February 2014, Forest announced that, effective as of August 15, 2014, it would no longer supply immediate-release Namenda tablets, and that it will focus on Namenda XR and MDX-8704.

Third-party reimbursement

        Sales of pharmaceutical products depend in significant part on the availability of coverage and adequate reimbursement by third-party payors, such as state and federal governmental authorities, including those that administer the Medicare and Medicaid programs, managed care organizations and private insurers. Decisions regarding the extent of coverage and amount of reimbursement to be provided for Namenda XR, MDX-8704 and ADS-5102 are or will be made on a plan by plan basis. Each plan determines whether or not it will provide coverage for a drug, what amount it will pay the manufacturer for the drug, and on what tier of its formulary the drug will be placed. The position of a drug on the formulary generally determines the co-payment that a patient will need to make to obtain the drug and can strongly influence the adoption of a drug by patients and physicians. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Additionally, a third-party payor's decision to provide

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coverage for a drug does not imply that an adequate reimbursement rate will be approved. Also, third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. As a result, coverage, reimbursement and placement determinations are complex and are often the subject of extensive negotiations between the payor and the owner of the drug.

        Forest is responsible for obtaining coverage and negotiating reimbursement amounts and formulary placement for Namenda XR and MDX-8704. Under our agreement with Forest, we will be entitled to receive payments from Forest based on future net sales of these products. The amount of revenue we will receive under the agreement is therefore significantly dependent on the extent to which Forest is able to obtain favorable coverage, reimbursement and placement decisions from payors.

        We will be responsible for negotiating coverage, reimbursement and placement decisions for ADS-5102 if approved. Coverage, reimbursements and placement decisions for a new product are based on many factors including the coverage, reimbursement and placement of already marketed branded drugs for the same or similar indications, the safety and efficacy of the new product, availability of generics for similar indications, and the clinical need for the new product. Currently, there are no drugs approved for the treatment of LID, and generic amantadine is not approved for this indication.

        We have had preliminary discussions regarding the potential coverage, reimbursement and placement of ADS-5102 with consultants and representatives of payors, but have not begun formal negotiations with any payors. Based on these discussions, we believe that if ADS-5102 is approved as the first product indicated for the treatment of LID, most payors are likely to extend coverage to it and that its placement on payor formularies and the amount of reimbursement will be influenced by the aforementioned products, generic amantadine and generic and branded treatments for symptoms of Parkinson's disease. Within the Medicare program, as self-administered drugs, MDX-8704 and ADS-5102 would be, and Namenda XR is, reimbursed under the expanded prescription drug benefit, known as Medicare Part D. This program is a voluntary Medicare benefit administered by private plans that operate under contracts with the federal government. These Part D plans negotiate discounts with drug manufacturers, which are passed on to each of the plan's enrollees. Historically, Part D beneficiaries have been exposed to significant out-of-pocket costs after they surpass an annual coverage limit and until they reach a catastrophic coverage threshold. However, changes made by recent legislation will reduce this patient coverage gap, known as the "donut hole", by transitioning patient responsibility in that coverage range from 100% in 2010 to only 25% in 2020. To help achieve this reduction, beginning in 2011, pharmaceutical manufacturers are required to pay quarterly discounts of 50% off the negotiated price of branded drugs issued to Medicare Part D patients in the donut hole.

        If a drug product is reimbursed by Medicare or Medicaid, pricing and rebate programs must comply with, as applicable, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 as well as the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, or the OBRA, and the Veterans Health Care Act of 1992, or the VHCA, each as amended. Among other things, the OBRA requires drug manufacturers to pay rebates on prescription drugs to state Medicaid programs and empowers states to negotiate rebates on pharmaceutical prices, which may result in prices for our future products that will likely be lower than the prices we might otherwise obtain. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply.

        An ongoing trend has been for third-party payors, including the U.S. government, to apply downward pressure on the reimbursement of pharmaceutical products. Also, the trend towards managed health care in the United States and the concurrent growth of organizations such as health maintenance organizations may result in lower reimbursement for pharmaceutical products. We expect that these trends will continue as these payors implement various proposals or regulatory policies, including various provisions of the recent health reform legislation that affects reimbursement of these products. There are currently, and we expect that there will continue to be, a number of federal and state proposals to implement controls on reimbursement and pricing, directly and indirectly.

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Manufacturing

        We currently have no manufacturing facilities and limited personnel with manufacturing experience. We rely on third-party manufacturers to produce bulk drug substance and drug products required for our clinical trials of ADS-5102. We plan to continue to rely upon contract manufacturers and to manufacture commercial quantities of our ADS-5102 and other product candidates if and when we receive approval for marketing by the applicable regulatory authorities.

        Our current products and product candidates are based upon controlled-release coated pellet products that are quite difficult to manufacture. As shown below, these products consist of an inert core, a drug layer, an optional seal coating and controlled-release coatings. Our products are made in a fluidized bed coating machine in sequential steps. At each step, the intermediate product is assayed and released if it meets the particular specification for that step. Once the extended or controlled-release coating is applied, the assay includes a step to insure that the desired dissolution rate is achieved. These coatings are relatively thin, and susceptible to changes in raw materials, temperature, humidity and other manufacturing process parameters. We have invested significant time and money to understand and manipulate drug release, and will continue to do so.

GRAPHIC

        Forest is responsible for all manufacturing related to Namenda XR and MDX-8704. We have clinical supplies of ADS-5102 manufactured for us by a contract manufacturing organization under a development agreement and do not have a long-term contract in place. We are currently seeking to qualify an additional manufacturer to include in our anticipated NDA for ADS-5102. Contract manufacturers often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Qualifying manufacturers and providers of packaging services is a lengthy process; if at any time, one or more of our qualified contract organizations were not able to manufacture our drug substance or provide the requisite services, our business and financial condition would be materially adversely affected.

        Our third-party manufacturers, their facilities and all lots of drug substance and drug products used in our clinical trials are required to be in compliance with current Good Manufacturing Practices, or cGMP. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP requirements and FDA satisfaction before any product is approved and we can manufacture commercial products. Our third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations.

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Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including warning letters, the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations and civil and criminal penalties. These actions could have a material impact on the availability of our products.

Government regulation

        The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, recordkeeping, tracking, approval, import, export, advertising and promotion of our products.

        The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

    nonclinical laboratory and animal tests including some that must be conducted in accordance with Good Laboratory Practices;

    submission of an IND, which must become effective before clinical trials may begin;

    adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug candidate for its intended use;

    pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with Good Manufacturing Practices, or cGMP, and Good Clinical Practices; and

    FDA approval of an NDA to permit commercial marketing for particular indications for use.

        The testing and approval process requires substantial time, effort and financial resources. Prior to commencing the first clinical trial with a product candidate, we must submit an IND to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development. Further, an independent institutional review board for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial commences at that center. Regulatory authorities or an institutional review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Some studies also include a data safety monitoring board, which receives special access to unblinded data during the clinical trial and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

        In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

    Phase 1 —Studies are initially conducted to test the product candidate for safety, dosage tolerance, absorption, metabolism, distribution and excretion in healthy volunteers or patients.

    Phase 2 —Studies are conducted with groups of patients with a specified disease or condition to provide enough data to evaluate the preliminary efficacy, optimal dosages and dosing schedule and expanded evidence of safety. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

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    Phase 3 —These clinical trials are undertaken in larger patient populations to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety in an expanded patient population at multiple clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. These trials may be done globally to support global registrations.

        Our product development strategy relies on using Phase 2/3 studies as a central element of our clinical development plans. Typically these studies involve the testing of two or more doses of a product candidate, as is characteristic of a Phase 2 study, and also include a sufficient number of patients so that statistically significant evidence of efficacy can be obtained, as is characteristic of a Phase 3 study. In addition, we conduct the studies in a manner that we believe is consistent with the requirements for a Phase 3 study. We believe this approach has the potential to significantly shorten the time frame required for clinical development. The FDA generally requires that sponsors successfully complete two Phase 3 studies to obtain approval for a new drug though in certain circumstances a single Phase 3 study is sufficient. We design and conduct our Phase 2/3 studies in a manner that is intended to allow the study to qualify as a Phase 3 study for the purposes of approval. The FDA has broad discretion in determining whether or not a completed Phase 2/3 study will be considered the equivalent of a Phase 3 study for the purposes of approval, and there can be no assurance that the FDA will agree with our assessment that the design, conduct and results of a Phase 2/3 study are such that the study should be treated as a Phase 3 study.

        The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information.

        Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

ANDA approval process

        The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, established abbreviated FDA approval procedures for drugs that are shown to be equivalent to proprietary drugs previously approved by the FDA through its NDA process. Approval to market and distribute these drugs is obtained by filing an abbreviated NDA, or ANDA, with the FDA. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, a generic applicant must demonstrate that its product is bioequivalent to the innovator drug. In certain situations, an applicant may obtain ANDA approval of a generic product with a strength or dosage form that differs from a referenced innovator drug pursuant to the filing and approval of an ANDA suitability petition. The FDA will approve the generic product as suitable for an ANDA application if it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if the FDA determines that it is not equivalent to the referenced innovator drug, if it is intended for a different use, or if it is not

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subject to an approved suitability petition. However, such a product might be approved under an NDA, with supportive data from clinical trials.

505(b)(2) approval process

        Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to FDA approval for new or improved formulations or new uses of previously approved drug products. Specifically, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely upon the FDA's findings of safety and effectiveness for an approved product that acts as the Reference Listed Drug, or RLD. The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support the change from the RLD. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

        Our current and anticipated product candidates based upon ADS-5102 are or will be based on already approved active pharmaceutical ingredients, or APIs, rather than new chemical entities, and a formulation that has been through Phase 1 studies. Accordingly, we expect to be able to rely on information from previously conducted studies involving our ADS-5102 formulation in our clinical development plans and our NDA submissions. For product candidates that involve novel fixed-dose combinations of existing drugs or for studies of an existing product or product candidate in a new indication, we expect that we will generally be able to initiate Phase 2/3 studies without conducting any new non-clinical or Phase 1 studies. In those instances where our product candidate is a pharmacokinetically enhanced version of an approved API, we will need to conduct certain non-clinical and Phase 1 studies to confirm the pharmacokinetic profile of the product candidate prior to conducting Phase 2/3 studies.

Orange Book listing

        In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant's product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with Therapeutic Equivalence Evaluations , also known as the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a Paragraph IV certification. If the competitor has provided a Paragraph IV certification to the FDA, the competitor must also send notice of the Paragraph IV certification to the holder of the NDA for the RLD and the patent owner once the application has been accepted for filing by the FDA. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the FDA from approving the application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant. The applicant may also elect to submit a "Section VIII" statement certifying that its proposed label does not contain, or carves out, any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. We and Forest have received notices of ANDAs submitted to the FDA requesting permission to manufacture and market

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generic versions of Namenda XR, and we and Forest are currently in litigation with the notifying parties. For further information, see "—Legal proceedings."

NDA submission and review by the FDA

        The results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. The FDA may convene an advisory committee to provide clinical insight on application review questions. The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Once the NDA submission has been accepted for filing, which occurs, if at all, within 60 days after submission of the NDA, the FDA typically takes ten months to review the application and respond to the applicant, which can take the form of either a Complete Response Letter or Approval. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product. FDA approval of any NDA submitted by us will be at a time the FDA chooses. Also, if regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be marketed. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require Phase 4 post-marketing studies to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post-marketing studies.

Post-approval requirements

        Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences. Drug and biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the NDA.

        The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer's communications on the subject of off-label use.

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        Moreover, the recently enacted Drug Supply Chain Security Act imposes new obligations on manufacturers of pharmaceutical products related to product and tracking and tracing. Among the requirements of this new legislation, manufacturers will be required to provide certain information regarding the drug products to individuals and entities to which product ownership is transferred, label drug product with a product identifier, and keep certain records regarding the drug product. The transfer of information to subsequent product owners by manufacturers will eventually be required to be done electronically. Manufacturers will also be required to verify that purchasers of the manufacturers' products are appropriately licensed. Further, under this new legislation, manufactures will have drug product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

Other healthcare regulations

        Our business activities, including but not limited to, research, sales, promotion, distribution, medical education and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, the Department of Health and Human Services and its various divisions, including the Centers for Medicare and Medicaid Services, and state and local governments. Our business activities must comply with numerous healthcare laws, including but not limited to, the federal Anti-Kickback Statute, the False Claims Act, the Veterans Health Care Act and similar state laws.

        The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and wilfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

        The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.

        We, and our business activities, are subject to the civil monetary penalties statute which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

        Additionally, the federal Physician Payments Sunshine Act within the Patient Protection and Affordable Care Act, or PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians and teaching

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hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.

        In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA's privacy and security standards directly applicable to business associates—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

        The Veterans Health Care Act of 1992 requires manufacturers of "covered drugs" to offer those drugs for sale to certain federal agencies, including but not limited to, the Department of Veterans Affairs, on the Federal Supply Schedule, which requires compliance with applicable federal procurement laws.

        Depending on the circumstances, failure to comply with these laws can result in penalties, including criminal, civil and/or administrative criminal penalties, damages, fines, disgorgement, exclusion of products from reimbursement under government programs, "qui tam" actions brought by individual whistleblowers in the name of the government, refusal to allow us to enter into supply contracts, including government contracts, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could adversely affect our business.

        The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

        For example, in March 2010, the PPACA was passed, which has the potential to substantially change health care financing by both governmental and private insurers, and to significantly impact the U.S. pharmaceutical industry. The PPACA, among other things, revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government's comparative effectiveness research.

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The Foreign Corrupt Practices Act

        The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Federal laws providing for patent term extensions and data exclusivity

        Provisions of various federal laws may allow a company to extend market exclusivity for a product beyond the expiration dates of the patents covering the product by either extending the term of the patents or limiting the right of a competitor to reference the company's data in a regulatory submission. These laws include the Hatch-Waxman Act and the Best Pharmaceuticals for Children Act of 2002. We do not anticipate materially benefiting from these provisions.

Foreign regulation

        In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Employees

        As of December 31, 2013, we had 22 full-time employees. Of these employees, 12 are engaged in research and development. Our employees are not represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Facilities

        We lease approximately 7,700 square feet of office space in Emeryville, California under a lease that expires in February 2016. We believe that our existing facilities and other available properties will be sufficient for our needs for the foreseeable future.

Legal proceedings

        In December 2013 and January 2014, we received notice that eight companies had submitted ANDAs to the FDA requesting permission to manufacture and market generic versions of Namenda XR, on which we are entitled to receive royalties from Forest beginning in June 2018. In the notices, these companies allege that the patents associated with Namenda XR, some of which are owned by Forest and others of which are owned by us and licensed by us exclusively to Forest in the United States, are invalid, unenforceable or will not be infringed by the companies' manufacture, use or sale of generic versions of Namenda XR. In January and February 2014, we, Merz Pharma GmbH & Co. KGaA and Forest filed lawsuits in the U.S. District Court for the District of Delaware against these companies for infringement of the relevant patents. We and Forest are seeking judgment that (i) the defendants have infringed the patents at issue, (ii) that the effective date of any approval of the defendants' ANDAs shall not be earlier than the expiration date of the last to expire of the relevant patents, including any extensions or exclusivities, (iii) that the defendants be enjoined from

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commercially manufacturing, using, offering for sale, or selling in the United States, or importing into the United States any products that infringe or induce or contribute to the infringement of the patents at issue prior to the expiration date of the last to expire of the patents, including extensions and exclusivities, and (iv) that we and Forest be awarded monetary relief, in addition to any attorney's fees, costs and expenses relating to the actions. Because these lawsuits were filed within the requisite 45-day period provided in the FDCA, there are stays preventing FDA approval of the ANDAs for 30 months or until a court decision adverse to the patents. The 30-month stay for these ANDAs will begin to expire in June 2016.

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MANAGEMENT

Executive officers and directors

        The following table sets forth information regarding our executive officers and directors as of December 31, 2013:

Name
  Age   Position

Gregory Went, Ph.D. 

  50   Co-Founder, Chief Executive Officer and Chairman of the board of directors

Anthony Rimac

  50   Chief Financial Officer

Natalie McClure, Ph.D. 

  61   Senior Vice President, Product Development

Michael Coffee

  67   Senior Vice President, Strategy & Planning

Jeffrey Knapp(8)

  48   Chief Commercial Officer

Richard Booth(1)(5)

  66   Director

Martha Demski(2)(6)

  61   Director

William Ericson(1)(3)

  55   Director

Sara Grootwassink Lewis(2)(3)(7)

  46   Director

Ivan Lieberburg, M.D., Ph.D. 

  64   Director

John MacPhee, MPH(2)

  46   Director

David Mahoney(1)(3)

  59   Director

George Rehm(4)

  65   Director

(1)
Member of the compensation committee

(2)
Member of the audit committee

(3)
Member of the nominating and corporate governance committee

(4)
Mr. Rehm will be resigning from our board of directors prior to the effectiveness of this offering.

(5)
Mr. Booth was elected to our board of directors on January 28, 2014.

(6)
Ms. Demski was elected to our board of directors on March 4, 2014.

(7)
Ms. Grootwassink Lewis was elected to our board of directors on March 4, 2014.

(8)
Mr. Knapp joined us on February 24, 2014 as our Chief Commercial Officer.

        Gregory Went, Ph.D.     Dr. Went has served as our Chief Executive Officer and Chairman of our board of directors since our inception in 2000. Previously, Dr. Went co-founded CuraGen Corporation in 1992, where he served as an Executive Vice President and Director from 1996 to 1999. Dr. Went also has served as a Director of Angelica Therapeutics, Inc., a biotechnology company, since 2006. Dr. Went holds a Ph.D. in Chemical Engineering from the University of California, Berkeley and a B.S. in Chemical Engineering from Carnegie Mellon University. We believe Dr. Went's extensive knowledge of our company, the pharmaceutical industry and our competitors qualifies him to serve on our board of directors.

        Anthony Rimac.     Mr. Rimac has served as our Chief Financial Officer since July 2011. From 2005 to 2011, Mr. Rimac served as Chief Financial Officer of Aerovance, Inc., a biopharmaceutical company. From 2001 to 2005, Mr. Rimac served as Vice President—Finance at Artemis Medical, Inc., a medical device company that was sold to Johnson & Johnson in 2004. Mr. Rimac holds a B.A. in Business Economics from the University of California, Santa Barbara, and an M.B.A. from Santa Clara University.

        Natalie McClure, Ph.D.     Dr. McClure has served as our Senior Vice President, Product Development since 2013 and served as our Vice President, Regulatory Affairs from 2009 to 2013. From 2008 through February 2011, Dr. McClure served as a consultant for DevRx Consulting, which

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specializes in pharmaceutical development consulting. From 2005 to 2008, Dr. McClure served as VP, Regulatory Affairs of Cerimon Pharmaceuticals, Inc., a biopharmaceutical company. Dr. McClure holds a Ph.D. in Organic Chemistry from Stanford University and a B.S. in Chemistry from the University of Michigan.

        Michael Coffee.     Mr. Coffee has served as our Senior Vice President, Strategy & Planning since November 2013 and served as our Senior Vice President Sales & Marketing from May 2009 to February 2010. From June 2010 to July 2013, Mr. Coffee served as Chief Business Officer of MediciNova, Inc., a pharmaceutical company. From February 2005 to March 2009, Mr. Coffee served as the Chief Business Officer of Avigen, Inc., a pharmaceutical company. Mr. Coffee holds a B.S. in Biology and Chemistry from Siena College and is a graduate of the advanced management program at Amos Tuck School of Business.

        Jeffrey H. Knapp.     Mr. Knapp has served as our Chief Commercial Officer since February 2014. From July 2006 to March 2013, Mr. Knapp served as Chief Commercial Officer of Affymax, Inc., a biopharmaceutical company. From November 2005 to April 2006, Mr. Knapp served as Senior Vice President, Sales and Marketing at Abgenix, Inc., a biopharmaceutical company. From October 2004 to July 2005, Mr. Knapp served as Vice President, Sales and Marketing, North America at Pharmion Corporation, a pharmaceutical company. From November 2001 to October 2004, Mr. Knapp served as Vice President, U.S. sales and marketing at EMD Pharmaceuticals, a division of Merck KGaA, a pharmaceutical company. He has also held sales, marketing and business development positions at Eli Lilly and Company and Schering-Plough Corporation, both pharmaceutical companies. Mr. Knapp holds a B.A. from Wittenberg University.

        Richard Booth.     Mr. Booth has served as a member of our board of directors since January 2014. Mr. Booth serves on the board of directors of The Hanover Insurance Group, Inc., a property and casualty insurance company, and Sun Life Financial Inc., an insurance and financial services company. He is also a trustee of Northeast Utilities, a utility company, and serves on the boards of directors of several privately-held organizations. Since July 2009, Mr. Booth has served as the Vice Chairman of Guy Carpenter & Company, LLC, a global risk management and reinsurance specialist and a wholly owned subsidiary of Marsh & McLennan Companies, Inc. From June 2008 to March 2009, Mr. Booth served as a corporate officer, and from October 2008 to March 2009, as Vice Chairman, Transition Planning and Chief Administrative Officer, of American International Group, Inc., an insurance and financial services company. From 2000 to 2009, Mr. Booth served as Chairman of HSB Group, Inc., a specialty insurer and reinsurer, also serving as its President and Chief Executive Officer from 2000 to 2007. Mr. Booth is a senior adviser to Century Capital Management. From 2004 to 2008, Mr. Booth was a member of the Financial Accounting Standards Advisory Council. Mr. Booth is a member of the American Institute of Certified Public Accountants. Mr. Booth received B.S. and M.S. degrees from the University of Hartford. We believe Mr. Booth's extensive experience in business and management, including, in particular, strategic planning, capital and financial markets, accounting and financial reporting, qualifies him to serve on our board of directors.

        Martha Demski.     Ms. Demski has served as a member of our board of directors since March 2014. Since April 2013, Ms. Demski has served as Senior Vice President, Chief Financial Officer and Corporate Secretary of Ajinomoto Althea, Inc., a fully-integrated contract development and manufacturing organization. From August 2011 to April 2013, Ms. Demski served as Senior Vice President and Chief Financial Officer of Althea Technologies, Inc. From July 2008 to December 2010, Ms. Demski served as the Interim Chief Operating Officer and Chief Financial Officer of the Sidney Kimmel Cancer Center (SKCC), a non-profit corporation engaged in biomedical research, which voluntarily filed for Chapter 11 bankruptcy in 2009. From April 2006 to May 2008, Ms. Demski served as Senior Vice President of U.S. Trust. Ms. Demski currently serves as a member of the board of directors of Chimerix, Inc., a publicly traded biopharmaceutical company, where she serves as chair of

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the audit committee. From 2005 to July 2008, Ms. Demski served on the Board of Trustees at SKCC, as well as Chair of the Audit Committee and Chair of the Governance and Nominating Committee. From December 1988 to June 2004, Ms. Demski served as Vice President, Chief Financial Officer, Treasurer and Secretary of Vical Incorporated, a publicly traded biopharmaceutical company. Ms. Demski holds a B.A. from Michigan State University and M.B.A. from The University of Chicago Booth School of Business. We believe that Ms. Demski's more than 30 years' experience in the fields of finance and biotechnology as well her experience as a chief financial officer of a publicly traded company and her experience in conducting financing transactions qualifies her to serve on our board of directors.

        William Ericson.     Mr. Ericson has served as a member of our board of directors since 2005. Mr. Ericson has been a General Partner at Mohr Davidow Ventures LP, or MDV, a venture capital firm, since 2000, and has served as Managing Partner since 2008. Prior to joining MDV, Mr. Ericson founded and operated Venture Law Group LLP's Seattle office from 1996 to 2000. Mr. Ericson currently serves as a member of the board of directors of Pacific Biosciences of California, Inc., a publicly traded gene sequencing company, Northwestern University School of Law and a number of MDV's privately held portfolio companies. Mr. Ericson holds a B.S.F.S. from the School of Foreign Service at Georgetown University and a J.D. from Northwestern University School of Law. We believe Mr. Ericson's experience with companies in the life sciences industry qualifies him to serve on our board of directors.

        Sara Grootwassink Lewis.     Ms. Grootwassink Lewis has served as a member of our board of directors since March 2014. She is a private investor and Chief Executive Officer of Lewis Corporate Advisors, LLC, a capital markets and board advisory firm. From May 2002 to February 2009, Ms. Grootwassink Lewis served as the Chief Financial Officer of Washington Real Estate Investment Trust, and from December 2001 to May 2002 she served as Managing Director, Finance and Capital Markets. Ms. Grootwassink Lewis currently serves as a member of the board of directors of CapitalSource Inc., a publicly traded commercial finance company, where she serves as the chairman of the audit committee, chairman of the nominating and corporate governance committee and a member of the compensation committee. Ms. Grootwassink Lewis currently serves on the board of directors and serves as the chairman of the audit committee and serves on the nominating/corporate governance committee of PS Business Parks, Inc., a publicly traded owner, operator and developer of commercial properties. Ms. Grootwassink Lewis currently serves as a member of the board of directors and on the audit committee of Plum Creek Timber Company, Inc., a publicly traded company and one of the largest landowners in the nation. Ms. Grootwassink Lewis holds a B.S. in Finance from the University of Illinois, Urbana-Champaign. We believe that Ms. Grootwassink Lewis' experience as a Chief Financial Officer of a publicly traded company, qualification as a chartered financial analyst, extensive experience in corporate finance and strong strategic planning and accounting skills qualifies her to serve on our board of directors.

        Ivan Lieberburg, M.D., Ph.D.     Dr. Lieberburg has served as a member of our board of directors since 2004. Dr. Lieberburg has been a member of the Tavistock Group, a private equity firm, since 2009 where he concentrates on health care and life sciences investment opportunities. From 1987 to 2009, Dr. Lieberburg was employed by Elan Pharmaceuticals, Inc. (formerly Athena Neurosciences, Inc.) where his most recent roles were as Executive Vice President, Corporate Office of Technology and Chief Medical Officer. Dr. Lieberburg holds an A.B. in Biology from Cornell University, a Ph.D. in Neurobiology from The Rockefeller University and an M.D. from the University of Miami Leonard M. Miller School of Medicine. Dr. Lieberburg is board certified in internal medicine and endocrinology/metabolism. We believe Dr. Lieberburg's executive experience in the life sciences industry and his medical training qualifies him to serve on our board of directors.

        John MacPhee, MPH.     Mr. MacPhee has served as a member of our board of directors since May 2013 and provided consulting services to us from March 2011 to May 2013. Since 2011, Mr. MacPhee

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has served as the Executive Director and CEO of The Jed Foundation, a non-profit organization. From 2005 to 2011, Mr. MacPhee served as Executive Vice President of Par Pharmaceutical, Inc. and President of Par's Strativa Pharmaceuticals division, where he oversaw commercial operations, clinical development, medical affairs, alliance management and business development. Previously, Mr. MacPhee worked at Forest Laboratories, Inc., where he led the launches of Celexa, Lexapro and Namenda. Mr. MacPhee also serves as a board member for Bottom Line, a nonprofit organization. Mr. MacPhee holds a B.A. from Columbia College, an M.B.A. from New York University and an MPH from Columbia University. We believe Mr. MacPhee's extensive experience building successful specialty pharmaceutical companies and commercializing drug products qualifies him to serve on our board of directors.

        David Mahoney.     Mr. Mahoney has served as a member of our board of directors since 2009. Mr. Mahoney has served on the board of directors of Symantec Corporation, a publicly-traded software technology company since 2003, including as a member of the Compensation and Nominating and Governance Committees. Mr. Mahoney also served as a member of the Audit Committee of Symantec from 2003 to 2011. Mr. Mahoney has served on the board of directors of Corcept Therapeutics Incorporated, a pharmaceutical company, since 2011. He also serves on the boards of directors of several privately-held organizations including San Francisco Museum of Modern Art and Mercy Corps and is a Trustee of the Schwab/Landis Family of Funds. Mr. Mahoney also serves on the board of directors of Northern California Public Broadcasting, Inc., a non-profit public television and radio operator. From 1999 to 2001, Mr. Mahoney served as co-CEO of McKesson HBOC, Inc., a healthcare supply management and information technology company and as CEO of McKesson LLC, a healthcare management and connectivity company. He joined McKesson Corporation in 1990 as Vice President for Strategic Planning. Prior to joining McKesson, Mr. Mahoney was a principal with McKinsey & Company, a management consulting firm, where he worked from 1981 to 1990. Mr. Mahoney holds a B.A. from Princeton University and an M.B.A. from Harvard University. We believe Mr. Mahoney's extensive experience in pharmaceutical distribution, fiscal management and in operating and advising technology companies qualifies him to serve on our board of directors.

        George Rehm.     Mr. Rehm has served as a member of our board of directors since 2008. Mr. Rehm has served as Managing Partner of aeris CAPITAL AG in Switzerland since 2006 where he holds board seats in numerous portfolio companies. Mr. Rehm remains of counsel to the Munich, Heidelberg and Berlin law firm of Weitnauer Partners. Mr. Rehm holds a B.S.F.S. from Georgetown University and a J.D. from the University of California, Hastings College of Law. We believe Mr. Rehm's extensive experience in fiscal management and in operating and advising in the IT, semiconductor, health care and medical device industries qualifies him to serve on our board of directors.

        Each of our executive officers serves at the discretion of our board of directors and holds office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

Board composition

        Our business and affairs are managed under the direction of our board of directors, which currently consists of 9 members. The members of our board of directors were elected in compliance with the provisions of our amended and restated certificate of incorporation, as amended, and a voting agreement among certain of our stockholders, as amended. The voting agreement will terminate upon the closing of this offering and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.

        Our board of directors will consist of 8 members upon the closing of this offering. In accordance with our amended and restated certificate of incorporation to be filed in connection with this offering, immediately after this offering, our board of directors will be divided into three classes with staggered

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three-year terms. At each annual general meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:

    The Class I directors will be William Ericson, Martha Demski and Ivan Lieberburg, and their terms will expire at our annual meeting of stockholders to be held in 2015;

    The Class II directors will be Gregory Went, Sara Grootwassink Lewis and Richard Booth, and their terms will expire at our annual meeting of stockholders to be held in 2016; and

    The Class III directors will be David Mahoney and John MacPhee, and their terms will expire at our annual meeting of stockholders to be held in 2017.

        We expect that additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Director independence

        Under the listing requirements and rules of The NASDAQ Global Market, independent directors must comprise a majority of a listed company's board of directors within a specified period of time after this offering.

        Our board of directors has undertaken a review of its composition, the composition of its committees, and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment, and affiliations, including family relationships, our board of directors has determined that all of our board of directors except Dr. Went do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the applicable rules and regulations of the Securities and Exchange Commission, or the SEC, and the listing requirements and rules of The NASDAQ Global Market. In making this determination, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Board leadership structure

        Our board of directors is currently led by a combined chairman of the board and chief executive officer. Our board of directors believes that this leadership structure is the most effective for us at this time. Because our chief executive officer is closest to the many facets of our business, our board of directors believes that the chief executive officer is in the best position to lead our board of directors most effectively and, accordingly, to serve in the critical role of chairman of the board. In addition, as the chief executive officer is directly involved in managing the company, having a chairman who also serves as chief executive officer facilitates timely communication with the board on critical business matters. Furthermore, we believe that this combined leadership structure is appropriate for our company because (i) our chairman and chief executive officer conveys a singular, cohesive message to our stockholders, employees, industry partners and the investment community and (ii) this structure eliminates any ambiguity as to who is accountable for the company's performance. Our directors and management team engage frequently and directly in the flow of information and ideas and we believe our combined leadership structure facilitates the quality, quantity and timeliness of the information flow and communication. Our board of directors believes that there is a well-functioning and effective balance between strong company leadership and oversight by active, independent directors.

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Lead independent director

        Our board of directors has appointed Mr. Mahoney to serve as our lead independent director. As lead independent director, Mr. Mahoney presides over periodic meetings of our independent directors, serves as a liaison between our Chairman and the independent directors and performs such additional duties as our board of directors may otherwise determine and delegate.

Board committees

        Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit committee

        Our audit committee consists of Ms. Demski, Ms. Grootwassink Lewis and Mr. MacPhee. Our board of directors has determined that Ms. Demski, Ms. Grootwassink Lewis and Mr. MacPhee are independent under the NASDAQ listing standards and Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended, or Exchange Act. The chair of our audit committee is Ms. Demski. Our board of directors has determined that each of Ms. Demski and Ms. Grootwassink Lewis is an "audit committee financial expert" within the meaning of the SEC regulations. Our board of directors has also determined that each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, the board of directors has examined each audit committee member's scope of experience and the nature of their employment in the corporate finance sector. The functions of this committee include:

    selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

    helping to ensure the independence and performance of the independent registered public accounting firm;

    discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;

    developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

    reviewing our policies on risk assessment and risk management;

    reviewing related party transactions;

    obtaining and reviewing a report by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and

    approving (or, as permitted, pre-approving) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm.

Compensation committee

        Our compensation committee consists of Mr. Mahoney, Mr. Ericson and Mr. Booth. Our board of directors has determined that each of Mr. Mahoney, Mr. Ericson and Mr. Booth is independent under

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the NASDAQ listing standards, is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act and is an "outside director" as that term is defined in Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, or Section 162(m). The chair of our compensation committee is Mr. Booth. The functions of this committee include:

    reviewing and approving, or recommending that our board of directors approve, the compensation of our executive officers;

    reviewing and recommending, at least every two years and after consultation with our nominating and corporate governance committee, to our board of directors the compensation of our directors;

    reviewing and approving, or recommending that our board of directors approve, the terms of compensatory arrangements with our executive officers;

    administering our stock and equity incentive plans;

    selecting independent compensation consultants and assessing conflict of interest compensation advisers;

    reviewing with our chief executive officer the plans for succession of our executive officers and to make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed such positions.

    reviewing and approving, or recommending that our board of directors approve, incentive compensation and equity plans; and

    reviewing and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy.

Nominating and corporate governance committee

        Our nominating and corporate governance committee consists of Mr. Mahoney, Mr. Ericson and Ms. Grootwassink Lewis. Our board of directors has determined that each of Mr. Mahoney, Mr. Ericson and Ms. Grootwassink Lewis are independent under the NASDAQ listing standards. The chair of our nominating and corporate governance committee is Mr. Mahoney. The functions of this committee include:

    identifying, evaluating and selecting, or recommending that our board of directors approve, nominees for election to our board of directors and its committees;

    evaluating the performance of our board of directors and of individual directors;

    considering and making recommendations to our board of directors regarding the composition of our board of directors and its committees;

    reviewing developments in corporate governance practices;

    evaluating the adequacy of our corporate governance practices and reporting;

    reviewing management succession plans;

    developing and making recommendations to our board of directors regarding corporate governance guidelines and matters and a code of business conduct and ethics; and

    overseeing an annual evaluation of the board of directors' performance.

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Role of the board in risk oversight

        The audit committee of the board of directors is primarily responsible for overseeing our risk management processes on behalf of the board of directors. Going forward, we expect that the audit committee will receive reports from management at least quarterly regarding our assessment of risks. In addition, the audit committee reports regularly to the board of directors, which also considers our risk profile. The audit committee and the board of directors focus on the most significant risks we face and our general risk management strategies. While the board of directors oversees our risk management, management is responsible for day-to-day risk management processes. Our board of directors expects management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies adopted by the audit committee and the board of directors. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our board of directors leadership structure, which also emphasizes the independence of the board of directors in its oversight of its business and affairs, supports this approach.

Code of business conduct and ethics

        Effective upon the closing of this offering, we have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Following the closing of this offering, the code of business conduct and ethics will be available on our website at www.adamaspharma.com . We intend to disclose any amendments to the code, or any waivers of its requirements, on our website to the extent required by the applicable rules and exchange requirements. The inclusion of our website address in this prospectus does not incorporate by reference the information on or accessible through our website into this prospectus.

Compensation committee interlocks and insider participation

        None of the members of our compensation committee has ever been an officer or employee of the company. None of our executive officers serve, or have served during the last fiscal year, as a member of the board of directors, compensation committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our compensation committee.

Director compensation

        We currently provide cash compensation to certain of our non-employee directors. We have a policy of reimbursing our directors for their reasonable out-of-pocket expenses in connection with attending board of directors and committee meetings. From time to time, we have granted stock options to certain of our non-employee directors as compensation for their services. In addition, Mr. MacPhee and Mr. Mahoney are paid $24,000 per year for their service on our board of directors and Dr. Lieberburg is paid $6,000 per year for his service on our board of directors. Mr. Went, who is also an employee, is compensated for his service as an employee and does not receive any additional compensation for his service on our board of directors.

        The following table sets forth information regarding compensation earned by our non-employee directors during the fiscal year ended December 31, 2013. Mr. Booth, Ms. Demski and

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Ms. Grootwassink Lewis did not serve on our board of directors in 2013 and are therefore not included in the table below.

Name
  Cash
Compensation ($)
  Option
Awards ($)(1)
  All Other
Compensation ($)
  Total ($)  

William Ericson

                 

Ivan Lieberburg, M.D., Ph.D. 

    6,000             6,000  

George Rehm

                 

David Mahoney

    24,000             24,000  

John MacPhee, MPH

    14,571     79,320     15,694 (2)   109,585  

(1)
The amounts in this column reflect the aggregate grant date fair value of each option award granted during the fiscal year, computed in accordance with FASB ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 12 to our financial statements included in this prospectus. The table below lists the aggregate number of shares and additional information with respect to the outstanding option awards held by each of our non-employee directors.

(2)
Represents cash compensation paid to Mr. MacPhee for consulting services from January 2013 to May 2013.

Name
  Date of
Grant
  Number of
Shares
Underlying
Option
  Exercise
Price
  Option
Expiration
Date
 

William Ericson

                 

Ivan Lieberburg, M.D., Ph.D. 

                 

George Rehm

                 

David Mahoney

                 

John MacPhee, MPH

    12/13/2013     12,000   $ 6.61     12/12/2023  

Compensation policy for non-employee directors

        Our board of directors has adopted a compensation policy for our non-employee directors, to be effective upon the closing of this offering. Under this policy, each of our non-employee directors will be paid $30,000 as an annual cash retainer, and our lead independent director will receive an additional annual cash payment of $15,000. Annual fees will also be paid to our directors who chair our board committees and to committee members, as follows:

Committee
  Annual Chair Fee   Annual Member Fee  

Audit Committee

  $ 15,000   $ 7,500  
           

Compensation Committee

  $ 10,000   $ 5,000  
           

Nominating and Governance Committee

  $ 7,000   $ 3,500  
           

        Our non-employee directors will also receive an initial equity award upon commencement of service as a board member; thereafter, each non-employee director will receive an annual equity retainer. Currently, the form of award in each case will be a non-qualified stock option. The initial award will be an option to purchase 15,000 shares of our common stock that will vest annually over three years of service. Each subsequent annual award will be an option to purchase 7,500 shares of our common stock that will vest after one year of service. Additionally, upon the closing of a change of control, the vesting of all outstanding equity awards held by our non-employee directors will accelerate in full.

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EXECUTIVE COMPENSATION

Summary compensation table

        The following table provides information regarding the compensation of our principal executive officer and each of our two other most highly compensated executive officers during the fiscal year ended December 31, 2013. We refer to these executive officers in this prospectus as our named executive officers.

Name and Principal Position
  Year   Salary
($)
  Bonus
($)
  Option
Awards
($)(1)
  All Other
Compensation
($)(2)
  Total
($)
 

Gregory Went, Ph.D.
Chief Executive Officer

    2013     400,000     328,000             728,000  

Anthony Rimac
Chief Financial Officer

   
2013
   
275,000
   
147,906
   
   
965
   
423,871
 

Natalie McClure, Ph.D.
Senior Vice President, Product Development

   
2013
   
325,000
   
236,453
   
410,250
   
15
   
971,718
 

(1)
The amounts in this column reflect the aggregate grant date fair value of each option award granted during the fiscal year, computed in accordance with ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 12 to our financial statements included in this prospectus.

(2)
The amounts in this column reflect the net premiums we paid on behalf of the employee for life insurance, short-term and long-term disability insurance.

Outstanding equity awards at fiscal year-end

        The following table provides information regarding outstanding equity awards held by our named executive officers as of December 31, 2013.

 
  Option Awards  
 
  Number of Securities
Underlying Unexercised
Options(1)
   
   
 
 
  Option
Exercise
Price
  Option
Expiration
Date
 
Name
  Exercisable   Unexercisable  

Gregory Went, Ph.D. 

    125,000 (2)     $ 3.75     9/11/2016  

    125,000 (3)     $ 1.33     11/15/2021  

    30,000 (4)     $ 1.33     2/21/2022  

Anthony Rimac

   
100,000

(3)
 
 
$

1.33
   
11/15/2021
 

    30,000 (4)     $ 1.33     2/21/2022  

Natalie McClure, Ph.D. 

   
23,333

(5)
 
 
$

3.51
   
3/2/2020
 

    20,000 (3)     $ 1.33     11/15/2021  

    30,000 (4)     $ 1.33     2/21/2022  

    25,000 (6)     $ 6.61     12/23/2023  

(1)
The options listed are fully vested or are subject to an early exercise right and may be exercised in full prior to vesting of the shares underlying such options. Vesting of all options is subject to continued service on the applicable vesting date.

(2)
The shares subject to this option are fully vested.

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(3)
50% of the shares subject to this option were vested as of December 31, 2013 and the remainder vest in approximately equal increments on a monthly basis thereafter through July 1, 2016.

(4)
36.67% of the shares subject to this option were vested as of December 31, 2013 and the remainder vest in approximately equal increments on a monthly basis thereafter through March 1, 2017.

(5)
78.33% of the shares subject to this option were vested as of December 31, 2013 and the remainder vest in approximately equal increments on a monthly basis thereafter through February 1, 2015.

(6)
None of the shares subject to this option were vested as of December 31, 2013. All shares will vest according to the following schedule, provided that the optionee remains in continuous service on each such date: the first 20% of the option shares shall vest upon the completion of twelve months of service measured from the vesting commencement date of December 23, 2013 and (ii) an additional 1/60 th  of the option shares shall vest upon the optionee's completion of each of the next forty-eight months of service thereafter on the first day of each month. This option will be fully vested on January 1, 2019.

Employment agreements, Executive Severance Plan and Transaction Bonus Plan

Offer letters

        We currently do not have employment agreements with any of our executive officers. All of our executive officers are employed on an "at will" basis, with no fixed term of employment, pursuant to the terms of their respective offer letters, each of which is described below. Each offer letter also contains standard terms related to vacation and participation in our employee benefit plans, and in addition, requires execution of our form of confidential information and proprietary information agreement.

        Gregory Went.     Dr. Went is a party to an offer letter dated with us dated March 8, 2006. These terms superseded in their entirety the terms of an employment agreement originally entered into between Dr. Went and us in 2002, and subsequently amended. Pursuant to the offer letter, Dr. Went agreed to continue to serve as the company's chief executive officer, at a then-agreed base salary of $250,000, which has been subsequently increased to $400,000. In connection with entering into the offer letter, Dr. Went was granted an option to purchase 125,000 shares of common stock with an exercise price of $3.75 per share and is fully vested as of 2007. In addition, pursuant to the offer letter Dr. Went was eligible to receive an additional option to purchase 150,000 shares of common stock following our attainment of a designated sales milestone related to certain of our commercial products which milestone was not achieved.

        At a meeting of the board of directors held in May 2013, the board adopted a bonus plan to provide for the payment of annual cash awards for the achievement of certain corporate and individual objectives. Under the bonus plan, target bonus levels were set at 50% of base salary for the CEO.

        Anthony Rimac.     Mr. Rimac is a party to an offer letter with us dated June 8, 2011 to serve as our Chief Financial Officer. Pursuant to the offer letter, we agreed to pay Mr. Rimac an annual base salary of $275,000, $25,000 of which was agreed to be deferred until the closing of a financing with proceeds to us in excess of $2 million subsequent to the closing of our 2011 Series AA preferred stock financing, which subsequent financing occurred in 2012. In addition, the offer letter provided that Mr. Rimac would be eligible for additional stock and cash bonus awards based on achievement of milestones to be determined in the future. Based upon the recommendation of Dr. Went, our board subsequently approved an annual bonus target for Mr. Rimac at 35% of his annual base salary.

        Pursuant to the offer letter, Mr. Rimac was granted an option to purchase 100,000 shares of our common stock with an exercise price of $1.33 per share. On the first anniversary of Mr. Rimac's

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employment by us, 20% of the shares subject to this option vested, and the remainder of the shares subject to the option vest thereafter as to 1/48 th  of the award per month of Mr. Rimac's service with us.

        Natalie McClure.     Dr. McClure is a party to an offer letter with us dated December 17, 2009 to serve as our Vice President, Regulatory Affairs. By letter of February 18, 2011, Dr. McClure agreed to assume a full-time work schedule at an annual base salary of $325,000. Pursuant to her 2009 offer letter, in March of 2010 Dr. McClure was granted an option to purchase 23,333 shares of common stock at an exercise price of $3.51 per share, with vesting to occur as to 20% of the option on the first anniversary of her employment commencement date, with the remainder of the option to vest thereafter as to 1/48 th  of the award per month. Based upon the recommendation of Dr. Went, our board subsequently approved an annual bonus target for Dr. McClure at 25% of her annual base salary.

        Michael Coffee.     Mr. Coffee is a party to an offer letter with us dated November 27, 2013 to serve as our Senior Vice President, Strategy and Planning. Previously, Mr. Coffee served as a consultant to us under a consulting agreement originally entered into in February 2010, which terminated upon his becoming an employee with us. Pursuant to the offer letter, we agreed to pay Mr. Coffee an annual base salary of $265,000, with an initial target bonus of 25% of that base salary based on achievement of milestones to be determined in the future. Pursuant to the offer letter Mr. Coffee was granted an option to purchase 55,000 shares of common stock at an exercise price of $6.61 per share, with vesting to occur as to 20% of the option on the first anniversary of his employment commencement date, with the remainder of the option to vest thereafter as to 1/48 th  of the award per month.

        Jeffrey Knapp.     Mr. Knapp is party to an offer letter with us dated February 24, 2014 to serve as our Chief Commercial Officer. Pursuant to the offer letter, we agreed to pay Mr. Knapp an annual base salary of $340,000, with an initial target bonus of 30% of that base salary based on achievement of milestones to be determined in the future. In addition, we granted to Mr. Knapp an option to purchase 130,000 shares of our common stock at an exercise price of $22.45 per share. The Option will vest as to 20% of the shares underlying the option on the first anniversary of Mr. Knapp's employment commencement date, with the remainder to vest thereafter as to 1/48 th of the balance per month.

Executive Severance Plan

        Our board of directors has adopted our Executive Severance Plan to be effective upon the closing of this offering, to provide our executives with severance benefits in the event their employment with us terminates without cause or, in case of a termination of employment that occurs in connection with our undergoing a change in control, either without cause or for for good reason. To be considered to have occurred in connection with our undergoing a change in control, the termination (or resignation) must occur at or within 12 months after our consummating the change in control.

        To be eligible for benefits under our Executive Severance Plan, the executive must hold the title of vice president or above on or within 90 days before the date of either the termination or the date of a change in control.

        Benefits under the Executive Severance Plan include both a cash portion, determined by reference to monthly base salary, and eligibility for group medical coverage (COBRA). Additionally, if the triggering termination or resignation occurs in connection with a change in control, the cash portion of the severance is determined by reference to both base pay and target bonus, the executive's equity awards that were outstanding at the time of the change in control will become fully vested and the post-termination period to exercise options will be extended up to the earlier of 12 months after the termination or the expiration date of the option.

        The amount and timing of cash severance payments and the duration of COBRA coverage are determined by the executive's title, length of service and whether the termination is in connection with

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a change in control. If the termination is not in connection with a change in control, cash severance is paid as salary continuation. If the termination is in connection with a change in control, cash severance is paid in a lump sum.

        The following table set forth the cash severance and COBRA benefits under our Executive Severance Plan:

 
  Other than in connection with a change in control   In connection with a change in control  
Title
  Cash Severance
(multiple of
monthly base pay)
  COBRA Period
(number of months)
  Cash Severance
(multiple of
monthly base pay
plus pro-rated
target bonus)
  COBRA Period
(number of months)
 

Chief Executive Officer

 

12

 

12

    18     18  

All other participants

 

Lesser of 9, and 1 / 2 the executive's full months of service

 

Same as length of salary continuation period

   
12
   
12
 

        Under the Executive Severance Plan, participants are eligible for severance benefits if we or our successor terminates the executive's employment other than due to (i) the commission of or indictment for a felony, or a misdemeanor involving fraud or moral turpitude, (ii) an act which constitutes gross negligence, willful misconduct or insubordination in the course of employment, or (iii) the continued failure of the executive to perform the essential duties and responsibilities of his or her position, after having received notice of the deficiencies and having had 30 days to cure such defects in performance.

        Under the Executive Severance Plan, participants are also eligible for severance benefits at or within 12 months following a change in control if the executive resigns for any of the following "good reasons": (i) a decrease in base salary or target bonus by more than 10% (other than a comparable decrease in compensation for all of our executives), (ii) a material decrease in the executive's duties or responsibilities (but excluding a change in title or reporting relationship), (iii) a relocation of the executive's primary work location by more than 50 miles, and (iv) our failure to obtain an agreement from our successor to continue this Executive Severance Plan, in each case without the executive's consent. In the case of items (ii) and (iii), the executive must provide us (or our successor) with notice within 30 days of the triggering event, and we (or our successor) will have 30 days thereafter to remedy the situation.

        To receive benefits under the Executive Severance Plan, in addition to having a termination or resignation that qualifies for benefits, the executive will be required to execute a full release of claims in a form satisfactory to us, within certain designated timeframes. This release of claims may include certain post-employment restrictive covenants, including confidentiality and non-solicitation clauses.

Transaction Bonus Plan

        Our board of directors has adopted our Transaction Bonus Plan to provide key employees with additional incentives in connection with our licensing agreement with Forest.

        Under the Transaction Bonus Plan, one percent of certain payments, or Covered Payments, that we expect to receive under the Forest license agreement will be designated for award under the Transaction Bonus Plan, with aggregate payments not to exceed $1,600,000. Covered Payments include both the initial licensing payment as well as milestone payments, but do not include royalty or certain other payments pursuant to the Forest license agreement. Any non-cash consideration received under the Forest license agreement that qualifies as a Covered Payment will be valued in good faith by our board of directors.

        Employees will be selected to participate in the Transaction Bonus Plan by our board of directors upon recommendation of our chief executive officer. From time to time, our board of directors will

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allocate some or all of the available pool among eligible participants, designated as either fixed dollar amounts or as a percentage of the total pool. Bonus payments generally will be awarded within 60 days after the date that a Covered Payment is made to us, and a participant is eligible to receive an allocation with respect to that Covered Payment if he or she (a) remains employed with us through the date of payment, and (b) if required by our board of directors, signs a general release of claims within the designated timeframe.

        If our board of directors determines that payments to be made under the Transaction Bonus Plan might result in our loss of a deduction under Section 280G of the Code, or imposition of an excise tax under Section 4999 of the Code on the participant, with respect to such payments, our board of directors may determine to submit the payments to stockholders for approval; if holders of less than 75% of our outstanding stock approve the payments, then the payments will not be paid. In addition, a participant's bonus will be reduced if and to the extent that, as a result of the application of the excise tax under Code Section 4999, his or her after-tax proceeds would be greater than if no reduction had occurred.

        The Transaction Bonus Plan may not be amended or terminated without the consent of any participant who may be adversely affected.

        We have paid an aggregate of $650,000 and $400,000 of bonuses, including to our named executive officers, in 2012 and 2013, respectively, pursuant to the Transaction Bonus Plan.

Employee benefit and stock plans

        The principal features of our equity incentive plans and our 401(k) plan are summarized below. These summaries are qualified in their entirety by reference to the actual text of the plans, which, other than the 401(k) plan, are filed as exhibits to the registration statement of which this prospectus is a part.

2002 Employee, Director and Consultant Stock Plan

        Our board of directors adopted and our stockholders approved our 2002 Employee, Director and Consultant Stock Plan, or 2002 Plan, in October 2002. Our 2002 Plan was amended and restated most recently in April 2012. Our 2002 Plan terminated in October 2012 and no new awards have been granted since that date, but outstanding awards remain subject to the terms of our 2002 Plan and applicable award agreements. Our 2002 Plan provided for the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the Code, to our employees, and for the grant of nonstatutory stock options, or NSOs, and restricted stock awards to our employees, directors and consultants.

        Authorized shares.     The maximum number of shares of our common stock that could be issued under our 2002 Plan was 2,000,000. Shares subject to stock awards granted under our 2002 Plan that expire or terminate without being exercised in full or are settled in cash do not reduce the number of shares available for issuance under our 2002 Plan. Additionally, shares issued pursuant to stock awards under our 2002 Plan that we repurchased become available for future grant under our 2002 Plan.

        Plan administration.     Our board of directors or a duly authorized committee of our board of directors administers our 2002 Plan and the stock awards granted under it. Under our 2002 Plan, our board of directors has the authority to determine and amend the terms of awards, including recipients, the exercise, purchase or strike price of stock awards, if any, the number of shares subject to each stock award, the vesting schedule applicable to the awards, and the form of consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements for use under our 2002 Plan.

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        Corporate transactions.     Our 2002 Plan provides that in the event of certain specified corporate transactions, outstanding awards may be assumed or continued by a surviving or acquiring corporation's parent company, or similar stock awards may be substituted for outstanding awards.

        Under our 2002 Plan, our board of directors may provide for accelerated vesting of unvested options or stock awards, may, following notice to participants, require exercise or acceptance of stock awards within a certain period, and may also provide for payment in lieu of exercise to holders of stock awards that would otherwise terminate if not exercised before the effective date of a corporate transaction, with the amount of payment equal to the value the holder would receive upon exercise.

        In the event of a change in control of our company, awards granted under the 2002 Plan will not receive automatic acceleration of vesting and exercisability, although this treatment may be provided for by the administrator or in an award agreement.

        Transferability.     Under our 2002 Plan, awards are generally not transferable other than by will or the laws of descent and distribution, except as otherwise determined by the administrator or as provided under our 2002 Plan.

2007 Stock Plan

        Our board of directors adopted and our stockholders approved our 2007 Stock Plan, or 2007 Plan, in December 2007. Our 2007 Plan was amended in September 2013. Our 2007 Plan provides for the grant of ISOs to our employees, and for the grant of NSOs and restricted stock awards our employees, directors and consultants.

        Our 2014 Equity Incentive Plan, or 2014 Plan, will become effective on the date the registration statement of which this prospectus forms a part is declared effective by the SEC. As a result, we do not expect to grant any additional awards under the 2007 Plan following that date, although any awards granted under the 2007 Plan will remain subject to the terms of our 2007 Plan and applicable award agreements, until such outstanding awards that are stock options are exercised, or until they terminate or expire by their terms, and until any restricted stock awards become vested, terminate or are forfeited.

        Authorized shares.     The maximum number of shares of our common stock that may be issued under our 2007 Plan is 500,000; this is also the maximum number of shares that may be issued upon the exercise of ISOs.

        Shares subject to stock awards granted under our 2007 Plan that expire or terminate without being exercised in full do not reduce the number of shares available for issuance under our 2007 Plan. Additionally, shares issued pursuant to stock awards under our 2007 Plan that we repurchase or that are forfeited become available for future grant under our 2007 Plan.

        Plan administration.     Our board of directors or a duly authorized committee of our board of directors administers our 2007 Plan and the stock awards granted under it. Under the 2007 Plan, our board of directors has the authority to determine and amend the terms of awards and award agreements, including recipients, the exercise or purchase of stock awards, the number of shares subject to each stock award, the vesting schedule applicable to the awards, and the form of consideration, if any, payable upon exercise or settlement of the award.

        Corporate transactions.     Our 2007 Plan provides that in the event our company is a party to a merger or consolidation, all shares acquired under the 2007 Plan and all options shall be subject to the agreement of merger or consolidation. In this circumstance, outstanding stock options may be assumed or continued by a surviving or acquiring corporation's parent company, or similar stock option awards may be substituted for outstanding awards.

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        If outstanding stock option awards are not assumed, continued or substituted in connection with a corporate transaction, our board of directors may provide for cancellation of such options without the payment of any consideration, and may also provide for payment in lieu of exercise to holders of stock awards that would otherwise terminate if not exercised before the effective date of a corporate transaction, with the amount of payment equal to the value the holder would receive upon exercise, either as to all options or only the portion that had previously vested under its terms. Our board of directors may also accelerate the vesting of option awards, contingent upon the closing of such merger or consolidation.

        Transferability.     Under our 2007 Plan, our board of directors may provide for restrictions on the transferability of awards, as specified in the applicable award agreement. These restrictions may include special forfeiture provisions, repurchase rights, rights of first refusal and other transfer restrictions, as determined by our board of directors.

        Plan amendment or termination.     Our board of directors has the authority to amend, suspend, or terminate our 2007 Plan, although certain material amendments require the approval of our stockholders, and amendments that would impair the rights of any participant require the consent of that participant.

2014 Equity Incentive Plan

        Our board of directors adopted our 2014 Plan in February 2014, and our stockholders approved the 2014 Plan in                        2014. The 2014 Plan will be the successor to our 2007 Plan. From the date the registration statement of which this prospectus forms a part is declared effective, no further grants will be made under our 2007 Plan. Our 2014 Plan provides for the grant of ISOs to our employees and for the grant of NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to our employees, directors and consultants.

        Authorized shares.     The maximum number of shares of our common stock that may be issued under our 2014 Plan is 3,354,432. Additionally, the number of shares of our common stock reserved for issuance under our 2014 Plan will automatically increase on the first day of each fiscal year for a period of up to 10 years, commencing on the first day of the fiscal year following the year in which the 2014 Plan becomes effective, in an amount equal to 4% of the total number of shares of our capital stock outstanding on the last day of the preceding fiscal year, or a lesser number of shares determined by our board of directors. The maximum number of shares of our common stock that may be issued upon the exercise of ISOs under our 2014 Plan is 6,800,000.

        Shares subject to stock awards granted under our 2014 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, do not reduce the number of shares available for issuance under our 2014 Plan. Additionally, shares issued pursuant to stock awards under our 2014 Plan that we repurchase or that are forfeited, as well as shares used to pay the exercise price of a stock award or to satisfy the tax withholding obligations related to a stock award, become available for future grant under our 2014 Plan.

        Plan administration.     Our board of directors, or a duly authorized committee of our board of directors, will administer our 2014 Plan. Our board of directors may also delegate to one or more of our officers the authority (1) to designate employees (other than officers) to receive specified stock awards, and (2) to determine the number of shares subject to such stock awards. Subject to the terms of our 2014 Plan, the board of directors has the authority to determine the terms of awards, including recipients, the exercise, purchase or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any,

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payable upon exercise or settlement of the award and the terms of the award agreements for use under our 2014 Plan.

        The board of directors has the power to modify outstanding awards under our 2014 Plan. The board of directors has the authority to reprice any outstanding option or stock appreciation right, cancel any outstanding stock award in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any adversely affected participant.

        Section 162(m) limits.     At such time as necessary for compliance with Section 162(m) of the Code, no participant may be granted stock awards that are intended to comply with Section 162(m) of the Code covering more than 1,000,000 shares of our common stock under our 2014 Plan during any calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of our common stock on the date of grant. Additionally, no participant may be granted in a calendar year a performance stock award covering more than 1,000,000 shares of our common stock or a performance cash award having a maximum value in excess of $1,000,000 under our 2014 Plan. These limitations are intended to give us the flexibility to grant compensation that will not be subject to the $1,000,000 annual limitation on the income tax deductibility imposed by Section 162(m) of the Code.

        Performance awards.     We believe our 2014 Plan permits the grant of performance-based stock and cash awards that may qualify as performance-based compensation that is not subject to the $1,000,000 limitation on the income tax deductibility imposed by Section 162(m) of the Code. Our compensation committee may structure awards so that the stock or cash will be issued or paid only following the achievement of certain pre-established performance goals during a designated performance period.

        Our compensation committee may establish performance goals by selecting from one or more of the following performance criteria: (1) earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings before interest, taxes, depreciation and amortization; (4) earnings before interest, taxes, depreciation, amortization and legal settlements; (5) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (6) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and stock-based compensation; (7) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), stock-based compensation and changes in deferred revenue; (8) total stockholder return; (9) return on equity or average stockholder's equity; (10) return on assets, investment or capital employed; (11) stock price; (12) margin (including gross margin); (13) income (before or after taxes); (14) operating income; (15) operating income after taxes; (16) pre-tax profit; (17) operating cash flow; (18) sales or revenue targets; (19) increases in revenue or product revenue; (20) expenses and cost reduction goals; (21) improvement in or attainment of working capital levels; (22) economic value added (or an equivalent metric); (23) market share; (24) cash flow; (25) cash flow per share; (26) share price performance; (27) debt reduction; (28) implementation or completion of projects or processes; (29) user satisfaction; (30) stockholders' equity; (31) capital expenditures; (32) debt levels; (33) operating profit or net operating profit; (34) workforce diversity; (35) growth of net income or operating income; (36) billings; (37) bookings; (38) the number of users, including but not limited to unique users; and (39) employee retention.

        Our compensation committee may establish performance goals on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless otherwise specified by our board of directors (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at the time the performance goals are established, our compensation committee will appropriately make adjustments in the method of calculating the attainment of the performance goals

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as follows: (1) to exclude restructuring and other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any "extraordinary items" as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock-based compensation and the award of bonuses under our bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item.

        Corporate transactions.     Our 2014 Plan provides that in the event of certain specified significant corporate transactions, as defined under our 2014 Plan, each outstanding award will be treated as the administrator determines. The administrator may (1) arrange for the assumption, continuation or substitution of a stock award by a successor corporation; (2) arrange for the assignment of any reacquisition or repurchase rights held by us to a successor corporation; (3) accelerate the vesting, in whole or in part, of the stock award and provide for its termination prior to the transaction; (4) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by us; or (5) cancel or arrange for the cancellation of the stock award prior to the transaction in exchange for a cash payment, if any, determined by the board. The plan administrator is not obligated to treat all stock awards or portions of stock awards in the same manner, even those that are of the same award type.

        Transferability.     A participant may not transfer stock awards under our 2014 Plan other than by will, the laws of descent and distribution or as otherwise provided under our 2014 Plan.

        Plan amendment or termination.     Our board of directors has the authority to amend, suspend or terminate our 2014 Plan, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. No awards may be granted after the tenth anniversary of the date our board of directors adopted our 2014 Plan. No stock awards may be granted under our 2014 Plan while it is suspended or after it is terminated.

2014 Employee Stock Purchase Plan

        Our board of directors adopted the 2014 Employee Stock Purchase Plan, or ESPP, in February 2014, and our stockholders approved the ESPP in                                    . The ESPP will become effective upon the date the registration statement of which this prospectus forms a part is declared effective. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. The ESPP is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Code.

        Share reserve.     Following this offering, the ESPP authorizes the issuance of 131,381 shares of our common stock pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our common stock reserved for issuance will automatically increase on January 1 of each calendar year, from January 1, 2015 (assuming the ESPP becomes effective in 2014) through January 1, 2024, by the least of (1) 1% of the total number of

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shares of our common stock outstanding on December 31 of the preceding calendar year, and (2) 260,000 shares; provided , that prior to the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). As of the date hereof, no shares of our common stock have been purchased under the ESPP.

        Administration.     Our board of directors has the authority administer the ESPP and may delegate this authority to the compensation committee. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of our common stock on specified dates during such offerings. Under the ESPP, we may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. We currently intend to have six month offerings with one purchase period (of approximately six months in duration) per offering, except that the first purchase period under our first offering may be shorter or longer than six months, depending on the date on which the underwriting agreement relating to this offering becomes effective. An offering under the ESPP may be terminated under certain circumstances.

        Payroll deductions.     Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of our common stock under the ESPP. Unless otherwise determined by our board of directors, common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of our common stock on the first date of an offering or (b) 85% of the fair market value of a share of our common stock on the date of purchase. For the initial offering, which we expect will commence upon the execution and delivery of the underwriting agreement relating to this offering, the fair market value on the first day of the offering period will be the price at which shares are first sold to the public.

        Limitations.     Employees may have to satisfy one or more of the following service requirements before participating in the ESPP, as determined by our board of directors, including: (1) being customarily employed for more than 20 hours per week; (2) being customarily employed for more than five months per calendar year; or (3) continuous employment with us or one of our affiliates for a period of time (not to exceed two years). No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our common stock based on the fair market value per share of our common stock at the beginning of an offering for each year such a purchase right is outstanding and the maximum number of shares an employee may purchase during a single purchase period is            . Finally, no employee will be eligible for the grant of any purchase rights under the ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value pursuant to Section 424(d) of the Code.

        Changes to capital structure.     In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or similar transaction, the board of directors will make appropriate adjustments to (1) the number of shares reserved under the ESPP, (2) the maximum number of shares by which the share reserve may increase automatically each year, (3) the number of shares and purchase price of all outstanding purchase rights, and (4) the number of shares that are subject to purchase limits under ongoing offerings.

        Corporate transactions.     In the event of certain significant corporate transactions, including: (1) a sale of all or substantially all of our assets; (2) the sale or disposition of 90% of our outstanding securities; (3) the consummation of a merger or consolidation where we do not survive the transaction;

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and (4) the consummation of a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction, any then-outstanding rights to purchase our stock under the ESPP may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such purchase right, then the participants' accumulated payroll contributions will be used to purchase shares of our common stock within 10 business days prior to such corporate transaction, and such purchase rights will terminate immediately.

        ESPP amendment; termination.     Our board of directors has the authority to amend or terminate our ESPP, provided that except in certain circumstances any such amendment or termination may not materially impair any outstanding purchase rights without the holder's consent. We will obtain stockholder approval of any amendment to our ESPP as required by applicable law or listing requirements.

401(k) plan

        We maintain a tax-qualified retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation up to certain Code limits, which are updated annually. We have the ability to make matching and discretionary contributions to the 401(k) plan but have not done so to date. Employee contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participants' directions. Employees are immediately and fully vested in their own contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code, with the related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan are deductible by us when made, and contributions and earnings on those amounts are not taxable to the employees until withdrawn or distributed from the 401(k) plan.

Pension benefits

        Our named executive officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by the company during 2013.

Nonqualified deferred compensation

        Our named executive officers did not participate in, or earn any benefits under, a nonqualified deferred compensation plan during 2013.

Limitation on liability and indemnification matters

        Upon the closing of this offering, our amended and restated certificate of incorporation will contain provisions that limit the liability of our current and former directors for monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:

    any breach of the director's duty of loyalty to the corporation or its stockholders;

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

    unlawful payments of dividends or unlawful stock repurchases or redemptions; or

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

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

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

        The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought and we are not aware of any threatened litigation that may result in claims for indemnification.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted for directors, executive officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Rule 10b5-1 sales plans

        Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, pursuant to which, if adopted, they would contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our insider trading policy. Prior to 180 days after the date of this offering (subject to early termination), the sale of any shares under such plan would be subject to the lock-up agreement that the director or officer has entered into with the underwriters.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

        Other than the compensation arrangements described elsewhere in this prospectus, we describe below transactions and series of similar transactions, since January 1, 2011, to which we were a party or will be a party, in which:

        Compensation arrangements for our directors and named executive officers are described elsewhere in this prospectus.

Sale of Series AA Preferred Stock and issuance of Secured Convertible Promissory Notes and Warrants to purchase preferred stock

        In March 2012 we entered into a Series AA Preferred Stock and Secured Note and Warrant Purchase Agreement, or the 2012 Purchase Agreement, with certain investors, including entities affiliated with our directors and beneficial owners of more than 5% of our capital stock. Pursuant to the 2012 Purchase Agreement, we issued (i) an aggregate of 525,671 shares of our Series AA preferred stock at a purchase price of $7.6089 per share for an aggregate purchase price of approximately $4 million (ii) approximately $4 million of secured convertible promissory notes, convertible into shares of our preferred stock, or the 2012 Notes and (iii) warrants to purchase preferred stock, or the 2012 Warrants. The 2012 Notes carried an interest rate of 10% per annum and had a maturity date of March 23, 2013. From March 2013 to August 2013, we repaid the outstanding principal balance and all accrued interest of the 2012 Notes. The 2012 Warrants are exercisable for shares of preferred stock issued in a subsequent financing or, if no subsequent financing occurs prior to the closing of our initial public offering, they are exercisable for shares of Series AA preferred stock. Unless earlier exercised, the 2012 Warrants will automatically net exercise immediately prior to the closing of this offering pursuant to their terms.

        The following table summarizes the purchase of Series AA preferred stock by holders of more than 5% of our capital stock pursuant to the 2012 Purchase Agreement.

Participants
  Number of
shares of
Series AA
preferred stock
 

Entities affiliated with Mohr Davidow Ventures(1)

    113,049  

aeris CAPITAL Equity Investments, L.P.(2)

    226,104  

Entities affiliated with DAG Ventures(3)

    56,516  

(1)
Consists of 113,049 shares of Series AA preferred stock held of record by MDV IX, L.P. as nominee for MDV IX, L.P. and MDV ENF IX, L.P. William Ericson, a member of our board of directors, is a General Partner of Mohr Davidow Ventures.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

(3)
Consists of (i) 51,617 shares held of record by DAG Ventures III-QP, L.P., (ii) 4,850 shares held of record by DAG Ventures III, L.P., and (iii) 49 shares held of record by DAG Ventures GP Fund III, LLC. DAG Ventures Management III, LLC is the sole

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    general partner of each of DAG Ventures III-QP, L.P. and DAG Ventures III L.P, and is the sole managing member of DAG Ventures GP Fund III LLC. John Caddedu and R. Thomas Goodrich are the managing members of DAG Ventures Management III, LLC, and share voting and investment power over these shares.

            The following table summarizes purchases of the 2012 Notes by holders of more than 5% of our capital stock pursuant to the 2012 Purchase Agreement.

Participants
  Aggregate
Principal
Amount of
2012 Notes
 

Entities affiliated with Mohr Davidow Ventures(1)

  $ 860,239  

aeris CAPITAL Equity Investments, L.P.(2)

  $ 1,720,433  

Entities affiliated with DAG Ventures(3)

  $ 430,240  

(1)
Consists of $860,239 aggregate principal amount of notes issued to MDV IX, L.P. as nominee for MDV IX, L.P. and MDV ENF IX, L.P. William Ericson, a member of our board of directors, is a General Partner of Mohr Davidow Ventures.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

(3)
Consists of (i) $392,800 aggregate principal amount of notes issued to DAG Ventures III-QP, L.P., (ii) $36,986 aggregate principal amount of notes issued to DAG Ventures III, L.P., and (iii) $454 aggregate principal amount of notes issued to DAG Ventures GP Fund III, LLC.

        The following table summarizes 2012 Warrants issued to holders of more than 5% of our capital stock pursuant to the 2012 Purchase Agreement, assuming such 2012 Warrants are exercisable for shares of Series AA preferred stock:

Participants
  Shares of
Series AA
Preferred Stock
Issuable upon
exercise of
2012 Warrants
 

Entities affiliated with Mohr Davidow Ventures(1)

    11,191  

aeris CAPITAL Equity Investments, L.P.(2)

    22,383  

Entities affiliated with DAG Ventures(3)

    5,587  

(1)
Consists of warrants to purchase 11,191 shares of Series AA preferred stock held of record by MDV IX, L.P., as nominee for MDV IX, L.P. and MDV ENF IX, L.P. William Ericson, a member of our board of directors, is a General Partner of MDV.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

(3)
Consists of warrants to purchase (i) 5,106 shares of Series AA preferred stock held of record by DAG Ventures III-QP, L.P., (ii) 480 shares of Series AA preferred stock held of record by DAG Ventures III, L.P., and (iii) 1 share of Series AA preferred stock held of

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    record by DAG Ventures GP Fund III, LLC. DAG Ventures Management III, LLC is the sole general partner of each of DAG Ventures III-QP, L.P. and DAG Ventures III L.P, and is the sole managing member of DAG Ventures GP Fund III LLC. John Caddedu and R. Thomas Goodrich are the managing members of DAG Ventures Management III, LLC, and share voting and investment power over these shares.

    Sale of Series AA preferred stock, Series AA-1 preferred stock and Warrants to purchase Series AA preferred stock

            From June 2011 and until December 2011 we sold an aggregate of 907,005 shares of Series AA preferred stock at a purchase price of $7.6089 per share and issued 283,134 shares of Series AA preferred stock upon conversion of convertible promissory notes. In connection with those sales, we issued (i) 643,777 shares of Series AA-1 preferred stock and (ii) warrants to purchase up to 231,381 shares of Series AA preferred stock, or the June 2011 Warrants, all pursuant to a Series AA Preferred Stock Purchase Agreement, or the AA Purchase Agreement. The purchasers in this transaction included certain of our officers and directors and entities affiliated with our directors and beneficial owners of more than 5% of our capital stock. The June 2011 Warrants are exercisable for shares of Series AA Preferred Stock. Unless earlier exercised, the June 2011 Warrants will automatically net exercise immediately prior to the closing of this offering pursuant to their terms.

            The following table summarizes the number of shares of Series AA preferred stock and Series AA-1 preferred stock issued to such purchasers.

Participants
  Number of
shares of
Series AA
preferred stock
  Number of
shares of
Series AA-1
preferred stock
 

Entities affiliated with Mohr Davidow Ventures(1)

    527,534     234,250  

aeris CAPITAL Equity Investments, L.P.(2)

    263,767     150,000  

Entities affiliated with DAG Ventures(3)

    263,763     125,001  

NCD Investors, A Delaware Multiple Series LLC

    29,570     40,004  

David Mahoney

    6,572     1,500  

Gregory Went

    16,690     4,080  

(1)
Consists of (i) 234,250 shares of Series AA-1 preferred stock and 396,110 shares of Series AA preferred stock held of record by MDV VII, L.P. as nominee for MDV VII, L.P., MDV VII Leaders' Fund, L.P., MDV ENF VII(A), L.P. and MDV ENF VII(B), L.P. (ii) 131,424 shares of Series AA preferred stock held of record by MDV IX, L.P. as nominee for MDV IX, L.P. and MDV ENF IX, L.P. William Ericson and Jonathan Feiber are Managing Members of Ninth MDV Partners, L.L.C., or Ninth MDV, the general partner of MDV IX, L.P. Each of William Ericson, Jonathan Feiber and Ninth MDV may be deemed to share voting and dispositive power over the shares held by MDV IX. Seventh MDV Partners, L.L.C. is the general partner of MDV VII, L.P. and has sole voting and investment power over the shares. Nancy Schoendorf and Mr. Feiber, as managing members of Seventh MDV Partners, L.L.C., share such power. William Ericson, a member of our board of directors, is a general partner with Mohr Davidow Ventures.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

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(3)
Consists of (i) 114,151 shares of Series AA-1 preferred stock and 240,872 shares of Series AA preferred stock held of record by DAG Ventures III-QP, L.P., (ii) 10,738 shares of Series AA-1 preferred stock and 22,656 shares of Series AA preferred stock held of record by DAG Ventures III, L.P., and (iii) 112 shares of Series AA-1 preferred stock and 235 shares of Series AA preferred stock held of record by DAG Ventures GP Fund III, LLC. DAG Ventures Management III, LLC is the sole general partner of each of DAG Ventures III-QP, L.P. and DAG Ventures III L.P, and is the sole managing member of DAG Ventures GP Fund III LLC. John Caddedu and R. Thomas Goodrich are the managing members of DAG Ventures Management III, LLC, and share voting and investment power over these shares.

        The following table summarizes the June 2011 Warrants issued to holders of more than 5% of our capital stock and our directors pursuant to the AA Purchase Agreement, assuming such June 2011 Warrants are exercisable for shares of Series AA preferred stock:

Participants
  Shares of Series AA
Preferred Stock
Issuable upon
exercise of
June 2011 Warrants
 

Entities affiliated with Mohr Davidow Ventures(1)

    105,506  

aeris CAPITAL Equity Investments, L.P.(2)

    52,753  

Entities affiliated with DAG Ventures(3)

    52,752  

David Mahoney

    1,314  

Gregory Went

    3,337  

(1)
Consists of warrants to purchase 105,506 shares of Series AA preferred stock held of record by MDV VII, L.P. as nominee for MDV VII Leaders' Fund, L.P., MDV ENF VII(A), L.P. and MDV ENF VII(B), L.P. William Ericson, a member of our board of directors, is a General Partner with Mohr Davidow Ventures.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

(3)
Consists of warrants to purchase (i) 48,174 shares of Series AA preferred stock held of record by DAG Ventures III-QP, L.P., (ii) 4,531 shares of Series AA preferred stock held of record by DAG Ventures III, L.P., and (iii) 47 shares of Series AA preferred stock held of record by DAG Ventures GP Fund III, LLC. DAG Ventures Management III, LLC is the sole general partner of each of DAG Ventures III-QP, L.P. and DAG Ventures III L.P, and is the sole managing member of DAG Ventures GP Fund III LLC. John Caddedu and R. Thomas Goodrich are the managing members of DAG Ventures Management III, LLC, and share voting and investment power over these shares.

Issuance of convertible promissory notes and warrants to purchase preferred stock

        In April 2011 we entered into a Note and Warrant Purchase Agreement, or the 2011 Purchase Agreement, with certain investors, including entities affiliated with our directors and beneficial owners of more than 5% of our capital stock. Pursuant to the 2011 Purchase Agreement, we issued (i) approximately $2,125,000 of convertible promissory notes, convertible into shares of our preferred stock, or the 2011 Notes and (ii) warrants to purchase preferred stock, or the April 2011 Warrants. The 2011 Notes carried an interest rate of 6% per annum and had a maturity date of January 6, 2012. In June 2011, the outstanding principal balance and all accrued interest of the 2011 Notes converted into

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shares of Series AA preferred stock. The April 2011 Warrants are exercisable for shares of Series AA Preferred Stock. Unless earlier exercised, the April 2011 Warrants will automatically net exercise immediately prior to the closing of this offering pursuant to their terms.

        The following table summarizes purchases of the 2011 Notes by holders of more than 5% of our capital stock pursuant to the 2011 Purchase Agreement.

Participants
  Aggregate
Principal
Amount of
2011 Notes
 

Entities affiliated with Mohr Davidow Ventures(1)

  $ 1,000,000  

aeris CAPITAL Equity Investments, L.P.(2)

  $ 500,000  

Entities affiliated with DAG Ventures(3)

  $ 500,000  

(1)
Consists of $1,000,000 aggregate principal amount of notes issued to MDV VII, L.P. as nominee for MDV VII, L.P., MDV VII Leaders' Fund, L.P., MDV ENF VII(A), L.P. and MDV ENF VII(B), L.P. William Ericson, a member of our board of directors, is a General Partner with Mohr Davidow Ventures.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

(3)
Consists of (i) $456,600 aggregate principal amount of notes issued to DAG Ventures III-QP, L.P., (ii) $42,950 aggregate principal amount of notes issued to DAG Ventures III, L.P., and (iii) $450 aggregate principal amount of notes issued to DAG Ventures GP Fund III, LLC.

        The following table summarizes April 2011 Warrants issued to holders of more than 5% of our capital stock pursuant to the 2011 Purchase Agreement, assuming such April 2011 Warrants are exercisable for shares of Series AA preferred stock:

Participants
  Shares of Series AA
Preferred Stock
Issuable upon
exercise of
April 2011 Warrants
 

Entities affiliated with Mohr Davidow Ventures(1)

    13,142  

aeris CAPITAL Equity Investments, L.P.(2)

    6,571  

Entities affiliated with DAG Ventures(3)

    6,569  

(1)
Consists of warrants to purchase 13,142 shares of Series AA preferred stock held of record by MDV VII, L.P. as nominee for MDV VII, L.P., MDV VII Leaders' Fund, L.P., MDV ENF VII(A), L.P. and MDV ENF VII(B), L.P. William Ericson, a member of our board of directors, is a General Partner of Mohr Davidow Ventures.

(2)
George Rehm, a member of our board of directors, is a Managing Partner of aeris CAPITAL AG, the investment advisor to aeris CAPITAL Equity Investments LP and has an ownership interest in aeris CAPITAL Equity Ltd., the general partner of aeris CAPITAL Equity Investments, LP.

(3)
Consists of warrants to purchase (i) 6,000 shares of Series AA preferred stock held of record by DAG Ventures III-QP, L.P., (ii) 564 shares of Series AA preferred stock held of record by DAG Ventures III, L.P., and (iii) 5 shares of Series AA preferred stock held of

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    record by DAG Ventures GP Fund III, LLC. DAG Ventures Management III, LLC is the sole general partner of each of DAG Ventures III-QP, L.P. and DAG Ventures III L.P, and is the sole managing member of DAG Ventures GP Fund III LLC. John Caddedu and R. Thomas Goodrich are the managing members of DAG Ventures Management III, LLC, and share voting and investment power over these shares.

    Stockholders Agreement

            We are party to a stockholders agreement under which certain holders of our capital stock, including certain holders of 5% of our capital stock, our chief executive officer and one of our directors, have agreed to vote in a certain way on certain matters, including with respect to the election of directors or a sale of the company. The stockholders agreement also provides for a right of first refusal in favor of certain holders of our stock with regard to certain issuances of capital stock and provides certain rights of first refusal and co-sale in respect of certain sales of securities by the parties to the stockholders agreement. The agreement also provides for a put right in the event that a party to the agreement becomes a Howard Hughes Medical Institute Investigator. Upon the closing of this offering, the stockholders agreement will terminate and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors. The rights of first refusal will not apply to with respect to this offering.

    Consulting Agreement

            In March 2011, we entered into a consulting agreement with John MacPhee. Pursuant to the consulting agreement, from April 2011 until May 2013 we paid Mr. MacPhee aggregate consulting fees of $80,797 and, in November 2011, we granted Mr. MacPhee an option to purchase 96,000 shares of our common stock, with an exercise price of $1.33 per share, in consideration for his consulting services provided in assisting with corporate development activities. The consulting agreement terminated upon Mr. MacPhee's appointment to our board of directors in May 2013.

    Investor Rights Agreement

            We are party to an investor rights agreement that provides holders of our preferred stock, including certain holders of 5% of our capital stock and entities affiliated with certain of our directors, with certain registration rights, including the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing. The investor rights agreement also provides for a right of first refusal in favor of certain holders of our stock with regard to certain issuances of our capital stock and the parties thereto have agreed to vote in a certain way on certain matters, including with respect to sales of the company. The rights of first refusal will not apply to, and will terminate upon, closing of this offering. For a more detailed description of these registration rights, see the section of this prospectus entitled "Description of Capital Stock—Registration Rights."

    Voting Agreement

            We are party to a voting agreement under which certain holders of our capital stock, including certain holders of 5% of our capital stock and entities affiliated with certain of our directors, have agreed to vote in a certain way on certain matters, including with respect to the election of directors. Pursuant to the voting agreement, each of MDV VII, L.P. and aeris CAPITAL Equity Investments, L.P. was granted the right to designate one member of our board of directors. William Ericson and George Rehm were designated by MDV and aeris, respectively, under the voting agreement. Upon the closing of this offering, the voting agreement will terminate and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.

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    Right of First Refusal and Co-Sale Agreement

            We are party to a right of first refusal and co-sale agreement with holders of our preferred stock and our founders, including certain holders of 5% of our capital stock and entities affiliated with certain of our directors, pursuant to which the holders of preferred stock have a right of first refusal and co-sale in respect of certain sales of securities by our founders. Upon the closing of this offering, the right of first refusal and co-sale agreement will terminate.

    Indemnification agreements

            Our amended and restated certificate of incorporation, which will be effective upon the closing of this offering, will contain provisions limiting the liability of directors, and our amended and restated bylaws will provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws will also provide our board of directors with discretion to indemnify our officers and employees when determined appropriate by the board. In addition, we have entered and expect to continue to enter into agreements to indemnify our directors and executive officers. For more information regarding these agreements, see the section of this prospectus entitled "Executive Compensation—Limitations on liability and indemnification matters."

    Employment arrangements

            We have extended an offer letter to our executive officers in connection with their employment, and have adopted an Executive Severance Plan and a Transaction Bonus Plan in which our executive officers are participants as described in greater detail in the section of this prospectus titled "Executive Compensation—Employment agreements, Executive Severance Plan and Transaction Bonus Plan."

    Policies and procedures for related party transactions

            Our board of directors have adopted a policy, effective upon the closing of this offering, that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the prior consent of our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock or any member of the immediate family of any of the foregoing persons in which the amount involved exceeds $25,000 and such person would have a direct or indirect interest must first be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our audit committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person's interest in the transaction. We did not have a formal review and approval policy for related party transactions at the time of any of the transactions described above. However, all of the transactions described above under "Certain Relationships And Related Party Transactions" were entered into after presentation, consideration and approval by our board of directors.

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PRINCIPAL STOCKHOLDERS

        The following table sets forth information regarding the beneficial ownership of our common stock as of February 28, 2014 by:

        Beneficial ownership is determined according to the rules of the Securities and Exchange Commission and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including options and warrants that are currently exercisable or exercisable within 60 days after February 28, 2014. Shares of our common stock issuable pursuant to stock options and warrants are deemed outstanding for computing the percentage of the person holding such options or warrants and the percentage of any group of which the person is a member but are not deemed outstanding for computing the percentage of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose, including for purposes of Section 13(d) and 13(g) of the Securities Act.

        Our calculation of the percentage of beneficial ownership prior to this offering is based on 6,474,216 shares of common stock outstanding as of February 28, 2014, assuming the conversion of all outstanding shares of our preferred stock into common stock immediately upon the closing of this offering, as if this conversion had occurred as of February 28, 2014. Our calculation of the percentage of beneficial ownership after this offering is based on                    shares of common stock outstanding immediately after the closing of this offering (assuming no exercise of the underwriters' over-allotment option to purchase additional shares of our common stock).

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        Unless otherwise indicated in the footnotes to the following table, the address of each beneficial owner listed in the table below is c/o Adamas Pharmaceuticals, Inc., 2200 Powell Street, Suite 220, Emeryville, California 94608.

 
  Number of Shares
Beneficially Owned
  Percentage of Shares
Beneficially Owned
 
Name of Beneficial Owner
  Before the
Offering
  After the
Offering
  Before the
Offering
  After the
Offering
 

5% Stockholders:

                         

Entities affiliated with Mohr Davidow Ventures(1)

   
2,142,007
         
32.4

%
     

aeris CAPITAL Equity Investments, L.P.(2)

    1,105,494           16.9 %      

Entities affiliated with DAG Ventures(3)

    830,115           12.7 %      

NCD Investors, A Delaware Multiple Series LLC(4)

    427,060           6.6 %      

Named executive officers and directors:

   
 
   
 
   
 
   
 
 

Gregory Went, Ph.D.(5)

    1,010,894           14.0 %      

Natalie McClure, Ph.D(6)

    198,333           3.0 %      

Anthony Rimac(7)

    130,000           2.0 %      

William Ericson(8)

    2,157,007           32.6 %      

Ivan Lieberburg, M.D., Ph.D.(9)

    89,000           1.4 %      

George Rehm(10)

    1,105,494           16.9 %      

David Mahoney(11)

    68,891           1.1 %      

John MacPhee, MPH(12)

    108,000           1.6 %      

Richard Booth(13)

    41,889           *        

Martha Demski(14)

    15,000           *        

Sara Grootwassink Lewis(15)

    15,000           *        

All executive officers and directors as a group (13 persons)(16)

    5,157,216           62.6 %      

*
Less than 1% of the outstanding shares of common stock

(1)
Includes (i) 1,761,029 shares held of record by MDV VII, L.P. as nominee for MDV IX, L.P., and MDV ENF IX, L.P., (ii) 244,473 shares held of record by MDV IX, L.P., as nominee for MDV IX, L.P., and MDV ENF IX, L.P., (iii) an aggregate of 11,191 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants held by MDV IX, L.P., as nominee for MDV IX, L.P., and MDV ENF IX, L.P. and (iv) an aggregate of 105,506 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants held by MDV VII, L.P. as nominee for MDV VII Leaders' Fund, L.P., MDV ENF VII(A), L.P. and MDV ENF VII(B), L.P., (v) an aggregate of 13,142 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants held by MDV VII, L.P. as nominee for MDV VII, L.P., MDV VII Leaders' Fund, L.P., MDV ENF VII(A), L.P. and MDV ENF VII(B), L.P. and (vi) an aggregate of 6,666 shares of common stock issuable upon exercise of common stock warrants held by Mohr Davidow Ventures. William Ericson and Jonathan Feiber are Managing Members of Ninth MDV Partners, L.L.C., the general partner of MDV IX, L.P., as nominee for MDV IX, L.P., and MDV ENF IX, L.P. Each of William Ericson, Jonathan Feiber and Ninth MDV Partners, L.L.C. may be deemed to share voting and dispositive power over the shares held by MDV IX, L.P., as nominee for MDV IX, L.P., and MDV ENF IX, L.P. Seventh MDV Partners, L.L.C. is the general partner of MDV VII, L.P. and has sole voting and investment power over the shares. Nancy Schoendorf and Mr. Feiber, as managing members of Seventh MDV Partners, L.L.C., share such power. William Ericson, a general partner with Mohr Davidow Ventures and a member of our Board of Directors, may be deemed to indirectly beneficially own the shares affiliated with Mohr Davidow Ventures. Gregory Went, our chief executive officer and

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    chairman of our board of directors, is a limited partner of MDV IX, L.P. but has no voting or dispositive power with respect to the shares held by MDV IX, L.P. The address of these entities is c/o Mohr Davidow Ventures, 3000 Sand Hill Road, Building 3, Suite 290, Menlo Park, CA 94025.

(2)
Represents 1,023,787 shares held directly by aeris CAPITAL Equity Investments, L.P., or the aeris LP, and an aggregate of 81,707 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants. George Rehm is a member of our board of directors and is a Managing Partner of aeris CAPITAL AG, the investment advisor to the aeris LP, and has an economic interest in aeris CAPITAL Equity Ltd., the general partner of the aeris LP, or the aeris GP. By virtue of his economic interest in the aeris GP, Mr. Rehm may be deemed to indirectly beneficially own the shares affiliated with aeris CAPITAL Equity Investments, L.P. The address of aeris CAPITAL Equity Investments, L.P. is Walker House, 87 Mary Street, Grand Cayman KY 1-9002 Cayman Islands.

(3)
Includes (i) 698,798 shares held of record by DAG Ventures III-QP, L.P. and an aggregate of 59,280 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants, (ii) 65,725 shares held of record by DAG Ventures III, L.P., (iii) an aggregate of 5,575 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants held by DAG Ventures III, L.P., (iv) 684 shares held of record by DAG Ventures GP Fund III, LLC and (v) an aggregate of 53 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants held by DAG Ventures GP Fund III, LLC. DAG Ventures Management III, LLC is the sole general partner of each of DAG Ventures III—QP, L.P. and DAG Ventures III L.P., and is the sole managing member of DAG Ventures GP Fund III LLC. John Caddedu and R. Thomas Goodrich are the managing members of DAG Ventures Management III, LLC, and share voting and investment power over these shares. The address for the entities affiliated with DAG Ventures is 251 Lytton Avenue, Suite 200, Palo Alto, CA 94301.

(4)
Represents 427,060 shares held directly by NCD Investors, a Delaware Multiple Series LLC. Redstone Management, LLC is the managing member of NCD Investors, a Delaware Multiple Series LLC. Brent Jones, Mark Harris, Jared Stone, Thomas Vardell and Hosein Khajeh-Hosseiny, the managing members of Redstone Management, LLC, may be deemed to share voting and investment power with respect to these shares. The address for NCD Investors, a Delaware Multiple Series LLC is 649 San Ramon Valley Road, Danville, CA 94526.

(5)
Represents (i) 281,998 shares held in irrevocable trusts for which Dr. Went and his wife are trustees or custodial arrangements for which Dr. Went is custodian for the benefit of Dr. Went's children, (ii)(a) 4 shares held directly by Dr. Went, (b) an aggregate of 14,892 shares of common stock, on an as converted basis, issuable upon the exercise of common stock and Series AA warrants and 714,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(6)
Represents 198,333 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(7)
Represents 130,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(8)
Includes 15,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014. William Ericson is a general partner with Mohr Davidow Ventures and may be deemed to indirectly beneficially own the shares affiliated with Mohr Davidow Ventures. Mr. Ericson disclaims beneficial ownership thereof except to the extent of his respective proportionate pecuniary interest in such shares.

(9)
Represents 8,000 shares held by Ivan Lieberburg and Janice Kirsch as Community Property with Right of Survivorship, over which Dr. Lieberburg shares voting and dispositive power, 42,000

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    shares held directly by Dr. Lieberburg and 39,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(10)
Represents 1,023,787 shares held directly by aeris CAPITAL Equity Investments, L.P., or the aeris LP, and an aggregate 81,707 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants. George Rehm is a member of our board of directors and is a Managing Partner of aeris CAPITAL AG, the investment advisor to the aeris LP, and has an economic interest in aeris CAPITAL Equity Ltd., the general partner of the aeris LP, or the aeris GP. By virtue of his economic interest in the aeris GP, Mr. Rehm may be deemed to indirectly beneficially own the shares affiliated with aeris CAPITAL Equity Investments, L.P.

(11)
Represents 11,911 shares held directly by Mr. Mahoney, an aggregate of 1,314 shares of common stock, on an as converted basis, issuable upon the exercise of Series AA warrants and 55,666 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(12)
Represents 108,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(13)
Represents 18,000 shares of common stock and 8,889 shares of common stock issuable upon the exercise of common stock warrants and 15,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014.

(14)
Represents 15,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014. Ms. Demski was elected to our board of directors on March 4, 2014.

(15)
Represents 15,000 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014. Ms. Grootwassink Lewis was elected to our board of directors on March 4, 2014.

(16)
Represents 361,913 shares held by our current directors and executive officers, 14,892 shares of common stock, on an as converted basis, issuable upon the exercise of common stock warrants and Series AA warrants held by an executive officers, 1,522,707 shares issuable pursuant to stock options exercisable within 60 days after February 28, 2014, 3,029,289 shares held by entities affiliated with certain of our directors and 228,415 shares of common stock, on an as converted basis, issuable upon the exercise of common stock warrants and Series AA warrants held by two of our directors and entities affiliated with certain of our directors.

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DESCRIPTION OF CAPITAL STOCK

General

        The following description of our capital stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference to the amended and restated certificate of incorporation and the amended and restated bylaws that will be in effect upon the closing of this offering. Copies of these documents will be filed with the Securities and Exchange Commission as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of our common stock and preferred stock reflect changes to our capital structure that will occur upon the closing of this offering.

        Upon the closing of this offering, our amended and restated certificate of incorporation will provide for common stock and will authorize shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our board of directors.

        Upon the closing of this offering, our authorized capital stock will consist of 105,000,000 shares, all with a par value of $0.001 per share, of which:

        As of December 31, 2013, we had outstanding 4,757,764 shares of common stock and 2,359,587 shares of preferred stock. Immediately prior to the closing of this offering all outstanding shares of preferred stock will convert into 1,716,452 shares of our common stock. Our outstanding capital stock was held by 94 stockholders of record as of December 31, 2013. As of December 31, 2013, we had outstanding options to acquire 1,777,850 shares of common stock pursuant to our 2002 Plan and 2007 Plan. As of December 31, 2013, we also had outstanding warrants to purchase 106,639 shares of common stock and warrants to purchase an aggregate of 311,330 shares of preferred stock, which preferred stock warrants will automatically net exercise immediately prior to the closing of this offering.

Common stock

Voting

        Each holder of our common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders, except as otherwise expressly provided in our amended and restated certificate of incorporation or required by applicable law. Our amended and restated certificate of incorporation does not provide for cumulative voting for the election of directors, which means that the holders of a majority of the then-outstanding shares of our common stock can elect all of the directors then standing for election.

Dividends and distributions

        Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends, if any, out of funds legally available at the times and in the amounts that our board of directors may determine.

Liquidation

        Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, on any outstanding shares of preferred stock and payment of other claims of creditors.

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Rights and preferences

        The rights, preferences, and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of preferred stock that we may designate and issue in the future.

Preemptive or similar rights

        Holders of our common stock have no preemptive, conversion, subscription or other similar rights, and there are no redemption or sinking fund provisions applicable to our common stock.

Fully paid and nonassessable

        All outstanding shares of our common stock are fully paid and nonassessable, and all of the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable.

Preferred stock

        As of December 31, 2013, there were 2,359,587 shares of our preferred stock outstanding. Immediately prior to the closing of this offering, all outstanding shares of our preferred stock will convert into 1,716,452 shares of our common stock.

        Upon the closing of this offering, our board of directors may, without further action by our stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of                    shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our common stock. The issuance of our preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control or other corporate action. Upon the closing of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Warrants

        As of December 31, 2013, we had outstanding warrants to purchase an aggregate of 311,330 shares of our Series AA preferred stock with an exercise price of $7.6089 per share. Each of these warrants has a net exercise provision under which the holder, in lieu of payment of the exercise price in cash, can surrender the warrant and receive a net number of shares of our common stock based on the fair market value of such stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Unless earlier exercised, all of these warrants will automatically net exercise immediately prior to the closing of this offering pursuant to their terms.

        As of December 31, 2013, we also had outstanding warrants to purchase an aggregate of 106,639 shares of our common stock with exercise prices ranging from $1.05 to $28.10 per share. Each of these warrants has a net exercise provision under which the holder, in lieu of payment of the exercise price in cash, can surrender the warrant and receive a net number of shares of our common stock based on the fair market value of such stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Unless earlier exercised, warrants to purchase 44,442 shares of common stock will expire on September 25, 2014, warrants to purchase 19,281 shares of common stock will expire on the earlier of (i) a sale of the company for cash or (ii) ten years from the date of issuance, and warrants to purchase 42,916 shares of common stock will expire on November 26, 2014.

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Registration rights

        We are party to an investor rights agreement that provides that holders of our preferred stock and certain holders of common stock that received the common stock upon conversion of preferred stock have certain registration rights. This investor rights agreement was entered into in June 2011 and has been amended and/or restated from time to time in connection with our preferred stock financings. The registration of shares of our common stock pursuant to the exercise of registration rights described below would enable the holders who have these rights to sell these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We will pay the registration expenses, other than underwriting discounts and commissions, of the shares registered pursuant to the demand, piggyback and Form S-3 registrations described below.

        Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions and limitations, to limit the number of shares the registration rights holders participating in any offering may include in any particular registration. The demand, piggyback and Form S-3 registration rights described below will expire on the earlier of (i) the date that is five years after the closing of this offering or (ii) with respect to each stockholder following the closing of this offering, at such time as (A) such stockholder holds less than 0.5% of the company's common stock on an as-converted, fully diluted basis and (B) such stockholder is entitled to sell all of its shares pursuant to Rule 144 of the Securities Act during any 90-day period.

        Demand registration rights.     The holders of an aggregate of 5,042,539 shares of our common stock (including shares previously issued upon conversion of preferred stock, shares issuable upon conversion of outstanding preferred stock and shares issuable upon conversion of shares of preferred stock issuable upon the exercise of outstanding warrants) are entitled to certain demand registration rights. At any time beginning sixth months after the closing of this offering, the holders of not less than 30% of these shares may, on not more than two occasions, request that we file a registration statement having an aggregate offering price to the public of not less than $10,000,000 to register at least 30% of their shares.

        Piggyback registration rights.     In connection with this offering, the holders of an aggregate of 5,042,539 shares of our common stock previously issued upon conversion of preferred stock and common stock issuable upon conversion of outstanding preferred stock and shares of preferred stock currently subject to outstanding warrants, were entitled to, and the necessary percentage of holders waived, rights to include their shares of registrable securities in this offering. In the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the holders of these shares will be entitled to certain "piggyback" registration rights allowing them to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act other than with respect to a demand registration or a registration statement on Form S-3, S-4 or S-8, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their shares in the registration.

        Form S-3 registration rights.     The holders of an aggregate of 5,042,539 shares of our common stock previously issued upon conversion of preferred stock and common stock issuable upon conversion of outstanding preferred stock and shares of preferred stock currently subject to outstanding warrants will be entitled to certain Form S-3 registration rights. Such holders may make a request that we register their shares on Form S-3 if we are qualified to file a registration statement on Form S-3. Such request for registration on Form S-3 must cover securities the aggregate offering price of which, after payment of underwriting discounts and commissions, is at least $3,000,000.

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Anti-takeover provisions

Section 203 of the Delaware General Corporation Law

        We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

        In general, Section 203 defines business combination to include:

        In general, Section 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Certificate of incorporation and bylaws to be in effect upon the closing of this offering

        Our amended and restated certificate of incorporation to be in effect upon the closing of this offering will provide for our board of directors to be divided into three classes with staggered three- year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the voting power of our shares of common stock outstanding will be able to elect all of our directors. The directors may be removed by the stockholders only for cause and upon the vote of holders of a

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majority of the shares then entitled to vote at an election of directors. Furthermore, the authorized number of directors may be changed only by resolution of our board of directors, and vacancies and newly created directorships on our board of directors may, except as otherwise required by law or determined by our board, only be filled by a majority vote of the directors then serving on the board, even though less than a quorum.

        Our amended and restated certificate of incorporation and amended and restated bylaws also will provide that all stockholder actions must be effected at a duly called meeting of stockholders and not by a consent in writing. A special meeting of stockholders may be called only by a majority of our whole board of directors, the chair of our board of directors, our chief executive officer or our president. Our amended and restated bylaws will also provide that stockholders seeking to present proposals before a meeting of stockholders to nominate candidates for election as directors at a meeting of stockholders must provide timely advance notice in writing, and will specify requirements as to the form and content of a stockholder's notice.

        Our amended and restated certificate of incorporation will further provide that, immediately after this offering, the affirmative vote of holders of at least 66 2 / 3 % of the voting power of all of the then-outstanding shares of voting stock, voting as a single class, will be required to amend certain provisions of our certificate of incorporation, including provisions relating to the structure of our board of directors, the size of the board, removal of directors, special meetings of stockholders, actions by written consent and cumulative voting. The affirmative vote of holders of at least 66 2 / 3 % of the voting power of all of the then-outstanding shares of voting stock, voting as a single class, will be required to amend or repeal our bylaws, although our bylaws may be amended by a simple majority vote of our board of directors.

        The foregoing provisions will make it more difficult for our stockholders to replace our board of directors as well as for another party to obtain control of the company by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for our stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change the control of the company.

        These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in control of the company or our management. As a consequence, these provisions also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts.

Limitations of liability and indemnification

        See the section of this prospectus entitled "Executive Compensation—Limitation on liability and indemnification matters."

Listing

        We have applied to have our common stock to be approved for listing on The NASDAQ Global Market under the trading symbol "ADMS."

Transfer agent and registrar

        Upon the closing of this offering, the transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC.

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, no public market for our common stock existed, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding options and warrants, or the anticipation of such sales, could adversely affect prevailing market prices of our common stock from time to time and could impair our future ability to raise equity capital in the future. Furthermore, because only a limited number of shares of our common stock will be available for sale shortly after this offering due to certain contractual and legal restrictions on resale described below, sales of substantial amounts of our common stock in the public market after such restrictions lapse, or the anticipation of such sales, could adversely affect the prevailing market price of our common stock and our ability to raise equity capital in the future.

        Based on the number of shares outstanding as of December 31, 2013, upon the closing of this offering,                    shares of our common stock will be outstanding, assuming no exercise of the underwriters' over-allotment option to purchase additional shares of common stock and no exercise of outstanding options or warrants. Of the outstanding shares, all of the shares sold in this offering will be freely tradable, except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below.

        The remaining shares of our common stock outstanding after this offering are restricted securities as such term is defined in Rule 144 under the Securities Act, or are subject to lock-up agreements with us as described below. In addition, any shares sold in this offering to our existing stockholders that are our affiliates will be subject to lock-up agreements. Following the expiration of the lock-up period, restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration such as by reason of Rule 144 or 701 promulgated under the Securities Act, as amended, described in greater detail below.

Rule 144

        In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding a sale and (ii) we are subject to the periodic reporting requirements of the Exchange Act, for at least 90 days before the sale. Persons who have beneficially owned restricted or unrestricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

provided, in each case, that we are subject to the periodic reporting requirements of the Securities Exchange Act, for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with current public information provisions and sales by affiliates must comply with manner of sale and notice provisions of Rule 144.

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Rule 701

        Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers, directors or consultants who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under the section of this prospectus entitled "Underwriting" and will become eligible for sale at the expiration of those agreements.

Lock-up agreements

        We, our directors and officers, and substantially all of our stockholders, optionholders and warrant holders have agreed with the underwriters that for a period of 180 days following the date of this prospectus, we will not offer, sell, assign, transfer, pledge, contract to sell or otherwise dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for shares of our common stock, subject to specified exceptions. Credit Suisse Securities (USA) LLC and Piper Jaffray & Co. may, in their sole discretion, at any time, release all or any portion of the shares from the restrictions in this agreement.

Registration rights

        The holders of our convertible preferred stock and warrants to purchase shares of our convertible preferred stock, or their transferees, are entitled to certain rights with respect to the registration of those shares under the Securities Act. For a description of these registration rights, see the section of this prospectus entitled "Description of Capital Stock—Registration rights." If these shares are registered, they will be freely tradable without restriction under the Securities Act, except for shares held by affiliates.

Equity incentive plans

        As soon as practicable after the closing of this offering, we intend to file a Form S-8 registration statement under the Securities Act, to register shares of our common stock issued or reserved for issuance under our equity compensation plans and agreements. This registration statement will become effective immediately upon filing, and shares covered by this registration statement will thereupon be eligible for sale in the public markets, subject to vesting restrictions, the lock-up agreements described above and Rule 144 limitations applicable to affiliates. For a more complete discussion of our equity compensation plans, see the section of this prospectus entitled "Executive Compensation—Employee benefit and stock plans."

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MATERIAL UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES TO NON-U.S. HOLDERS

        The following summary describes the material U.S. federal income and estate tax consequences of the acquisition, ownership and disposition of our common stock acquired in this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income and estate taxes and does not deal with foreign, state and local consequences that may be relevant to Non-U.S. Holders in light of their particular circumstances, nor does it address U.S. federal tax consequences other than income and estate taxes. Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the Code, such as financial institutions, insurance companies, tax-exempt organizations, broker-dealers and traders in securities, U.S. expatriates, "controlled foreign corporations," "passive foreign investment companies," corporations that accumulate earnings to avoid U.S. federal income tax, persons that hold our common stock as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or integrated investment or other risk reduction strategy, persons subject to the alternative minimum tax or Medicare contribution tax, partnerships and other pass-through entities, and investors in such pass-through entities. Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. Furthermore, the discussion below is based upon the provisions of the Code, and Treasury regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, perhaps retroactively, so as to result in U.S. federal income and estate tax consequences different from those discussed below. We have not requested a ruling from the U.S. Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions. This discussion assumes that the Non-U.S. Holder holds our common stock as a "capital asset" within the meaning of Section 1221 of the Code (generally, property held for investment).

        Persons considering the purchase of our common stock pursuant to this offering should consult their own tax advisors concerning the U.S. federal income and estate tax consequences of acquiring, owning and disposing of our common stock in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction, including any state, local or foreign tax consequences.

        For the purposes of this discussion, a "Non-U.S. Holder" is, for U.S. federal income tax purposes, a beneficial owner of common stock that is neither a U.S. Holder, nor a partnership (or other entity treated as a partnership for U.S. federal income tax purposes regardless of its place of organization or formation). A "U.S. Holder" means a beneficial owner of our common stock that is for U.S. federal income tax purposes (a) an individual who is a citizen or resident of the U.S., (b) a corporation or other entity treated as a corporation created or organized in or under the laws of the U.S., any state thereof or the District of Columbia, (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (d) a trust if it (1) is subject to the primary supervision of a court within the U.S. and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

Distributions

        Subject to the discussion below, distributions, if any, made on our common stock to a Non-U.S. Holder of our common stock to the extent made out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) generally will constitute dividends for U.S. tax purposes and will be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide us with a properly executed IRS Form W-8BEN,

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or other appropriate form, certifying the Non-U.S. Holder's entitlement to benefits under that treaty. In the case of a Non-U.S. Holder that is an entity, Treasury Regulations and the relevant tax treaty provide rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends will be treated as paid to the entity or to those holding an interest in that entity. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder's behalf, the holder will be required to provide appropriate documentation to such agent. The holder's agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, you may be able to obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.

        We generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the U.S. (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that such holder maintains in the U.S.) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to us (or, if stock is held through a financial institution or other agent, to such agent). In general, such effectively connected dividends will be subject to U.S. federal income tax, on a net income basis at the regular graduated rates. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional "branch profits tax," which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder's effectively connected earnings and profits, subject to certain adjustments.

        To the extent distributions on our common stock, if any, exceed our current and accumulated earnings and profits, they will first reduce the Non-U.S. Holder's adjusted basis in our common stock, but not below zero, and then will be treated as gain to the extent of any excess, and taxed in the same manner as gain realized from a sale or other disposition of common stock as described in the next section.

Gain on disposition of our common stock

        Subject to the discussion below regarding backup withholding and foreign accounts, a Non-U.S. Holder generally will not be subject to U.S. federal income tax with respect to gain realized on a sale or other disposition of our common stock unless (a) the gain is effectively connected with a trade or business of such holder in the U.S. (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that such holder maintains in the U.S.), (b) the Non-U.S. Holder is a nonresident alien individual and is present in the U.S. for 183 or more days in the taxable year of the disposition and certain other conditions are met or (c) we are or have been a "United States real property holding corporation" within the meaning of Code Section 897(c)(2) at any time within the shorter of the five-year period preceding such disposition or such holder's holding period. In general, we would be a U.S. real property holding corporation if interests in U.S. real estate comprised (by fair market value) at least half of our business assets. We believe that we are not, and do not anticipate becoming, a U.S. real property holding corporation. Even if we are treated as a U.S. real property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly and constructively, no more than five percent of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder's holding period and (2) our common stock is regularly traded on an established securities market. There can be no assurance that our common stock will qualify as regularly traded on an established securities market.

        If you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at regular graduated U.S. federal income tax rates, and corporate Non-U.S. Holders described in (a) above may be subject to the additional branch profits tax at a 30% rate or

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such lower rate as may be specified by an applicable income tax treaty. If you are an individual Non-U.S. Holder described in (b) above, you will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by U.S. source capital losses (even though you are not considered a resident of the U.S.).

Information reporting requirements and backup withholding

        Generally, we must report information to the IRS with respect to any dividends we pay on our common stock including the amount of any such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient's country of residence.

        Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN or otherwise establishes an exemption.

        Under current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our common stock effected by or through a U.S. office of any broker, U.S. or foreign, except that information reporting and such requirements may be avoided if the holder provides a properly executed IRS Form W-8BEN or otherwise meets documentary evidence requirements for establishing Non-U.S. Holder status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the U.S. through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.

        Any amounts of tax withheld under the backup withholding rules may be credited against the tax liability of persons subject to backup withholding, provided that the required information is timely furnished to the IRS.

Foreign accounts

        A U.S. federal withholding tax of 30% may apply on dividends on and the gross proceeds of a disposition of our common stock paid to a foreign financial institution (as specifically defined by applicable rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). This U.S. federal withholding tax of 30% will also apply on dividends on and the gross proceeds of a disposition of our common stock to a non-financial foreign entity unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding substantial direct and indirect U.S. owners of the entity. The withholding tax described above will not apply if the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from the rules. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Holders are encouraged to consult with their own tax advisors regarding the possible implications of the legislation on these rules for their investment in our common stock.

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        The IRS has issued guidance providing that the withholding provisions described above will generally apply to payments of dividends made on or after July 1, 2014 and to payments of gross proceeds from a sale or other disposition of common stock on or after January 1, 2017.

Federal estate tax

        An individual Non-U.S. Holder who is treated as the owner of, or has made certain lifetime transfers of, an interest in our common stock will be required to include the value thereof in his or her gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise, even though such individual was not a citizen or resident of the U.S. at the time of his or her death.

        EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW.

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UNDERWRITING

        Under the terms and subject to the conditions contained in an underwriting agreement dated                    , 2014, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Piper Jaffray & Co. are acting as representatives, the following respective numbers of shares of common stock:

Underwriter
  Number
of Shares

Credit Suisse Securities (USA) LLC

   

Piper Jaffray & Co. 

   

William Blair & Company, L.L.C. 

   

Needham & Company, LLC

   
     

Total

   
     
     

        The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

        We have granted to the underwriters a 30-day over-allotment option to purchase on a pro rata basis up to                    additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of our common stock in this offering.

        The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel including the validity of the shares, and subject to other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The offering of the shares by the underwriters is also subject to the underwriters' right to reject any order in whole or in part.

        The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of up to $            per share. The underwriters and selling group members may allow a discount of $        per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and selling concession and discount to broker/dealers.

        The following table summarizes the compensation we will pay:

 
  Per Share   Total  
 
  Without
Over-
allotment
  With
Over-
allotment
  Without
Over-
allotment
  With
Over-
allotment
 

Underwriting discounts and commissions paid by us

  $              $              $              $             

        We estimate that our out of pocket expenses for this offering (not including any underwriting discounts and commissions) will be approximately $            .

        We have agreed to reimburse the underwriters for expenses of approximately $            related to clearance of this offering with the Financial Industry Regulatory Authority, Inc. or FINRA.

        The underwriters have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

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        We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act, relating to any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of the representatives for a period of 180 days after the date of this prospectus, or the Lock-Up Period except issuances pursuant to the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof or the exercise of warrants or options outstanding on the date hereof, grants of employee stock options pursuant to our existing plans or issuances pursuant to the exercise of such employee options.

        Our officers, directors and substantially all of our existing security holders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of the representatives during the Lock-Up Period, subject to limited exceptions.

        We have agreed to indemnify the several underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

        We intend to apply to list our common stock on The NASDAQ Global Market under the symbol "ADMS".

        Prior to the offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations between us and the representatives. In determining the initial public offering price, we and the representatives expect to consider a number of factors including:

        Neither we nor the underwriters can assure investors that an active trading market will develop for our common stock, or that shares of our common stock will trade in the public market at or above the initial public offering price.

        In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions, penalty bids and passive market making in accordance with Regulation M under the Exchange Act.

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        These stabilizing transactions, over-allotment transactions, syndicate covering transactions, penalty bids and passive market making may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The NASDAQ Global Market or otherwise and, if commenced, may be discontinued at any time.

        A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.

Other relationships

        Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they may receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and

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investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities.

Selling restrictions

Notice to prospective investors in the European Economic Area

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, it has not made and will not make an offer of shares which are the subject of the offering contemplated by this prospectus to the public in that Relevant Member State other than:

        For the purposes of this provision, the expression an "offer to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

Notice to prospective investors in the United Kingdom

        Each of the underwriters severally represents, warrants and agrees as follows:

Notice to prospective investors in Switzerland

        Our shares of common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or

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marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

        Neither this document nor any other offering or marketing material relating to the offering, us or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of the shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares.


LEGAL MATTERS

        Cooley LLP, San Francisco and Palo Alto, California, will pass upon the validity of the shares of common stock offered hereby. The underwriters are being represented by Davis Polk & Wardwell LLP, Menlo Park, California, in connection with the offering.


EXPERTS

        The consolidated financial statements of Adamas Pharmaceuticals, Inc. as of December 31, 2012 and 2013, and for each of the two years in the period ended December 31, 2013, included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing.


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to this offering of our common stock. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some items of which are contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits and the financial statements and notes filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room of the SEC, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements, and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov .

        As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements, and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the SEC's public reference facilities and the website of the SEC referred to above. We also maintain a website at www.adamaspharma.com . After the closing of this offering, you may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference into this prospectus.

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ADAMAS PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS

 
  Page

Report of Independent Registered Public Accounting Firm

 
F-2

Consolidated Financial Statements

 
 

Consolidated Balance Sheets

 
F-3

Consolidated Statements of Operations and Comprehensive Income

 
F-4

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity

 
F-5

Consolidated Statements of Cash Flows

 
F-6

Notes to Consolidated Financial Statements

 
F-7

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
of Adamas Pharmaceuticals, Inc.

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, of convertible preferred stock and stockholders' equity and cash flows present fairly, in all material respects, the financial position of Adamas Pharmaceuticals, Inc. and its subsidiaries (the "Company") at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California
March 5, 2014

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Adamas Pharmaceuticals, Inc.

Consolidated Balance Sheets

(in thousands except share and per share data)

 
   
   
  Pro forma
stockholders'
equity as of
December 31,
2013
 
 
  December 31,  
 
  2012   2013  
 
   
   
  (unaudited)
 

Assets

                   

Current assets

                   

Cash and cash equivalents

  $ 62,957   $ 85,612        

Accounts receivable, net

    890     129        

Prepaid expenses and other current assets

    348     267        
               

Total current assets

    64,195     86,008        

Property and equipment, net

    99     199        

Other assets

    9     9        
               

Total assets

  $ 64,303   $ 86,216        
               
               

Liabilities, convertible preferred stock
and stockholders' equity

                   

Current liabilities

                   

Accounts payable

  $ 3,255   $ 2,097        

Accrued liabilities

    1,406     2,119        

Convertible notes payable

    4,000            

Deferred revenue

    29,611            

Interest payable and other current liabilities

    208     2        
               

Total current liabilities

    38,480     4,218        

Warrant liability

    1,706     6,232        

Other non current liabilities

        12        
               

Total liabilities

    40,186     10,462        
               

Commitments and contingencies (Note 7)

                   

Convertible preferred stock, $0.001 par value—3,350,000 shares authorized in 2012, and 2013 respectively, and 2,359,587 shares issued and outstanding at December 31, 2012 and 2013, respectively and            shares outstanding pro forma (unaudited); liquidation value of $77,433 at December 31, 2012 and 2013, respectively

    19,149     19,149        
               

Stockholders' equity

                   

Common stock, $0.001 par value—10,000,000 shares authorized, 4,749,931 and 4,757,764 shares issued and outstanding at December 31, 2012 and 2013, respectively

    14     14        

Additional paid-in capital

    76,447     77,163        

Accumulated deficit

    (71,493 )   (20,572 )      
               

Total stockholders' equity

    4,968     56,605        
               

Total liabilities, convertible preferred stock and stockholders' equity                

  $ 64,303   $ 86,216        
               
               

   

The accompanying notes are an integral part of these financial statements.

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Adamas Pharmaceuticals, Inc.

Consolidated Statements of Operations and Comprehensive Income

(in thousands except per share data)

 
  Years Ended December 31,  
 
  2012   2013  

Revenue

  $ 37,471   $ 71,095  
           

Operating expenses

             

Research and development

    9,192     7,410  

General and administrative

    8,330     6,667  
           

Total operating expenses

    17,522     14,077  
           

Income from operations

    19,949     57,018  

Interest and other income (expense), net

    (1,537 )   (4,818 )

Interest expense

    (376 )   (88 )
           

Income before income taxes

    18,036     52,112  

Income tax expense

    (300 )   (1,191 )
           

Net income

  $ 17,736   $ 50,921  
           
           

Net income attributable to common stockholders

             

Basic

  $ 11,441   $ 33,068  
           
           

Diluted

  $ 11,596   $ 35,353  
           
           

Net income per share attributable to common stockholders

             

Basic

  $ 2.41   $ 6.96  
           
           

Diluted

  $ 2.34   $ 5.99  
           
           

Weighted average number of shares used in computing net income attributable to common stockholders

             

Basic

    4,744     4,753  
           
           

Diluted

    4,962     5,903  
           
           

   

The accompanying notes are an integral part of these consolidated financial statements.

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Adamas Pharmaceuticals, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity

(in thousands except share and per share data)

 
  Convertible
Preferred Stock
   
   
   
   
   
 
 
  Common Stock    
   
   
 
 
  Additional
Paid-In
Capital
  Accumulated
Deficit
  Total
Stockholders'
Equity
 
 
  Shares   Amount   Shares   Amount  

Balances at December 31, 2011

    1,833,916   $ 15,336     4,712,431   $ 14   $ 75,583   $ (89,229 ) $ (13,632 )
                               

Issuance of common stock in January 2012 in consideration of service at fair value of $1.97 per share

            32,500         64         64  

Issuance of common stock in July 2012 from the exercise of options for cash at $1.33 per share

            5,000         1         1  

Issuance of Series AA convertible preferred stock at $7.61 per share recorded at relative fair value, net of issuance costs of $188

    525,671     3,813                      

Vesting of common stock

                    2         2  

Employee stock-based compensation

                    221         221  

Nonemployee stock-based compensation

                    576         576  

Net income

                        17,736     17,736  
                               

Balances at December 31, 2012

    2,359,587     19,149     4,749,931     14     76,447     (71,493 )   4,968  
                               

Issuance of common stock in July 2013 from the exercise of options for cash at $2.73 per share

            7,833         16         16  

Vesting of common stock

                    8         8  

Modification of common stock purchase warrants

                    52         52  

Employee stock-based compensation

                    275         275  

Nonemployee stock-based compensation

                    365         365  

Net income

                        50,921     50,921  
                               

Balances at December 31, 2013

    2,359,587   $ 19,149     4,757,764   $ 14     77,163   $ (20,572 ) $ 56,605  
                               
                               

   

The accompanying notes are an integral part of these consolidated financial statements.

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Adamas Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 
  Years Ended
December 31,
 
 
  2012   2013  

Cash flows from operating activities

             

Net income

  $ 17,736   $ 50,921  

Adjustments to reconcile net income to net cash provided by operating activities

             

Depreciation and amortization

    41     66  

Stock-based compensation

    797     640  

Change in preferred stock warrant value

    1,330     4,526  

Provision for employee notes receivable

    158     1  

Noncash interest expense

    377      

Issuance of common stock and vesting of restricted common stock for services received

    67     52  

Changes in assets and liabilities

             

Prepaid expenses and other assets

    (39 )   79  

Accounts receivable

    (516 )   761  

Accounts payable

    1,799     (1,157 )

Accrued liabilities and other liabilities

    600     523  

Deferred revenue

    29,611     (29,611 )
           

Net cash provided by operating activities

    51,961     26,801  
           

Cash flows from investing activities

             

Purchase of property and equipment

    (24 )   (167 )
           

Net cash used in investing activities

    (24 )   (167 )
           

Cash flows from financing activities

             

Proceeds from issuance of convertible preferred stock, net of issuance costs

    3,948      

Proceeds from issuance of common stock upon exercise of stock options

    7     21  

Proceeds from issuance of convertible promissory notes and related warrants

    3,948      

Principal payments on convertible promissory notes

        (4,000 )
           

Net cash provided by (used in) financing activities

    7,903     (3,979 )
           

Net increase in cash and cash equivalents

    59,840     22,655  

Cash and cash equivalents at beginning of period

    3,117     62,957  
           

Cash and cash equivalents at end of period

  $ 62,957   $ 85,612  
           
           

Supplemental disclosure

             

Cash paid for interest

  $   $ 279  

Cash paid for income taxes

        1,501  

Supplemental disclosure of noncash items

             

Issuance of warrants for preferred stock in connection with 2012 notes and preferred stock financing

    269     200  

Accrued deferred offering costs

        85  

   

The accompanying notes are an integral part of these consolidated financial statements.

F-6


Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

1. The Company

        Adamas Pharmaceuticals, Inc. (the "Company") is a specialty pharmaceutical company focused on the development and commercialization of therapeutics targeting chronic disorders of the central nervous systems ("CNS"). The Company achieves this by enhancing the pharmacokinetic profiles of proven drugs to create novel therapeutics for use alone and in fixed-dose combination products. The Company is developing its lead wholly owned product candidate, ADS-5102, for a complication of Parkinson's disease known as levodopa induced dyskinesia ("LID") and as a treatment for chronic behavioral symptoms associated with traumatic brain injury ("TBI"). The Company has successfully completed a Phase 2/3 clinical study in LID and intends to initiate a Phase 3 registration trial in 2014. Its late-stage therapeutics portfolio also includes an NDA-submitted product candidate, MDX-8704, being co-developed with Forest Laboratories, Inc. ("Forest"), and an approved product, Namenda XR, which Forest developed and is marketing in the United States under a license from the Company.

        The Company was incorporated in the State of Delaware on November 15, 2000. The Company's headquarters and operations are located in Emeryville, California. The Company has two subsidiaries: Adamas Pharmaceuticals Asia Pte Limited (inactive) and Adamas India Pharmaceuticals Private Limited, which ceased operations in August 2013.

2. Summary of Significant Accounting Policies

    Basis of Presentation and Use of Estimates

        The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of the accompanying consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

        To date, nearly all of the Company's resources have been dedicated to the research and development of its products, and the Company has not generated any commercial revenue from the sale of its products. The Company does not anticipate the generation of any commercial product revenue until it receives the necessary regulatory approvals to launch one of its products.

        Based upon the current status of, and plans for, its product development, the Company believes that the existing cash and cash equivalents will be adequate to satisfy the Company's capital needs through at least the next twelve months. However, the process of developing and commercializing products requires significant research and development, preclinical testing and clinical trials, manufacturing arrangements as well as regulatory approvals. These activities, together with the Company's general and administrative expenses, are expected to result in significant operating losses until the commercialization of the Company's products or partner collaborations generate sufficient revenue to cover expenses. While the Company had net income during 2012 and 2013, it has not generated any commercial revenue from sales of its products. To achieve sustained profitability, the Company, alone or with others, must successfully develop its product candidates, obtain required regulatory approvals and successfully manufacture and market its products.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

    Unaudited Pro Forma Balance Sheet Information

        The unaudited pro forma stockholders' equity information in the accompanying consolidated balance sheet reflects that there are             shares of common stock outstanding and assumes: (i) the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock, (ii) the issuance of common stock upon conversion of the Series AA preferred stock issued upon net exercise of warrants, (iii) the related reclassification of the convertible preferred warrant liability to additional paid-in-capital. The unaudited pro forma stockholders' equity does not assume any proceeds from the proposed initial public offering.

    Reverse Stock Split

        In June 2011, the Board of Directors of the Company approved a reverse stock split of the Company's common stock. As a result, common stock, stock options and warrants to purchase common stock were adjusted in the ratio of 1:3, effective June 30, 2011. All common shares and per share amounts presented in these consolidated financial statements for all periods have been retroactively adjusted to reflect this reverse stock split (see Note 10). No fractional shares were issued.

    Consolidation

        The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

    Segments

        The Company operates in one segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. All long-lived assets are maintained in the United States.

    Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

    Revenue Recognition

        The Company recognizes revenue when all four of the following criteria have been met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Revenue under license and collaboration arrangements is recognized based on the performance requirements of the contract. Determinations of whether persuasive evidence of an arrangement exists and whether delivery has occurred or services have been rendered are based on management's judgments regarding the fixed nature of the fees charged for deliverables and the collectability of those fees. Should changes in conditions cause management to determine that these criteria are not met for any new or modified transactions, revenue recognized could be adversely affected.

        The Company generates revenue from collaboration and license agreements for the development and commercialization of products. Collaboration and license agreements may include non-refundable upfront license fees, partial or complete reimbursement of research and development costs, contingent

F-8


Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

consideration payments based on the achievement of defined collaboration objectives and royalties on sales of commercialized products. The Company's performance obligations under the collaborations may include the license or transfer of intellectual property rights, obligations to provide research and development services and related materials and obligations to participate on certain development and/or commercialization committees with the collaborators.

        On January 1, 2011, the Company adopted an accounting standards update that amends the guidance on accounting for new arrangements, or those materially modified, with multiple deliverables. This guidance eliminates the requirement for objective and reliable evidence of fair value of the undelivered items in order to consider a deliverable a separate unit of accounting. It also changes the allocation method such that the relative-selling-price method must be used to allocate arrangement consideration to the units of accounting in an arrangement. This guidance establishes the following estimation hierarchy that must be used in estimating selling price under the relative-selling-price method: (i) vendor-specific objective evidence of fair value of the deliverable, if it exists, (ii) third-party evidence of selling price, if vendor-specific objective evidence is not available or (iii) vendor's best estimate of selling price, if neither vendor-specific nor third-party evidence is available.

        On January 1, 2011, the Company adopted an accounting standards update that provides guidance on revenue recognition using the milestone method. Payments that are contingent upon achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved. Milestones are defined as events that can only be achieved based on the Company's performance and there is substantive uncertainty about whether the event will be achieved at the inception of the arrangement. Events that are contingent only on the passage of time or only on counterparty performance are not considered milestones subject to this guidance. Further, the amounts received must relate solely to prior performance, be reasonable relative to all of the deliverables and payment terms within the agreement and commensurate with the Company's performance to achieve the milestone after commencement of the agreement.

        Amounts related to research and development funding are recognized as the related services or activities are performed, in accordance with the contract terms. Payments may be made to or by the Company based on the number of full-time equivalent researchers assigned to the collaboration project and the related research and development expenses incurred.

    Concentration of Credit Risk

        Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents and accounts receivable. Substantially all the Company's cash and cash equivalents are held at one financial institution that management believes is of high credit quality. Such deposits generally exceed federally insured limits.

    Risk and Uncertainties

        The Company's future results of operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, uncertainty of results of clinical trials and reaching milestones, uncertainty of market acceptance of the Company's products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

        Products developed by the Company require approvals from the U.S. Food and Drug Administration ("FDA") or other international regulatory agencies prior to commercial sales. There can be no assurance that the products will receive the necessary approvals. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval, it could have a materially adverse impact on the Company.

        The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company may require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. Additional funds may not be available on acceptable terms, if at all. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs which would materially and adversely affect its business, financial condition and operations.

    Property and Equipment

        Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three and ten years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in operations in the period realized. Costs of maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized.

    Accounting for Long-Lived Assets

        The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by the comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. There have been no such impairments of long-lived assets as of December 31, 2013.

    Preclinical and Clinical Trial Accruals

        The Company's clinical trial accruals are based on estimates of patient enrollment and related costs at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations ("CROs") that conduct and manage clinical trials on the Company's behalf.

        The Company estimates preclinical and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on its behalf. In accruing service fees, the Company

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

estimates the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. The Company has had no significant adjustments to accrued preclinical and clinical trial expenses through December 31, 2013.

    Convertible Preferred Stock

        The Company has classified the convertible preferred stock as temporary equity in the balance sheets due to certain change in control events that are outside the Company's control, including liquidation, sale or transfer of the Company, as holders of the convertible preferred stock can cause redemption of the shares.

    Convertible Preferred Stock Warrants

        The Company accounts for its convertible preferred stock warrants as a liability based upon the characteristics and provisions of each instrument. Convertible preferred stock warrants classified as a liability are recorded on the Company's balance sheet at their fair value on the date of issuance and are revalued on each subsequent balance sheet, with fair value changes recognized as increases or reductions in the statements of operations. The Company adjusts the liability for changes in fair value of these warrants until the earlier of: (i) exercise of warrants, (ii) expiration of warrants, (iii) a change of control of the Company or (iv) the closing of the Company's initial public offering ("IPO"). At that time, the convertible preferred stock warrant liability will be adjusted to fair value in the consolidated statements of operations and comprehensive income (loss) with the final fair value reclassified to additional paid-in capital.

    Research and Development

        Research and development costs are charged to operations as incurred. Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, consulting costs, and allocated overhead, including rent, equipment depreciation, and utilities.

    Fair Value of Financial Instruments

        The carrying value of the Company's cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, other assets, accounts payable, accrued liabilities, and convertible notes payable approximate fair value due to the short-term nature of these items. Based on the borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the convertible notes payable approximates their fair value. The convertible preferred stock warrant liability is carried at fair value (see Note 8).

        Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

        The fair value hierarchy has three levels that prioritize the inputs used in fair value measurements:

Level 1   Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2

 

Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3

 

Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

        The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

        The Company's financial instruments consist of Level 1 assets and Level 3 liabilities. Level 1 securities include highly liquid money market funds. Level 3 liabilities that are measured at fair value on a recurring basis consist of the convertible preferred stock warrant liability.

    Income Taxes

        The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

        The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position's sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

    Foreign Currency Translation

        For non U.S. operations, the U.S. dollar is the functional currency. Monetary assets and liabilities of the foreign subsidiary are translated into U.S. dollars at current exchange rates. Nonmonetary assets such as property and equipment are translated at historical rates. Income and expense items are translated at average rates of exchange prevailing during the period of the related transactions, except that depreciation charged to operations is translated at historical rates.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

    Stock-Based Compensation

        The Company accounts for stock-based employee compensation arrangements in accordance with provisions of ASC 718, "Compensation—Stock Compensation." ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.

        The Company accounts for equity instruments issued to nonemployees in accordance with the provisions of ASC 505-50, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." Equity instruments issued to nonemployees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the underlying equity instruments vest.

    Comprehensive Income (Loss)

        Comprehensive income (loss) is defined as a change in equity of a business enterprise during a period, resulting from transactions from non-owner sources. There have been no items qualifying as comprehensive income (loss) and, therefore, for all periods presented, the Company's comprehensive income (loss) was the same as its reported net income (loss).

    Deferred Offering Costs

        Deferred offering costs, which primarily consist of direct incremental legal and accounting fees relating to the initial public offering ("IPO"), are capitalized. The deferred offering costs will be offset against IPO proceeds upon the consummation of the offering. In the event the offering is terminated, deferred offering costs will be expensed.

    Net Income (Loss) Per Share Attributable to Common Stockholders

        The Company calculates its basic and diluted net income (loss) per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities. Under the two-class method, the Company determines whether it has net income attributable to common stockholders, which includes the results of operations less current period convertible preferred stock non-cumulative dividends. If it is determined that the Company does have net income attributable to common stockholders during a period, the related undistributed earnings are then allocated between common stock and the convertible preferred stock based on the weighted average number of shares outstanding during the period to determine the numerator for the basic net income per share attributable to common stockholders. In computing diluted net income attributable to common stockholders, undistributed earnings are re-allocated to reflect the potential impact of dilutive securities to determine the numerator for the diluted net income per share attributable to common stockholders. The Company's basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period. The diluted net income (loss) per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock and common stock warrants are considered common stock equivalents.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

    Recent Accounting Pronouncements

        From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company's financial position or results of operations upon adoption.

        In February 2013, the FASB issued guidance which addresses the presentation of amounts reclassified from accumulated other comprehensive income. This guidance does not change current financial reporting requirements, instead an entity is required to cross-reference to other required disclosures that provide additional detail about amounts reclassified out of accumulated other comprehensive income. In addition, the guidance requires an entity to present significant amounts reclassified out of accumulated other comprehensive income by line item of net income if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. Adoption of this standard is required for periods beginning after December 15, 2012 for public companies. The amended guidance became effective for the Company in the first quarter of fiscal year 2013. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

3. Balance Sheet Components

    Prepaid expenses and other current assets (in thousands)

 
  December 31,  
 
  2012   2013  

Prepaid expenses

  $ 200   $ 237  

Prepaid clinical trial

    16     10  

Other current assets

    132     20  
           

  $ 348   $ 267  
           
           

    Property and equipment, net (in thousands)

 
  December 31,  
 
  2012   2013  

Computer equipment and software

  $ 206   $ 330  

Office equipment

    84     60  

Furniture and fixtures

    137     121  

Leasehold improvements

    6     25  
           

    433     536  

Less: Accumulated depreciation and amortization

    (334 )   (337 )
           

  $ 99   $ 199  
           
           

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Balance Sheet Components (Continued)

    Accrued liabilities (in thousands)

 
  December 31,  
 
  2012   2013  

Accrued vacation

  $ 277   $ 317  

Accrued salaries and bonus

        1,349  

Preclinical and clinical trial accruals

    535     104  

Consulting expenses

    73     180  

Income and other taxes

    362     101  

Other

    159     68  
           

  $ 1,406   $ 2,119  
           
           

4. Collaboration and License Agreements

        In November 2012, the Company entered into a license agreement with a wholly owned subsidiary of Forest, which granted Forest an exclusive license with right to sublicense certain of the Company's intellectual property rights in the United States in connection with the development and commercialization of MDX-8704 and marketing of Forest's approved product Namenda XR for the treatment of moderate to severe dementia related to Alzheimer's disease. Pursuant to the agreement, Forest made an upfront payment of $65.0 million. The Company was eligible to receive additional cash payments totaling up to $95.0 million upon achievement by Forest of certain development and regulatory milestones in addition to tiered royalty payments based on future net sales of the product upon commercialization.

        The Company identified the following two non-contingent performance deliverables under the license agreement: (i) transfer of intellectual property rights ("license and know-how" or "license") and (ii) the obligation to participate on Joint Development Committee ("JDC"). The Company concluded that the license does not have standalone value from the know-how and therefore the two together have been accounted for as a single unit of accounting. There was no separate consideration identified in the agreement for the two deliverables and there was no right of return under the agreement. The Company considered the provisions of the multiple-element arrangement guidance in determining whether the deliverables outlined above have standalone value. The transfer of license has standalone value as the agreement allows Forest to sublicense its rights to the acquired license to a third party. Further, the Company believes that Forest has research and development expertise with compounds similar to those licensed under the agreement and has the ability to engage other third parties to develop these compounds allowing Forest to realize the value of the license without receiving any of the remaining deliverables. Therefore, the participation in JDC is deemed to have standalone value.

        The Company developed its best estimates of selling prices ("BESP") for each deliverable in order to allocate the non-contingent arrangement consideration to the two units of accounting. Based on BESP analysis, value assigned to JDC was a negligible amount. Accordingly, the entire upfront license fee of $65.0 million was allocated to transfer of license and technical know-how. A straight-line pattern of revenue recognition is only acceptable when a more precise pattern cannot be discerned. The way in which the transfer of know-how occured did not give rise to a more precise pattern of recognition and the Company therefore recognized revenue on a straight-line basis over the period of the transfer of the know-how (November 2012 to February 2013).

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

4. Collaboration and License Agreements (Continued)

        In November and December 2013, the Company received a total of $40.0 million in milestone payments under its license agreement with Forest. The milestone payments were for the successful completion of studies that support the planned New Drug Application filing with the FDA for MDX-8704 by Forest. These amounts have been recorded as revenue in the consolidated statement of operations and comprehensive income during 2013.

5. Borrowings

    2012 Notes and Preferred stock

        In March 2012, the Company issued convertible promissory notes ("2012 Notes") pursuant to a convertible notes, Series AA preferred stock and warrants agreement ("2012 Notes and Preferred Stock Agreement") with various investors, raising proceeds of $9.3 million in multiple drawdowns with each drawdown to be divided in equal parts between convertible note and Series AA convertible preferred stock.

        The 2012 Notes accrue at an interest rate of 10.0% per annum (upon an event of default, all unpaid principal and accrued interest will accrue at the default rate of 20%) and had a maturity date at the earliest of:

    i.
    March 2013,

    ii.
    upon an event of default or

    iii.
    pursuant to prepayment:

    a.
    at the Company's election at its sole discretion following a subsequent sale of the Company's equity securities led by an investor not currently affiliated with the Company and from which the Company receives $15.0 million or such lower amount approved by a majority of the holders of the 2012 notes (a "Subsequent Financing") in which the financing is priced by a strategic investor as determined in good faith by the Company's board of directors (a "Strategic Financing") or

    b.
    automatically upon a "Corporate Transaction," defined as a liquidation event, a deemed liquidation event, a firm commitment underwritten IPO, or a Strategic Financing in which $50.0 million or more in cash payments are made to the Company.

        The principal and accrued interest on the 2012 Notes are convertible into "Conversion Shares" (defined as common stock, preferred stock or any securities conferring the right to purchase, convertible into, or exchangeable for the Company's common stock or preferred stock) upon (a) a Subsequent Financing or (b) a Strategic Financing at the sole discretion of the Company. The number of conversion shares shall be equal to the quotient obtained by dividing the outstanding principal and unpaid accrued interest on date of conversion by conversion price (defined as 80% of price paid per share by investors in subsequent financing).

        In connection with the execution of the 2012 Note and Preferred Stock Agreement, the investors deposited $9.3 million into an escrow account in March and May 2012. The Company drew down $8.0 million in six closings between March and November 2012. In November 2012, the Company determined that no further drawdowns were needed and the remaining $1.3 million (plus interest accrued within the escrow account) were released from the escrow account to the investors.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Borrowings (Continued)

        The Company also issued warrants to purchase equity securities upon each drawdown (see Note 6). The warrant liability has been recorded at its estimated full fair value. The remaining proceeds have been allocated between Series AA preferred stock and 2012 Notes based on their relative fair values.

        In connection with the 2012 Notes, the Company determined that the subsequent financing and strategic financing put options were embedded derivatives but had negligible value. Further, the cash settled put option upon an event of default or Corporate Transaction was not considered to be an embedded derivative as the debt did not result in a substantial premium or discount in the recorded basis of debt. The Company repaid all principal and accrued interest on these notes during 2013.

6. Warrants to Purchase Common or Preferred Stock

    Common stock warrants

        In June 2011, the Company recapitalized its outstanding preferred stock and warrants to purchase preferred stock as part of Series AA financing. Pursuant to the recapitalization agreement, the Company raised $7.0 million in gross proceeds by issuing 907,005 shares of Series AA preferred stock at $7.61 per share (incurred $176,650 as stock issuance costs) and each then outstanding Series A, B, C, C-1, and D preferred stock converted into common stock. Upon conversion, there was a reverse stock split in the ratio of 1:3.

        In conjunction with the convertible promissory notes issued in November 2002 and September 2003, the Company issued warrants to purchase 11,110 shares and 44,442 shares, respectively, of the Company's Series A convertible preferred stock. The warrants expire ten years from issuance. The relative fair value of these warrants was determined to be approximately $49,188 and $205,001, respectively, and was amortized to interest expense over the term of each loan. These preferred stock warrants converted to warrants to purchase common stock as part of the Company's recapitalization transaction during 2011. The warrants to purchase 11,110 shares of common stock expired in November 2012 while warrants to purchase 44,442 shares remain outstanding as of December 31, 2012 and December 31, 2013.

        The warrants to purchase 44,442 shares of common stock that were scheduled to expire in September 2013 were modified to extend their term by one additional year. As such, the Company has recorded an expense of $51,636. These warrants were outstanding as of December 31, 2013.

        In conjunction with the convertible promissory notes issued in November 2004, the Company issued warrants to purchase 57,224 shares of common stock at $1.05 per share. The warrants expire on November 26, 2014. The relative fair value of these warrants was determined to be $53,496 and is being amortized to interest expense over the term of the convertible note. To induce payment of the note in cash rather than the holder exercising their conversion option, the warrant holder relinquished the right to purchase 14,308 shares of the Company's common stock provided for under the original warrant. Upon modification of the warrants, the Company recorded a gain of $29,149 during the year ended December 31, 2006 which was equal to the fair market value of the relinquished share purchase right. The gain was recorded in interest and other income and as a reduction in additional paid in capital. As of December 31, 2012, the warrant holder had the right to purchase 42,916 shares of the Company's common stock. The warrants were outstanding as of December 31, 2012 and December 31, 2013.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

6. Warrants to Purchase Common or Preferred Stock (Continued)

        In 2006, the Company issued a warrant to purchase 6,666 shares of common stock at an exercise price of $3.75 per share to a consultant in consideration for the provision of such third-party services. The common stock warrant was exercisable for a period of 10 years. The Company recorded $12,837 in additional paid in capital at the time of issuance. The warrant was outstanding as of December 31, 2012 and December 31, 2013.

        In connection with the first two draw-downs pertaining to the 2006 Term Loan, made in 2006 for a total of $1.5 million, the Company issued warrants to purchase a total of 6,793 shares of the Company's Series B preferred stock. Using the Black-Scholes model with a volatility of 84%, term of ten years and a risk-free interest rate of 4.72%, the fair value of the warrants was determined to be $121,336 and was recorded as warrant liability and discount against the borrowings and is being amortized to interest expense over the term of the loan. These preferred stock warrants converted to warrants to purchase common stock as part of the Company's recapitalization transaction during 2011. The common stock warrants were outstanding as of December 31, 2012 and December 31, 2013.

        In connection with the third draw-down pertaining to the 2006 Term Loan, made in 2007 for $500,000, the Company issued a warrant to purchase 2,264 shares of the Company's Series B preferred stock. Using the Black-Scholes model with a volatility of 73%, term of ten years and a risk free interest rate of 4.72%, the fair value of the warrant was determined to be $47,278 and was recorded as warrant liability and discount against the borrowings and is being amortized to interest expense over the term of the loan. These preferred stock warrants converted to warrants to purchase common stock as part of the Company's recapitalization transaction during 2011. The common stock warrants were outstanding as of December 31, 2012 and December 31, 2013.

        In connection with the first draw-down of $500,000 in June 2008 pertaining to the 2008 Term Loan, the Company issued warrants to purchase a total of 1,957 shares of the Company's Series D preferred stock. Using the Black-Scholes model with a volatility of 82%, term of ten years and a risk-free interest rate of 3.99%, the fair value of the warrants was determined to be $46,266 and was recorded as warrant liability and discount against the borrowings and is being amortized to interest expense over the term of the loan. These preferred stock warrants converted to warrants to purchase common stock as part of the Company's recapitalization transaction during 2011. The common stock warrants were outstanding as of December 31, 2012 and December 31, 2013.

        In connection with the second draw-down of $1.5 million in December 2008 pertaining to the 2008 Term Loan, the Company issued warrants to purchase a total of 1,601 shares of the Company's Series D preferred stock. Using the Black-Scholes model with a volatility of 85%, term of ten years and a risk-free interest rate of 2.25%, the fair value of the warrants was determined to be $20,239 and was recorded as warrant liability and discount against the borrowings and is being amortized to interest expense over the term of the loan. These preferred stock warrants converted to warrants to purchase common stock as part of the Company's recapitalization transaction during 2011. The common stock warrants were outstanding as of December 31, 2012 and December 31, 2013.

    Convertible preferred stock warrants

        In connection with the 2011 Notes and warrant purchase agreement, the Company issued warrants to purchase 27,924 shares of Series AA preferred stock. Using the Black-Scholes model with a volatility of 90%, expected term of 3 years and risk-free interest rate of 0.82%, the fair value of the warrant

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

6. Warrants to Purchase Common or Preferred Stock (Continued)

liability was determined to be $12,504 and was recorded as debt discount and amortized in 2011. The warrants were outstanding as of December 31, 2012 and December 31, 2013.

        In connection with the issuance of Series AA preferred stock in June 2011, the Company issued warrants to purchase 231,381 shares of Series AA preferred stock. Using the Black-Scholes model with a volatility of 90%, expected term of 3 years and a risk-free interest rate of 0.82%, the fair value of the warrant liability was determined to be $64,787 and was recorded as a reduction against the value of Series AA preferred stock. The warrants were outstanding as of December 31, 2012 and December 31, 2013.

        In conjunction with the issuance of the 2012 Notes, the Company issued warrants to purchase equity securities (the "2012 Warrants"). The 2012 Warrants become exercisable on the date the 2012 Notes are converted into the Company's equity securities (or upon cash settlement of the strategic financing put option) and expire on March 22, 2019, or if there is a Corporate Transaction prior to the date the 2012 Notes are converted, the 2012 Warrants will be automatically net exercised immediately prior to the closing of a Corporate Transaction.

        The number and class of shares into which the 2012 Warrants are exercisable are determined as follows:

    Number of shares

    If the 2012 Notes convert into shares of the Company's equity securities through the financing put options, then the 2012 Warrants are exercisable into a number of shares equal to: (1) 10% of the principal amount of the 2012 Notes issued to the warrant holder divided by (2) the "Conversion Price," which is the greater of (a) $7.61 and (b) 80% of the price paid by subsequent investors.

    Upon a Corporate Transaction or in the event the Company elects to settle the strategic financing put option in cash, then the 2012 warrants are exercisable into a number of AA Preferred equal to: (1) 10% of the principal of the 2012 Notes issued to the warrant holder divided by (2) $7.61.

    Class of shares

    If the conversion price is equal to $7.61, the 2012 Warrants become exercisable into AA Preferred.

    If the conversion price is greater than $7.61, the 2012 Warrants convert into the class of equity securities issued through the exercise of the financing put options.

        In order to determine a fair value for the 2012 Warrants upon issuance of the 2012 Notes, the Company evaluated multiple potential outcomes using the option pricing model value depending on the scenario while applying estimated probabilities to each scenario value. These scenarios included potential subsequent financing, strategic financing and corporate transaction at different times during 2012. Accordingly, the Company determined the fair value of the warrants to be $268,763, which was recorded as a convertible preferred stock warrant liability and a debt discount. Upon repayment of the 2012 Notes in 2013, the warrants became exercisable to purchase 52,025 shares of Series AA convertible preferred stock at $7.61 per share.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

6. Warrants to Purchase Common or Preferred Stock (Continued)

        The Company remeasures its preferred stock warrants at each reporting period and records the change in fair value in the consolidated statement of operations and comprehensive income. The Company remeasured their preferred warrants at December 31, 2012 and 2013 and recorded a change in fair value of $1.3 million and $4.5 million, respectively, in the consolidated statement of operations and comprehensive income under interest and other income (expense), net. The warrants were outstanding as of December 31, 2012 and 2013.

        The following table summarizes the outstanding warrants as of:

 
  Number of shares outstanding  
 
  December 31,  
 
  2012   2013  

Series AA convertible preferred stock warrants issued in 2011

    259,305     259,305  

Series AA convertible preferred stock warrants issued in 2012

    *     52,025  

Common stock warrants

    106,639     106,639  

*
not determinable as the number of shares is dependant upon the conversion or repayment of the 2012 Notes.

7. Commitments and Contingencies

        The Company leases various facilities under operating leases with various expiration dates. In 2013, the Company amended its facility lease agreement which expires on February 28, 2016. Rent expense for the years ended December 31, 2012 and 2013 was $122,148 and $213,960, respectively.

        As of December 31, 2013, future minimum lease payments under non-cancelable facility operating leases were as follows:

2014

   
227,769
 

2015

    234,603  

2016

    39,291  
       

Total

    501,663  
       
       

    Contingencies

        In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

    Indemnification

        In accordance with the Company's amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

7. Commitments and Contingencies (Continued)

certain events or occurrences, subject to certain limits, while they are serving in such capacity. There have been no claims to date and the Company has a director and officer insurance policy that may enable it to recover a portion of any amounts paid for future claims.

    Litigation

        The Company is not a party to any material litigation and does not have contingent reserves established for any litigation liabilities.

8. Fair Value Measurements

        The following table sets forth the Company's financial instruments that were measured at fair value on a recurring basis at December 31, 2012 by level within the fair value hierarchy (in thousands):

 
  Fair Value Measurements at
December 31, 2012
 
 
  Total   Level 1   Level 2   Level 3  

Assets

                         

Money market fund

  $ 61,703   $ 61,703   $   $  

Liabilities

                         

Preferred stock warrant liability

  $ 1,706   $   $   $ 1,706  

        The following table sets forth the Company's financial instruments that were measured at fair value on a recurring basis at December 31, 2013 by level within the fair value hierarchy (in thousands):

 
  Fair Value Measurements at
December 31, 2013
 
 
  Total   Level 1   Level 2   Level 3  

Assets

                         

Money market fund

  $ 83,700   $ 83,700   $   $  

Liabilities

                         

Preferred stock warrant liability

  $ 6,232   $   $   $ 6,232  

        Upon issuance of the convertible preferred stock warrants, the Company estimates the fair value of the liability and subsequent remeasurement using the option pricing model at each reporting date, using the following inputs: the risk-free interest rates; the expected dividend rates; the remaining expected life of the warrants; and the expected volatility of the price of the underlying stock. The estimates are based, in part, on subjective assumptions and could differ materially in the future.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

8. Fair Value Measurements (Continued)

        The following table includes a roll forward of the financial instruments classified within Level 3 of the fair value hierarchy (in thousands):

 
  Amounts  

Fair Value Using Level 3 Inputs

       

Balance at December 31, 2011

 
$

107
 

Issuance of preferred stock warrant liability

    269  

Change in fair value recorded in interest and other income/expense

    1,330  
       

Balance at December 31, 2012

    1,706  

Change in fair value recorded in interest and other income/expense

    4,526  
       

Balance at December 31, 2013

  $ 6,232  
       
       

9. Convertible Preferred Stock

        The Company's amended and restated certificate of incorporation authorizes 3,350,000 shares of convertible preferred stock, 2,500,000 of which are designated as Series AA and 850,000 of which are designated as Series AA-1.

        At December 31, 2012 and 2013, the convertible preferred stock consists of the following (in thousands except share and per share data):

 
  Shares    
   
 
 
  Per Share Liquidation Preference   Carrying Value  
Series
  Authorized   Outstanding  

Series AA

    2,500,000     1,715,810   $ 7.61   $ 6,521  

Series AA-1

    850,000     643,777     100.00     12,628  
                     

    3,350,000     2,359,587         $ 19,149  
                     
                     

    Amended and Restated Certificate of Incorporation

        In June 2011, in connection with the recapitalization transaction and Series AA preferred stock financing, the Company amended and restated its certificate of incorporation. The significant rights and preferences of preferred stock are as follows:

    Dividends

        The preferred stockholders are entitled to receive, when and as declared by the Board of Directors, out of funds legally available, cash dividends at the rate of 8% of the original issue price per annum on each outstanding share of Series AA and AA-1 preferred stock. Such dividends are payable when, as and if declared by the Board of Directors and are noncumulative. No dividends have been declared to date.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

9. Convertible Preferred Stock (Continued)

    Liquidation

        Upon liquidation, dissolution or winding up of the Company and including a merger, acquisition or sale of assets, before distribution or payment is made to the holders of common stock, the holders of Series AA and Series AA-1 preferred stock are entitled to a liquidation preference of an amount per share equal to the original issue price for the preferred stock (as adjusted for any stock dividends, stock splits or recapitalization and similar events), plus all declared and unpaid dividends thereon to the date fixed for such distribution. After the payment of the full liquidation preference, all remaining assets available for distribution, if any, shall be distributed among the holders of common stock. If available assets are insufficient to pay the full liquidation preference, the available assets will be distributed pro rata to the holders of Series AA and Series AA-1 preferred stock based on their liquidation preferences. The holders of Series AA-1 preferred stock will not participate in cash distributions upon liquidation if sufficient liquidation proceeds exist to fully satisfy their $100 per share liquidation preference. In such a situation, the holders of Series AA-1 preferred stock would instead participate through common shares held, which would entitle the holder to participate in the residual assets on a pro-rata basis.

    Conversion

        At the option of the holder thereof, each share of the Series AA preferred stock is convertible, at any time or from time to time, into fully paid and nonassessable shares of common stock as is determined by dividing the applicable original issue price for the Series AA preferred stock by the applicable conversion price for such series.

    Automatic Conversion

        Each share of the Series AA preferred stock shall automatically be converted into shares of common stock immediately upon the earlier of (i) at anytime upon the affirmative election of the holders of a majority of the then-outstanding shares of the preferred stock or (ii) immediately upon the closing of a firmly underwritten public offering, the public offering price which results in proceeds to the Company of at least $40.0 million, net of underwriting discounts and commissions. Upon the closing of a firmly underwritten public offering the Series AA-1 preferred stock shall automatically be converted into one one-thousandth of a share of common stock.

    Voting

        Each holder of Series AA preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such holder's shares of preferred stock could be converted as of the record date. The Series AA-1 preferred stock is non-voting stock except as required by law.

10. Shareholders' Equity

    Common Stock

        The amended and restated certificate of incorporation authorizes the Company to issue 10.0 million shares of common stock. Common stockholders are entitled to dividends as and when declared by the Board of Directors, subject to the rights of holders of all classes of stock outstanding

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Shareholders' Equity (Continued)

having priority rights as to dividends. There have been no dividends declared to date. Each share of common stock is entitled to one vote.

        The Company has classified all early exercised options as employee deposits (a liability) as these options are not considered to be substantive exercises until vested. At December 31, 2012 and 2013, 2,500 and zero shares of common stock respectively from early exercised options were unvested.

    Shares reserved for Future Issuance

        Shares of Company's common stock reserved for future issuance are as follows:

 
  December 31,  
 
  2012   2013  

Conversion of convertible preferred stock

    1,716,454     1,716,454  

Common stock options outstanding

    1,571,512     1,777,850  

Common stock options available for grant

    100,389     886,218  

Warrants to purchase common stock

    106,645     106,645  

Warrants to purchase convertible preferred stock

    259,305     311,330  
           

Total

    3,754,305     4,798,497  
           
           

        The above table does not include the Series AA preferred stock warrants issued in connection with the 2012 Notes, as they are dependent on the repayment or conversion of the 2012 Notes.

    Restricted Stock

        The Company has entered into Restricted Stock Agreements with founders, employees or consultants. Pursuant to these agreements, the Company has the right but not the obligation, to repurchase the unvested shares of common stock upon termination of employment or consulting arrangement at the original purchase price per share. The repurchase rights with respect to these shares lapse over a term of up to four years. At December 31, 2012 and 2013, 2,500 and zero shares of common stock, respectively, were subject to repurchase by the Company.

11. Stock Option Plans

        In October 2002, the Company established its 2002 Employee, Director and Consultant Stock Plan (the "2002 Plan") which provides for the granting of stock options to employees and consultants of the Company and issuance of restricted shares of common stock. Options granted under the 2002 Plan could be either incentive stock options ("ISOs") or nonqualified stock options ("NSOs"). ISOs could be granted only to Company employees. NSOs could be granted to Company employees and consultants.

        In December 2007, the Company established its 2007 Stock Plan. No further grants will be made under the 2002 Plan. The 2007 Stock Plan provides both for the direct award or sale of shares and for the grant of options to purchase shares. Options granted under the 2007 Stock Plan could either be ISOs or NSOs. ISOs could be granted only to Company employees. NSOs could be granted to Company employees and consultants.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Stock Option Plans (Continued)

        Options granted under the 2007 Stock Plan may have terms of up to ten years. All options issued to date have had a ten year life. The exercise price of an ISO shall not be less than 100% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. The exercise price of an ISO and NSO granted to a 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, respectively, as determined by the Board of Directors. The exercise price of a NSO shall not be less than the par value per share of common stock. The options granted generally vest over five years and vest at a rate of 20% upon the first anniversary of the issuance date and 1/48th per month thereafter.

        Under the terms of the 2002 Plan and 2007 Stock Plan, all options are fully exercisable on the grant date, subject to the Company's repurchase right, which under the 2002 Plan is at the original exercise price and under the 2007 Stock Plan is at the lower of original exercise price or fair value. The repurchase rights lapse over the options' vesting period of generally five years.

        Activity under the Company's stock option plans is set forth below:

 
   
  Outstanding Options    
 
 
  Shares
Available
for Grant
  Number of
Shares
  Weighted
Average
Exercise
Price
  Aggregate Intrinsic
Value
(thousands)
 

Balances, December 31, 2011

    343,657     1,397,342   $ 2.36        

Options granted

    (272,500 )   272,500     1.33        

Options exercised

        (5,000 )   1.33        

Options cancelled

    93,330     (93,330 )   2.11        

Options retired

    (64,098 )              
                       

Balances, December 31, 2012

    100,389     1,571,512   $ 2.20   $ 599  

Additional shares reserved

    1,000,000                

Options granted

    (308,000 )   308,000     6.15        

Options exercised

        (7,833 )   2.73        

Options cancelled

    93,829     (93,829 )   1.99        
                       

Balances, December 31, 2013

    886,218     1,777,850   $ 2.89   $ 3,701  
                       
                       

        The aggregate intrinsic value of options exercised was $8,100 and $28,762 for the years ended December 31, 2012 and 2013, respectively.

        The following table summarizes information about stock options as of December 31, 2012:

 
  Options Outstanding and Exercisable  
Exercise Price
  Number
Outstanding
  Weighted
Average
Remaining
Contractual
Life (in Years)
  Weighted
Average
Exercise
Price
 

$0.15-0.45

    1,666     1.00   $ 0.15  

$1.05-1.33

    1,056,424     8.58     1.32  

$3.48-4.50

    513,422     5.16     4.01  
                   

    1,571,512     7.46   $ 2.20  
                   
                   

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Stock Option Plans (Continued)

        The following table summarizes information about stock options as of December 31, 2013:

 
  Options Outstanding and Exercisable  
Exercise Price
  Number
Outstanding
  Weighted
Average
Remaining
Contractual
Life (in Years)
  Weighted
Average
Exercise
Price
 

$0.15-0.45

    1,666     0.01   $ 0.15  

$1.05-1.33

    980,965     7.55     1.32  

$3.38-4.50

    795,219     6.31     4.84  
                   

    1,777,850     6.99   $ 2.89  
                   
                   

Stock-Based Compensation

        During the years ended December 31, 2012 and 2013, the Company granted stock options to employees to purchase 220,000 and 261,000 shares of common stock respectively with a weighted-average grant date fair value of $2.17 per share and $17.45 per share, respectively. As of December 31, 2013, there was total unrecognized compensation cost of $5.0 million. This cost is expected to be recognized over a period of 4.55 years. The total fair value of employee stock options vested for the years ended December 31, 2012 and 2013 was $183,324, and $240,650, respectively.

        Stock-based compensation expense related to employee options for the years ended December 31, 2012 and 2013 was $220,732, and $275,073, respectively.

        The Company estimated the fair value of stock options using the Black-Scholes option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards.

        The fair value of employee stock options was estimated using the following assumptions:

 
  Year Ended
December 31,
 
 
  2012   2013  

Expected volatility

    91-92%     89-100%  

Risk-free interest rate

    1.15%-1.41%     1.45%-2.48%  

Dividend yield

         

Expected term (in years)

    7.00     7.25  

Determining Fair Value of Stock Options

        The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

        Weighted-Average Expected Term:     The expected term of options granted is determined using the average period the stock options are expected to remain outstanding and is based on the options vesting term, contractual terms and historical exercise and vesting information used to develop

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Stock Option Plans (Continued)

reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

        Volatility:     The expected stock price volatility assumption was determined by examining the historical volatilities of a group of industry peers, as the Company did not have any trading history for the Company's common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company's common stock becomes available.

        Risk-Free Interest Rate:     The risk-free rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

        Dividend Yield:     The expected dividend assumption was based on the Company's history and expectation of dividend payouts.

        Forfeitures:     Forfeitures were estimated based on historical experience.

        Fair Value of Common Stock:     The fair value of the shares of common stock underlying the stock options has historically been the responsibility of and determined by the Company's board of directors. Because there has been no public market for the Company's common stock, the board of directors determined fair value of common stock at the time of grant of the option by considering a number of objective and subjective factors including independent third-party valuations of the Company's common stock, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, amongst other factors. The fair value of the underlying common stock will be determined by the Company's board of directors until such time as the Company's common stock is listed on an established exchange, after which it will be determined based on the closing price on that exchange.

Nonemployee Stock-Based Compensation

        During the years ended December 31, 2012 and 2013, the Company granted options to purchase 52,500 and 47,000 shares of common stock to consultants, respectively. These options are granted in exchange for consulting services to be rendered and vest over the term of the consulting agreement.

        The Company has estimated fair value of common stock options granted to nonemployees using the Black-Scholes option pricing model with the following assumptions:

 
  Year Ended
December 31,
 
 
  2012   2013  

Expected volatility

    89%-92%     88%-98%  

Risk-free interest rate

    0.87%-1.93%     1.02%-2.72%  

Dividend yield

         

Contractual life (in years)

    6.25-10.00     5.25-10.00  

        Compensation expense related to nonemployee options for the years ended December 31, 2012 and 2013 was $575,460 and $364,490, respectively.

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Stock Option Plans (Continued)

    Total Stock-Based Compensation

        Total stock-based compensation expense was allocated as follows (in thousands):

 
  Year Ended
December 31,
 
 
  2012   2013  

Research and development

  $ 269   $ 304  

General and administrative

    528     336  
           

  $ 797   $ 640  
           
           

12. Related Party Transactions

        In July 2008, the Company loaned an officer, who is no longer associated with the Company, $200,000 by issuing a full recourse promissory note bearing interest at 3.45% per annum. The note is due at the earliest of (i) July 2012, (ii) the Company's initial filing for an IPO, or (iii) the termination of employment of the officer. The Company recorded accrued interest income of $20,634 as of December 31, 2013. Subsequent amendments were made to the terms of the note to (a) reduce the interest rate to 0.55% effective April 1, 2011, and (b) extension the maturity date to July 1, 2014. A reserve in the amount of $220,634 for the outstanding principal and accrued interest has been reflected in the consolidated financial statements as of December 31, 2013.

        The officer notes are included in prepaid and other current assets on the consolidated balance sheets.

13. Income Taxes

        Income before provision for income tax is summarized as follows (in thousands):

 
  Year Ended December 31,  
 
  2012   2013  

United States

  $ 17,989   $ 52,095  

International

    47     18  
           

Total

  $ 18,036   $ 52,113  
           
           

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Table of Contents


Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

        The income tax provision is summarized as follows (in thousands):

 
  December 31,  
 
  2012   2013  

Current:

             

Federal

  $ 297   $ 1,190  

State

    6     1  

Foreign

    (2 )   (1 )
           

    301     1,190  
           

Deferred:

             

Federal

         

State

         

Foreign

    (1 )   1  
           

    (1 )   1  
           

Provision for income tax

  $ 300   $ 1,191  
           
           

        The provision for income taxes differs from the amount computed by applying the federal income tax rate of 35% to pretax income from operations as a result of the following:

 
  2012   2013  

Statutory federal income tax rate

  $ 6,313   $ 18,239  

AMT taxes

    263      

State income taxes, net of federal tax benefits

    4     1  

Warrants

    466     1,584  

Foreign rate differential

    (20 )   (6 )

Tax credits

    (263 )   (119 )

Change in statutory rates

    (804 )   (61 )

Other

    176     (59 )

Change in valuation allowance

    (5,835 )   (18,388 )
           

Income tax provision

  $ 300   $ 1,191  
           
           

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Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

        Significant components of the Company's deferred tax assets are as follows (in thousands):

 
  December 31,  
 
  2012   2013  

Net operating loss carryforwards

  $ 23,537   $ 5,459  

Research and development tax credits

    1,760     1,187  

Accruals and reserves

    124     103  

Stock compensation

    506     660  

Depreciation and amortization

    1,752     1,804  
           

Total deferred tax assets

    27,679     9,213  

Less: Valuation allowance

    (27,679 )   (9,213 )
           

Net deferred tax assets

  $   $  
           
           

        The deferred income tax assets have been fully offset by a valuation allowance, as realization is dependent on future earnings, if any, the timing and amount of which are uncertain. The net valuation allowance decreased by $5.8 million for the year ended December 31, 2012 and decreased by $18.5 million during the year ended December 31, 2013.

        The Company's accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company's deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying balance sheets.

        As of December 31, 2013 the Company had federal net operating loss carryforwards of approximately $3.5 million available to reduce future taxable income. The Company also had state net operating loss carryforwards of approximately $73.4 million. The federal net operating loss carryforward begins expiring in 2022, and the state net operating loss carryforward began expiring in 2012.

        The Company also had federal research and development tax credit carryforwards of approximately $1.4 million. If not utilized, the carryforwards will begin expiring in 2030. The Company has state research and development credit carryforwards or approximately $2.2 million which do not expire.

        Under federal and similar state tax statutes, changes in our ownership, including ownership changes resulting from the offering contemplated by this prospectus, may limit our ability to use our available net operating loss and tax credit carryforwards. The annual limitation, as a result of a change of control, may result in the expiration of net operating losses and credits before utilization.

        We have determined that an ownership change occurred on June 25, 2008 and our annual limitation is $2.0 million. We do not currently have any prior ownership changes that will have a material impact on our ability to utilized our existing Federal net operating losses and credit.

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Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Income Taxes (Continued)

        Our ability to use our remaining net operating losses carryforwards may be further limited if we experience a Section 382 ownership change in connection with this offering or as a result of future changes in our stock ownership.

Uncertain Tax Positions

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 
  December 31,  
 
  2012   2013  

Balance at the beginning of the year

  $ 1,676   $ 1,880  

Additions based on prior period tax positions

        184  

Reductions based on prior period tax positions

         

Additions based on current period tax positions

    204     206  
           

Balance at the end of the year

  $ 1,880   $ 2,270  
           
           

        The Company's policy is to account for interest and penalties as income tax expense. As of December 31, 2013, the Company had no interest related to unrecognized tax benefits. No amounts of penalties related to unrecognized tax were recognized in the provision for income taxes.

        The Company files income tax returns in the U.S. federal jurisdiction, California and India. The Company is subject to U.S. federal income tax examination for the calendar years ending 2001 through 2013. Additionally, the Company is subject to state income tax examinations for the 2001 through 2013 calendar years. The U.S. federal and U.S. state taxing authorities may choose to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years, making adjustments only to carryforward attributes. The Company is subject to audit by the Indian tax authorities from 2009 onward. The Company is not currently under audit in any major tax jurisdiction.

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Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Net Income per Share

        A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net income per share is as follows (in thousands except per share data):

 
  December 31,  
 
  2012   2013  

Historical net income per share

             

Numerator:

             

Net income

  $ 17,736   $ 50,921  

Accretion of preferred stock to redemption value

         

Noncumulative dividend on preferred stock

    (1,268 )   (1,436 )

Undistributed earnings allocated to preferred stock holders

    (5,027 )   (16,417 )
           

Basic net income attributable to common stockholders

    11,441     33,068  

Adjustment to net income for dilutive securities

    155     2,285  
           

Diluted net income attributable to common stockholders

  $ 11,596   $ 35,353  
           
           

Denominator:

             

Basic common shares outstanding:

             

Basic common shares outstanding: weighted average common shares outstanding

    4,745     4,754  

Less: weighted average unvested common shares subject to repurchase

    (1 )   (1 )
           

Weighted average number of common shares used in calculating net income per share—basic

    4,744     4,753  
           
           

Dilutive securities:

             

Common stock options

    218     1,102  

Warrants to purchase common stock

        48  
           

Weighted average number of common shares used in calculating net income per share—diluted

    4,962     5,903  
           
           

Net income per share to attributable to common stockholders

             

Basic

  $ 2.41   $ 6.96  
           
           

Diluted

  $ 2.34   $ 5.99  
           
           

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Adamas Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Net Income per Share (Continued)

        The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net income per share of common stock for the periods presented, because including them would have been anti-dilutive:

 
  December 31,  
 
  2012   2013  

Convertible preferred stock

    4,749,931     2,359,587  

Options to purchase common stock

         

Warrants to purchase convertible preferred stock

    311,330     311,330  

Warrants to purchase common stock

    106,639      
           

Total

    5,167,900     2,670,917  
           
           

15. Subsequent Events

        In February 2014, the Company's board of directors adopted, subject to the approval of the Company's stockholders, the 2014 Equity Incentive Plan (the "2014 Plan"), which will become effective on the completion of this offering and will serve as a successor to the 2007 Plan. 3,354,432 shares of the Company's common stock will be available for issuance under the 2014 Plan.

        In February 2014, the Company's board of directors adopted, subject to the approval of the Company's stockholders, the 2014 Employee Stock Purchase Plan (the "ESPP"). 131,381 shares of the Company's common stock will be available for future grant or issuance under the ESPP, which will become effective on the completion of this offering.

        The Company applies ASC 855 for the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. For the financial statements as of December 31, 2012 and 2013, the Company has evaluated subsequent events through March 5, 2014, the date these financial statements were issued.

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LOGO


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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution

        The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale and distribution of our common stock being registered. All amounts are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee, and the listing fee of The NASDAQ Global Market.

SEC registration fee

  $              *

FINRA filing fee

                 *

The NASDAQ Global Market listing fee

                 *

Legal fees and expenses

                 *

Accounting fees and expenses

                 *

Printing and engraving expenses

                 *

Transfer agent and registrar fees and expenses

                 *

Miscellaneous fees and expenses

                 *
       

Total

  $              *
       
       

*
To be filed by amendment.

Item 14.    Indemnification of Directors and Officers

        Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act.

        Our amended and restated certificate of incorporation that will be in effect upon the closing of this offering provides for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law, and our amended and restated bylaws that will be in effect upon the closing of this offering provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law.

        We have entered and expect to continue to enter into agreements to indemnify our directors and executive officers. With certain exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought and we are not aware of any threatened litigation that may result in claims for indemnification.

        We maintain insurance policies that indemnify our directors and officers against various liabilities arising under the Securities Act and the Exchange Act, that might be incurred by any director or officer in his capacity as such.

        In an underwriting agreement we enter into in connection with the sale of our common stock being registered hereby, or the Underwriting Agreement, the underwriters will agree to indemnify, under certain circumstances, us, our officers, our directors, and our controlling persons within the meaning of the Securities Act, against certain liabilities.

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Item 15.    Recent Sales of Unregistered Securities

        The following sets forth information regarding all unregistered securities sold since January 1, 2011:

Preferred Stock Issuances

    On June 30, 2011, we issued an aggregate of 629,519 shares of our Series AA preferred stock to 8 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $4,789,947 and issued 283,134 shares of Series AA preferred stock upon conversion of convertible promissory notes. In connection with this issuance, we issued 556,347 shares of Series AA-1 preferred stock to 8 accredited investors.

    On November 17, 2011, we issued an aggregate of 29,570 shares of our Series AA preferred stock to 1 accredited investor at a per share price of $7.6089, for aggregate consideration of approximately $224,995. In connection with this issuance, we issued 40,004 shares of Series AA-1 preferred stock to 1 accredited investor.

    On December 2, 2011, we issued an aggregate of 227,596 shares of our Series AA preferred stock to 11 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $1,731,755. In connection with this issuance, we issued 2,764 shares of Series AA-1 preferred stock to 4 accredited investors.

    On December 8, 2011, we issued an aggregate of 3,630 shares of our Series AA preferred stock to 1 accredited investor at a per share price of $7.6089, for aggregate consideration of approximately $27,620.

    On December 30, 2011, we issued an aggregate of 16,690 shares of our Series AA preferred stock to 1 accredited investor at a per share price of $7.6089, for aggregate consideration of approximately $126,993. In connection with this issuance, we issued 44,662 shares of Series AA-1 preferred stock to 28 accredited investors.

    On March 23, 2012, we issued an aggregate of 135,662 shares of our Series AA preferred stock to 7 accredited investor at a per share price of $7.6089, for aggregate consideration of approximately $1,032,238.

    On May 23, 2012, we issued an aggregate of 61,469 shares of our Series AA preferred stock to 7 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $467,711.

    On June 23, 2012, we issued an aggregate of 65,708 shares of our Series AA preferred stock to 7 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $499,965.

    On August 1, 2012, we issued an aggregate of 65,708 shares of our Series AA preferred stock to 7 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $499,965.

    On September 4, 2012, we issued an aggregate of 65,708 shares of our Series AA preferred stock to 7 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $499,965.

    On October 4, 2012, we issued an aggregate of 65,708 shares of our Series AA preferred stock to 7 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $499,965.

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    On November 14, 2012, we issued an aggregate of 65,708 shares of our Series AA preferred stock to 7 accredited investors at a per share price of $7.6089, for aggregate consideration of approximately $499,965.

Convertible Promissory Note Issuances

    On April 6, 2011, we issued convertible promissory notes in an aggregate principal amount of approximately $2,000,000 to 5 accredited investors pursuant to a note and warrant purchase agreement. These notes converted into 266,520 shares of Series AA preferred stock in June 2011.

    On April 22, 2011, we issued convertible promissory notes in an aggregate principal amount of approximately $125,000 to 1 accredited investor pursuant to a note and warrant purchase agreement. These notes converted into 16,614 shares of Series AA preferred stock in June 2011.

    On March 23, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $1,032,277 to 7 accredited investors pursuant to a Series AA preferred stock, secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

    On May 23, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $467,772 to 7 accredited investors pursuant to a Series AA preferred stock and secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

    On June 23, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $500,034 to 7 accredited investors pursuant to a Series AA preferred stock and secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

    On August 1, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $500,034 to 7 accredited investors pursuant to a Series AA preferred stock and secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

    On September 4, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $500,034 to 7 accredited investors pursuant to a Series AA preferred stock and secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

    On October 4, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $500,034 to 7 accredited investors pursuant to a Series AA preferred stock and secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

    On November 14, 2012, we issued convertible promissory notes in an aggregate principal amount of approximately $500,034 to 7 accredited investors pursuant to a Series AA preferred stock and secured note and warrant purchase agreement. The notes were repaid in full between March and August 2013.

Preferred Stock Warrant Issuances

    On April 6, 2011, we issued warrants to purchase 27,924 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

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    On June 30, 2011, we issued warrants to purchase 231,381 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 13 accredited investors.

    On March 23, 2012, we issued warrants to purchase 13,428 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 7 accredited investors.

    On May 23, 2012, we issued warrants to purchase 6,082 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

    On June 23, 2012, we issued warrants to purchase 6,503 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

    On August 1, 2012, we issued warrants to purchase 6,503 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

    On September 4, 2012, we issued warrants to purchase 6,503 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

    On October 4, 2012, we issued warrants to purchase 6,503 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

    On November 14, 2012, we issued warrants to purchase 6,503 shares of our Series AA preferred stock at an exercise price of $7.6089 per share to 6 accredited investors.

Option and Common Stock Issuances

    From January 1, 2011 to date, we have granted to our directors, officers, employees and consultants options to purchase an aggregate of 2,244,000 shares of common stock under our 2007 Plan, at exercise prices ranging from $1.33 to $22.45 per share.

    From January 1, 2011 to date, we have issued and sold to our directors, officers, employees and consultants an aggregate of 12,833 shares of common stock upon the exercise of options under our 2007 Plan at exercise prices ranging from $1.33 to $3.51 per share, for an aggregate amount of approximately $28,044.

        Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act (or Regulation D promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. We did not pay or give, directly or indirectly, any commission or other remuneration, including underwriting discounts or commissions, in connection with any of the issuances of securities listed above. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their employment or other relationship with us or through other access to information provided by us, to information about us. The sales of these securities were made without any general solicitation or advertising.

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Item 16.    Exhibits and Financial Statement Schedules

    (a)
    Exhibits


EXHIBIT INDEX

Exhibit No.   Description
1.1 * Form of Underwriting Agreement.
      
3.1   Amended and Restated Certificate of Incorporation, as amended and as currently in effect.
      
3.2   Form of Amended and Restated Certificate of Incorporation to become effective upon closing of this offering.
      
3.3   Bylaws, as currently in effect.
      
3.4   Form of Amended and Restated Bylaws to become effective upon closing of this offering.
      
4.1 * Form of Common Stock Certificate of the registrant.
      
5.1 * Opinion of Cooley LLP.
      
10.1 + Adamas Pharmaceuticals, Inc. 2002 Employee, Director and Consultant Stock Plan, as amended, and Form of Stock Option Grant Notice, Option Agreement and Form of Notice of Exercise.
      
10.2 + Adamas Pharmaceuticals, Inc. 2007 Stock Plan, as amended, and Form of Stock Option Grant Notice, Option Agreement and Form of Notice of Exercise.
      
10.3 + Adamas Pharmaceuticals, Inc. 2014 Equity Incentive Plan and Form of Stock Option Agreement and Form of Stock Option Grant Notice thereunder.
      
10.4 + Adamas Pharmaceuticals, Inc. 2014 Employee Stock Purchase Plan.
      
10.5   Fourth Amended and Restated Investor Rights Agreement, dated as of June 30, 2011, by and among the registrant and certain of its stockholders.
      
10.6 License Agreement by and between the registrant and Forest Laboratories Holdings Limited, dated as of November 13, 2012.
      
10.7   Office Lease Agreement by and between the registrant and CA-Emeryville Properties Limited Partnership, dated as of October 25, 2006.
      
10.8   First Amendment to Lease by and between the registrant and NOP Watergate LLC (as successor in interest to CA-Emeryville Properties Limited Partnership), dated as of April 29, 2009.
      
10.9   Second Amendment to Office Lease Agreement by and between the registrant and Emeryville Office, L.L.C. (as successor to NOP Watergate, LLC), dated as of January 18, 2011.
      
10.10   Third Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of June 17, 2011.
      
10.11   Fourth Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of January 31, 2013.
      
10.12 + Offer Letter by and between the registrant and Gregory Went, dated as of March 8, 2006.

   

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Exhibit No.   Description
10.13 + Offer Letter by and between the registrant and Anthony Rimac, dated as of June 8, 2011.
      
10.14 + Offer Letter by and between the registrant and Natalie McClure, dated as of December 17, 2009, as amended by the letter dated February 18, 2011.
      
10.15 + Offer Letter by and between the registrant and Michael Coffee, dated November 27, 2013.
      
10.16 + Offer Letter by and between the registrant and Jeffrey Knapp, dated February 24, 2014.
      
10.17   Form of Indemnity Agreement between the registrant and its directors and officers.
      
10.18 + Adamas Pharmaceuticals, Inc. Transaction Bonus Plan.
      
10.19 + Adamas Pharmaceuticals, Inc. Executive Severance Plan.
      
23.1   Consent of Independent Registered Public Accounting Firm.
      
23.2 * Consent of Cooley LLP (included in Exhibit 5.1).
      
24.1   Power of Attorney (included in signature page).

*
To be filed by amendment.

Confidential Treatment Requested.

+
Indicates management contract or compensatory plan.

Item 17.    Undertakings

        The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes that:

    (1)
    For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

    (2)
    For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Emeryville, State of California, on March 5, 2014.

    Adamas Pharmaceuticals, Inc.

 

 

By:

 

/s/ GREGORY WENT

Gregory Went
Chief Executive Officer and Chairman


POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitute and appoint Gregory Went and Anthony M. Rimac, and each one of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature
 
Title
 
Date

 

 

 

 

 
/s/ GREGORY WENT

Gregory Went, Ph.D.
  Chief Executive Officer and Chairman (Principal Executive Officer)   March 5, 2014

/s/ ANTHONY RIMAC

Anthony Rimac

 

Chief Financial Officer
(Principal Financial and Accounting Officer)

 

March 5, 2014

/s/ RICHARD BOOTH

Richard Booth

 

Director

 

March 5, 2014

/s/ MARTHA DEMSKI

Martha Demski

 

Director

 

March 5, 2014

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Signature
 
Title
 
Date

 

 

 

 

 
/s/ WILLIAM ERICSON

William Ericson
  Director   March 5, 2014

/s/ SARA GROOTWASSINK LEWIS

Sara Grootwassink Lewis

 

Director

 

March 5, 2014

/s/ IVAN LIEBERBURG

Ivan Lieberburg, M.D., Ph.D.

 

Director

 

March 5, 2014

/s/ DAVID MAHONEY

David Mahoney

 

Director

 

March 5, 2014

/s/ JOHN MACPHEE

John MacPhee, MPH

 

Director

 

March 5, 2014

/s/ GEORGE REHM

George Rehm

 

Director

 

March 5, 2014

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EXHIBIT INDEX

Exhibit No.   Description
1.1 * Form of Underwriting Agreement.
      
3.1   Amended and Restated Certificate of Incorporation, as amended and as currently in effect.
      
3.2   Form of Amended and Restated Certificate of Incorporation to become effective upon closing of this offering.
      
3.3   Bylaws, as currently in effect.
      
3.4   Form of Amended and Restated Bylaws to become effective upon closing of this offering.
      
4.1 * Form of Common Stock Certificate of the registrant.
      
5.1 * Opinion of Cooley LLP.
      
10.1 + Adamas Pharmaceuticals, Inc. 2002 Employee, Director and Consultant Stock Plan, as amended, and Form of Stock Option Grant Notice, Option Agreement and Form of Notice of Exercise.
      
10.2 + Adamas Pharmaceuticals, Inc. 2007 Stock Plan, as amended, and Form of Stock Option Grant Notice, Option Agreement and Form of Notice of Exercise.
      
10.3 + Adamas Pharmaceuticals, Inc. 2014 Equity Incentive Plan and Form of Stock Option Agreement and Form of Stock Option Grant Notice thereunder.
      
10.4 + Adamas Pharmaceuticals, Inc. 2014 Employee Stock Purchase Plan.
      
10.5   Fourth Amended and Restated Investor Rights Agreement, dated as of June 30, 2011, by and among the registrant and certain of its stockholders.
      
10.6 License Agreement by and between the registrant and Forest Laboratories Holdings Limited, dated as of November 13, 2012.
      
10.7   Office Lease Agreement by and between the registrant and CA-Emeryville Properties Limited Partnership, dated as of October 25, 2006.
      
10.8   First Amendment to Lease by and between the registrant and NOP Watergate LLC (as successor in interest to CA-Emeryville Properties Limited Partnership), dated as of April 29, 2009.
      
10.9   Second Amendment to Office Lease Agreement by and between the registrant and Emeryville Office, L.L.C. (as successor to NOP Watergate, LLC), dated as of January 18, 2011.
      
10.10   Third Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of June 17, 2011.
      
10.11   Fourth Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of January 31, 2013.
      
10.12 + Offer Letter by and between the registrant and Gregory Went, dated as of March 8, 2006.
      
10.13 + Offer Letter by and between the registrant and Anthony Rimac, dated as of June 8, 2011.
      
10.14 + Offer Letter by and between the registrant and Natalie McClure, dated as of December 17, 2009, as amended by the letter dated February 18, 2011.

   

Table of Contents

Exhibit No.   Description
10.15 + Offer Letter by and between the registrant and Michael Coffee, dated November 27, 2013.
      
10.16 + Offer Letter by and between the registrant and Jeffrey Knapp, dated February 24, 2014.
      
10.17   Form of Indemnity Agreement between the registrant and its directors and officers.
      
10.18 + Adamas Pharmaceuticals, Inc. Transaction Bonus Plan.
      
10.19 + Adamas Pharmaceuticals, Inc. Executive Severance Plan.
      
23.1   Consent of Independent Registered Public Accounting Firm.
      
23.2 * Consent of Cooley LLP (included in Exhibit 5.1).
      
24.1   Power of Attorney (included in signature page).

*
To be filed by amendment.

Confidential Treatment Requested.

+
Indicates management contract or compensatory plan.



Exhibit 3.1

 

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

 

OF

 

ADAMAS PHARMACEUTICALS, INC.

 

The undersigned, as President of Adamas Pharmaceuticals, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”) does hereby certify as follows:

 

(a)            The name of the Corporation is Adamas Pharmaceuticals, Inc.  The Certificate of Incorporation of the Corporation was filed with the Secretary of the State of Delaware on November 15, 2000 under the name NeuroMolecular, Inc.  A Restated Certificate of Incorporation was filed on March 24, 2004 and thereafter a Certificate of Amendment was filed on December 10, 2004 which changed the name of the Corporation to NeuroMolecular Pharmaceuticals, Inc.  A Restated Certificate of Incorporation was filed on March 29, 2005 and a Restated Certificate of Incorporation was filed on June 29, 2006, and amended on April 19, 2007.  A Restated Certificate of Incorporation was filed on July 20, 2007 which, among other things, changed the name of the Corporation to Adamas Pharmaceuticals, Inc. (the “Restated Certificate”).  A Restated Certificate of Incorporation was filed on June 25, 2008, and amended on June 8, 2009.

 

(b)            The Restated Certificate is hereby amended in its entirety, as set forth below.

 

(c)            This Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 141, 228, 242 and 245 of the General Corporation Law of the State of Delaware.

 

(d)            Pursuant to Section 228(a) of the General Corporation Law of the State of Delaware, the holders of outstanding shares of the Corporation having no less than the minimum number of votes that would be necessary to authorize or take such actions at a meeting at which all shares entitled to vote thereon were present and consented to the adoption of the aforesaid amendment without a meeting, without a vote and without prior notice.  Written notice of the taking of such actions is being given in accordance with Section 228(e) of the General Corporation Law of the State of Delaware.

 

(e)            The text of the Restated Certificate of Incorporation of the Corporation, as amended and restated herein, shall read in its entirety as follows:

 

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AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADAMAS PHARMACEUTICALS, INC.

 

FIRST:                   The name of the corporation (hereinafter called the “Corporation”) is

 

ADAMAS PHARMACEUTICALS, INC.

 

SECOND:              The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle; and the name of the registered agent of the Corporation in the State of Delaware is The Prentice Hall Corporation System, Inc.

 

THIRD:                  The nature of the business to be conducted and the purposes of the Corporation are to engage in any lawful act or activity or carry on any business for which corporations may be organized under the Delaware General Corporation Law or any successor statute.

 

FOURTH:

 

A.             DESIGNATION AND NUMBER OF SHARES.

 

Immediately prior to the filing of this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware and pursuant to Article FOURTH, Sections C(4)(b) and (c) of the Corporation’s Restated Certificate of Incorporation filed on June 25, 2008, and amended on June 8, 2009, and the Notice of and Election to Convert delivered to the Corporation by the signatories thereto, dated as of June [30], 2011 (i) each share of the Corporation’s Series A Convertible Preferred Stock, par value $.001 per share (the “Series A Stock”) was converted into one share of the Corporation’s common stock, par value $.001 per share (the “Common Stock”), without any further action on the part of the holder thereof; (ii) each share of the Corporation’s Series B Convertible Preferred Stock, par value $.001 per share (the “Series B Stock”) was converted into one share of Common Stock, without any further action on the part of the holder thereof; (iii) each share of the Corporation’s Series C Convertible Preferred Stock, par value $.001 per share (the “Series C Stock”) was converted into one share of Common Stock, without any further action on the part of the holder thereof; (iv) each share of the Corporation’s Series C-1 Convertible Preferred Stock, par value $.001 per share (the “Series C-1 Stock”) was converted into one share of Common Stock, without any further action on the part of the holder thereof; and (v) each share of the Corporation’s Series D Convertible Preferred Stock, par value $.001 per share (the “Series D Stock”) was converted into one share of Common Stock, without any further action on the part of the holder thereof (collectively, the “Conversion”).

 

Immediately following the Conversion, each share of Common Stock shall be reverse split into 0.3333 shares of Common Stock, without any further action on the part of the holder thereof (the “Reverse Stock Split”).

 



 

All numbers in this Amended and Restated Certificate of Incorporation have been adjusted to reflect the Reverse Stock Split and Conversion.  No fractional shares shall be issued in the Reverse Split or Conversion and the aggregate number of shares of Common Stock or Preferred Stock to be issued to particular stockholders shall be rounded down to the nearest whole share and the corporation shall pay in cash the fair market value of any fractional shares as of the time when entitlement to receive such fractions is determined.

 

Immediately following the Reverse Split and Conversion, the total number of shares of capital stock that this corporation is authorized to issue is thirteen million three hundred fifty thousand (13,350,000).  The total number of shares of Common Stock authorized to be issued is ten million (10,000,000), par value $.001 per share.  The total number of shares of preferred stock authorized to be issued is three million three hundred fifty thousand (3,350,000), par value $.001 per share (the “Preferred Stock”), of which two million five hundred thousand (2,500,000) shares are designated as “Series AA Convertible Preferred Stock” and eight hundred fifty thousand (850,000) shares are designated as “Series AA-1 Preferred Stock.”  The rights, preferences, privileges and restrictions granted to and imposed upon the various classes and series of capital stock of the Corporation are as follows.

 

B.             COMMON STOCK.

 

The powers, preferences, rights, qualifications, limitations and restrictions of the shares of the Common Stock are as follows:

 

1.              General .  The voting, dividend and liquidation and other rights of the holders of the Common Stock are expressly made subject to and qualified by the rights of the holders of any series of Preferred Stock.

 

2.              Voting Rights .  The holders of record of the Common Stock are entitled to one (1) vote per share on all matters to be voted on by the Corporation’s stockholders.

 

3.              Dividends .  Dividends may be declared and paid on the Common Stock from funds lawfully available therefor if, as and when determined by the Board of Directors in their sole discretion, subject to provisions of law and any provision of this Restated Certificate, as amended from time to time, and subject to the relative rights and preferences of any shares of Preferred Stock authorized, issued and outstanding hereunder.

 

4.              Liquidation .  In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation and the amounts to which the holders of any Preferred Stock shall be entitled, the holders of Common Stock shall be entitled (together as one class) to share ratably in the remaining assets of the Corporation.

 

5.              Transfer .  No shares of Common Stock issued pursuant to the Conversion shall be transferable unless the transfer of such shares includes in such transfer a pro rata number of the shares of Series AA-1 Preferred Stock held by such transferor.  No shares of Series AA-1 Preferred Stock may be transferred except in connection with a transfer of Common Stock issued pursuant to the Conversion pursuant to the preceding sentence.

 

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C.             PREFERRED STOCK.

 

The powers, preferences, rights, qualifications, limitations and restrictions of the shares of Series AA Convertible Preferred Stock, par value $.001 per share (the “Series AA Preferred Stock”) and Series AA-1 Preferred Stock, par value $.001 per share (the “Series AA-1 Preferred Stock”) are as follows.

 

1.              Dividends .

 

(a)            Preferred Stock Dividends and Payments .  The holders of shares of Series AA Preferred Stock and Series AA-1 Preferred shall be entitled to receive dividends at the rate (the “Dividend Rate”) of eight percent (8%) of the Original Issue Price (as defined in paragraph 1(b) below) for the applicable series of Preferred Stock per share per annum, payable only when, as and if declared by the Board of Directors of the Corporation.  The right to receive dividends on Preferred Stock shall not be cumulative, and, therefore, if not declared in any year, the right to such dividends shall terminate and shall not carry forward into the next year.  In the event that the Corporation declares or pays any cash dividends on shares of any series of Preferred Stock, the Corporation shall also declare and pay any such cash dividend with respect to shares of all series of Preferred Stock.  The Corporation shall not declare or pay any cash dividends on shares of Common Stock until the holders of the Preferred Stock then outstanding shall have first received a dividend at the rate specified in this Section 1.  Further, no dividend or other distribution (other than a stock dividend giving rise to an adjustment under Section 4(f) or Section 4(g) hereof) will be paid, declared, or set apart for payment in respect of any share of Common Stock unless a dividend is declared and paid in respect of each outstanding share of Preferred Stock in an amount at least equal to the product of (i) the amount of dividends to be paid, declared, or set apart for each share of Common Stock multiplied by (ii) the number of shares of Common Stock into which the Preferred Stock is then convertible pursuant to Section 4 hereof.

 

(b)            Original Issue Price .  The applicable “Original Issue Price” for each series of Preferred Stock shall be: (i) $7.6089 per share for the Series AA Preferred Stock and (ii) $100.00 per share for the Series AA-1 Preferred Stock.

 

(c)            Miscellaneous .  As authorized by Section 402.5(c) of the California Corporation Code, Sections 502 and 503 of the California Corporation Code shall not apply with respect to payments made by the Corporation in connection with (i) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries following termination of their employment or services pursuant to agreements providing for the right of said repurchase; (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right; or (iii) any other repurchase or redemption of capital stock of the Corporation approved by the holders of a majority of the Preferred Stock of the Corporation.

 

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2.              Liquidation, Dissolution, or Winding-Up .

 

(a)            Distributions to Holders o f Preferred Stock .  In the event of any liquidation, dissolution, or winding-up of the Corporation, whether voluntary or involuntary (each such event being hereinafter referred to as a “Liquidation Event”) or a Deemed Liquidation Event (as defined below), then the holders of outstanding shares of Preferred Stock will be entitled to be paid out of the assets of the Corporation available for distribution to stockholders, by reason of their ownership thereof an amount per share of Series AA Preferred Stock (its “Series AA Liquidation Value”) or Series AA-1 Preferred Stock (its “Series AA-1 Liquidation Value”) equal to the sum of (A) the Original Issue Price of such share (such amount to be subject to proportionate adjustment in the event of any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event affecting such share and occurring after the date of filing of this Restated Certificate), plus (B) an amount equal to the aggregate of all dividends declared but unpaid in respect of such share.  Such amounts shall first be paid simultaneously to the holders of Series AA Preferred Stock and Series AA-1 Preferred Stock before any payment shall be made to the holders of Common Stock or any other class or series of stock ranking on liquidation junior to the Series AA Preferred Stock and Series AA-1 Preferred Stock, by reason of their ownership thereof.  The Series AA Liquidation Value and the Series AA-1 Liquidation Value are each sometimes referred to herein as the “Liquidation Value.”

 

If upon the occurrence of a Liquidation Event or a Deemed Liquidation Event, the assets and funds to be distributed among the holders of the Series AA Preferred Stock and Series AA-1 Preferred Stock shall be insufficient to permit the payment to such holders of the full Series AA Liquidation Value and Series AA-1 Liquidation Value, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series AA Preferred Stock and Series AA-1 Preferred Stock based on the aggregate Liquidation Value to which each such holder is entitled.

 

(b)            Remaining Distributions .  After payment in accordance with the foregoing has been made in full to the holders of the Preferred Stock or funds necessary for such payment have been set aside by the Corporation in trust for the exclusive benefit of such holders so as to be available for such payment, the holders of Common Stock shall be entitled (together as one class) to share ratably in the remaining assets of the Corporation.

 

(c)            Notwithstanding the foregoing, if, with respect to any holder of Series AA-1 Preferred Stock, the aggregate amount payable to any such holder pursuant to Section 2(b) above in respect of the Common Stock issued to such holder in the Conversion (assuming for this purpose, no payment to such holder under Section 2(a) above) would be greater than the Series AA-1 Liquidation Value payable to such holder, then such holder shall not be entitled to receive any proceeds pursuant to Section 2(a) above, and if the aggregate amount payable to any such holder pursuant to Section 2(b) above in respect of the Common Stock issued to such holder in the Conversion (assuming for this purpose, no payment to such holder under Section 2(a) above) would be less than or equal to the Series AA-1 Liquidation Value payable to such holder, then such holder shall not be entitled to receive any proceeds pursuant to Section 2(b) above.

 

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(d)            Deemed Liquidations .  For purposes of this Section 2, a liquidation, dissolution or winding up of the Corporation shall be deemed to be occasioned by, or to include any transaction or series of related transactions (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding (a) any sale of stock for capital raising purposes, (b) an exclusive license of substantially all of the Company’s intellectual property or (c) a reorganization, merger or consolidation involving only a change in the state of incorporation of the Corporation):  (i) involving the merger, acquisition or consolidation of the Corporation into or with another entity (other than a transaction or series of related transactions in which the holders of the voting securities of the Corporation outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Corporation held by such holders prior to such transaction, at least a majority of the total voting power represented by the voting securities of the Corporation of such surviving entity outstanding immediately after such transaction or series of transactions), (ii) involving the sale, lease, exchange, license or other conveyance of all or substantially all of the assets of the Corporation, (iii) following which holders of the Corporation’s capital stock outstanding immediately prior to such transactions or series of related transactions hold fifty percent (50%) or less of the voting securities of the entity surviving such transaction or series of related transactions or entity controlling such surviving entity, or (iv) involving any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (each such transaction, a “Deemed Liquidation Event”).

 

(e)            Non-Cash Distributions .  In the event of a Liquidation Event or Deemed Liquidation Event resulting in the availability of assets other than cash, the holders of Preferred Stock will be entitled to a distribution of cash and, in the event there is insufficient cash available to satisfy the liquidation preferences and other distribution rights stated in this Section 2, other assets equal in value to the liquidation preference and other distribution rights stated in this Section 2.  In the event that such distribution to the holders of shares of Preferred Stock will include any assets other than cash, the Board of Directors will first determine in good faith and with due care the value of such assets for such purpose, except that:

 

(i)             any publicly-traded securities to be distributed to stockholders in a liquidation, dissolution or winding up of the Corporation shall be valued as follows:  (A) if the securities are then traded on a national securities exchange (including the Nasdaq Stock Market or a similar national quotation system), then the value of the securities shall be deemed to be the average of the closing prices of the securities on such exchange or system over the ten (10) trading day period ending five (5) trading days prior to the distribution, (B) if the securities are actively traded over-the counter, then the value of the securities shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) of the securities over the ten (10) trading day period ending five (5) trading days prior to the distribution, or (C) if there is no active public market, the value shall be the fair market value thereof, as determined by the Board of Directors in good faith and with due care; and

 

(ii)            The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in 2(d)(i) to reflect the approximate fair market value

 

5



 

thereof, as mutually determined by this Corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock.

 

Notwithstanding the foregoing subsections 2(d)(i) and 2(d)(ii), if, in connection with a Deemed Liquidation Event, which is approved by the holders of Preferred Stock in accordance with the provisions of Section 5(a)(vii) of this Article Fourth, the definitive agreements governing the Deemed Liquidation Event address the methods of valuation for non-cash consideration and/or securities subject to investment letter, then the provisions contained in the definitive agreements shall supersede the provisions governing the methods of valuation for non-cash consideration and securities subject to investment letter set forth in the foregoing subsections 2(d)(i) and 2(d)(ii).

 

For the purposes of this subsection 2(d), “trading day” shall mean any day on which the exchange or system on which the securities to be distributed are traded is open and “closing prices” or “closing bid prices” shall be deemed to be:  (i) for securities traded primarily on the New York Stock Exchange, the American Stock Exchange or Nasdaq, the last reported trade price or sale price, as the case may be, at 4:00 p.m., New York time, on that day and (ii) for securities listed or traded on other exchanges, markets and systems, the market price as of the end of the “regular hours” trading period that is generally accepted in the securities industry for determining the market price of a stock as of a given trading day shall change from those set forth above, the fair market value shall be determined as of such other generally accepted benchmark times.

 

(f)             Allocation of Escrow .  In the case of a Deemed Liquidation Event, pursuant to Subsection 2(c) above, if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow and/or is payable to the stockholders of the Corporation subject to contingencies, the acquisition, merger or other relevant agreement shall provide that (a) the portion of such consideration that is not placed in escrow and not subject to any contingencies (the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2(a), 2(b) and 2(c) above 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 release from escrow or satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2(a), 2(b) and 2(c) above after taking into account the previous payment of the Initial Consideration as part of the same transaction.  The result of this approach is that, for certain transactions, the portion of the transaction consideration that is subject to an escrow or other contingencies may be allocated disproportionately (or even exclusively) to the holders of Common Stock.

 

3.              Voting Rights .

 

(a)            Restricted Class Voting .  Except as otherwise expressly provided herein or as required by law, the holders of Preferred Stock and the holders of Common Stock shall vote together, on an as-converted basis, and not as separate classes.

 

(b)            No Series Voting .  Other than as provided herein or required by law, there shall be no series voting.

 

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(c)            Preferred Stock .  Except as otherwise expressly required by law, the Series AA-1 Preferred Stock shall be non-voting stock.  Each holder of Series AA Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Series AA Preferred Stock held by such holder could be converted as of the record date.  The holders of shares of the Series AA Preferred Stock shall be entitled to vote on all matters on which the Common Stock shall be entitled to vote.  Holders of Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with the By-laws of the Corporation.  Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted), shall be disregarded.

 

(d)            Election of Directors.  The Board of Directors shall consist of up to seven (7) members, such amount determined in accordance with the Corporation’s bylaws.  So long as at least twenty-five percent (25%) of the shares (as adjusted for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event) of Series AA Preferred Stock originally issued remain outstanding, the holders of at least a majority of the Series AA Preferred Stock shall be entitled to elect two (2) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors (and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such director).  The holders of at least a majority of the Common Stock and the Series AA Preferred Stock, voting together as a single class, shall be entitled to elect the person then serving as the Corporation’s Chief Executive Officer as one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors (and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director).  The holders of at least a majority of the Common Stock, voting as a separate class, and the holders of at least a majority of the Series AA Preferred Stock, voting together as a separate class, shall, by mutual agreement, be entitled to elect four (4) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors (and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors).  If a vacancy on the Board of Directors is to be filled by the Board of Directors, only directors elected by the same class or classes of stockholders as those who would be entitled to vote to fill such vacancy shall vote to fill such vacancy.

 

(i)             No person entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of such election, the Corporation is subject to Section 2115 of California Corporations Code (the “CCC”).  During such time or times that the Corporation is subject to Section 2115(b) of the CCC, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder desires.  No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (A) the names of such candidate or candidates have been placed in nomination prior to the voting and (B) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes.  If any

 

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stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination.  Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

 

(ii)            During such time or times that the Corporation is subject to Section 2115(b) of the CCC, one or more directors may be removed from office at any time without cause by the affirmative vote of the holders of a majority of the outstanding shares entitled to vote for that director as provided above; provided, however, that unless the entire Board of Directors is removed, no individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively at an election which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of such director’s most recent election were then being elected.

 

(e)            Common Stock .  Each holder of shares of Common Stock shall be entitled to one vote for each share thereof held.  The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof outstanding) by the affirmative vote of the holders of a majority of the shares of stock of the Corporation entitled to vote irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.

 

4.              Conversion .  Except a set forth in Section 4(b) below, the Series AA-1 Preferred Stock shall not be convertible into Common Stock.  The holders of Series AA Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

(a)            Right to Convert .  Each share of Series AA Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for the Series AA Preferred Stock, into that number of fully-paid, non-assessable shares of Common Stock determined by dividing the Original Issue Price for the relevant series by the Conversion Price for such series then in effect.  (The rate at which shares of Series AA Preferred Stock may be converted into shares of Common Stock is hereinafter referred to as the “Conversion Rate” for each such series.)  Upon any decrease or increase in the Conversion Price for any Series AA Preferred Stock, as described in this Section 4, the Conversion Rate for such series shall be appropriately increased or decreased.  The initial conversion price of the Series AA Preferred Stock is $7.6089 (the “Series AA Conversion Price”).  The Series AA Conversion Price is sometimes referred to herein as the “Conversion Price”

 

(b)            Automatic Conversion .  Each share of Series AA Preferred Stock shall automatically be converted into fully-paid, non-assessable shares of Common Stock at the then effective Conversion Rate for such share:  (i) immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of the Corporation’s Common Stock, provided that the aggregate gross proceeds to the Corporation are at least $40,000,000; or (ii) upon the receipt of the Corporation of a written

 

8



 

request for such conversion from the holders of at least fifty percent (50%) of the then outstanding shares of Series AA Preferred Stock indicating their election to convert (each of the events referred to in (i) and (ii) are referred to herein as an “Automatic Conversion Event”).  Upon this corporation’s sale of its Common Stock in a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act, each share of Series AA-1 Preferred Stock shall automatically be converted into one one-thousandth of a share of Common Stock (the “Series AA-1 Conversion Rate”).

 

(c)            Mechanics of Conversion .  No fractional shares of Common Stock shall be issued upon conversion of Series AA Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock as determined by the Board of Directors.  For such purpose, all shares of Series AA Preferred Stock held by each holder of Series AA Preferred Stock that are then being converted shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash.  Before any holder of Series AA Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, he shall either; (i) surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series AA Preferred Stock; or (ii) notify the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and execute an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates, and shall give written notice to the Corporation at such office that he elects to convert the same; provided, however, that on the date of an Automatic Conversion Event, the outstanding shares of Series AA Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent, provided further, however, that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Series AA Preferred Stock are delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates.  On the date of the occurrence of an Automatic Conversion Event, each holder of record of shares of Series AA Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of Series AA Preferred Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have been received by any holder of record of shares of Series AA Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.

 

The Corporation shall, as soon as practicable after such delivery, or after such agreement and indemnification, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which he shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Preferred Stock.  Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of

 

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Series AA Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date; provided, however, that if the conversion is in connection with an underwritten offer of securities registered pursuant to the Securities Act or a merger, sale, financing, or liquidation of the Corporation or other event, the conversion may, at the option of any holder tendering Series AA Preferred Stock for conversion, be conditioned upon the closing of such transaction or upon the occurrence of such event, in which case the person(s) entitled to receive the Common Stock issuable upon such conversion of the Series AA Preferred Stock shall not be deemed to have converted such Series AA Preferred Stock until immediately prior to the closing of such transaction or the occurrence of such event.

 

(d)            Convertible Securities Definition .  As used herein, “Convertible Securities” means (i) all shares of stock and other securities that are convertible into or exchangeable for shares of Common Stock and (ii) all options, warrants, and other rights to acquire shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock.

 

(e)            Adjustments to Conversion Price for Diluting Issues .

 

(i)             Additional Shares Definition .  For purposes of this paragraph 4(e), “Additional Shares of Common” shall mean all shares of Common Stock or Convertible Securities issued (or, pursuant to paragraph 4(e)(iii), deemed to be issued) by the Corporation after the filing of this Restated Certificate, other than shares of Common Stock or Convertible Securities:

 

(1)            issued to employees, officers or directors, of, or consultants or advisors to the Corporation or any subsidiary pursuant to stock grants, option plans or similar arrangements which vest over a period of 4 years at a rate of 25% after the first year with 1/48 of the remainder vesting monthly, unless otherwise determined by a unanimous vote of the Board of Directors of the Corporation;

 

(2)            issued upon the exercise or conversion of Convertible Securities outstanding as of the date of the filing of this Restated Certificate or upon the exercise or conversion of Convertible Securities described in subparagraph 4(e)(i)(1) above, and provided, that such Convertible Securities are described in Section 3.3 of the Series AA Convertible Preferred Stock Purchase Agreement dated on or about the date of this Restated Certificate, by and among the Corporation, and the persons and entities listed on the Schedule of Investors attached thereto (the “Purchase Agreement”);

 

(3)            issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to paragraphs 4(f), 4(g) or 4(h) hereof;

 

(4)            issued in a registered public offering under the Securities Act in connection with which all outstanding shares of Preferred Stock are converted into Common Stock;

 

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(5)            issued or issuable pursuant to the bona fide acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization, which acquisition is approved by a unanimous vote of the Board of Directors of the Corporation;

 

(6)            issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing, equipment lease or bank credit arrangement entered into for primarily non-equity financing purposes and approved by a unanimous vote of the Board of Directors of the Corporation;

 

(7)            issued or issuable in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by a unanimous vote of the Board of Directors of the Corporation;

 

(8)            issued or issuable to strategic suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by a unanimous vote of the Board of Directors of the Corporation;

 

(9)            issued or issuable upon conversion of the shares of Preferred Stock; and

 

(10)          issued pursuant to the Purchase Agreement;

 

(11)          to acquire any security convertible into the securities excluded from the definition of Additional Shares of Common pursuant to subsections (1) through (10) above.

 

(ii)            No Adjustment of Conversion Price .  No adjustment in the Conversion Price of the Series AA Preferred Stock shall be made in respect of the issuance of Additional Shares of Common unless the consideration per share (as determined pursuant to paragraph 4(e)(v)) for an Additional Share of Common issued or deemed to be issued by the Corporation is less than the Conversion Price for the Series AA Preferred Stock in effect on the date of and immediately prior to such issuance.

 

(iii)           Deemed Issue of Additional Shares of Common .  In the event the Corporation at any time or from time to time after the date of the filing of this Restated Certificate shall issue any Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Convertible Securities, the conversion or exchange of such Convertible Securities or, in the case of options for Convertible Securities, the exercise of such options and the conversion or exchange of the underlying securities, shall be deemed to have been 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, provided that in any such case in which shares are deemed to be issued:

 

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(1)            no further adjustment in the Conversion Price of the Series AA Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock in connection with the exercise of such or conversion or exchange of such Convertible Securities;

 

(2)            if such Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Corporation or in the number of shares of Common Stock issuable upon the exercise, conversion or exchange thereof (other than a change pursuant to the anti-dilution provisions of such Convertible Securities such as this Section 4(e) or pursuant to recapitalization, reorganization, adjustment or similar provisions of such Convertible Securities such as Sections 4(f), 4(g) and 4(h) hereof), the Conversion Price of the Series AA Preferred Stock and any subsequent adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original issue thereof (or upon the occurrence of the record date with respect thereto);

 

(3)            no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of the Series AA Preferred Stock to an amount above the Conversion Price that would have resulted from any other issuances of Additional Shares of Common and any other adjustments provided for herein between the original adjustment date and such readjustment date;

 

(4)            upon the expiration of any such options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price of the Series AA Preferred Stock computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:

 

(a)            in the case of Convertible Securities for Common Stock, the only Additional Shares of Common issued were the shares of Common Stock if any, actually issued upon the exercise or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of such options plus the consideration actually received by the Corporation upon such exercise or for the issue of all such Convertible Securities, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange; and

 

(b)            in the case of options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such options, and the consideration received by the Corporation for the Additional Shares of Common deemed to have been then issued was the consideration actually received by the Corporation for the issue of such options, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section 4(e)(v)) upon the issue of the Convertible Securities with respect to which such options were actually exercised; and

 

(5)            if such record date shall have been fixed and such Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the

 

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close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this paragraph 4(e)(iii) as of the actual date of their issuance.

 

(iv)           Adjustment of Conversion Price Upon Issuance of Additional Shares of Common .

 

(1)            In the event this Corporation shall issue on or after the date upon which this Amended and Restated Certificate of Incorporation is accepted for filing by the Secretary of State of Delaware, Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to paragraph 4(e)(iii)) without consideration or for a consideration per share less than the applicable Conversion Price of the Series AA Preferred Stock in effect on the date of and immediately prior to such issue, then the Conversion Price of the Series AA Preferred Stock shall be reduced, concurrently with such issue, to a price determined by multiplying the Conversion Price of the Series AA Preferred Stock by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common so issued would purchase at such Conversion Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common so issued.  Notwithstanding the foregoing, the Conversion Price shall not be reduced at such time if the amount of such reduction would be less than $0.01, but any such amount shall be carried forward, and a reduction will be made with respect to such amount at the time of, and together with, any subsequent reduction which, together with such amount and any other amount so carried forward, equal $0.01 or more in the aggregate.  For the purposes of this Subsection 4(e)(iv), all shares of Common Stock issuable upon conversion of all outstanding shares of Series AA Preferred Stock and the exercise and/or conversion of any other outstanding Convertible Securities shall be deemed to be outstanding in addition to Common Stock outstanding.

 

(v)            Determination of Consideration .  For purposes of this subsection 4(e), the consideration received by the Corporation for the issue (or deemed issue) of any Additional Shares of Common shall be computed as follows:

 

(1)            Cash and Property .  Such consideration shall:

 

(a)            insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation after deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with such issuance;

 

(b)            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; and

 

(c)            in the event Additional Shares of Common are issued together with other shares or securities or other assets of the Corporation for consideration

 

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which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as reasonably determined in good faith by the Board of Directors.

 

(2)            Convertible Securities .  The consideration per share received by the Corporation for Additional Shares of Common deemed to have been issued pursuant to paragraph 4(e)(iii) shall be determined by dividing:

 

(x)            the total amount, if any, received or receivable by the Corporation as consideration for the issue of such 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 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

 

(y)            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 or the conversion or exchange of such Convertible Securities.

 

(f)             Adjustments for Subdivisions or Combinations of Common Stock .  In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion Price of the Series AA Preferred Stock and the Series AA-1 Conversion Rate in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased.  In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Prices in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

 

(g)            Adjustments for Subdivisions or Combinations of Preferred Stock .  In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Value of the affected series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased.  In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Value of the affected series of Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

 

(h)            Adjustments for Reclassification, Exchange and Substitution .  Subject to Section 2 above, if the Common Stock issuable upon conversion of the Series AA Preferred Stock or the Series AA-1 Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or

 

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otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each holder of such Series AA Preferred Stock and Series AA-1 Preferred Stock shall have the right thereafter to convert such shares of Series AA Preferred Stock or Series AA-1 Preferred Stock into a number of shares of such other class or classes of stock which a holder of the number of shares of Common Stock deliverable upon conversion of such series of Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

 

(i)             No Impairment The Corporation will not through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Series AA Preferred Stock against impairment.  Notwithstanding the foregoing, nothing in this Section 4(i) shall prohibit the Corporation from amending its Certificate of Incorporation with the requisite consent of its stockholders and the Board of Directors.

 

(j)             Certificate as to Adjustments .  Upon the occurrence of each adjustment or readjustment of a Conversion Price pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series AA Preferred Stock to which adjustments or readjustments of Conversion Price applies a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, upon the written request at any time of any holder of Series AA Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth:  (i) such adjustments and readjustments; (ii) the Conversion Prices at the time in effect; and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Series AA Preferred Stock.

 

(k)            Waiver of Adjustment of Conversion Price .  Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of the Series AA Preferred Stock may be waived, either prospectively or retroactively and either generally or in a particular instance, by the consent or vote of the holders of the majority of the outstanding shares of Series AA Preferred Stock.  Any such waiver shall bind all future holders of shares of Series AA Preferred Stock.  A copy of any such waiver shall be provided to the holders of shares of Series AA Preferred Stock upon request to the Secretary of the Corporation.  Prompt notice of any such waiver by the holders of less than all the shares of Series AA Preferred Stock shall be given to those holders of shares of Series AA Preferred Stock who have not consented to such waiver.

 

(l)             Reservation of Stock Issuable Upon Conversion .  The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series AA Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to

 

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effect the conversion of all then outstanding shares of Series AA 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 Series AA Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

 

5.              Covenants .

 

(a)            So long as at least fifty percent (50%) of the shares (as adjusted for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event) of Series AA Preferred Stock originally issued shall be issued and outstanding, the Corporation shall not, without first obtaining approval (by vote or written consent as provided by law) of the holders of at least fifty percent (50%) of the outstanding shares of Series AA Preferred Stock, voting together as a single series:

 

(i)             amend any provision of the Restated Certificate or By-laws of the Corporation if such action would materially and adversely alter the rights, preferences, privileges or powers of the Preferred Stock or any series thereof;

 

(ii)            alter or change the rights (including the rights under Section 3(d) herein), preferences or privileges of the Preferred Stock, whether by merger, consolidation or otherwise;

 

(iii)           increase or decrease (other than decreases resulting from conversion of the Preferred Stock) the authorized number of shares of Common Stock or Preferred Stock or any series thereof;

 

(iv)           create any new class or series of shares having rights, preferences or privileges senior to or on parity with the Preferred Stock;

 

(v)            declare or pay any dividend or make other distributions to the holders of shares of Common Stock;

 

(vi)           reclassify or recapitalize the outstanding capital stock of the Corporation;

 

(vii)          merge, consolidate or sell the assets of the Corporation or consummate any other reorganization of the Corporation in which control of the Corporation is affected;

 

(viii)         acquire (whether directly or through acquisition of stock, merger, consolidation or otherwise) any business, technology, entity or any material asset thereof;

 

(ix)           permit the issuance of any securities of any subsidiary to persons other than the Corporation, and issuances by NeuroMolecular Pharmaceuticals India Private Limited to one or more residents of India in order to comply with applicable law;

 

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(x)            increase or decrease the number of authorized directors or change the method of the election of such directors;

 

(xi)           redeem or repurchase any shares of Common Stock (except for acquisitions of Common Stock by the Corporation pursuant to agreements which permit the Corporation to repurchase such shares upon termination of service to the Corporation or in exercise of the Corporation’s right of first refusal upon a proposed transfer); or

 

(xii)          agree to do any of the foregoing.

 

(b)            So long as any shares of Preferred Stock shall be issued and outstanding, the Corporation shall not without first obtaining approval (by vote or written consent as provided by law) of the holders of at least a majority of the Preferred Stock then outstanding, voting together as a single class, alter or change the rights, preferences or privileges of the Series AA Preferred Stock or the Series AA-1 Preferred Stock, whether by merger, consolidation or otherwise, so as to materially and adversely affect the holders of such shares.

 

6.              Notices of Record Dates, Etc.   In the event (i) the Corporation establishes a record date to determine the holders of any class or series of securities who are entitled to receive any dividend or other distribution or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or series of any other securities or property, or to receive any other right or (ii) there is to occur any Liquidation Event or Deemed Liquidation Event, the Corporation will deliver to each holder of Preferred Stock, in accordance with Section 7(a) hereof, and at least twenty (20) days prior to such record date or the proposed effective date of the transaction specified therein (or, if earlier, twenty (20) days prior to any stockholders’ meeting called to approve such transaction), as the case may be, a notice specifying (a) the date of such record date for the purpose of such dividend, distribution or right and a description (including the amount and character) of such dividend, distribution or right, (b) the date on which any such transaction is expected to become effective and the material terms and conditions thereof, and (c) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) will be entitled to exchange their shares of Common Stock (or other securities), for cash, securities, and/or other property deliverable upon such transaction.  The Corporation shall thereafter give each holder of Preferred Stock, in accordance with Section 7(a) hereof, prompt notice of any material changes.  Such transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes as provided for herein, provided that such periods may be shortened upon the written consent of the holders of the Preferred Stock that are entitled to such notice rights or similar notice rights and that represent a majority of the voting power of all then outstanding shares of the Preferred Stock, voting together as a single class on an as-converted basis.

 

7.              Miscellaneous .

 

(a)            Notices .  All notices, requests, payments, instructions or other documents to be given hereunder will be in writing or by written telecommunication, and will be deemed to have been duly given if (i) delivered personally (effective upon delivery), (ii) mailed by certified mail, return receipt requested, postage prepaid (effective five business days after dispatch), (iii)

 

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sent by a reputable, established courier service that provides evidence of delivery and that guarantees next business day delivery (effective the next business day), or (iv) sent by facsimile followed within twenty-four (24) hours by confirmation by one of the foregoing methods (effective upon receipt of the facsimile in complete, readable form), sent to the intended recipient at the recipient’s address or facsimile number as it appears on the books of the Corporation.

 

(b)            Transfer Taxes, Etc.   The Corporation will pay any and all stock transfer, documentary stamp taxes, and the like that may be payable in respect of any issuance or delivery of shares of Preferred Stock or shares of Common Stock or other securities issued in respect of shares of Preferred Stock pursuant hereto or certificates representing such shares or securities.  The Corporation will not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Preferred Stock or shares of Common Stock or other securities in a name other than that in which such shares were registered, or in respect of any payment to any person other than the registered holder thereof with respect to any such shares.

 

(c)            Transfer Agents .  The Corporation may appoint, and from time to time discharge and change, a transfer agent for Preferred Stock.  Upon any such appointment or discharge of a transfer agent, the Corporation will reasonably promptly send written notice thereof to each holder of record of Preferred Stock.

 

(d)            Non-Impairment .  The Corporation shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but shall at all times in good faith assist in the carrying out of all the provisions of this Article Fourth (C) and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Preferred Stock against impairment.

 

FIFTH:                  The Corporation is to have perpetual existence.

 

SIXTH:                   For the management of the business and for the conduct of the affairs of the Corporation, and in further definition and not in limitation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, conferred by the State of Delaware, it is further provided that:

 

A.             The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors.   Except as provided herein, the number of directors which shall constitute the whole Board shall be fixed by, or in the manner provided in, the By-Laws.  The phrase “whole Board” and the phrase “total number of directors” shall be deemed to have the same meaning, to wit, the total number of directors which the Corporation would have if there were no vacancies.  No election of directors need be by written ballot.

 

B.             Subject to the provisions herein, after the original or other By Laws of the Corporation have been adopted, amended or repealed, as the case may be, in accordance with the provisions of Section 109 of the General Corporation Law of the State of Delaware, and, after the Corporation has received any payment for any of its stock, the power to adopt, amend, or

 

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repeal the By Laws of the Corporation may be exercised by the Board of Directors of the Corporation.

 

C.             The books of the Corporation may be kept at such place within or without the State of Delaware as the By Laws of the Corporation may provide or as may be designated from time to time by the Board of Directors of the Corporation.

 

SEVENTH:           The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented from time to time, or other applicable law indemnify and advance expenses to, (i) its directors and officers, and (ii) any person who at the request of the Corporation is or was serving as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section as amended or supplemented (or any successor), provided, however, that except with respect to proceedings to enforce rights to indemnification, the By-Laws of the Corporation may provide that the Corporation shall indemnify any director, officer or such person in connection with a proceeding (or part thereof) initiated by such director, officer or such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.  The Corporation, by action of its Board of Directors, may provide indemnification or advance expenses to employees and agents of the Corporation or other persons only on such terms and conditions and to the extent determined by the Board of Directors in its sole and absolute discretion.  The indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

EIGHTH:               No director of this Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as in effect at the time such liability or limitation thereof is determined.  No amendment, modification or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment, modification or repeal.  If the General Corporation Law of the State of Delaware is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.

 

NINTH:                  Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the

 

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application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs.  If a majority in number representing three fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

 

TENTH:                 From time to time any of the provisions of this Restated Certificate may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Restated Certificate are granted subject to the provisions of this Article.

 

ELEVENTH:        The Corporation renounces 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 by, created or developed by, or which otherwise comes into 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 or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Person”), 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 or Preferred Stock holder of the Corporation.

 

*****

 

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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its duly authorized officer this 30th day of June, 2011.

 

 

ADAMAS PHARMACEUTICALS, INC.

 

 

 

 

 

By:

/s/ Gregory T. Went

 

 

Gregory T. Went

 

 

President

 


 

CERTIFICATE OF AMENDMENT TO

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

ADAMAS PHARMACEUTICALS, INC.

 

Gregory T. Went hereby certifies that:

 

ONE:     The name of this company is ADAMAS PHARMACEUTICALS, INC. (the “ Company ”).

 

TWO:    He is the elected and acting Chief Executive Officer of the Company.

 

THREE: The Board of Directors of the Company, acting in accordance with the provisions of Section 141 and 242 of the Delaware General Corporation Law (the “ DGCL ”), adopted resolutions amending the Company’s Amended and Restated Certificate of Incorporation as follows:

 

Part A of Article FOURTH is hereby amended to read in its entirety as follows:

 

A.          DESIGNATION AND NUMBER OF SHARES .

 

The total number of shares of capital stock that this Corporation is authorized to issue is 103,350,000. The total number of shares of common stock authorized to be issued is 100,000,000, par value $0.001 per share (the “Common Stock”). The total number of shares of preferred stock authorized to be issued is 3,350,000, par value $0.001 per share (the “Preferred Stock”), of which two million five hundred thousand (2,500,000) shares are designated as “Series AA Convertible Preferred Stock” and eight hundred fifty thousand (850,000) shares are designated as “Series AA-1 Preferred Stock.” The rights preferences, privileges and restrictions granted to and imposed upon the various classes and series of capital stock of the Corporation are as follows.”

 

Part C(3)(d) of Article FOURTH is hereby amended to read in its entirety as follows:

 

“(d)         Election of Directors. The Board of Directors shall consist of up to nine (9) members, such amount determined in accordance with the Corporation’s bylaws. So long as at least twenty-five percent (25%) of the shares (as adjusted for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event) of Series AA Preferred Stock originally issued remain outstanding, the holders of at least a majority of the Series AA Preferred Stock shall be entitled to elect two (2) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors (and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such director). The holders of at least a majority of the Common Stock and Series AA Preferred Stock, voting together as a single class, shall be entitled to elect the person then serving as the Corporation’s Chief Executive Officer as one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors (and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director). The holders of at least a majority of the Common Stock , voting as a separate class, and the holders of at least a majority of the Series AA Preferred Stock, voting together as a separate class, shall, by mutual agreement, be entitled to elect six (6) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors (and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors). If a vacancy on the Board of Directors is to be filled by the Board

 



 

of Directors, only, directors elected by the same class or classes of stockholders as those who would be entitled to vote to fill such vacancy shall vote to fill such vacancy.”

 

FOUR:   Thereafter pursuant to a resolution of the Board of Directors, such amendment was submitted to the stockholders of the Company for their approval, and was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the DGCL and duly adopted in accordance with the provisions of Section 242 of the DGCL.

 

[SIGNATURE PAGE FOLLOWS]

 



 

ADAMAS PHARMACEUTICALS, INC. has caused this Certificate of Amendment to the Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer on March 4, 2014.

 

 

 

ADAMAS PHARMACEUTICALS, INC.

 

 

 

 

 

By:

/s/ Gregory T. Went

 

Gregory T. Went

 

Chief Executive Officer

 

SIGNATURE PAGE TO

CERTIFICATE OF AMENDMENT TO

CERTIFICATE OF INCORPORATION

 




Exhibit 3.2

 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

ADAMAS PHARMACEUTICALS, INC.

 

Gregory T. Went hereby certifies that:

 

ONE:                                         The name of the Corporation is Adamas Pharmaceuticals, Inc.  The Certificate of Incorporation of the Corporation was filed with the Secretary of the State of Delaware on November 15, 2000 under the name NeuroMolecular, Inc.

 

TWO:                                     He is the duly elected and acting Chief Executive Officer and Chairman of Adamas Pharmaceuticals, Inc., a Delaware corporation.

 

THREE:                       The Certificate of Incorporation of this company is hereby amended and restated to read as follows:

 

I.

 

The name of this company is Adamas Pharmaceuticals, Inc. (the “ Company ”).

 

II.

 

The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle; and the name of the registered agent of the Corporation in the State of Delaware is The Prentice Hall Corporation System, Inc.

 

III.

 

The purpose of this Company is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“ DGCL ”).

 

IV.

 

A.                                     This Company is authorized to issue two classes of stock to be designated, respectively, “ Common Stock ” and “ Preferred Stock .” The total number of shares which the Company is authorized to issue is 105,000,000 shares. 100,000,000 shares shall be Common Stock, each having a par value of one-tenth of one cent ($0.001). 5,000,000 shares shall be Preferred Stock, each having a par value of one-tenth of one cent ($0.001).

 

B.                                     The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “ Board ”) is hereby expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be

 

1



 

stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such shares and as may be permitted by the DGCL. The Board is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the stock of the Company entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

 

C.                                     Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) 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 as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

 

V.

 

For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation and regulation of the powers of the Company, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

 

A.                                     MANAGEMENT OF BUSINESS. The management of the business and the conduct of the affairs of the Company shall be vested in its Board. The number of directors which shall constitute the Board shall be fixed exclusively by resolutions adopted by a majority of the authorized number of directors constituting the Board.

 

B.                                     BOARD OF DIRECTORS

 

1.                                       Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, and for so long as permitted by applicable law, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. The Board is authorized to assign members of the Board already in office to such classes at the time the classification becomes effective. At the first annual meeting of stockholders following the filing of this Amended and Restated Certificate of Incorporation, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full

 

2



 

term of three years. At the second annual meeting of stockholders following the filing of this Amended and Restated Certificate of Incorporation, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the filing of this Amended and Restated Certificate of Incorporation, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

 

2.                                       At any time that applicable law prohibits a classified board as described in Section B.2. of this Article V, all directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting.

 

3.                                       No stockholder entitled to vote at an election for directors may cumulate votes to which such stockholder is entitled, unless required by applicable law at the time of such election. During such time or times that applicable law requires cumulative voting, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (a) the names of such candidate or candidates have been placed in nomination prior to the voting and (b) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

 

4.                                       Notwithstanding the foregoing provisions of this section, each director shall serve until their successor is duly elected and qualified or until their earlier death, resignation or removal. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.

 

C.                                     REMOVAL OF DIRECTORS. Subject to any limitations imposed by applicable law, removal shall be as provided in Section 141(k) of the DGCL.

 

D.                                     VACANCIES.                   Subject to any limitations imposed by applicable law and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall, unless the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders and except as otherwise provided by applicable law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.

 

3



 

E.                                     BYLAW AMENDMENTS.

 

1.                                       The Board is expressly empowered to adopt, amend or repeal the Bylaws of the Company. Any adoption, amendment or repeal of the Bylaws of the Company by the Board shall require the approval of a majority of the authorized number of directors. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Company; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Company required by law or by this Amended and Restated Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class.

 

2.                                       The directors of the Company need not be elected by written ballot unless the Bylaws so provide.

 

3.                                       No action shall be taken by the stockholders of the Company except at an annual or special meeting of stockholders called in accordance with the Bylaws, and no action shall be taken by the stockholders by written consent or electronic transmission.

 

4.                                       Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Company shall be given in the manner provided in the Bylaws of the Company.

 

VI.

 

A.                                     The liability of the directors for monetary damages shall be eliminated to the fullest extent under applicable law.

 

B.                                     To the fullest extent permitted by applicable law, the Company is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Company (and any other persons to which applicable law permits the Company 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 such applicable law. If applicable law is amended after approval by the stockholders of this Article VI to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director to the Company shall be eliminated or limited to the fullest extent permitted by applicable law as so amended.

 

C.                                     Any repeal or modification of this Article VI shall only be prospective and shall not affect the rights or protections or increase the liability of any director under this Article VI in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

 

VII.

 

Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any

 

4



 

derivative action or proceeding brought on behalf of the Company; (B) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders; (C) any action asserting a claim against the Company arising pursuant to any provision of the DGCL, the Amended and Restated Certificate of Incorporation or the Bylaws of the Company; or (D) any action asserting a claim against the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and to have consented to the provisions of this Article VII.

 

VIII.

 

A.                                     The Company reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in paragraph B. of this Article VIII, and all rights conferred upon the stockholders herein are granted subject to this reservation.

 

B.                                     Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Company required by law or by this Amended and Restated Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI, VII and VIII.

 

* * * *

 

FOUR:         This Amended and Restated Certificate of Incorporation has been duly approved by the Board.

 

FIVE:              This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of the Company in accordance with Section 228 of the DGCL. This Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL by the stockholders of the Company.

 

[Remainder of Page Intentionally Left Blank]

 

5



 

IN WITNESS WHEREOF , Adamas Pharmaceuticals, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer and Chairman this          day of                2014.

 

 

ADAMAS PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

By:

 

 

 

Name: Gregory Went

 

 

Title: Chief Executive Officer and Chairman

 

 

Signature Page to Amended and Restated Certificate of Incorporation

 




Exhibit 3.3

 

NEUROMOLECULAR, INC.

 

BY-LAWS

 

ARTICLE I- STOCKHOLDERS

 

Section 1. Annual Meeting.

 

An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at ten o’clock a.m. or such other time as is determined by the Board of Directors, on such date (other than a Saturday, Sunday or legal holiday) as is determined by the Board of Directors, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation or the last annual meeting of stockholders, and at such place as the Board of Directors shall each year fix.

 

Section 2. Special Meetings.

 

Subject to the rights of the holders of any class or series of preferred stock of the Corporation, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors authorized. Special meetings of the stockholders may be held at such place within or without the State of Delaware as may be stated in such resolution.

 

Section 3. Notice of Meetings.

 

Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation).

 

When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

 

Section 4. Quorum.

 

At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required

 



 

by law. Where a separate vote by a class or classes is required, a majority of the shares of such class or classes present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.

 

If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time.

 

Section  5. Organization.

 

The Chairman of the Board of Directors or, in his or her absence, such person as the Board of Directors may have designated or, in his or her absence, the chief executive officer of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman of the meeting appoints.

 

Section 6. Conduct of Business.

 

The Chairman of the Board of Directors or his or her designee or, if neither the Chairman of the Board nor his or her designee is present at the meeting, then a person appointed by a majority of the Board of Directors, shall preside at, and act as chairman of, any meeting of the stockholders. The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such regulation of the manner of voting and the conduct of discussion as he or she deems to be appropriate.

 

Section  7. Proxies and Voting.

 

At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting.

 

Each stockholder shall have one (1) vote for every share of stock entitled to vote which is registered in his or her name on the record date for the meeting, except as otherwise provided herein or required by law.

 

All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his or her proxy, a vote by ballot shall be taken.

 

Except as otherwise provided in the terms of any class or series of preferred stock of the Corporation, all elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast.

 

Section 8. Action Without Meeting.

 

Any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing,

 



 

setting forth the action so taken, shall be (1) signed and dated by the holders of outstanding stock having not less than the minimum 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 and (2) delivered to the Corporation within sixty (60) days of the earliest dated consent by delivery to its registered office in the State of Delaware (in which case delivery shall be by hand or by certified or registered mail, return receipt requested), 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. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

Section 9. Stock List.

 

A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.

 

The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

 

ARTICLE II- BOARD OF DIRECTORS

 

Section 1. Number, Election, Tenure and Qualification.

 

The number of directors which shall constitute the whole board shall be determined by resolution of the Board of Directors or by the stockholders at the annual meeting or at any special meeting of stockholders. The directors shall be elected at the annual meeting or at any special meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his or her successor is elected and qualified, unless sooner displaced. Directors need not be stockholders.

 

Section 2. Vacancies and Newly Created Directorships.

 

Subject to the rights of the holders of any class or series of preferred stock of the Corporation to elect directors, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors then in office, though less than a quorum, or the sole remaining director. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director.

 



 

Section 3. Resignation and Removal.

 

Any director may resign at any time upon written notice to the Corporation at its principal place of business or to the chief executive officer or secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, unless otherwise specified by law or the Certificate of Incorporation.

 

Section 4. Regular Meetings.

 

Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A written notice of each regular meeting shall not be required.

 

Section 5. Special Meetings.

 

Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, if any, the President, the Treasurer, the Secretary or one or more of the directors then in office and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived by mailing written notice not less than three (3) days before the meeting or orally, by telegraph, telex, cable or telecopy given not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

 

Section 6. Quorum.

 

At any meeting of the Board of Directors, a majority of the total number of members of the Board of Directors shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

 

Section  7. Action by Consent.

 

Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, 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 or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

 

Section 8. Participation in Meetings By Conference Telephone.

 

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar

 



 

communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

 

Section 9. Conduct of Business.

 

At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law.

 

Section 10. Powers.

 

The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:

 

(1) To declare dividends from time to time in accordance with law;

(2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

(3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, to borrow funds and guarantee obligations, and to do all things necessary in connection therewith;

(4) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;

(5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;

(6) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine;

(7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and,

(8) To adopt from time to time regulations, not inconsistent with these By-Laws, for the management of the Corporation’s business and affairs.

 

Section 11. Compensation of Directors.

 

Directors, as such, may receive, pursuant to a resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors.

 



 

ARTICLE III COMMITTEES

 

Section 1. Committees of the Board of Directors.

 

The Board of Directors, by a vote of a majority of the Board of Directors, may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. 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 amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

 

Section 2. Conduct of Business.

 

Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third ( 113) of the members shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee.

 

ARTICLE IV- OFFICERS

 

Section 1. Enumeration.

 

The officers of the Corporation shall be the President, the Treasurer, the Secretary and such other officers as the Board of Directors or the Chairman of the Board may determine, including, but not limited to, the Chairman of the Board of Directors, one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries.

 



 

Section 2. Election.

 

The Chairman of the Board, if any, the President, the Treasurer and the Secretary shall be elected annually by the Board of Directors at their first meeting following the annual meeting of the stockholders. The Board of Directors or the Chairman of the Board, if any, may, from time to time, elect or appoint such other officers as it or he or she may determine, including, but not limited to, one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries.

 

Section 3. Qualification.

 

No officer need be a stockholder. The Chairman of the Board, if any, and any Vice Chairman appointed to act in the absence of the Chairman, if any, shall be elected by and from the Board of Directors, but no other officer need be a director. Two or more offices may be held by any one person. If required by vote of the Board of Directors, an officer shall give bond to the Corporation for the faithful performance of his or her duties, in such form and amount and with such sureties as the Board of Directors may determine. The premiums for such bonds shall be paid by the Corporation.

 

Section 4. Tenure and Removal.

 

Each officer elected or appointed by the Board of Directors shall hold office until the first meeting of the Board of Directors following the next annual meeting of the stockholders and until his or her successor is elected or appointed and qualified, or until he or she dies, resigns, is removed or becomes disqualified, unless a shorter term is specified in the vote electing or appointing said officer. Each officer appointed by the Chairman of the Board, if any, shall hold office until his or her successor is elected or appointed and qualified, or until he or she dies, resigns, is removed or becomes disqualified, unless a shorter term is specified by any agreement or other instrument appointing such officer. Any officer may resign by giving written notice of his or her resignation to the Chairman of the Board, if any, the President, or the Secretary, or to the Board of Directors at a meeting of the Board, and such resignation shall become effective at the time specified therein. Any officer elected or appointed by the Board of Directors may be removed from office with or without cause by vote of a majority of the directors. Any officer appointed by the Chairman of the Board, if any, may be removed with or without cause by the Chairman of the Board.

 

Section  5. Chairman of the Board.

 

The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and stockholders at which he or she is present and shall have such authority and perform such duties as may be prescribed by these By-Laws or from time to time be determined by the Board of Directors. The Chairman of the Board shall also have the power and authority to determine the compensation and duties of all officers, employees and agents of the Corporation.

 

Section 6. President.

 

The President shall, subject to the control and direction of the Board of Directors, have and perform such powers and duties as may be prescribed by these By-Laws or from time to time be determined by the Board of Directors.

 


 

Section  7. Vice Presidents.

 

The Vice Presidents, if any, in the order of their election, or in such other order as the Board of Directors may determine, shall have and perform the powers and duties of the President (or such of the powers and duties as the Board of Directors may determine) whenever the President is absent or unable to act. The Vice Presidents, if any, shall also have such other powers and duties as may from time to time be determined by the Board of Directors.

 

Section 8. Treasurer and Assistant Treasurers.

 

The Treasurer shall, subject to the control and direction of the Board of Directors, have and perform such powers and duties as may be prescribed in these By-Laws or be determined from time to time by the Board of Directors. All property of the Corporation in the custody of the Treasurer shall be subject at all times to the inspection and control of the Board of Directors. Unless otherwise voted by the Board of Directors, each Assistant Treasurer, if any, shall have and perform the powers and duties of the Treasurer whenever the Treasurer is absent or unable to act, and may at any time exercise such of the powers of the Treasurer, and such other powers and duties, as may from time to time be determined by the Board of Directors.

 

Section 9. Secretary and Assistant Secretaries.

 

The Board of Directors shall appoint a Secretary and, in his or her absence, an Assistant Secretary. The Secretary or, in his or her absence, any Assistant Secretary, shall attend all meetings of the directors and shall record all votes of the Board of Directors and minutes of the proceedings at such meetings. The Secretary or, in his or her absence, any Assistant Secretary, shall notify the directors of their meetings, and shall have and perform such other powers and duties as may from time to time be determined by the Board of Directors. If the Secretary or an Assistant Secretary is elected but is absent from any meeting of directors, a temporary secretary may be appointed by the directors at the meeting

 

Section 10. Bond.

 

If required by the Board of Directors, any officer shall give the Corporation a bond in such sum and with such surety or sureties and upon such terms and conditions as shall be satisfactory to the Board of Directors, including without limitation a bond for the faithful performance of the duties of his office and for the restoration to the Corporation of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his control and belonging to the Corporation.

 

Section 11. Action with Respect to Securities of Other Corporations.

 

Unless otherwise directed by the Board of Directors, the President, the Treasurer or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may

 



 

hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

 

ARTICLE V- STOCK

 

Section 1. Certificates of Stock.

 

Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by the Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile.

 

Section 2. Transfers of Stock.

 

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of this Article of these By-Laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

 

Section 3. Record Date.

 

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or 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 record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.

 

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.

 



 

Section 4. Lost, Stolen or Destroyed Certificates.

 

In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

 

Section 5. Regulations.

 

The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

 

Section 6. Interpretation.

 

The Board of Directors shall have the power to interpret all of the terms and provisions of these By-Laws, which interpretation shall be conclusive.

 

ARTICLE VI- NOTICES

 

Section 1. Notices.

 

Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mail, postage paid, or by sending such notice by courier service, prepaid telegram or mailgram, or telecopy, cable, or telex. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand delivered, or dispatched, if delivered through the mail or by courier, telegram, mailgram, telecopy, cable, or telex shall be the time of the giving of the notice.

 

Section 2. Waiver of Notice.

 

A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance of a director or stockholder at a meeting without protesting prior thereto or at its commencement the lack of notice shall also constitute a waiver of notice by such director or stockholder.

 

ARTICLE VII INDEMNIFICATION

 

Section 1. Actions other than by or in the Right of the Corporation.

 

The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director, officer, employee or agent

 



 

of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she 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 Corporation, and, with respect to any criminal action or proceedings, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person 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 Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

 

Section 2. Actions by or in the Right of the Corporation.

 

The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he 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 Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper.

 

Section 3. Success on the Merits.

 

To the extent that any person described in Section 1 or Section 2 of this Article has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in said Sections, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

 

Section 4. Specific Authorization.

 

Any indemnification under Section 1 or Section 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of any person described in said Sections is proper in the circumstances because he or she has met the applicable standard of conduct set forth in said Sections. Such determination shall be made (1) by the Board of Directors by a majority vote of a

 



 

quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders of the Corporation.

 

Section  5. Advance Payment.

 

Expenses incurred in defending any civil, criminal, administrative, or investigative action, suit or proceeding may 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 any person described in said Section to repay such amount if it shall ultimately be determined that he or she is not entitled to indemnification by the Corporation as authorized in this Article.

 

Section 6. Non-Exclusivity.

 

The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article shall not be deemed exclusive of any other rights to which those provided indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

 

Section  7. Insurance.

 

The Board of Directors may authorize, by a vote of the majority of the full board, the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Article.

 

Section 8. Continuation of Indemnification and Advancement of Expenses.

 

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

Section 9. Severability.

 

If any word, clause or provision of this Article or any award made hereunder shall for any reason be determined to be invalid, the provisions hereof shall not otherwise be affected thereby but shall remain in full force and effect.

 



 

Section 10. Intent of Article.

 

The intent of this Article is to provide for indemnification and advancement of expenses to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware. To the extent that such Section or any successor section may be amended or supplemented from time to time, this Article shall be amended automatically and construed so as to permit indemnification and advancement of expenses to the fullest extent from time to time permitted by law.

 

ARTICLE VIII- CERTAIN TRANSACTIONS

 

Section 1. Transactions with Interested Parties.

 

No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction or solely because the votes of such director or officer are counted for such purpose, if: (a) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (b) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders.

 

Section 2. Quorum.

 

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

 

ARTICLE IX MISCELLANEOUS

 

Section 1. Facsimile Signatures.

 

In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

 

Section 2. Corporate Seal.

 

The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the

 



 

Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.

 

Section 3. Reliance upon Books, Reports and Records.

 

Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

 

Section 4. Fiscal Year.

 

Except as otherwise determined by the Board of Directors from time to time, the fiscal year of the Corporation shall end on the last day of December of each year.

 

Section 5. Time Periods.

 

In applying any provision of these By-Laws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

 

ARTICLE X- AMENDMENTS

 

These By-Laws may be amended, added to, rescinded or repealed 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 meeting of the stockholders or of the Board of Directors, provided notice of the proposed change was given in the notice of the meeting or, in the case of a meeting of the Board of Directors, in a notice given not less than two (2) days prior to the meeting.

 




Exhibit 3.4

 

AMENDED AND RESTATED BYLAWS

 

OF

 

ADAMAS PHARMACEUTICALS, INC.
(A DELAWARE CORPORATION)

 



 

AMENDED AND RESTATED BYLAWS

 

OF

 

ADAMAS PHARMACEUTICALS, INC.
(A DELAWARE CORPORATION)

 

OFFICES

 

Section 1.                                           Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle.

 

Section 2.                                           Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and 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.

 

CORPORATE SEAL

 

Section 3.                                           Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

STOCKHOLDERS’ MEETINGS

 

Section 4.                                           Place of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. 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 provided under the Delaware General Corporation Law (“ DGCL ”).

 

Section 5.                                           Annual Meetings.

 

(a)                                  The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may properly come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of

 



 

stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders (with respect to business other than nominations); (ii) brought specifically by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in Section 5(b) below, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5. For the avoidance of doubt, clause (iii) above shall be the exclusive means for a stockholder to make nominations and submit other business (other than matters properly included in the corporation’s notice of meeting of stockholders and proxy statement under Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “ 1934 Act ”)) before an annual meeting of stockholders.

 

(b)                                  At an annual meeting of the stockholders, only such business shall be conducted as is a proper matter for stockholder action under Delaware law and as shall have been properly brought before the meeting.

 

i.                                           For nominations for the election to the Board of Directors to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the corporation on a timely basis as set forth in Section 5(b)(iii) and must update and supplement such written notice on a timely basis as set forth in Section 5(c). Such stockholder’s notice shall set forth: (A) as to each nominee such stockholder proposes to nominate at the meeting: (1) the name, age, business address and residence address of such nominee, (2) the principal occupation or employment of such nominee, (3) the class and number of shares of each class of capital stock of the corporation which are owned of record and beneficially by such nominee, (4) the date or dates on which such shares were acquired and the investment intent of such acquisition, (5) a statement whether such nominee, if elected, intends to tender, promptly following such person’s failure to receive the required vote for election or re-election at the next meeting at which such person would face election or re-election, an irrevocable resignation effective upon acceptance of such resignation by the Board of Directors, and (6) such other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that is otherwise required to be disclosed pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named as a nominee and to serving as a director if elected); and (B) the information required by Section 5(b)(iv). The corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such proposed nominee.

 

ii.                                        Other than proposals sought to be included in the corporation’s proxy materials pursuant to Rule 14(a)-8 under the 1934 Act, for business other than nominations for the election to the Board of Directors to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the corporation on a timely basis as set forth in Section 5(b)(iii), and must update and supplement such written notice on a timely basis as set forth in Section 5(c). Such stockholder’s notice shall set forth: (A)

 



 

as to each matter such stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, and any material interest (including any anticipated benefit of such business to any Proponent (as defined below) other than solely as a result of its ownership of the corporation’s capital stock, that is material to any Proponent individually, or to the Proponents in the aggregate) in such business of any Proponent; and (B) the information required by Section 5(b)(iv).

 

iii.                                     To be timely, the written notice required by Section 5(b)(i) or 5(b)(ii) must be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the ninetieth (90 th ) day nor earlier than the close of business on the one hundred twentieth (120 th ) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that, subject to the last sentence of this Section 5(b)(iii), in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so received not earlier than the close of business on the one hundred twentieth (120 th ) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90 th ) day prior to such annual meeting or the tenth (10 th ) day following the day on which public announcement of the date of such meeting is first made. In no event shall an adjournment or a postponement of an annual meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder’s notice as described above.

 

iv.                                    The written notice required by Section 5(b)(i) or 5(b)(ii) shall also set forth, as of the date of the notice and as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (each, a “ Proponent ” and collectively, the “ Proponents ”): (A) the name and address of each Proponent, as they appear on the corporation’s books; (B) the class, series and number of shares of the corporation that are owned beneficially and of record by each Proponent; (C) a description of any agreement, arrangement or understanding (whether oral or in writing) with respect to such nomination or proposal between or among any Proponent and any of its affiliates or associates, and any others (including their names) acting in concert, or otherwise under the agreement, arrangement or understanding, with any of the foregoing; (D) a representation that the Proponents are holders of record or beneficial owners, as the case may be, of shares of the corporation entitled to vote at the meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice (with respect to a notice under Section 5(b)(i)) or to propose the business that is specified in the notice (with respect to a notice under Section 5(b)(ii)); (E) a representation as to whether the Proponents intend to deliver a proxy statement and form of proxy to holders of a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (with respect to a notice under Section 5(b)(i)) or to carry such proposal (with respect to a notice under Section 5(b)(ii)); (F) to the extent known by any Proponent, the name and address of any other stockholder supporting the proposal on the date of such stockholder’s notice; and (G) a description of all Derivative Transactions (as defined below) by each Proponent during the previous twelve (12) month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, such Derivative Transactions.

 



 

For purposes of Sections 5 and 6, a “ Derivative Transaction ” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proponent or any of its affiliates or associates, whether record or beneficial:

 

(w)                                the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the corporation,

 

(x)                                  which otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the corporation,

 

(y)                                  the effect or intent of which is to mitigate loss, manage risk or benefit of security value or price changes, or

 

(z)                                   which provides the right to vote or increase or decrease the voting power of, such Proponent, or any of its affiliates or associates, with respect to any securities of the corporation,

 

which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proponent in the securities of the corporation held by any general or limited partnership, or any limited liability company, of which such Proponent is, directly or indirectly, a general partner or managing member.

 

(c)                                   A stockholder providing written notice required by Section 5(b)(i) or (ii) shall update and supplement such notice in writing, if necessary, so that the information provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for the meeting and (ii) the date that is five (5) business days prior to the meeting and, in the event of any adjournment or postponement thereof, five (5) business days prior to such adjourned or postponed meeting. In the case of an update and supplement pursuant to clause (i) of this Section 5(c), such update and supplement shall be received by the Secretary at the principal executive offices of the corporation not later than five (5) business days after the record date for the meeting. In the case of an update and supplement pursuant to clause (ii) of this Section 5(c), such update and supplement shall be received by the Secretary at the principal executive offices of the corporation not later than two (2) business days prior to the date for the meeting, and, in the event of any adjournment or postponement thereof, two (2) business days prior to such adjourned or postponed meeting.

 

(d)                                  Notwithstanding anything in Section 5(b)(iii) to the contrary, in the event that the number of directors in an Expiring Class is increased and there is no public announcement of the appointment of a director to such class, or, if no appointment was made, of the vacancy in such class, made by the corporation at least ten (10) days before the last day a stockholder may deliver a notice of nomination in accordance with Section 5(b)(iii), a stockholder’s notice required by this Section 5 and which complies with the requirements in Section 5(b)(i), other than the timing requirements in Section 5(b)(iii), shall also be considered

 



 

timely, but only with respect to nominees for any new positions in such Expiring Class created by such increase, if it shall be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation. For purposes of this section, an “ Expiring Class ” shall mean a class of directors whose term shall expire at the next annual meeting of stockholders.

 

(e)                                   A person shall not be eligible for election or re-election as a director unless the person is nominated either in accordance with clause (ii) of Section 5(a), or in accordance with clause (iii) of Section 5(a). Except as otherwise required by law, the Chairperson of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, or the Proponent does not act in accordance with the representations in Sections 5(b)(iv)(D) and 5(b)(iv)(E), to declare that such proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded, notwithstanding that proxies in respect of such nominations or such business may have been solicited or received.

 

(f)                                    Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act; provided, however, that any references in these Bylaws to the 1934 Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to proposals and/or nominations to be considered pursuant to Section 5(a)(iii) of these Bylaws.

 

(g)                                  For purposes of Sections 5 and 6,

 

i.                                           public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act; and

 

ii.                                        affiliates ” and “ associates ” shall have the meanings set forth in Rule 405 under the Securities Act of 1933, as amended (the “ 1933 Act ”).

 

Section 6.                                           Special Meetings.

 

(a)                                  Special meetings of the stockholders of the corporation may be called, for any purpose as is a proper matter for stockholder action under Delaware law, by (i) the Chairperson of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption). At any time or

 



 

times that the corporation is subject to Section 2115(b) of the California General Corporation Law (“ CGCL ”), stockholders holding five percent (5%) or more of the outstanding shares shall have the right to call a special meeting of stockholders only as set forth in Section 18(b) herein.

 

(b)                                  The Board of Directors shall determine the time and place, if any, of such special meeting. Upon determination of the time and place, if any, of the meeting, the Secretary shall cause a notice of meeting to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. No business may be transacted at such special meeting otherwise than specified in the notice of meeting.

 

(c)                                   Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in this paragraph, who shall be entitled to vote at the meeting and who delivers written notice to the Secretary of the corporation setting forth the information required by Section 5(b)(i). In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder of record may nominate a person or persons (as the case may be), for election to such position(s) as specified in the corporation’s notice of meeting, if written notice setting forth the information required by Section 5(b)(i) of these Bylaws shall be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the later of the ninetieth (90 th ) day prior to such meeting or the tenth (10 th ) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The stockholder shall also update and supplement such information as required under Section 5(c). In no event shall an adjournment or a postponement of a special meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder’s notice as described above.

 

(d)                                  Notwithstanding the foregoing provisions of this Section 6, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 6. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act; provided, however, that any references in these Bylaws to the 1934 Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to nominations for the election to the Board of Directors to be considered pursuant to Section 6(c) of these Bylaws.

 

Section 7.                                           Notice of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any

 



 

meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

Section 8.                                           Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the Chairperson of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute or by applicable stock exchange rules, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

 

Section 9.                                           Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the Chairperson of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. 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.

 



 

Section 10.                                    Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

 

Section 11.                                    Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 12.                                    List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address 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, (a) 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 (b) 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. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

 

Section 13.                                    Action without Meeting. No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent or by electronic transmission.

 

Section 14.                                    Organization.

 

(a)                                  At every meeting of stockholders, the Chairperson of the Board of Directors, or, if a Chairperson has not been appointed or is absent, the Chief Executive Officer, or if no Chief Executive Officer is then serving or is absent, the President, or, if the President is absent, a Chairperson of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as Chairperson. The Chairperson of the Board may appoint the Chief Executive Officer as Chairperson of the meeting. The Secretary, or, in his

 



 

or her absence, an Assistant Secretary or other officer or other person directed to do so by the Chairperson of the meeting, shall act as secretary of the meeting.

 

(b)                                  The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the Chairperson of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such Chairperson, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the Chairperson shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the Chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

DIRECTORS

 

Section 15.                                    Number and Term of Office. The authorized number of directors of the corporation shall be fixed in accordance with the Certificate of Incorporation. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.

 

Section 16.                                    Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

 

Section 17.                                    Classes of Directors.

 

(a)                                  Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the initial public offering pursuant to an effective registration statement under the 1933 Act, covering the offer and sale of Common Stock of the corporation to the public (the “ Initial Public Offering ”), the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes at the time the classification becomes effective. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Initial Public Offering,

 


 

the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

 

(b)           During such time or times that the corporation is subject to Section 2115(b) of the CGCL, Section 17(a) of these Bylaws shall not apply and all directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting.

 

(c)           No stockholder entitled to vote at an election for directors may cumulate votes to which such stockholder is entitled, unless, at the time of the election, the corporation is subject to Section 2115(b) of the CGCL. During such time or times that the corporation is subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected.

 

Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

Section 18.            Vacancies.

 

(a)           Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of Preferred Stock or as otherwise provided by applicable law, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, and not by the stockholders, provided, however , that whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series shall, unless the Board of Directors determines by resolution that any such vacancies or newly created

 



 

directorships shall be filled by stockholders, be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under these Bylaws in the case of the death, removal or resignation of any director.

 

(b)           At any time or times that the corporation is subject to Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in office who have been elected by stockholders shall constitute less than a majority of the directors then in office, then

 

i.              any holder or holders of an aggregate of five percent (5%) or more of the total number of shares at the time outstanding having the right to vote for those directors may call a special meeting of stockholders; or

 

ii.             the Superior Court of the proper county shall, upon application of such stockholder or stockholders, summarily order a special meeting of stockholders, to be held to elect the entire board, all in accordance with Section 305(c) of the CGCL. The term of office of any director shall terminate upon that election of a successor.

 

In order to be valid, a written request to call a special meeting pursuant to Section 18(b)(i), shall be in writing, shall specify the nominees that such stockholder (or stockholders) proposes to nominate at the special meeting and shall be addressed to the attention of the Chairperson of the Board of Directors, President, Vice President or Secretary of the corporation.

 

Section 19.            Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time. If no such specification is made, the Secretary, in his or her discretion, may either (a) require confirmation from the director prior to deeming the resignation effective, in which case the resignation will be deemed effective upon receipt of such confirmation, or (b) deem the resignation effective at the time of delivery of the resignation to the Secretary. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been duly elected and qualified.

 

Section 20.            Removal.

 

(a)           During such time or times that the corporation is subject to Section 2115(b) of the CGCL, the Board of Directors or any individual director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote on such removal; provided, however, that unless the entire Board is removed, no individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such removal, would be sufficient to elect that

 



 

director if voted cumulatively at an election which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of such director’s most recent election were then being elected.

 

(b)           At any time or times that the corporation is not subject to Section 2115(b) of the CGCL, and subject to any limitations imposed by law and subject to the rights of the holders of any series of Preferred Stock, Section 20(a) above shall no longer apply and removal shall be as provided in Section 141(k) of the DGCL.

 

Section 21.            Meetings.

 

(a)           Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board of Directors.

 

(b)           Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairperson of the Board, the Chief Executive Officer, the President, or a majority of the total number of authorized directors.

 

(c)           Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(d)           Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be oral or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

(e)           Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though it had been transacted at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present

 



 

who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 22.            Quorum and Voting.

 

(a)           Unless the Certificate of Incorporation requires a greater number, and except with respect to questions related to indemnification arising under Section 45 for which a quorum shall be one-third of the exact number of directors fixed from time to time, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

 

(b)           At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

 

Section 23.            Action without 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 such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 24.            Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 25.            Committees.

 

(a)           Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and 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 (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly

 



 

required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any Bylaw of the corporation.

 

(b)           Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

 

(c)           Term. The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsections (a) or (b) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. 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, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he 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.

 

(d)           Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

 

Section 26.            Lead Independent Director .  The Chairperson of the Board of Directors, or if the Chairperson is not an independent director, one of the independent directors, may be designated by the Board of Directors as lead independent director to serve until replaced by the

 



 

Board of Directors (“Lead Independent Director”).  The Lead Independent Director will: with the Chairperson of the Board of Directors, establish the agenda for regular Board meetings and serve as Chairperson of Board of Directors meetings in the absence of the Chairperson of the Board of Directors; establish the agenda for meetings of the independent directors; coordinate with the committee chairs regarding meeting agendas and informational requirements; preside over meetings of the independent directors; preside over any portions of meetings of the Board of Directors at which the evaluation or compensation of the Chief Executive Officer is presented or discussed; preside over any portions of meetings of the Board of Directors at which the performance of the Board of Directors is presented or discussed; and perform such other duties as may be established or delegated by the Chairperson of the Board of Directors.

 

Section 27.            Duties of Chairperson of the Board of Directors. The Chairperson of the Board of Directors, if appointed and when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairperson of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

 

Section 28.            Organization. At every meeting of the directors, the Chairperson of the Board of Directors, or, if a Chairperson has not been appointed or is absent, the Chief Executive Officer (if a director), or, if a Chief Executive Officer is absent, the President (if a director), or if the President is absent, the most senior Vice President (if a director), or, in the absence of any such person, a Chairperson of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, any Assistant Secretary or other officer, director or other person directed to do so by the person presiding over the meeting, shall act as secretary of the meeting.

 

OFFICERS

 

Section 29.            Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer and the Treasurer. The Board of Directors may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

 

Section 30.            Tenure and Duties of Officers.

 

(a)           General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any

 



 

time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

 

(b)           Duties of Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors (if a director), unless the Chairperson of the Board of Directors has been appointed and is present. Unless an officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. To the extent that a Chief Executive Officer has been appointed and no President has been appointed, all references in these Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

 

(c)           Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors (if a director), unless the Chairperson of the Board of Directors or the Chief Executive Officer has been appointed and is present. Unless another officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

 

(d)           Duties of Vice Presidents. A Vice President may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. A Vice President shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or, if the Chief Executive Officer has not been appointed or is absent, the President shall designate from time to time.

 

(e)           Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. The Chief Executive Officer, or if no Chief Executive Officer is then serving, the President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

 



 

(f)            Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time. To the extent that a Chief Financial Officer has been appointed and no Treasurer has been appointed, all references in these Bylaws to the Treasurer shall be deemed references to the Chief Financial Officer. The President may direct the Treasurer, if any, or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

 

(g)           Duties of Treasurer. Unless another officer has been appointed Chief Financial Officer of the corporation, the Treasurer shall be the chief financial officer of the corporation and shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President, and, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Treasurer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President and Chief Financial Officer (if not Treasurer) shall designate from time to time.

 

Section 31.            Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 32.            Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

Section 33.            Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or

 



 

by the Chief Executive Officer or by other superior officers upon whom such power of removal may have been conferred by the Board of Directors.

 

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

 

Section 34.            Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

 

All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.

 

Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

Section 35.            Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairperson of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

SHARES OF STOCK

 

Section 36.            Form and Execution of Certificates. The shares of the corporation shall be represented by certificates, or shall be uncertificated if so provided by resolution or resolutions of the Board of Directors. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation represented by certificate shall be entitled to have a certificate signed by or in the name of the corporation by the Chairperson of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case 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, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

 



 

Section 37.            Lost Certificates. A new certificate or certificates shall 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 of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount 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.

 

Section 38.            Transfers.

 

(a)           Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(b)           The corporation shall have 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 the DGCL.

 

Section 39.            Fixing Record Dates.

 

(a)           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, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. 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.

 

(b)           In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders 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, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 


 

Section 40.            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, and to vote as such owner, 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.

 

OTHER SECURITIES OF THE CORPORATION

 

Section 41.            Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 36), may be signed by the Chairperson of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

 

DIVIDENDS

 

Section 42.            Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.

 

Section 43.            Dividend Reserve. 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 Board of Directors from time to time, in their absolute 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 purpose as the Board of Directors shall think conducive to

 



 

the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

 

FISCAL YEAR

 

Section 44.            Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

INDEMNIFICATION

 

Section 45.            Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents.

 

(a)           Directors and Executive Officers. The corporation shall indemnify its directors and executive officers (for the purposes of this Article XI, “ executive officers ” shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under subsection (d).

 

(b)           Other Officers, Employees and Other Agents. The corporation shall have power to indemnify its other officers, employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person except executive officers to such officers or other persons as the Board of Directors shall determine.

 

(c)           Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or executive officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer in connection with such proceeding provided, however, that if the DGCL requires, an advancement of expenses incurred by a director or executive officer in his or her capacity as a director or executive officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made

 



 

only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “ final adjudication ”) that such indemnitee is not entitled to be indemnified for such expenses under this section or otherwise.

 

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this section, no advance shall be made by the corporation to an executive officer of the corporation (except by reason of the fact that such executive officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

(d)           Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive officers under these Bylaws shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by this section to a director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. To the extent permitted by law, the claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or executive officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the

 



 

director or executive officer is not entitled to be indemnified, or to such advancement of expenses, under this section or otherwise shall be on the corporation.

 

(e)           Non-Exclusivity of Rights. The rights conferred on any person by these Bylaws shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL, or by any other applicable law.

 

(f)            Survival of Rights. The rights conferred on any person by these Bylaws shall continue as to a person who has ceased to be a director or executive officer or officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

(g)           Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this section.

 

(h)           Amendments. Any repeal or modification of this section shall only be prospective and shall not affect the rights under these Bylaws in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

(i)            Saving Clause. If these Bylaws or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and executive officer to the full extent not prohibited by any applicable portion of this section that shall not have been invalidated, or by any other applicable law. If this section shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and executive officer to the full extent under any other applicable law.

 

(j)            Certain Definitions. For the purposes of these Bylaws, the following definitions shall apply:

 

i.              The term “ proceeding ” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

ii.             The term “ expenses ” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 



 

iii.            The term the “ corporation ” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

iv.            References to a “ director ,” “ executive officer ,” “ officer ,” “ employee ,” or “ agent ” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

v.             References to “ other enterprises ” shall include employee benefit plans; references to “ fines ” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “ serving at the request of the corporation ” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the corporation ” as referred to in this section.

 

NOTICES

 

Section 46.            Notices.

 

(a)           Notice to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

 

(b)           Notice to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), as otherwise provided in these Bylaws, or by overnight delivery service, facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known address of such director.

 



 

(c)           Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d)           Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

(e)           Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

(f)            Notice to Stockholders Sharing an Address. Except as otherwise prohibited under DGCL, any notice given under the provisions of DGCL, the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the corporation within sixty (60) days of having been given notice by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the corporation.

 

AMENDMENTS

 

Section 47.            Subject to the limitations set forth in Section 45(h) of these Bylaws or the provisions of the Certificate of Incorporation, the Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-

 



 

outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.

 

LOANS TO OFFICERS

 

Section 48.            Loans to Officers. Except as otherwise prohibited by applicable law, t he 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.

 




Exhibit 10.1

 

NEUROMOLECULAR, INC.

 

2002 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK PLAN

 

1.                                       Definitions .

 

Unless otherwise specified or unless the context otherwise requires, the following terms, as used in this Neuromolecular, Inc. 2002 Employee, Director and Consultant Stock Plan, have the following meanings:

 

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

 

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

 

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

 

d.                                       Code means the United States Internal Revenue Code of 1986, as amended.

 

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

 

f.                                         Common Stock means shares of the Company’s common stock, $.001 par value per share.

 

g.                                        Company means Neuromolecular, Inc., a Delaware corporation.

 

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

 

i.                                           Fair Market Value of a Share of Common Stock means:

 

(1)                                  the Common Stock, the closing or last price of the Common Stock on the Composite Tape or other comparable reporting system for the trading day immediately preceding the applicable date;

 

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

 



 

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

 

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

 

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

 

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

 

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

 

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

 

o.                                       Participant means a Key Employee, director or consultant to whom one or more Stock Rights are granted under the Plan.  As used herein, “Participant” shall include “Participant’s Survivors” where the context requires.

 

p.                                       Plan means this Neuromolecular, Inc. 2002 Employee, Director and Consultant Stock Plan.

 

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

 

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

 

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

 

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

 

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

 

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2.                                       Purposes of the Plan .

 

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

 

3.                                       Shares Subject to the Plan .

 

The number of Shares which may be issued from time to time pursuant to this Plan shall be 2,000,000, or the equivalent of such number of Shares after the Administrator, in its sole discretion, has interpreted the effect of any stock split, stock dividend, combination, recapitalization or similar transaction in accordance with Paragraph 23 of the Plan.

 

If an Option ceases to be “outstanding”, in whole or in part, or if the Company shall reacquire any Shares issued pursuant to a Stock Grant, the Shares which were subject to such Option and any Shares so reacquired by the Company shall be available for the granting of other Stock Rights under the Plan.  Any Option shall be treated as “outstanding” until such Option is exercised in full, or terminates or expires under the provisions of the Plan, or by agreement of the parties to the pertinent Option Agreement.

 

4.                                       Administration of the Plan .

 

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

 

a.                                       Interpret the provisions of the Plan or of any Option or Stock Grant and to make all rules and determinations which it deems necessary or advisable for the administration of the Plan;

 

b.                                       Determine which employees of the Company or of an Affiliate shall be designated as Key Employees and which of the Key Employees, directors and consultants shall be granted Stock Rights;

 

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

 

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

 

provided, however, that all such interpretations, rules, determinations, terms and conditions shall be made and prescribed in the context of preserving the tax status under Section 422 of the Code of those Options which are designated as ISOs.  Subject to the foregoing, the interpretation and construction by the Administrator of any provisions of the Plan or of any Stock Right granted

 

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under it shall be final, unless otherwise determined by the Board of Directors, if the Administrator is the Committee.

 

5.                                       Eligibility for Participation .

 

The Administrator will, in its sole discretion, name the Participants in the Plan, provided, however, that each Participant must be a Key Employee, director or consultant of the Company or of an Affiliate at the time a Stock Right is granted.  Notwithstanding the foregoing, the Administrator may authorize the grant of a Stock Right to a person not then an employee, director or consultant of the Company or of an Affiliate; provided, however, that the actual grant of such Stock Right shall be conditioned upon such person becoming eligible to become a Participant at or prior to the time of the delivery of the Agreement evidencing such Stock Right.  ISOs may be granted only to Key Employees.  Non-Qualified Options and Stock Grants may be granted to any Key Employee, director or consultant of the Company or an Affiliate.  The granting of any Stock Right to any individual shall neither entitle that individual to, nor disqualify him or her from, participation in any other grant of Stock Rights.

 

6.                                       Terms and Conditions of Options .

 

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

 

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

 

1)                                      Option Price :  Each Option Agreement shall state the option price (per share) of the Shares covered by each Option, which option price shall be determined by the Administrator but shall not be less than the par value per share of Common Stock.

 

2)                                      Each Option Agreement shall state the number of Shares to which it pertains;

 

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

 

4)                                      Exercise of any Option may be conditioned upon the Participant’s execution of a Share purchase agreement in form satisfactory to the

 

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Administrator providing for certain protections for the Company and its other shareholders, including requirements that:

 

(a)                                  The Participant’s or the Participant’s Survivors’ right to sell or transfer the Shares may be restricted; and

 

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

 

B.                                     ISOs :  Each Option intended to be an ISO shall be issued only to a Key Employee and be subject to the following terms and conditions, with such additional restrictions or changes as the Administrator determines are appropriate but not in conflict with Section 422 of the Code and relevant regulations and rulings of the Internal Revenue Service:

 

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

 

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

 

(a)                                  Ten percent (10%) or less of the total combined voting power of all classes of stock of the Company or an Affiliate, the Option price per share of the Shares covered by each Option shall not be less than one hundred percent (100%) of the Fair Market Value per share of the Shares on the date of the grant of the Option.

 

(b)                                  More than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an Affiliate, the Option price per share of the Shares covered by each Option shall not be less than one hundred ten percent (110%) of the said Fair Market Value on the date of grant.

 

3)                                      Term of Option :  For Participants who own

 

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

 

(b)                                  More than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an Affiliate, each Option shall terminate not more than five (5) years from the date of the grant or at such earlier time as the Option Agreement may provide.

 

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4)                                      Limitation on Yearly Exercise :  The Option Agreements shall restrict the amount of Options which may be exercisable in any calendar year (under this or any other ISO plan of the Company or an Affiliate) so that the aggregate Fair Market Value (determined at the time each ISO is granted) of the stock with respect to which ISOs are exercisable for the first time by the Participant in any calendar year does not exceed one hundred thousand dollars ($100,000), provided that this subparagraph (d) shall have no force or effect if its inclusion in the Plan is not necessary for Options issued as ISOs to qualify as ISOs pursuant to Section 422(d) of the Code.

 

7.                                       Terms and Conditions of Stock Grants .

 

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

 

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

 

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

 

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

 

8.                                       Exercise of Options and Issue of Shares .

 

An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal executive office address, together with provision for payment of the full purchase price in accordance with this Paragraph for the Shares as to which the Option is being exercised, and upon compliance with any other condition(s) set forth in the Option Agreement.  Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised and shall contain any representation required by the Plan or the Option Agreement.  Payment of the purchase price for the Shares as to which such Option is being exercised shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock having a Fair Market Value equal as of the date of the exercise to the cash exercise price of the Option, or (c) at the discretion of the Administrator, by having the Company retain from the shares otherwise issuable upon exercise of the Option, a number of shares having

 

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a Fair Market Value equal as of the date of exercise to the exercise price of the Option, or (d) at the discretion of the Administrator, by delivery of the grantee’s personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (e) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (f) at the discretion of the Administrator, by any combination of (a), (b), (c), (d) and (e) above.  Notwithstanding the foregoing, the Administrator shall accept only such payment on exercise of an ISO as is permitted by Section 422 of the Code.

 

The Company shall then reasonably promptly deliver the Shares as to which such Option was exercised to the Participant (or to the Participant’s Survivors, as the case may be).  In determining what constitutes “reasonably promptly,” it is expressly understood that the issuance and delivery of the Shares may be delayed by the Company in order to comply with any law or regulation (including, without limitation, state securities or “blue sky” laws) which requires the Company to take any action with respect to the Shares prior to their issuance.  The Shares shall, upon delivery, be evidenced by an appropriate certificate or certificates for fully paid, non-assessable Shares.

 

The Administrator shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Administrator shall not accelerate the exercise date of any installment of any Option granted to any Key Employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to Paragraph 26) if such acceleration would violate the annual vesting limitation contained in Section 422(d) of the Code, as described in Paragraph 6.B.d.

 

The Administrator may, in its discretion, amend any term or condition of an outstanding Option provided (i) such term or condition as amended is permitted by the Plan, (ii) any such amendment shall be made only with the consent of the Participant to whom the Option was granted, or in the event of the death of the Participant, the Participant’s Survivors, if the amendment is adverse to the Participant, and (iii) any such amendment of any ISO shall be made only after the Administrator, after consulting the counsel for the Company, determines whether such amendment would constitute a “modification” of any Option which is an ISO (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holder of such ISO.

 

9.                                       Acceptance of Stock Grant and Issue of Shares .

 

A Stock Grant (or any part or installment thereof) shall be accepted by executing the Stock Grant Agreement and delivering it to the Company at its principal office address, together with provision for payment of the full purchase price, if any, in accordance with this Paragraph for the Shares as to which such Stock Grant is being accepted, and upon compliance with any other conditions set forth in the Stock Grant Agreement.  Payment of the purchase price for the Shares as to which such Stock Grant is being accepted shall be made (a) in United States dollars in cash or by check, or (b) at the discretion of the Administrator, through delivery of shares of Common Stock having a fair market value equal as of the date of acceptance of the Stock Grant to the purchase price of the Stock Grant determined in good faith by the Administrator, or (c) at the discretion of the Administrator, by delivery of the grantee’s personal recourse note bearing

 

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interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the Administrator, by any combination of (a), (b) and (c) above.

 

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

 

The Administrator may, in its discretion, amend any term or condition of an outstanding Stock Grant or Stock Grant Agreement provided (i) such term or condition as amended is permitted by the Plan, and (ii) any such amendment shall be made only with the consent of the Participant to whom the Stock Grant was made, if the amendment is adverse to the Participant.

 

10.                                Rights as a Shareholder .

 

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

 

11.                                Assignability and Transferability of Stock Rights .

 

By its terms, a Stock Right granted to a Participant shall not be transferable by the Participant other than (i) by will or by the laws of descent and distribution, or (ii) as otherwise determined by the Administrator and set forth in the applicable Option Agreement or Stock Grant Agreement.  The designation of a beneficiary of a Stock Right by a Participant, with the prior approval of the Administrator and in such form as the Administrator shall prescribe, shall not be deemed a transfer prohibited by this Paragraph.  Except as provided above, a Stock Right shall only be exercisable or may only be accepted, during the Participant’s lifetime, by such Participant (or by his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.  Any attempted transfer, assignment, pledge, hypothecation or other disposition of any Stock Right or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon a Stock Right, shall be null and void.

 

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12.                                Effect on Options of Termination of Service Other than “For Cause” or Death or Disability .

 

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

 

a.                                       A Participant who ceases to be an employee, director or consultant of the Company or of an Affiliate (for any reason other than termination “for cause”, Disability, or death for which events there are special rules in Paragraphs 13, 14, and 15, respectively), may exercise any Option granted to him or her to the extent that the Option is exercisable on the date of such termination of service, but only within such term as the Administrator has designated in the pertinent Option Agreement.

 

b.                                       Except as provided in Subparagraph (c) below, or Paragraph 14 or 15, in no event may an Option Agreement provide, if an Option is intended to be an ISO, that the time for exercise be later than three (3) months after the Participant’s termination of employment.

 

c.                                        The provisions of this Paragraph, and not the provisions of Paragraph 14 or 15, shall apply to a Participant who subsequently becomes Disabled or dies after the termination of employment, director status or consultancy, provided, however, in the case of a Participant’s Disability or death within three (3) months after the termination of employment, director status or consultancy, the Participant or the Participant’s Survivors may exercise the Option within one (1) year after the date of the Participant’s termination of employment, but in no event after the date of expiration of the term of the Option.

 

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

 

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

 

f.                                         Except as required by law or as set forth in the pertinent Option Agreement, Options granted under the Plan shall not be affected by any change of a

 

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Participant’s status within or among the Company and any Affiliates, so long as the Participant continues to be an employee, director or consultant of the Company or any Affiliate.

 

13.                                Effect on Options of Termination of Service “For Cause” .

 

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

 

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

 

b.                                       For purposes of this Plan, “cause” means (i) a material breach of any employment, consulting, non-compete or other contract with the Company after a minimum of forty-five (45) days written notice from the Board of Directors of such breach and an opportunity to cure during such forty-five day period, (ii) substantial malfeasance or non-feasance of job duties after a minimum of forty-five (45) days written notice from the Board of Directors of such substantial malfeasance or non-feasance and an opportunity to cure during such forty-five day period, (iii) failure to comply with all material applicable laws in performing duties for the Company, (iv) commission of a felony or intentionally fraudulent or other act against the Company, or its employees, agents or customers which demonstrates untrustworthiness or lack of integrity, (v) commission of any fraud against the Company or use or appropriation for personal benefit of any funds, assets or properties of the Company not authorized by the Company to be so used or appropriated, or (vi) disclosure of any confidential or proprietary information of the Company.  The reasonable determination of the Board of Directors as to the existence of “cause” will be conclusive on the Participant and the Company.

 

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

 

d.                                       Any definition in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of “cause” for termination and which is in effect at the time of such termination, shall supersede the definition in this Plan with respect to such Participant.

 

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14.                                Effect on Options of Termination of Service for Disability .

 

Except as otherwise provided in the pertinent Option Agreement, a Participant who ceases to be an employee, director or consultant of the Company or of an Affiliate by reason of Disability may exercise any Option granted to such Participant:

 

a.                                       To the extent exercisable but not exercised on the date of Disability; and

 

b.                                       In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion of any additional rights as would have accrued had the Participant not become Disabled prior to the end of the accrual period which next ends following the date of Disability.  The proration shall be based upon the number of days of such accrual period prior to the date of Disability.

 

A Disabled Participant may exercise such rights only within the period ending one (1) year after the date of the Participant’s termination of employment, directorship or consultancy, as the case may be, notwithstanding that the Participant might have been able to exercise the Option as to some or all of the Shares on a later date if the Participant had not become disabled and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.

 

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

 

15.                                Effect on Options of Death While an Employee, Director or Consultant .

 

Except as otherwise provided in the pertinent Option Agreement, in the event of the death of a Participant while the Participant is an employee, director or consultant of the Company or of an Affiliate, such Option may be exercised by the Participant’s Survivors:

 

a.                                       To the extent exercisable but not exercised on the date of death; and

 

b.                                       In the event rights to exercise the Option accrue periodically, to the extent of a pro rata portion of any additional rights which would have accrued had the Participant not died prior to the end of the accrual period which next ends following the date of death.  The proration shall be based upon the number of days of such accrual period prior to the Participant’s death.

 

If the Participant’s Survivors wish to exercise the Option, they must take all necessary steps to exercise the Option within one (1) year after the date of death of such Participant, notwithstanding that the decedent might have been able to exercise the Option as to some or all of the Shares on a later date if he or she had not died and had continued to be an employee, director or consultant or, if earlier, within the originally prescribed term of the Option.

 

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16.                                Effect of Termination of Service on Stock Grants .

 

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

 

For purposes of this Paragraph 16 and Paragraph 17 below, a Participant to whom a Stock Grant has been offered under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability (any disability other than a permanent and total Disability as defined in Paragraph 1 hereof), or who is on leave of absence for any purpose, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated such Participant’s employment, director status or consultancy with the Company or with an Affiliate, except as the Administrator may otherwise expressly provide.

 

In addition, for purposes of this Paragraph 16 and Paragraph 17 below, any change of employment or other service within or among the Company and any Affiliates shall not be treated as a termination of employment, director status or consultancy so long as the Participant continues to be an employee, director or consultant of the Company or any Affiliate.

 

17.                                Effect on Stock Grants of Termination of Service Other Than “For Cause” or Death or Disability.

 

Except as otherwise provided in the pertinent Stock Grant Agreement, in the event of a termination of service (whether as an employee, director or consultant), other than termination “for cause,” Disability, or death for which events there are special rules in Paragraphs 18, 19, and 20, respectively, before all Company rights of repurchase shall have lapsed, then the Company shall have the right to repurchase that number of Shares subject to a Stock Grant as to which the Company’s repurchase rights have not lapsed.

 

18.                                Effect on Stock Grants of Termination of Service “For Cause” .

 

Except as otherwise provided in the pertinent Stock Grant Agreement, the following rules apply if the Participant’s service (whether as an employee, director or consultant) with the Company or an Affiliate is terminated “for cause”:

 

a.                                       All Shares subject to any Stock Grant shall be immediately subject to repurchase by the Company at the purchase price, if any, thereof.

 

b.                                       For purposes of this Plan, “cause” means (i) a material breach of any employment, consulting, non-compete or other contract with the Company after a minimum of forty-five (45) days written notice from the Board of Directors of such breach and an opportunity to cure during such forty-five day period, (ii) substantial malfeasance or non-feasance of job duties after a minimum of forty-five (45) days written notice from the Board of Directors of such substantial malfeasance or non-feasance and an opportunity to cure during such forty-five day period, (iii) failure to comply with all material applicable laws in performing duties for the Company, (iv) commission of a felony or intentionally fraudulent or

 

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other act against the Company, or its employees, agents or customers which demonstrates untrustworthiness or lack of integrity, (v) commission of any fraud against the Company or use or appropriation for personal benefit of any funds, assets or properties of the Company not authorized by the Company to be so used or appropriated, or (vi) disclosure of any confidential or proprietary information of the Company.  The reasonable determination of the Board of Directors as to the existence of “cause” will be conclusive on the Participant and the Company.

 

c.                                        “Cause” is not limited to events which have occurred prior to a Participant’s termination of service, nor is it necessary that the Administrator’s finding of “cause” occur prior to termination.  If the Administrator determines, subsequent to a Participant’s termination of service, that either prior or subsequent to the Participant’s termination the Participant engaged in conduct which would constitute “cause,” then the Company’s right to repurchase all of such Participant’s Shares shall apply.

 

d.                                       Any definition in an agreement between the Participant and the Company or an Affiliate, which contains a conflicting definition of “cause” for termination and which is in effect at the time of such termination, shall supersede the definition in this Plan with respect to such Participant.

 

19.                                Effect on Stock Grants of Termination of Service for Disability .

 

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

 

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

 

20.                                Effect on Stock Grants of Death While an Employee, Director or Consultant .

 

Except as otherwise provided in the pertinent Stock Grant Agreement, the following rules apply in the event of the death of a Participant while the Participant is an employee, director or consultant of the Company or of an Affiliate:  to the extent the Company’s rights of repurchase have not lapsed on the date of death, they shall be exercisable; provided, however, that in the event such rights of repurchase lapse periodically, such rights shall lapse to the extent of a pro

 

13



 

rata portion of the Shares subject to such Stock Grant as would have lapsed had the Participant not died prior to the end of the vesting period which next ends following the date of death.  The proration shall be based upon the number of days of such vesting period prior to the Participant’s death.

 

21.                                Purchase for Investment .

 

Unless the offering and sale of the Shares to be issued upon the particular exercise or acceptance of a Stock Right shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

a.                                       The person(s) who exercise(s) or accept(s) such Stock Right shall warrant to the Company, prior to the receipt of such Shares, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing their Shares issued pursuant to such exercise or such grant:

 

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

 

b.                                       At the discretion of the Administrator, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise or acceptance in compliance with the 1933 Act without registration thereunder.

 

22.                                Dissolution or Liquidation of the Company .

 

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

 

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23.                                Adjustments .

 

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

 

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

 

B.                                     Consolidations or Mergers .  If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company’s assets or otherwise (an “Acquisition”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the Shares then subject to such Options either the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that all Options must be exercised (either to the extent then exercisable or, at the discretion of the Administrator, all Options being made fully exercisable for purposes of this Subparagraph) at the end of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the Fair Market Value of the Shares subject to such Options (either to the extent then exercisable or, at the discretion of the Administrator, all Options being made fully exercisable for purposes of this Subparagraph) over the exercise price thereof.

 

With respect to outstanding Stock Grants, the Administrator or the Successor Board, shall either (i) make appropriate provisions for the continuation of such Stock Grants by substituting on an equitable basis for the Shares then subject to such Stock Grants either the consideration payable with respect to the outstanding Shares of Common Stock in connection with the Acquisition or securities of any successor or acquiring entity; or (ii) upon written notice to the Participants, provide that all Stock Grants must be accepted (to the extent then subject to acceptance) within a specified number of days of the date of such notice, at the end of which period the offer of the Stock Grants shall terminate; or (iii) terminate all Stock Grants in exchange for a cash payment equal to the excess of the Fair Market Value of the Shares subject to such Stock Grants over the purchase price thereof, if any.  In addition, in the event of an Acquisition, the Administrator may waive any or all Company repurchase rights with respect to outstanding Stock Grants.

 

C.                                     Recapitalization or Reorganization .  In the event of a recapitalization or reorganization of the Company (other than a transaction described in Subparagraph B above) pursuant to which securities of the Company or of another corporation are issued with respect to

 

15



 

the outstanding shares of Common Stock, a Participant upon exercising or accepting a Stock Right shall be entitled to receive for the purchase price, if any, paid upon such exercise or acceptance the securities which would have been received if such Stock Right had been exercised or accepted prior to such recapitalization or reorganization.

 

D.                                     Modification of ISOs .  Notwithstanding the foregoing, any adjustments made pursuant to Subparagraph A, B or C with respect to ISOs shall be made only after the Administrator, after consulting with counsel for the Company, determines whether such adjustments would constitute a “modification” of such ISOs (as that term is defined in Section 424(h) of the Code) or would cause any adverse tax consequences for the holders of such ISOs.  If the Administrator determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments, unless the holder of an ISO specifically requests in writing that such adjustment be made and such writing indicates that the holder has full knowledge of the consequences of such “modification” on his or her income tax treatment with respect to the ISO.

 

24.                                Issuances of Securities .

 

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

 

25.                                Fractional Shares .

 

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

 

26.                                Conversion of ISOs into Non-Qualified Options; Termination of ISOs .

 

The Administrator, at the written request of any Participant, may in its discretion take such actions as may be necessary to convert such Participant’s ISOs (or any portions thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the Participant is an employee of the Company or an Affiliate at the time of such conversion.  Such actions may include, but not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such Options.

 

At the time of such conversion, the Administrator (with the consent of the Participant) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Administrator in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give any Participant the right to have such Participant’s ISOs converted into Non-Qualified Options, and no such conversion

 

16



 

shall occur until and unless the Administrator takes appropriate action.  The Administrator, with the consent of the Participant, may also terminate any portion of any ISO that has not been exercised at the time of such conversion.

 

27.                                Withholding .

 

In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act (“F.IC.A.”) withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Participant’s salary, wages or other remuneration in connection with the exercise or acceptance of a Stock Right or in connection with a Disqualifying Disposition (as defined in Paragraph 28) or upon the lapsing of any right of repurchase, the Company may withhold from the Participant’s compensation, if any, or may require that the Participant advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Participant, the statutory minimum amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company’s Common Stock or a promissory note, is authorized by the Administrator (and permitted by law).  For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner provided in Paragraph 1 above, as of the most recent practicable date prior to the date of exercise.  If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Participant may be required to advance the difference in cash to the Company or the Affiliate employer.  The Administrator in its discretion may condition the exercise of an Option for less than the then Fair Market Value on the Participant’s payment of such additional withholding.

 

28.                                Notice to Company of Disqualifying Disposition .

 

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

 

29.                                Termination of the Plan .

 

The Plan will terminate on October 31, 2012, the date which is ten (10) years from the earlier of the date of its adoption and the date of its approval by the shareholders of the Company.  The Plan may be terminated at an earlier date by vote of the shareholders of the Company; provided, however, that any such earlier termination shall not affect any Option Agreements or Stock Grant Agreements executed prior to the effective date of such termination.

 

30.                                Amendment of the Plan and Agreements .

 

The Plan may be amended by the shareholders of the Company.  The Plan may also be amended by the Administrator, including, without limitation, to the extent necessary to qualify

 

17



 

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

 

31.                                Employment or Other Relationship .

 

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

 

32.                                Governing Law .

 

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

 

18


 

Option No.         

 

SCHEDULE A

 

NEUROMOLECULAR PHARMACEUTICALS, INC.

 

Stock Option Grant under the Company’s

2002 Employee, Director and Consultant Stock Plan

(Immediately Exercisable; Subject to Repurchase)

 

1.

 

Name and Address of Employee:

 

 

 

 

 

 

 

2.

 

Date of Grant:

 

 

 

 

 

 

 

3.

 

Type of Grant:

 

Incentive Stock Option

 

 

 

 

 

4.

 

Maximum Number of Shares for

 

 

 

 

which this Option is exercisable:

 

 

 

 

 

 

 

5.

 

Exercise (purchase) price per share:

 

 

 

 

 

 

 

6.

 

Vesting Schedule: This Option shall be immediately exercisable (and the Shares issued upon exercise shall be vested) as follows:

 

[Insert Vesting Schedule]

 

The Company and the Employee acknowledge receipt of this Schedule A and agree to the terms of (i) the Incentive Stock Option Agreement attached hereto and incorporated by reference herein, (ii) the Company’s 2002 Employee, Director and Consultant Stock Plan and (iii) this Option Grant as set forth above.

 

 

NEUROMOLECULAR PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

Gregory T. Went

 

 

Title:

CEO

 

 

 

 

 

 

 

 

Date:

 

 

 

 

Employee

 



 

INCENTIVE STOCK OPTION AGREEMENT

(Immediately Exercisable; Subject to Repurchase)

 

NEUROMOLECULAR PHARMACEUTICALS, INC.

 

Between NeuroMolecular Pharmaceuticals, Inc. (the “Company”), a Delaware corporation, and the employee listed on Schedule A attached hereto (the “Employee”).

 

WHEREAS, the Company desires to grant to the Employee an Option to purchase shares of its common stock, $.001 par value per share (the “Shares”), under and for the purposes set forth in the Company’s 2002 Employee, Director and Consultant Stock Plan (the “Plan”) with the specific terms of each Option grant as set forth on Schedule A hereto, and with additional Options, if any, to be granted in the future pursuant to the terms of this Agreement, (each such Option grant set forth on Schedule A hereto shall hereafter be referred to in this Agreement singularly, as the “Option”);

 

WHEREAS, the Company and the Employee understand and agree that any terms used and not defined herein have the same meanings as in the Plan; and

 

WHEREAS, the Company and the Employee each intend that the Option granted herein qualify as an ISO.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto agree as follows:

 

1.                                       GRANT OF OPTION .

 

The Company hereby grants to the Employee the right and option to purchase all or any part of an aggregate number of Shares set forth on Schedule A hereto, on the terms and conditions and subject to all the limitations set forth herein, under United States securities and tax laws, and in the Plan, which is incorporated herein by reference.  The Employee acknowledges receipt of a copy of the Plan.

 

2.                                       PURCHASE PRICE .

 

The purchase price of the Shares covered by the Option shall be as set forth on Schedule A hereto, subject to adjustment, as provided in the Plan, in the event of a stock split, reverse stock split or other events affecting the holders of Shares (the “Purchase Price”).  Payment shall be made in accordance with Paragraph 8 of the Plan.

 

3.                                       EXERCISABILITY OF OPTION .

 

Subject to the terms and conditions set forth in this Agreement and the Plan, the Option granted hereby is immediately exercisable.  However, the Shares issued upon exercise of the Option will be subject to the vesting schedule set forth on Schedule A hereto which rights are

 



 

cumulative and are subject to the other terms and conditions of this Agreement and the Plan.  In addition, the Shares will be subject to restrictions on transfer and the Company shall have certain rights to repurchase the Shares acquired by the Employee by exercise of the Option, as more fully set forth below in Section 4 of this Agreement.  Shares that have become vested pursuant to this Agreement are “Vested Shares.”  Shares that have not become vested pursuant to this Agreement are “Unvested Shares.”  Unless otherwise set forth in this Agreement, Shares shall cease vesting in the event that for any reason the Employee ceases to be an employee of the Company or an Affiliate.  Upon the death or Disability of an Employee, vesting will accrue as set forth in Section 5 below.   Notwithstanding any provision in the Plan or this Agreement to the contrary, Options for Unvested Shares will not be exercisable on or after the date an Employee ceases to be an employee of the Company or an Affiliate.

 

4.                                       COMPANY’S REPURCHASE RIGHT FOR UNVESTED SHARES .

 

(a)                                  Company Repurchase Right .  In the event that for any reason the Employee ceases to be an employee of  the Company or an Affiliate (a “Termination”), the Company (or its designee) shall have the option, but not the obligation, to purchase from the Employee (or the Employee’s Survivors), and, in the event the Company exercises such option, the Employee (or the Employee’s Survivors) shall be obligated to sell to the Company (or its designee), at a price per Share equal to the Purchase Price, all or any part of the Unvested Shares subject to this Option that have been acquired by the Employee by exercise of the Option (including any Shares acquired after such Termination pursuant to the provisions hereof) (the “Company Repurchase Right”).  The Company Repurchase Right shall be valid for a period of one year commencing with the date of such termination of employment.  Notwithstanding any other provision hereof, in the event that the Company is prohibited during such one year period from exercising the Company Repurchase Right by Section 160 of the Delaware General Corporation Law, as amended from time to time (or any successor provision), then the time period during which such Company Repurchase Right may be exercised shall be extended until 30 days after the Company is first not so prohibited.

 

(b)                                  Closing .  In the event that the Company exercises the Company Repurchase Right, the Company shall notify the Employee, or, in the case of the Employee’s death, his or her Survivor, in writing of its intent to repurchase the Unvested Shares.  Such notice may be mailed by the Company up to and including the last day of the time period provided for above for exercise of Unvested Shares.  The notice shall specify the place, time and date for payment of the Purchase Price (the “Closing”) and the number of Unvested Shares to be purchased.  The Closing shall be not less than ten days nor more than 60 days from the date of mailing of the notice, and the Employee or the Employee’s Survivor with respect to the Unvested Shares which the Company elects to repurchase shall have no further rights as the owner thereof from and after the date specified in the notice.  At the Closing, the Purchase Price shall be delivered to the Employee or the Employee’s Survivor and the Unvested Shares being repurchased, duly endorsed for transfer, shall, to the extent that they are not then in the possession of the Company, be delivered to the Company by the Employee or the Employee’s Survivor.

 

(c)                                   Escrow .  The certificates representing all Unvested Shares shall be delivered to the Company and the Company shall hold such Unvested Shares in escrow as provided in this

 



 

Subsection 4(c).  Promptly following receipt by the Company of a written request from the Employee, the Company shall release from escrow and deliver to the Employee a certificate for the whole number of Unvested Shares, which have become vested and which are no longer subject to the Company Repurchase Right.  In the event of the Company exercises the Company Repurchase Right, the Company shall release from escrow and cancel a certificate for the number of Unvested Shares so repurchased.  Any securities distributed in respect of the Shares held in escrow, including, without limitation, shares issued as a result of stock splits, stock dividends or other recapitalizations, shall also be held in escrow in the same manner as the Shares.

 

(d)                                  Prohibition on Transfer .  The Employee hereby agrees not to sell, transfer, assign, hypothecate, pledge, encumber or otherwise dispose of any of the Unvested Shares, whether voluntarily or by operation of law, other than to the Company (or its designee).  However, the Employee, with the approval of the Administrator, may transfer Unvested Shares for no consideration to or for the benefit of the Employee’s Immediate Family (including, without limitation, to a trust for the benefit of the Employee’s Immediate Family or to a partnership or limited liability company for one or more members of the Employee’s Immediate Family), subject to such limits as the Administrator may establish, and the transferee shall remain subject to all the terms and conditions applicable to this Agreement prior to such transfer and each such transferee shall so acknowledge in writing as a condition precedent to the effectiveness of such transfer.  The term “Immediate Family” shall mean the Employee’s spouse, former spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers, nieces and nephews and grandchildren (and, for this purpose, shall also include the Employee).  The Company shall not be required to transfer any Unvested Shares on its books which shall have been sold, assigned or otherwise transferred in violation of this Agreement, or to treat as the owner of such Unvested Shares, or to accord the right to vote as such owner or to pay dividends to, any person or organization to which any such Unvested Shares shall have been so sold, assigned or otherwise transferred, in violation of this Agreement.  The Employee further recognizes and agrees that all Shares remain subject to Section 13 hereof, except that with respect to Unvested Shares, this Subsection 4(d) will supercede Section 13.3.

 

(e)                                   Failure to Deliver Shares to be Repurchased .  In the event that the Unvested Shares to be repurchased by the Company under this Agreement are not in the Company’s possession pursuant to Subsection 4(c) above or otherwise and the Employee or the Employee’s Survivor fails to deliver such Unvested Shares to the Company (or its designee), the Company may elect (i) to establish a segregated account in the amount of the Purchase Price, such account to be turned over to the Employee or the Employee’s Survivor upon delivery of such Unvested Shares, and (ii) immediately to take such action as is appropriate to transfer record title of such Unvested Shares from the Employee to the Company (or its designee) and to treat the Employee and such Unvested Shares in all respects as if delivery of such Unvested Shares had been made as required by this Agreement.  The Employee hereby irrevocably grants the Company a power of attorney which shall be coupled with an interest for the purpose of effectuating the preceding sentence.

 

(f)                                    Additional Securities .  If the Company shall pay a stock dividend or declare a stock split on or with respect to any of its Common Stock, or otherwise distribute securities of

 



 

the Company to the holders of its Common Stock, the number of shares of stock or other securities of the Company issued with respect to the Unvested Shares shall be added to the Unvested Shares without any change in the aggregate purchase price.  If the Company shall distribute to its stockholders securities of another corporation, the securities of such other corporation, distributed with respect to the Unvested Shares, shall be added to the Unvested Shares without any change in the aggregate purchase price.  If the outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or combined into a smaller number of shares, or in the event of a reclassification of the outstanding shares of the Company’s Common Stock, or if the Company shall be a party to a merger, consolidation or capital reorganization, there shall be substituted for the Unvested Shares such amount and kind of securities as are issued in such subdivision, combination, reclassification, merger, consolidation or capital reorganization in respect of the Unvested Shares immediately prior thereto, without any change in the aggregate purchase price.

 

5.                                       TERM OF OPTION .

 

The Option shall terminate ten years from the date of grant set forth on Schedule A hereto or, if the Employee owns as of the date of grant set forth on Schedule A hereto more than 10% of the total combined voting power of all classes of capital stock of the Company or an Affiliate, five years from the date of grant set forth on Schedule A hereto, but shall be subject to earlier termination as provided herein or in the Plan.

 

If the Employee ceases to be an employee of the Company or of an Affiliate (for any reason other than the death or Disability of the Employee or termination of the Employee’s employment for “cause” (as defined in the Plan), the Option may be exercised, if it has not previously terminated, within three months after the date the Employee ceases to be an employee of the Company or an Affiliate, or within the originally prescribed term of the Option, whichever is earlier, but may not be exercised thereafter.  In such event, the Option shall be exercisable only to the extent that the Option has become exercisable and is in effect at the date of such cessation of employment.

 

Notwithstanding the foregoing, in the event of the Employee’s Disability or death within three months after the termination of employment, the Employee or the Employee’s Survivors may exercise the Option within one year after the date of the Employee’s termination of employment, but in no event after the date of expiration of the term of the Option.

 

In the event the Employee’s employment is terminated by the Employee’s employer for “cause” (as defined in the Plan) , the Employee’s right to exercise any unexercised portion of this Option shall cease immediately as of the time the Employee is notified his or her employment is terminated for “cause,” and this Option shall thereupon terminate.  Notwithstanding anything herein to the contrary, if subsequent to the Employee’s termination as an employee, but prior to the exercise of the Option, the Board of Directors of the Company determines that, either prior or subsequent to the Employee’s termination, the Employee engaged in conduct which would constitute “cause,” then the Employee shall immediately cease to have any right to exercise the Option and this Option shall thereupon terminate.

 



 

In the event of the Disability of the Employee, as determined in accordance with the Plan, the Option shall be exercisable within one year after the Employee’s termination of employment or, if earlier, within the term originally prescribed by the Option.  In such event, the Option shall be exercisable:

 

(a)                                  to the extent that the Option has become exercisable but has not been exercised as of the date of Disability; and

 

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

 

In the event of the death of the Employee while an employee of the Company or of an Affiliate, the Option shall be exercisable by the Employee’s Survivors within one year after the date of death of the Employee or, if earlier, within the originally prescribed term of the Option.  In such event, the Option shall be exercisable:

 

(x)                                  to the extent that the Option has become exercisable but has not been exercised as of the date of death; and

 

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

 

6.                                       METHOD OF EXERCISING OPTION .

 

Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company or its designee, in substantially the form of Exhibit A attached hereto.  Such notice shall state the number of Shares with respect to which the Option is being exercised and shall be signed by the person exercising the Option.  Payment of the purchase price for such Shares shall be made in accordance with Paragraph 8 of the Plan.  The Company shall deliver a certificate or certificates representing such Shares as soon as practicable after the notice shall be received, provided, however, that the Company may delay issuance of such Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including, without limitation, state securities or “blue sky” laws).  The certificate or certificates for the Shares as to which the Option shall have been so exercised shall be registered in the Company’s share register in the name of the person so exercising the Option (or, if the Option shall be exercised by the Employee and if the Employee shall so request in the notice exercising the Option, shall be registered in the name of the Employee and another person jointly, with right of survivorship) and shall be delivered as provided above to or upon the written order of the person exercising the Option.  In the event the Option shall be exercised, pursuant to Section 5 hereof, by any person other than the Employee,

 



 

such notice shall be accompanied by appropriate proof of the right of such person to exercise the Option.  All Shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable.

 

7.                                       PARTIAL EXERCISE .

 

Exercise of this Option to the extent above stated may be made in part at any time and from time to time within the above limits, except that no fractional share shall be issued pursuant to this Option.

 

8.                                       NON-ASSIGNABILITY .

 

The Option shall not be transferable by the Employee otherwise than by will or by the laws of descent and distribution.  The Option shall be exercisable, during the Employee’s lifetime, only by the Employee (or, in the event of legal incapacity or incompetency, by the Employee’s guardian or representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.  Any attempted transfer, assignment, pledge, hypothecation or other disposition of the Option or of any rights granted hereunder contrary to the provisions of this Section 8, or the levy of any attachment or similar process upon the Option shall be null and void.

 

9.                                       NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE .

 

The Employee shall have no rights as a stockholder with respect to Shares subject to this Agreement until registration of the Shares in the Company’s share register in the name of the Employee.  Except as is expressly provided in the Plan with respect to certain changes in the capitalization of the Company, no adjustment shall be made for dividends or similar rights for which the record date is prior to the date of such registration.

 

10.                                ADJUSTMENTS .

 

The Plan contains provisions covering the treatment of Options in a number of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment with respect to stock subject to Options and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.

 

11.                                TAXES .

 

The Employee acknowledges that any income or other taxes due from him or her with respect to this Option or the Shares issuable pursuant to this Option including, without limitation, the Unvested Shares, shall be the Employee’s responsibility.

 

In the event of a Disqualifying Disposition (as defined in Section 16 below) or if the Option is converted into a Non-Qualified Option and such Non-Qualified Option is exercised,

 



 

the Company may withhold from the Employee’s remuneration, if any, the minimum statutory amount of federal, state and local withholding taxes attributable to such amount that is considered compensation includable in such person’s gross income.  At the Company’s discretion, the amount required to be withheld may be withheld in cash from such remuneration, or in kind from the Shares otherwise deliverable to the Employee on exercise of the Option.  The Employee further agrees that, if the Company does not withhold an amount from the Employee’s remuneration sufficient to satisfy the Company’s income tax withholding obligation, the Employee will reimburse the Company on demand, in cash, for the amount under-withheld.

 

Without limiting the foregoing, the Employee agrees that, to the extent that the exercise of Unvested Shares or the declaration of dividends on any such Unvested Shares results in the Employee’s being deemed to be in receipt of earned income under the provisions of the Code, the Company shall be entitled to immediate payment from the Employee of the amount of any tax required to be withheld by the Company.

 

Upon exercise of all or any part of this Option for the issuance of Unvested Shares, the Employee may file an election under Section 83 of the Code in substantially the form attached as Attachment I within 30 days after the purchase of the Unvested Shares.  The Employee acknowledges that if he or she does not file such an election, as the Unvested Shares vest, the Employee may have income for tax purposes equal to the fair market value of the Unvested Shares on the date of vesting, less the price paid for the Shares by the Employee.

 

12.                                PURCHASE FOR INVESTMENT .

 

Upon the request of Employee, the Company shall, as soon as practicable, provide access to the Company’s financial statements for the preceding fiscal year.

 

Unless the offering and sale of the Shares to be issued upon the particular exercise of the Option shall have been effectively registered under the Securities Act of 1933, as now in force or hereafter amended (the “1933 Act”), the Company shall be under no obligation to issue the Shares covered by such exercise unless and until the following conditions have been fulfilled:

 

(a)                                  The person(s) who exercise the Option shall warrant to the Company, at the time of such exercise, that such person(s) are acquiring such Shares for their own respective accounts, for investment, and not with a view to, or for sale in connection with, the distribution of any such Shares, in which event the person(s) acquiring such Shares shall be bound by the provisions of the following legend which shall be endorsed upon the certificate(s) evidencing the Shares issued pursuant to such exercise:

 

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

 



 

then available, and (2) there shall have been compliance with all applicable state securities laws;” and

 

(b)                                  If the Company so requires, the Company shall have received an opinion of its counsel that the Shares may be issued upon such particular exercise in compliance with the 1933 Act without registration thereunder.  Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or “blue sky” laws).

 

13.                                RESTRICTIONS ON TRANSFER OF SHARES .

 

13.1                         The Shares acquired by the Employee pursuant to the exercise of the Option granted hereby shall not be transferred by the Employee except as permitted in the Stockholders Agreement dated October 31, 2002 between the Company and its stockholders, as such agreement may be amended, restated or superceded by any such similar agreement from time to time.

 

13.2                         In the event of the Employee’s termination of employment for any reason, the Company shall have the option, but not the obligation, to repurchase all or any part of the Shares issued pursuant to this Agreement (including, without limitation, Shares purchased after termination of employment, Disability or death in accordance with Section 5 hereof).  In the event the Company does not, upon the termination of employment of the Employee (as described above), exercise its option pursuant to this Section 13.2, the restrictions set forth in the balance of this Agreement shall not thereby lapse, and the Employee for himself or herself, his or her heirs, legatees, executors, administrators and other successors in interest, agrees that the Shares shall remain subject to such restrictions.  The following provisions shall apply to a repurchase under this Section 13.2 and shall be in addition to, and not in place of the provisions set forth in Section 4 hereof:

 

(i)                                      The per share repurchase price of the Shares to be sold to the Company upon exercise of its option under this Section 13.2 shall be equal to the Fair Market Value of each such Share determined in accordance with the Plan as of the date of termination of employment provided, however, in the event of a termination by the Company for “cause” (as defined in the Plan) , the per share repurchase price of the Shares to be sold to the Company upon exercise of its option under this Section 13.2 shall be equal to the Purchase Price.

 

(ii)                                   The Company’s option to repurchase the Employee’s Shares in the event of termination of employment shall be valid for a period of 18 months commencing with the date of such termination of employment.

 

(iii)                                In the event the Company shall be entitled to and shall elect to exercise its option to repurchase the Employee’s Shares under this Section 13.2, the Company shall notify the Employee, or in case of death, his or her Survivor, in writing of its

 



 

intent to repurchase the Shares.  Such written notice may be mailed by the Company up to and including the last day of the time period provided for in Section 13.2(ii) for exercise of the Company’s option to repurchase.

 

(iv)                               The written notice to the Employee shall specify the address at, and the time and date on, which payment of the repurchase price is to be made (the “Closing”).  The date specified shall not be less than ten days nor more than 60 days from the date of the mailing of the notice, and the Employee or his or her  successor in interest with respect to the Shares shall have no further rights as the owner thereof from and after the date specified in the notice.  At the Closing, the repurchase price shall be delivered to the Employee or his or her successor in interest and the Shares being purchased, duly endorsed for transfer, shall, to the extent that they are not then in the possession of the Company, be delivered to the Company by the Employee or his or her successor in interest.

 

13.3                         In the event that the Employee or his or her successor in interest fails to deliver the Shares to be repurchased by the Company under this Agreement, the Company may elect (a) to establish a segregated account in the amount of the repurchase price, such account to be turned over to the Employee or his or her successor in interest upon delivery of such Shares, and (b) immediately to take such action as is appropriate to transfer record title of such Shares from the Employee to the Company and to treat the Employee and such Shares in all respects as if delivery of such Shares had been made as required by this Agreement.  The Employee hereby irrevocably grants the Company a power of attorney which shall be coupled with an interest for the purpose of effectuating the preceding sentence.

 

13.4                         If the Company shall pay a stock dividend or declare a stock split on or with respect to any of its Common Stock, or otherwise distribute securities of the Company to the holders of its Common Stock, the number of shares of stock or other securities of Company issued with respect to the shares then subject to the restrictions contained in this Agreement shall be added to the Shares subject to the Company’s rights to repurchase pursuant to this Agreement.  If the Company shall distribute to its stockholders shares of stock of another corporation, the shares of stock of such other corporation, distributed with respect to the Shares then subject to the restrictions contained in this Agreement, shall be added to the Shares subject to the Company’s rights to repurchase pursuant to this Agreement.

 

13.5                         If the outstanding shares of Common Stock of the Company shall be subdivided into a greater number of shares or combined into a smaller number of shares, or in the event of a reclassification of the outstanding shares of Common Stock of the Company, or if the Company shall be a party to a merger, consolidation or capital reorganization, there shall be substituted for the Shares then subject to the restrictions contained in this Agreement such amount and kind of securities as are issued in such subdivision, combination, reclassification, merger, consolidation or capital reorganization in respect of the Shares subject immediately prior thereto to the Company’s rights to repurchase pursuant to this Agreement.

 

13.6                         The Company shall not be required to transfer any Shares on its books which shall have been sold, assigned or otherwise transferred in violation of this Agreement, or to treat as

 



 

owner of such Shares, or to accord the right to vote as such owner or to pay dividends to, any person or organization to which any such Shares shall have been so sold, assigned or otherwise transferred, in violation of this Agreement.

 

13.7                         The provisions of Sections 13.1 and 13.2 shall terminate upon the consummation of a public offering of any of the Company’s securities pursuant to a registration statement filed with the Securities and Exchange Commission pursuant to the 1933 Act.

 

13.8                         If, in connection with a registration statement filed by the Company pursuant to the 1933 Act, the Company or its underwriter so requests, the Employee will agree not to sell any Shares for a period not to exceed 180 days following the effectiveness of such registration.

 

13.9                         The Employee acknowledges and agrees that neither the Company, its shareholders nor its directors and officers, has any duty or obligation to disclose to the Employee any material information regarding the business of the Company or affecting the value of the Shares before, at the time of, or following a termination of the employment of the Employee by the Company, including, without limitation, any information concerning plans for the Company to make a public offering of its securities or to be acquired by or merged with or into another firm or entity.

 

13.10                  All certificates representing the Shares to be issued to the Employee pursuant to this Agreement shall have endorsed thereon a legend substantially as follows:

 

“The shares represented by this certificate are subject to restrictions set forth in an Incentive Stock Option Agreement, a copy of which Agreement is available for inspection at the offices of the Company or will be made available upon request.”

 

14.                                NO OBLIGATION TO EMPLOY .

 

The Company is not by the Plan or this Option obligated to continue the Employee as an employee of the Company or an Affiliate.  The Employee acknowledges:  (i) that the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (ii) that the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (iii) that all determinations with respect to any such future grants, including, but not limited to, the times when options shall be granted, the number of shares subject to each option, the option price, and the time or times when each option shall be exercisable, will be at the sole discretion of the Company; (iv) that the Employee’s participation in the Plan is voluntary; (v) that the value of the Option is an extraordinary item of compensation which is outside the scope of the Employee’s employment contract, if any; and (vi) that the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments.

 



 

15.                                OPTION IS INTENDED TO BE AN ISO .

 

The parties each intend that the Option be an ISO so that the Employee (or the Employee’s Survivors) may qualify for the favorable tax treatment provided to holders of Options that meet the standards of Section 422 of the Code.  Any provision of this Agreement or the Plan which conflicts with the Code so that this Option would not be deemed an ISO is null and void and any ambiguities shall be resolved so that the Option qualifies as an ISO.  Nonetheless, if the Option is determined not to be an ISO, the Employee understands that neither the Company nor any Affiliate is responsible to compensate him or her or otherwise make up for the treatment of the Option as a Non-qualified Option and not as an ISO.  The Employee should consult with the Employee’s own tax advisors regarding the tax effects of the Option and the requirements necessary to obtain favorable tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements.

 

16.                                NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION .

 

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

 

17.                                NOTICES .

 

Any notices required or permitted by the terms of this Agreement or the Plan shall be given by recognized courier service, facsimile, registered or certified mail, return receipt requested, addressed as follows:

 

If to the Company:

 

NeuroMolecular Pharmaceuticals, Inc.

1900 Powell Street, Suite 1050

Emeryville, CA 94608

Attn: CEO

 

If to the Employee:                                       at the address set forth on Schedule A hereto

 

or to such other address or addresses of which notice in the same manner has previously been given.  Any such notice shall be deemed to have been given upon the earlier of receipt, one business day following delivery to a recognized courier service or three business days following mailing by registered or certified mail.

 


 

18.                                GOVERNING LAW .

 

This Agreement shall be construed and enforced in accordance with the law of the State of Delaware, without giving effect to the conflict of law principles thereof. .  For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in California and agree that such litigation shall be conducted in the courts of Alameda County, California or the federal courts of the United States for the Northern District of California.

 

19.                                EQUITABLE RELIEF .

 

The Employee specifically acknowledges and agrees that in the event of a breach or threatened breach of the provisions of this Agreement or the Plan, including the attempted transfer of Unvested Shares by the Employee in violation of this Agreement, monetary damages may not be adequate to compensate the Company, and, therefore, in the event of such a breach or threatened breach, in addition to any right to damages, the Company shall be entitled to equitable relief in any court having competent jurisdiction.  Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach.

 

20.                                SEVERABILITY .

 

If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, then such provision or provisions shall be modified to the extent necessary to make such provision valid and enforceable, and to the extent that this is impossible, then such provision shall be deemed to be excised from this Agreement, and the validity, legality and enforceability of the rest of this Agreement shall not be affected thereby.

 

21.                                BENEFIT OF AGREEMENT .

 

Subject to the provisions of the Plan and the other provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.

 

22.                                ENTIRE AGREEMENT .

 

This Agreement, together with Schedule A and the Plan, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof.  No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret, change or restrict, the express terms and provisions of this Agreement, provided, however, in any event, this Agreement shall be subject to and governed by the Plan.

 



 

23.                                MODIFICATIONS AND AMENDMENTS .

 

The terms and provisions of this Agreement may be modified or amended as provided in the Plan.

 

24.                                WAIVERS AND CONSENTS .

 

Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

25.                                DATA PRIVACY .

 

By entering into this Agreement, the Employee:  (i) authorizes the Company and each Affiliate, and any agent of the Company or any Affiliate administering the Plan or providing Plan recordkeeping services, to disclose to the Company or any of its Affiliates such information and data as the Company or any such Affiliate shall request in order to facilitate the grant of options and the administration of the Plan; (ii) waives any data privacy rights he or she may have with respect to such information; and (iii) authorizes the Company and each Affiliate to store and transmit such information in electronic form.

 

26.                                CONSENT OF SPOUSE .

 

If the Employee is married as of the date of this Agreement, the Employee’s spouse shall execute a Consent of Spouse in the form of Exhibit B hereto, effective as of the date hereof.  Such consent shall not be deemed to confer or convey to the spouse any rights in the Shares that do not otherwise exist by operation of law or the agreement of the parties.  If the Employee marries or remarries subsequent to the date hereof, the Employee shall, not later than 60 days thereafter, obtain his or her new spouse’s acknowledgement of and consent to the existence and binding effect of Sections 4 and 13.2 of this Agreement by such spouse’s executing and delivering a Consent of Spouse in the form of Exhibit B .

 

27.                                ADDITIONAL OPTION GRANTS .

 

The Company may grant to the Employee additional Options by revising Schedule A hereto to add the terms of additional Option grants, if any, and the Company and the Employee by executing an acknowledgment of the terms of the additional Option grant, hereby agree to be bound by the terms of this Agreement as it shall extend to, and as applied to, such additional Option grants.  The addition of additional Options shall not constitute a modification or amendment of the Options heretofore granted pursuant to this Agreement.

 



 

Exhibit A

 

NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

 

[Form for Unregistered Shares]

 

To:                              NeuroMolecular Pharmaceuticals, Inc.

 

Ladies and Gentlemen:

 

I hereby exercise my Incentive Stock Option to purchase                        shares (the “Shares”) of the common stock, $.001 par value, of NeuroMolecular Pharmaceuticals, Inc. (the “Company”), at the exercise price of $         per share, pursuant to and subject to the terms of that certain Incentive Stock Option Agreement between the undersigned and the Company dated                   , 200   .

 

I am aware that the Shares have not been registered under the Securities Act of 1933, as amended (the “1933 Act”), or any state securities laws.  I understand that the reliance by the Company on exemptions under the 1933 Act is predicated in part upon the truth and accuracy of the statements by me in this Notice of Exercise.

 

I hereby represent and warrant that (1) I have been furnished with all information which I deem necessary to evaluate the merits and risks of the purchase of the Shares; (2) I have had the opportunity to ask questions concerning the Shares and the Company and all questions posed have been answered to my satisfaction; (3) I have been given the opportunity to obtain any additional information I deem necessary to verify the accuracy of any information obtained concerning the Shares and the Company; and (4) I have such knowledge and experience in financial and business matters that I am able to evaluate the merits and risks of purchasing the Shares and to make an informed investment decision relating thereto.

 

I hereby represent and warrant that I am purchasing the Shares for my own personal account for investment and not with a view to the sale or distribution of all or any part of the Shares.

 

I understand that because the Shares have not been registered under the 1933 Act, I must continue to bear the economic risk of the investment for an indefinite time and the Shares cannot be sold unless the Shares are subsequently registered under applicable federal and state securities laws or an exemption from such registration requirements is available.

 

I agree that I will in no event sell or distribute or otherwise dispose of all or any part of the Shares unless (1) there is an effective registration statement under the 1933 Act and applicable state securities laws covering any such transaction involving the Shares or (2) the Company receives an opinion of my legal counsel (concurred in by legal counsel for the Company) stating that such transaction is exempt from registration or the Company otherwise satisfies itself that such transaction is exempt from registration.

 



 

I consent to the placing of a legend on my certificate for the Shares stating that the Shares have not been registered and setting forth the restriction on transfer contemplated hereby and to the placing of a stop transfer order on the books of the Company and with any transfer agents against the Shares until the Shares may be legally resold or distributed without restriction.

 

I understand that at the present time Rule 144 of the Securities and Exchange Commission (the “SEC”) may not be relied on for the resale or distribution of the Shares by me.  I understand that the Company has no obligation to me to register the sale of the Shares with the SEC and has not represented to me that it will register the sale of the Shares.

 

I understand the terms and restrictions on the right to dispose of the Shares set forth in the 2002 Employee, Director and Consultant Stock Plan and the Incentive Stock Option Agreement, both of which I have carefully reviewed.  I consent to the placing of a legend on my certificate for the Shares referring to such restriction and the placing of stop transfer orders until the Shares may be transferred in accordance with the terms of such restrictions.

 

I have considered the Federal, state and local income tax implications of the exercise of my Option and the purchase and subsequent sale of the Shares.

 

I am paying the option exercise price for the Shares as follows:

 

 

Please issue the stock certificate for the Shares (check one):

 

o to me; or

 

o to me and                                 , as joint tenants with right of survivorship

 

and mail the certificate to me at the following address:

 

 

 

 

 



 

My mailing address for shareholder communications, if different from the address listed above is:

 

 

 

 

 

 

 

Very truly yours,

 

 

 

 

 

 

 

Employee (signature)

 

 

 

 

 

 

 

Print Name

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Social Security Number

 



 

Exhibit A

 

NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

 

[Form For Registered Shares]

 

TO:                            NeuroMolecular Pharmaceuticals, Inc.

 

IMPORTANT NOTICE:  This form of Notice of Exercise may only be used at such time as the Company has filed a Registration Statement with the Securities and Exchange Commission under which the issuance of the Shares for which this exercise is being made is registered and such Registration Statement remains effective.

 

Ladies and Gentlemen:

 

I hereby exercise my Incentive Stock Option to purchase                    shares (the “Shares”) of the common stock, $.001 par value, of NeuroMolecular Pharmaceuticals, Inc. (the “Company”), at the exercise price of $                 per share, pursuant to and subject to the terms of that certain Incentive Stock Option Agreement between the undersigned and the Company dated                               , 200   .

 

I understand the nature of the investment I am making and the financial risks thereof.  I am aware that it is my responsibility to have consulted with competent tax and legal advisors about the relevant national, state and local income tax and securities laws affecting the exercise of the Option and the purchase and subsequent sale of the Shares.

 

I am paying the option exercise price for the Shares as follows:

 

Please issue the Shares (check one):

 

o to me; or

 

o to me and                                                         , as joint tenants with right of survivorship,

 

at the following address:

 

 

 

 

 



 

My mailing address for shareholder communications, if different from the address listed above, is:

 

 

 

 

 

 

 

Very truly yours,

 

 

 

 

 

 

 

Employee (signature)

 

 

 

 

 

 

 

Print Name

 

 

 

 

 

 

 

Date

 

 

 

 

 

 

 

Social Security Number

 




Exhibit 10.2

 

ADAMAS PHARMACEUTICALS, INC.

 

2007 STOCK PLAN

 

ADOPTED ON DECEMBER 12, 2007

 

AMENDED THROUGH SEPTEMBER 3, 2013

 



 

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 Purchase Agreement

2

(b)

Duration of Offers and Nontransferability of Rights

2

(c)

Purchase Price

2

(d)

Withholding Taxes

2

(e)

Restrictions on Transfer of Shares

2

 

 

 

SECTION 6.

Terms And Conditions Of Options

3

(a)

Stock Option Agreement

3

(b)

Number of Shares

3

(c)

Exercise Price

3

(d)

Exercisability

3

(e)

Basic Term

3

(f)

Termination of Service (Except by Death)

3

(g)

Leaves of Absence

4

(h)

Death of Optionee

4

(i)

Restrictions on Transfer of Shares

4

(j)

Transferability of Options

5

(k)

Withholding Taxes

5

(l)

No Rights as a Stockholder

5

(m)

Modification, Extension and Assumption of Options

5

 

 

 

SECTION 7.

Payment For Shares

5

(a)

General Rule

5

(b)

Services Rendered

5

(c)

Promissory Note

5

(d)

Surrender of Stock

6

(e)

Exercise/Sale

6

(f)

Other Forms of Payment

6

 

i



 

SECTION 8.

Adjustment Of Shares

6

(a)

General

6

(b)

Dissolution or Liquidation

6

(c)

Mergers and Consolidations

6

(d)

Reservation of Rights

8

 

 

 

SECTION 9.

Securities Law Requirements

8

 

 

 

SECTION 10.

No Retention Rights

8

 

 

 

SECTION 11.

Duration and Amendments

8

(a)

Term of the Plan

8

(b)

Right to Amend or Terminate the Plan

9

(c)

Effect of Amendment or Termination

9

 

 

 

SECTION 12.

Definitions

9

 

ii



 

ADAMAS PHARMACEUTICALS, INC. 2007 STOCK PLAN

 

SECTION 1.         ESTABLISHMENT AND PURPOSE .

 

The purpose of the Plan is to offer selected persons an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Shares of the Company’s Stock.  The Plan provides both for the direct award or sale of Shares and for the grant of Options to purchase Shares.  Options granted under the Plan may include Nonstatutory Options as well as ISOs intended to qualify under Section 422 of the Code.

 

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 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 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.  All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee.

 

SECTION 3.         ELIGIBILITY .

 

(a)            General Rule .  Only Employees, Outside Directors and Consultants shall be eligible for the grant of Nonstatutory Options or the direct award or sale of Shares.  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 Section 424(d) of the Code shall be applied.

 



 

SECTION 4.         STOCK SUBJECT TO PLAN .

 

(a)            Basic Limitation .  Not more than 2,378,200 Shares may be issued under the Plan (subject to Subsection (b) below and Section 8(a)).  All of these Shares may be issued upon the exercise of ISOs.  The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares that then remain available for issuance under the Plan.  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 reacquired by the Company, such Shares shall be added to the number of Shares then available for issuance under the Plan.  In the event that an outstanding Option or other right for any reason expires or is canceled, the Shares allocable to the unexercised portion of such Option or other right shall be added to the number of Shares then available for issuance under the Plan.

 

SECTION 5.         TERMS AND CONDITIONS OF AWARDS OR SALES .

 

(a)            Stock Purchase Agreement .  Each award or 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 Purchase Agreement.  The provisions of the various Stock Purchase Agreements entered into under the Plan need not be identical.

 

(b)            Duration of Offers and Nontransferability of Rights .  Any right to acquire Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days after the grant of such right was communicated to the Purchaser by the Company.  Such right shall not be transferable and shall be exercisable only by the Purchaser to whom such right was granted.

 

(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 7.

 

(d)            Withholding Taxes .  As a condition to the purchase of Shares, the Purchaser shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase.

 

(e)            Restrictions on Transfer of Shares .  Any Shares awarded or sold under the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine.  Such restrictions

 

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shall be set forth in the applicable Stock Purchase Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally.

 

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 which are not inconsistent with the Plan and which 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 8.  The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option.

 

(c)            Exercise Price .  Each Stock Option Agreement shall specify the Exercise Price.  The Exercise Price of any Option shall not be less than 100% of the Fair Market Value of a Share on the date of grant, and in the case of an ISO a higher percentage may be required by Section 3(b).  Subject to the preceding sentence, the Exercise Price shall be determined by the Board of Directors at its sole discretion.  The Exercise Price shall be payable in a form described in Section 7.

 

(d)            Exercisability .  Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become 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 exercisability provisions of the Stock Option Agreement at its sole discretion.  All of an Optionee’s Options shall become exercisable in full if Section 8(b)(iv) applies.

 

(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 occasions:

 

(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 later date as the Board of Directors may determine; or

 

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(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).  The balance of such Options shall lapse when the Optionee’s Service terminates.  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).

 

(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, if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).

 

(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 later date as the Board of Directors may determine.

 

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).  The balance of such Options shall lapse when the Optionee dies.

 

(i)             Restrictions on Transfer of Shares .  Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine.  Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally.

 

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(j)             Transferability 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 applicable Stock Option Agreement so provides, a Nonstatutory Option shall also be transferable by gift or domestic relations order to a Family Member of the Optionee.  An ISO may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative.

 

(k)            Withholding Taxes .  As a condition to the exercise of an Option, the Optionee shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise.  The Optionee shall also make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.

 

(l)             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 becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option.

 

(m)           Modification, Extension and Assumption of Options .  Within the limitations of the Plan, the Board of Directors may modify, 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 for the same or a different number of Shares and at the same or a different Exercise Price.  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.

 

SECTION 7.         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 7.

 

(b)            Services Rendered .  At the discretion of the Board of Directors, 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 .  At the discretion of the Board of Directors, 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 full-recourse 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 (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note.

 

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(d)            Surrender of Stock .  At the discretion of the Board of Directors, 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)            Exercise/Sale .  To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, all or part of the Exercise 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.

 

(f)             Other Forms of Payment .  To the extent that a Stock Purchase Agreement or Stock Option 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 8.         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 in each of (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares covered by each outstanding Option and (iii) the Exercise Price under each outstanding Option.  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 (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares covered by each outstanding Option or (iii) the Exercise Price under each outstanding Option; 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.

 

(b)            Dissolution or Liquidation .  Unless the Board of Directors at its sole discretion determines otherwise, upon a dissolution or liquidation of the Company, all outstanding Options shall be cancelled.  Optionees shall be able to exercise their outstanding Options (to the extent vested) during a period of not less than five full business days preceding the closing date of such dissolution or liquidation, unless (A) a shorter period is required to permit a timely closing of such dissolution or liquidation and (B) such shorter period still offers the Optionees a reasonable opportunity to exercise such Options.  Any exercise of an Option during such period may be contingent on the closing of such dissolution or liquidation.

 

(c)            Mergers and Consolidations .  In the event that the Company is a party to a merger or consolidation, all Shares acquired under the Plan and all Options shall be subject to the agreement of merger or consolidation.  Such agreement need not treat all Options in an

 

6



 

identical manner, and it shall provide for one or more of the following with respect to each Option:

 

(i)             The continuation of the Option by the Company (if the Company is the surviving corporation).

 

(ii)            The assumption of the Option by the surviving corporation or its parent in a manner that complies with Section 424(a) of the Code (whether or not the Option is an ISO).

 

(iii)           The substitution by the surviving corporation or its parent of a new option for the Option in a manner that complies with Section 424(a) of the Code (whether or not the Option is an ISO).

 

(iv)           The cancellation of the Option without the payment of any consideration.  To the extent provided by the Board of Directors or in the agreement of merger or consolidation, the Option may (but need not) become fully vested contingent on the closing of such merger or consolidation.  The Optionee shall be able to exercise the Option (to the extent vested) during a period of not less than five full business days preceding the closing date of such merger or consolidation, unless (A) a shorter period is required to permit a timely closing of such merger or consolidation and (B) such shorter period still offers the Optionee a reasonable opportunity to exercise the Option.  Any exercise of the Option during such period may be contingent on the closing of such merger or consolidation.

 

(v)            The cancellation of the Option and a payment to the Optionee equal to the excess of (A) the Fair Market Value of the Shares subject to the Option (to the extent the Option is exercisable or the Shares subject to the Option are vested as of the closing date of the merger or consolidation) as of the closing date of such merger or consolidation over (B) the Exercise Price of the Option.  Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount.  If the Exercise Price of the Shares subject to the Option exceeds the Fair Market Value of such Shares, then the Option may be cancelled without making a payment to the Optionee.

 

(vi)           The cancellation of the Option and a payment to the Optionee equal to the excess of (A) the Fair Market Value of the Shares subject to the Option (whether or not the Option is then exercisable or such Shares are then vested) as of the closing date of such merger or consolidation over (B) the Exercise Price of the Option.  Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount.  Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates when the Option would have become exercisable or such Shares would have vested.  Such payment may be subject to vesting based on the Optionee’s

 

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continuing Service, provided that the vesting schedule shall not be less favorable to the Optionee than the schedule under which the Option would have become exercisable or such Shares would have vested.  If the Exercise Price of the Shares subject to the Option exceeds the Fair Market Value of such Shares, then the Option may be cancelled without making a payment to the Optionee.  For purposes of this Paragraph (vi), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security.

 

(d)            Reservation of Rights .  Except as provided in this Section 8, an Optionee or Purchaser 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 Option.  The grant of an Option 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 9.         SECURITIES LAW REQUIREMENTS .

 

Shares shall not be issued under the Plan unless the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, 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.

 

SECTION 10.       NO RETENTION RIGHTS .

 

Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the Purchaser or 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 Purchaser or Optionee) or of the Purchaser or Optionee, 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.

 

SECTION 11.       DURATION AND AMENDMENTS .

 

(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 the approval of the Company’s stockholders.  If the stockholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred under the Plan shall be rescinded and no additional grants, exercises or sales shall thereafter be made under the Plan.  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

 

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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 .  The Board of Directors may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that any amendment of the Plan shall be subject to the approval of the Company’s stockholders if it (i) increases the number of Shares available for issuance under the Plan (except as provided in Section 8) or (ii) materially changes the class of persons who are eligible for the grant of ISOs.  Stockholder approval shall not be required for any other amendment of the Plan.  If the stockholders fail to approve an increase in the number of Shares reserved under Section 4 within 12 months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred in reliance on such increase shall be rescinded and no additional grants, exercises or sales shall thereafter be made in reliance on such increase.

 

(c)            Effect of Amendment or Termination .  No Shares shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination.  The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan.

 

SECTION 12.       DEFINITIONS .

 

(a)            Board of Directors ” shall mean the Board of Directors of the Company, as constituted from time to time.

 

(b)            Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

(c)            Committee ” shall mean a committee of the Board of Directors, as described in Section 2(a).

 

(d)            Company ” shall mean Adamas Pharmaceuticals, Inc., a Delaware corporation.

 

(e)            Consultant ” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

 

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

 

(g)            Employee ” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

(h)            Exercise Price ” shall mean 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.

 

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(i)             Fair Market Value ” shall mean the fair market value of a Share, as determined by the Board of Directors in accordance with applicable law.  Such determination shall be conclusive and binding on all persons.

 

(j)             Family Member ” shall mean (i) any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, (ii) any person sharing the Optionee’s household (other than a tenant or employee), (iii) a trust in which persons described in Clause (i) or (ii) have more than 50% of the beneficial interest, (iv) a foundation in which persons described in Clause (i) or (ii) or the Optionee control the management of assets and (v) any other entity in which persons described in Clause (i) or (ii) or the Optionee own more than 50% of the voting interests.

 

(k)            ISO ” shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(l)             Nonstatutory Option ” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

 

(m)           Option ” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.

 

(n)            Optionee ” shall mean a person who holds an Option.

 

(o)            Outside Director ” shall mean a member of the Board of Directors who is not an Employee.

 

(p)            Parent ” shall mean 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.

 

(q)            Plan ” shall mean this Adamas Pharmaceuticals, Inc. 2007 Stock Plan.

 

(r)             Purchase Price ” shall mean 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.

 

(s)             Purchaser ” shall mean a person to whom the Board of Directors has offered the right to acquire Shares under the Plan (other than upon exercise of an Option).

 

(t)             Service ” shall mean service as an Employee, Outside Director or Consultant.

 

(u)            Share ” shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable).

 

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(v)            Stock ” shall mean the Common Stock of the Company.

 

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

 

(x)            Stock Purchase Agreement ” shall mean the agreement between the Company and a Purchaser who acquires Shares under the Plan that contains the terms, conditions and restrictions pertaining to the acquisition of such Shares.

 

(y)            Subsidiary ” shall mean 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.

 

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ADAMAS PHARMACEUTICALS, INC. 2007 STOCK PLAN

 

NOTICE OF STOCK OPTION GRANT

 

The Optionee has been granted the following option to purchase shares of the Common Stock of Adamas Pharmaceuticals, Inc.:

 

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:

Provided the Optionee remains in continuous Service on each such date: (i) this option may be exercised with respect to the first 25% of the Shares subject to this option on the 12 month anniversary of the Vesting Commencement Date set forth below and (ii) this option may be exercised with respect to an additional 1/48 th  of the Shares subject to this option on the first day of each month 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.

 

By signing below, the Optionee and the Company agree that this option is granted under, and governed by the terms and conditions of, the 2007 Stock Plan and the Stock Option Agreement.  Both of these documents are attached to, and made a part of, this Notice of Stock Option Grant.  Section 13 of the Stock Option Agreement includes important acknowledgements of the Optionee .

 

 

OPTIONEE:

 

ADAMAS PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 


 

THE OPTION GRANTED PURSUANT TO 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.

 

ADAMAS PHARMACEUTICALS, INC. 2007 STOCK PLAN:

STOCK OPTION AGREEMENT

 

SECTION 1.         GRANT OF OPTION.

 

(a)            Option .  On the terms and conditions set forth in the Notice of Stock Option Grant and this Agreement, the Company grants 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.  Capitalized terms are defined in Section 14 of this Agreement.

 

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 this Agreement, 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 giving written notice to the Company pursuant to Section 12(c).  The notice shall specify the election to exercise this option, the number of Shares for which it is being exercised and the form of payment.  The person exercising this option shall sign the notice.  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.  The Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.

 

(b)            Issuance of Shares .  After receiving a proper notice of exercise, the Company shall cause to be issued one or more certificates evidencing 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 his or her 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.  The Company shall cause such certificates to be delivered to or upon the order of the person exercising this option.

 

(c)            Withholding Taxes .  In the event that the Company determines that it is required to withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the exercise of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all withholding requirements.  The Optionee shall also make arrangements satisfactory to the Company to enable it to satisfy any withholding requirements that may arise in connection with the disposition of Shares purchased by 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.

 

(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)            Exercise/Sale .  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 this Subsection (c) shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law.

 



 

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 (Except by Death) .  If the Optionee’s Service terminates for any reason other than death, then this option 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 exercisable before the Optionee’s Service terminated.  When the Optionee’s Service terminates, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable.  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 exercisable before the Optionee’s Service terminated.

 

(c)            Death of the Optionee .  If the Optionee dies while in Service, then this option 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 exercisable before the Optionee’s death.  When the Optionee dies, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable.

 

(d)            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 in accordance with the Company’s part-time work

 



 

policy or the terms of an agreement between the Optionee and the Company pertaining to his or her part-time schedule.  If the Optionee goes on a leave of absence, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant in accordance with the Company’s leave of absence policy or the terms of such leave.  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, if (i) such leave was approved by the Company in writing and (ii) continued crediting of Service for such purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).  Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work.

 

(e)            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 90 days, 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 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 different from 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 with or into another entity, 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 established by the Optionee 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 the 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 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)            Securities Law Restrictions .  Regardless of whether the offering 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, 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 stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act, the securities laws of any State or any other law.

 

(b)            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 final prospectus for the offering as may be requested by the Company or such underwriter.  In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules.  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 (b).  This Subsection (b) shall not apply to Shares registered in the public offering under the Securities Act.

 

(c)            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.

 

(d)            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.

 

(e)            Legends .  All certificates evidencing Shares purchased under this Agreement shall bear the following legend:

 

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).  SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

 



 

All certificates 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, 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.”

 

(f)             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.

 

(g)            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.       ADJUSTMENT OF SHARES.

 

In the event of any transaction described in Section 8(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 8(a) of the Plan.  In the event the Company is subject to a dissolution or liquidation, this option shall be cancelled, as provided in Section 8(b) of the Plan.  In the event that the Company is a party to a merger or consolidation, this option shall be subject to the agreement of merger or consolidation, as provided in Section 8(c) of the Plan.

 

SECTION 12.       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 his or her 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 or (iii) deposit with Federal Express Corporation, with shipping charges prepaid.  Notice shall be

 



 

addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided to the Company in accordance with this Subsection (c).

 

(d)            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.

 

(e)            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.

 

SECTION 13.       ACKNOWLEDGEMENTS OF THE OPTIONEE.

 

(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, the Optionee 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.

 

(b)            Electronic Delivery of Documents .  The Optionee agrees that the Company may deliver by email all documents relating to the Plan or this option (including, without limitation, a copy of the Plan) 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).  The Optionee also agrees that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a website, it shall notify the Optionee by email.

 

SECTION 14.       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)            Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

(d)            Committee ” shall mean a committee of the Board of Directors, as described in Section 2 of the Plan.

 



 

(e)            Company ” shall mean Adamas Pharmaceuticals, Inc., a Delaware corporation.

 

(f)             Consultant ” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

 

(g)            Date of Grant ” shall mean the date of grant specified in the Notice of Stock Option Grant, which date shall be the later of (i) the date on which the Board of Directors resolved to grant this option or (ii) the first day of the Optionee’s Service.

 

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

 

(i)             Employee ” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

(j)             Exercise Price ” shall mean the amount for which one Share may be purchased upon exercise of this option, as specified in the Notice of Stock Option Grant.

 

(k)            Fair Market Value ” shall mean 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.

 

(l)             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.

 

(m)           ISO ” shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(n)            Notice of Stock Option Grant ” shall mean the document so entitled to which this Agreement is attached.

 

(o)            NSO ” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

 

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

 

(q)            Outside Director ” shall mean a member of the Board of Directors who is not an Employee.

 

(r)             Parent ” shall mean 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.

 



 

(s)             Plan ” shall mean the Adamas Pharmaceuticals, Inc. 2007 Stock Plan, as in effect on the Date of Grant.

 

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

 

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

 

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

 

(w)           Service ” shall mean service as an Employee, Outside Director or Consultant.

 

(x)            Share ” shall mean one share of Stock, as adjusted in accordance with Section 8 of the Plan (if applicable).

 

(y)            Stock ” shall mean the Common Stock of the Company.

 

(z)            Subsidiary ” shall mean 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.

 

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

 

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

 


 

ADAMAS PHARMACEUTICALS, INC. 2007 STOCK PLAN

NOTICE OF STOCK OPTION EXERCISE

 

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

 

OPTIONEE INFORMATION:

 

Name:

Social Security Number:

 

 

Address:

Employee Number:

 

 

 

OPTION INFORMATION:

 

Date of Grant:                                  , 20

 

Type of Stock Option:

 

 

 

Exercise Price per Share: $

 

o Nonstatutory (NSO)

 

 

 

Total number of shares of Common Stock of Adamas Pharmaceuticals, Inc. (the “Company”) covered by the option:

 

o 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] :

 

o

Check for $                        , payable to “Adamas Pharmaceuticals, Inc.”

 

 

o

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.]

 

 

o

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] :

 

 

o

In my name only

 



 

o

In the names of my spouse and myself as community property

 

My spouse’s name (if applicable):

 

 

 

 

o

In the names of my spouse and myself as community property with the right of survivorship

 

 

 

 

 

 

o

In the names of my spouse and myself as joint tenants with the right of survivorship

 

 

 

 

 

 

o

In the name of an eligible revocable trust [requires Stock Transfer Agreement]

 

Full legal name of revocable trust:

 

 

 

 

 

 

 

 

The certificate for the Purchased Shares should be sent to the following address:

 

 

 

REPRESENTATIONS AND ACKNOWLEDGMENTS OF THE OPTIONEE:

 

SECTION 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”).

 

SECTION 2.                             I understand that the Purchased Shares have 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.

 

SECTION 3.                             I acknowledge that the Company is under no obligation to register the Purchased Shares.

 

SECTION 4.                             I am aware of the adoption by the Securities and Exchange Commission 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 and that the Company is not required to take action to satisfy any conditions applicable to it.

 

SECTION 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.

 

SECTION 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.

 



 

SECTION 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.

 

SECTION 8.                             I acknowledge that the Purchased Shares remain subject to the Company’s right of first refusal 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.

 

SECTION 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.

 

SECTION 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.  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.

 

SECTION 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.

 

SECTION 12.                      I agree that the Company does not have a duty to design or administer the 2007 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.

 

SECTION 13.                      I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing.

 

 

SIGNATURE:

 

DATE:

 

 

 

 

 

 

 

 

 

 




Exhibit 10.3

 

ADAMAS PHARMACEUTICALS, INC.

 

2014 EQUITY INCENTIVE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS:  FEBRUARY 20, 2014

APPROVED BY THE STOCKHOLDERS:            , 2014

IPO DATE/EFFECTIVE DATE:            , 2014

 

1.                                       GENERAL.

 

(a)                                  Successor to and Continuation of Prior Plans.   The Plan is intended as the successor to and continuation of the Neuromolecular, Inc. 2002 Employee, Director and Consultant Stock Plan and the Adamas Pharmaceuticals, Inc. 2007 Stock Plan, as amended (the “ Prior Plans ”).  From and after 12:01 a.m. Pacific time on the Effective Date, no additional stock awards will be granted under the Prior Plans.  All Awards granted on or after 12:01 a.m. Pacific Time on the Effective Date will be granted under this Plan. All stock awards granted under the Prior Plans will remain subject to the terms of the Prior Plans.

 

(i)                                     Any shares that would otherwise remain available for future grants under the Prior Plans as of 12:01 a.m. Pacific Time on the Effective Date (the “ Prior Plans’ Available Reserve ”) will cease to be available under the Prior Plans at such time.  Instead, that number of shares of Common Stock equal to the Prior Plans’ Available Reserve will be added to the Share Reserve (as further described in Section 3(a) below) and be then immediately available for grants and issuance pursuant to Stock Awards hereunder, up to the maximum number set forth in Section 3(a) below.

 

(ii)                                 In addition, from and after 12:01 a.m. Pacific time on the Effective Date, with respect to the aggregate number of shares subject, at such time, to outstanding stock awards granted under the Prior Plans that (1) expire or terminate for any reason prior to exercise or settlement; (2) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company; or (3) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award (such shares the “ Returning Shares ”) will immediately be added to the Share Reserve (as further described in Section 3(a) below) as and when such a share becomes a Returning Share, up to the maximum number set forth in Section 3(a) below.

 

(b)                                  Eligible Award Recipients.   Employees, Directors and Consultants are eligible to receive Awards.

 

(c)                                   Available Awards.   The Plan provides for the grant of the following Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and (viii) Other Stock Awards.

 

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(d)                                  Purpose.   The Plan, through the grant of Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and provide a means by which the eligible recipients may benefit from increases in value of the Common Stock.

 

2.                                       ADMINISTRATION.

 

(a)                                  Administration by Board.   The Board will administer the Plan.  The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c).

 

(b)                                  Powers of Board.   The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

(i)                                     To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to a Stock Award.

 

(ii)                                 To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards.  The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.

 

(iii)                             To settle all controversies regarding the Plan and Awards granted under it.

 

(iv)                              To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or the time at which cash or shares of Common Stock may be issued in settlement thereof).

 

(v)                                  To suspend or terminate the Plan at any time.  Except as otherwise provided in the Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under the Participant’s then-outstanding Award without the Participant’s written consent, except as provided in subsection (viii) below.

 

(vi)                              To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or bringing the Plan or Awards granted under the Plan into compliance with the requirements for Incentive Stock Options or ensuring that they are exempt from, or compliant with, the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law.  If required by applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of

 

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shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Awards available for issuance under the Plan. Except as otherwise provided in the Plan or an Award Agreement, no amendment of the Plan will materially impair a Participant’s rights under an outstanding Award without the Participant’s written consent.

 

(vii)                          To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding “incentive stock options” or (C) Rule 16b-3.

 

(viii)                      To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided, however, that a Participant’s rights under any Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing.  Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent (A) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code; or (D) to comply with other applicable laws or listing requirements.

 

(ix)                              Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.

 

(x)                                  To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).

 

(xi)                              To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2)  Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock

 

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Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.

 

(c)                                   Delegation to Committee.

 

(i)                                     General.   The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee, as applicable).  Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable).  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

 

(ii)                                 Section 162(m) and Rule 16b-3 Compliance.   The Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.

 

(d)                                  Delegation to an Officer.   The Board may delegate to one (1) or more Officers the authority to do one or both of the following (i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by applicable law, other Stock Awards) and, to the extent permitted by applicable law, the terms of such Awards, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Employees; provided, however , that the Board resolutions regarding such delegation will specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself.  Any such Stock Awards will be granted on the form of Stock Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided in the resolutions approving the delegation authority.  The Board may not delegate authority to an Officer who is acting solely in the capacity of an Officer (and not also as a Director) to determine the Fair Market Value pursuant to Section 13(x)(iii) below.

 

(e)                                   Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

 

3.                                       SHARES SUBJECT TO THE PLAN.

 

(a)                                  Share Reserve.  Subject to Section 9(a) relating to Capitalization Adjustments, and the following sentence regarding the annual increase, the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards will not exceed  3,354,432 shares

 

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(the “ Share Reserve ”), which number is the sum of (i) 690,364 shares, plus (ii) 886,218 shares subject to the Prior Plans’ Available Reserve, plus (iii) up to 1,777,850 shares that are Returning Shares, as such shares become available from time to time.  In addition, the Share Reserve will automatically increase on January 1 st  of each year, for a period of not more than ten years, commencing on January 1 st  of the year following the year in which the IPO Date occurs and ending on (and including) January 1, 2024, in an amount equal to 4% of the total number of shares of Capital Stock outstanding on December 31 st  of the preceding calendar year.  Notwithstanding the foregoing, the Board may act prior to January 1 st  of a given year to provide that there will be no January 1 st  increase in the Share Reserve for such year or that the increase in the Share Reserve for such year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.  For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be issued pursuant to the Plan.  Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).  Shares may be issued in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.

 

(b)                                  Reversion of Shares to the Share Reserve.  If a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued or (ii) is settled in cash ( i.e. , the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan.  If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan.  Any shares reacquired by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.

 

(c)                                   Incentive Stock Option Limit.  Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options will be 6,800,000 shares of Common Stock.

 

(d)                                  Section 162(m) Limitations .  Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, the following limitations shall apply.

 

(i)                                     A maximum of 1,000,000 shares of Common Stock subject to Options, SARs and Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value on the date the Stock Award is granted may be granted to any one Participant during any one calendar year.  Notwithstanding the foregoing, if any additional Options, SARs or Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value on the date the Stock Award are granted to any Participant during any

 

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calendar year, compensation attributable to the exercise of such additional Stock Awards will not satisfy the requirements to be considered “qualified performance-based compensation” under Section 162(m) of the Code unless such additional Stock Award is approved by the Company’s stockholders.

 

(ii)                                 A maximum of 1,000,000 shares of Common Stock subject to Performance Stock Awards may be granted to any one Participant during any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during the Performance Period of the Performance Goals).

 

(iii)                             A maximum of $1,000,000 may be granted as a Performance Cash Award to any one Participant during any one calendar year.

 

(e)                                   Source of Shares.   The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.

 

4.                                       ELIGIBILITY.

 

(a)                                  Eligibility for Specific Stock Awards .  Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code).  Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however , that Stock Awards may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 of the Securities Act, unless (i) the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Stock Awards are granted pursuant to a corporate transaction such as a spin off transaction), (ii) the Company, in consultation with its legal counsel, has determined that such Stock Awards are otherwise exempt from Section 409A of the Code, or (iii) the Company, in consultation with its legal counsel, has determined that such Stock Awards comply with the distribution requirements of Section 409A of the Code.

 

(b)                                  Ten Percent Stockholders.   A Ten Percent Stockholder will not be granted an Incentive Stock Option unless the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five years from the date of grant.

 

5.                                       PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.

 

Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate.  All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option.  If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need

 

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not be identical; provided, however , that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:

 

(a)                                  Term.   Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of ten years from the date of its grant or such shorter period specified in the Award Agreement.

 

(b)                                  Exercise Price.   Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Award is granted.  Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A and, if applicable, Section 424(a) of the Code.  Each SAR will be denominated in shares of Common Stock equivalents.

 

(c)                                   Purchase Price for Options.   The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.  The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment.  The permitted methods of payment are as follows:

 

(i)                                     by cash, check, bank draft or money order payable to the Company;

 

(ii)                                 pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

 

(iii)                             by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

 

(iv)                              if an Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however , that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.  Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or

 

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(v)                                  in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Agreement.

 

(d)                                  Exercise and Payment of a SAR.   To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such SAR.  The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR, and with respect to which the Participant is exercising the SAR on such date, over (B) the aggregate strike price of the number of Common Stock equivalents with respect to which the Participant is exercising the SAR on such date.  The appreciation distribution may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Award Agreement evidencing such SAR.

 

(e)                                   Transferability of Options and SARs.   The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine.  In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:

 

(i)                                     Restrictions on Transfer.   An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant.  The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws.  Except as explicitly provided in the Plan, neither an Option nor a SAR may be transferred for consideration.

 

(ii)                                 Domestic Relations Orders.   Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulations Section 1.421-1(b)(2).  If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

 

(iii)                             Beneficiary Designation.   Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise.  In the absence of such a designation, upon the death of the Participant, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.

 

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(f)                                    Vesting Generally.   The total number of shares of Common Stock subject to an Option or SAR may vest and become exercisable in periodic installments that may or may not be equal.  The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options or SARs may vary.  The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.

 

(g)                                  Termination of Continuous Service.   Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date which occurs ninety (90) days following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Award Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR (as applicable) within the applicable time frame, the Option or SAR will terminate.

 

(h)                                  Extension of Termination Date.   If the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of time (that need not be consecutive) equal to the applicable post termination exercise period after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.  In addition, unless otherwise provided in a Participant’s Award Agreement, if the sale of any Common Stock received on exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of the period of days or months (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.

 

(i)                                     Disability of Participant.   Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date which occurs 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Award Agreement), and

 

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(ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.

 

(j)                                     Death of Participant.   Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Award Agreement for exercisability after the termination of the Participant’s Continuous Service for a reason other than death, then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date which occurs 18 months following the date of death (or such longer or shorter period specified in the Award Agreement), and (ii) the expiration of the term of such Option or SAR as set forth in the Award Agreement.  If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR (as applicable) will terminate.

 

(k)                                  Termination for Cause.   Except as explicitly provided otherwise in a Participant’s Award Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate immediately upon such Participant’s termination of Continuous Service, and the Participant will be prohibited from exercising his or her Option or SAR from and after the date of such termination of Continuous Service.

 

(l)                                     Non-Exempt Employees .  If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Award Agreement in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months following the date of grant.  The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay.  To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.

 

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6.                                       PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.

 

(a)                                  Restricted Stock Awards.   Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate.  To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical.  Each Restricted Stock Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)                                     Consideration.   A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

 

(ii)                                 Vesting.  Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

 

(iii)                             Termination of Participant’s Continuous Service.   If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

 

(iv)                              Transferability.   Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

 

(v)                                  Dividends.  A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.

 

(b)                                  Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical.  Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

 

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(i)                                     Consideration.   At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award.  The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

 

(ii)                                 Vesting.  At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

 

(iii)                             Payment .  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

 

(iv)                              Additional Restrictions.  At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

 

(v)                                  Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.  At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

 

(vi)                              Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

 

(c)                                   Performance Awards .

 

(i)                                     Performance Stock Awards .  A Performance Stock Award is a Stock Award (covering a number of shares not in excess of that set forth in Section 3(d) above) that is payable (including that may be granted, may vest or may be exercised) contingent upon the attainment during a Performance Period of certain Performance Goals.  A Performance Stock Award may but need not require the Participant’s completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion.  In addition, to

 

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the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.

 

(ii)                                 Performance Cash Awards .  A Performance Cash Award is a cash award (for a dollar value not in excess of that set forth in Section 3(d) above) that is payable contingent upon the attainment during a Performance Period of certain Performance Goals.  A Performance Cash Award may also require the completion of a specified period of Continuous Service.  At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion.  The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property.

 

(iii)                             Board Discretion .  The Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.  Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.

 

(iv)                              Section 162(m) Compliance .  Unless otherwise permitted in compliance with the requirements of Section 162(m) of the Code with respect to an Award intended to qualify as “performance-based compensation” thereunder, the Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under, the Award no later than the earlier of (a) the date which occurs 90 days after the commencement of the applicable Performance Period, and (b) the date on which 25% of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains substantially uncertain.  Prior to the payment of any compensation under an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee will certify the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where such Performance Goals relate solely to the increase in the value of the Common Stock).  Notwithstanding satisfaction of, or completion of any Performance Goals, the number of shares of Common Stock, Options, cash or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee, in its sole discretion, will determine.

 

(d)                                  Other Stock Awards .  Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6.  Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will

 

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be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.

 

7.                                       COVENANTS OF THE COMPANY.

 

(a)                                  Availability of Shares.   The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Awards.

 

(b)                                  Securities Law Compliance.   The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however , that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law.

 

(c)                                   No Obligation to Notify or Minimize Taxes.  The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award.  Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised.  The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award.

 

8.                                       MISCELLANEOUS.

 

(a)                                  Use of Proceeds from Sales of Common Stock.  Proceeds from the sale of shares of Common Stock pursuant to Awards will constitute general funds of the Company.

 

(b)                                  Corporate Action Constituting Grant of Awards.   Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant.  In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement or related grant documents as a result of a clerical error in the papering of the Award Agreement or related grant documents, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement or related grant documents.

 

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(c)                                   Stockholder Rights.   No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common Stock under, the Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to such Award has been entered into the books and records of the Company.

 

(d)                                  No Employment or Other Service Rights.   Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

 

(e)                                   Change in Time Commitment.   In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award.  In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended.

 

(f)                                    Incentive Stock Option Limitations.   To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

 

(g)                                  Investment Assurances.   The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that such Participant is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the

 

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Company stating that the Participant is acquiring Common Stock subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Award has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

 

(h)                                  Withholding Obligations.   Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement.

 

(i)                                     Electronic Delivery .  Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).

 

(j)                                     Deferrals.   To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in accordance with Section 409A of the Code.  Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company.  The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

 

(k)                                  Compliance with Section 409A of the Code.  Unless otherwise expressly provided for in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code.  If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Award Agreement

 

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evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement.  Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original schedule.

 

(l)                                     Clawback/Recovery .  All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.  In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of an event constituting Cause.  No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.

 

9.                                       ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

 

(a)                                  Capitalization Adjustments .  In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Sections 3(d), and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards.  The Board will make such adjustments, and its determination will be final, binding and conclusive.

 

(b)                                  Dissolution or Liquidation .  Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided, however , that the Board may, in

 

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its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

 

(c)                                   Corporate Transaction.   The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.  In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:

 

(i)                                     arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);

 

(ii)                                 arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

(iii)                             accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;

 

(iv)                              arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

 

(v)                                  cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and

 

(vi)                              make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise.

 

The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award.

 

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(d)                                  Change in Control.   A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.

 

10.                                PLAN TERM; EARLIER TERMINATION OR SUSPENSION OF THE PLAN.

 

The Board may suspend or terminate the Plan at any time.  No Incentive Stock Options may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board (the “ Adoption Date ”), or (ii) the date the Plan is approved by the stockholders of the Company.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

11.                                EXISTENCE OF THE PLAN; TIMING OF FIRST GRANT OR EXERCISE.

 

The Plan will come into existence on the Adoption Date; provided, however , that no Award may be granted prior to the IPO Date (that is, the Effective Date).  In addition, no Stock Award will be exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award, or Other Stock Award, no Stock Award will be granted) and no Performance Cash Award will be settled unless and until the Plan has been approved by the stockholders of the Company, which approval will be within 12 months after the date the Plan is adopted by the Board.

 

12.                                CHOICE OF LAW.

 

The law of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

 

13.                                DEFINITIONS.  As used in the Plan, the following definitions will apply to the capitalized terms indicated below:

 

(a)                                  Affiliate ” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act.  The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

 

(b)                                  Award ” means a Stock Award or a Performance Cash Award.

 

(c)                                   Award Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award.

 

(d)                                  Board ” means the Board of Directors of the Company.

 

(e)                                   Capital Stock ” means each and every class of common stock of the Company, regardless of the number of votes per share.

 

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(f)                                    Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

 

(g)                                  Cause ” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events:  (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Company, in its sole discretion.  Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

 

(h)                                  Change in Control ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)                                     any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities, (C) on account of the acquisition of securities of the Company by any individual who is, on the IPO Date, either an executive officer or a Director (either, an “ IPO Investor ”) and/or any entity in which an IPO Investor has a direct or indirect interest (whether in the form of voting rights or participation in profits or capital contributions) of more than 50% (collectively, the “ IPO Entities ”) or on account of the IPO Entities continuing to hold shares that come to represent more than 50% of the combined voting power of the Company’s then outstanding securities as a result of the conversion of any class of the Company’s securities into another class of the Company’s securities having a different number of votes per share pursuant to the conversion provisions set forth in the Company’s Amended

 

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and Restated Certificate of Incorporation; or (D) solely because the level of Ownership held by any Exchange Act Person (the “ Subject Person ”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;

 

(ii)                                 there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; provided, however , that a merger, consolidation or similar transaction will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the surviving Entity or its parent are owned by the IPO Entities;

 

(iii)                             there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; provided, however , that a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the acquiring Entity or its parent are owned by the IPO Entities; or

 

(iv)                              individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the members of the Board; provided, however , that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.

 

Notwithstanding the foregoing definition or any other provision of the Plan, the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company and the definition of

 

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Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however , that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.

 

(i)                                     Code ” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

 

(j)                                     Committee ” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

 

(k)                                  Common Stock ” means, as of the IPO Date, the common stock of the Company, having one vote per share.

 

(l)                                     Company ” means Adamas Pharmaceuticals, Inc., a Delaware corporation.

 

(m)                              Consultant means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services.  However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan.  Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person.

 

(n)                                  Continuous Service ” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however , that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate.  To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors.  Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

 

(o)                                  Corporate Transaction ” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

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(i)                                     a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

 

(ii)                                 a sale or other disposition of at least 90% of the outstanding securities of the Company;

 

(iii)                             a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

(iv)                              a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

 

(p)                                  Covered Employee ” will have the meaning provided in Section 162(m)(3) of the Code.

 

(q)                                  Director ” means a member of the Board.

 

(r)                                   Disability ” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

(s)                                    Effective Date ” means the IPO Date.

 

(t)                                     Employee means any person employed by the Company or an Affiliate.  However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.

 

(u)                                  Entity ” means a corporation, partnership, limited liability company or other entity.

 

(v)                                  Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(w)                                Exchange Act Person ” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange

 

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Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.

 

(x)                                  Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows:

 

(i)                                     If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable.

 

(ii)                                 Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.

 

(iii)                             In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.

 

(y)                                  Incentive Stock Option ” means an option granted pursuant to Section 5 of the Plan that is intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.

 

(z)                                   IPO Date ” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

 

(aa)                           Non-Employee Director ” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“ Regulation S-K ”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

(bb)                           Nonstatutory Stock Option ” means any Option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option.

 

(cc)                             Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.

 

(dd)                           Option ” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

 

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(ee)                             Option Agreement ” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant.  Each Option Agreement will be subject to the terms and conditions of the Plan.

 

(ff)                               Optionholder ” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

 

(gg)                           Other Stock Award means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(d).

 

(hh)                           Other Stock Award Agreement means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant.  Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.

 

(ii)                                 Outside Director ” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

 

(jj)                                 Own, ” “ Owned, ” “ Owner, ” “ Ownership ” means a person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

 

(kk)                           Participant ” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

 

(ll)                                 Performance Cash Award ” means an award of cash granted pursuant to the terms and conditions of Section 6(c)(ii).

 

(mm)                   Performance Criteria means the one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period.  The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) earnings before interest, taxes, depreciation, amortization and legal settlements; (v) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (vi) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and stock-based compensation; (vii) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), stock-based compensation and changes in deferred revenue; (viii) total stockholder return; (ix) return on equity or average stockholder’s equity; (x) return on assets, investment, or

 

25



 

capital employed; (xi) stock price; (xii) margin (including gross margin); (xiii) income (before or after taxes); (xiv) operating income; (xv) operating income after taxes; (xvi) pre-tax profit; (xvii) operating cash flow; (xviii) sales or revenue targets; (xix) increases in revenue or product revenue; (xx) expenses and cost reduction goals; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) user satisfaction; (xxx) stockholders’ equity; (xxxi) capital expenditures; (xxxii) debt levels; (xxxiii) operating profit or net operating profit; (xxxiv) workforce diversity; (xxxv) growth of net income or operating income; (xxxvi) billings; (xxxvii) bookings; (xxxviii) the number of users, including but not limited to unique users; (xxxix) employee retention; and (xxxx) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board.

 

(nn)                           Performance Goals means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria.  Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices.  Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.

 

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(oo)                           Performance Period means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award or a Performance Cash Award.  Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.

 

(pp)                           Performance Stock Award ” means a Stock Award granted under the terms and conditions of Section 6(c)(i).

 

(qq)                           Plan ” means this Adamas Pharmaceuticals, Inc. 2014 Equity Incentive Plan, as it may be amended.

 

(rr)                             Restricted Stock Award means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

 

(ss)                               Restricted Stock Award Agreement means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant.  Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.

 

(tt)                                 Restricted Stock Unit Award means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

 

(uu)                           Restricted Stock Unit Award Agreement means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreement will be subject to the terms and conditions of the Plan.

 

(vv)                           Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

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

 

(xx)                           Stock Appreciation Right or “ SAR ” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.

 

(yy)                           Stock Appreciation Right Agreement means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan.

 

(zz)                             Stock Award means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award or any Other Stock Award.

 

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(aaa)                    Stock Award Agreement means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant.  Each Stock Award Agreement will be subject to the terms and conditions of the Plan.

 

(bbb)                    Subsidiary ” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.

 

(ccc)                       Ten Percent Stockholder ” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate.

 

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Exhibit 10.4

 

ADAMAS PHARMACEUTICALS, INC.
2014 EMPLOYEE STOCK PURCHASE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS:  FEBRUARY 20, 2014
APPROVED BY THE STOCKHOLDERS:                  , 2014

 

1.                                       GENERAL; PURPOSE.

 

(a)                                  The Plan provides a means by which Eligible Employees of the Company and certain designated Related Corporations may be given an opportunity to purchase shares of Common Stock.  The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan.

 

(b)                                  The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.

 

2.                                       ADMINISTRATION.

 

(a)                                  The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).

 

(b)                                  The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

(i)                                     To determine how and when Purchase Rights will be granted and the provisions of each Offering (which need not be identical).

 

(ii)                                 To designate from time to time which Related Corporations of the Company will be eligible to participate in the Plan.

 

(iii)                             To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective.

 

(iv)                              To settle all controversies regarding the Plan and Purchase Rights granted under the Plan.

 

(v)                                  To suspend or terminate the Plan at any time as provided in Section 12.

 

(vi)                              To amend the Plan at any time as provided in Section 12.

 

(vii)                          Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Related Corporations and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan.

 



 

(viii)                      To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside of the United States.

 

(c)                                   The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.  Whether or not the Board has delegated administration of the Plan to a Committee, the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.

 

(d)                                  All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

 

3.                                       SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

 

(a)                                  Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares of Common Stock that may be issued under the Plan will not exceed 131,381 shares of Common Stock, plus the number of shares of Common Stock that are automatically added on January 1st of each year for a  period of up to ten years, commencing on the first January 1 following the IPO Date and ending on (and including) January 1, 2024, in an amount equal to the lesser of (i) 1% of the total number of shares of Capital Stock outstanding on December 31st of the preceding calendar year, and (ii) 260,000 shares of Common Stock.  Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year to provide that there will be no January 1 st  increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.

 

(b)                                  If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common Stock not purchased under such Purchase Right will again become available for issuance under the Plan.

 

(c)                                   The stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.

 

4.                                       GRANT OF PURCHASE RIGHTS; OFFERING.

 

(a)                                  The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on

 

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an Offering Date or Offering Dates selected by the Board.  Each Offering will be in such form and will contain such terms and conditions as the Board will deem appropriate, and will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges.  The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan.  The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of the Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.

 

(b)                                  If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in forms delivered to the Company: (i) each form will apply to all of the Participant’s Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.

 

(c)                                   The Board will have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on any Offering Date of an Offering (the “ New Offering ”) is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for an ongoing Offering, then (i) such ongoing Offering will terminate immediately following the purchase of shares of Common Stock on the Purchase Date immediately preceding the New Offering, and (ii) the Participants in such terminated ongoing Offering will be automatically enrolled in the New Offering.

 

5.                                       ELIGIBILITY.

 

(a)                                  Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation.  Except as provided in Section 5(b), an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company or the Related Corporation, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event will the required period of continuous employment be equal to or greater than two years.  In addition, the Board may provide that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company or the Related Corporation is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.

 

(b)                                  The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be

 

3



 

deemed to be a part of that Offering.  Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:

 

(i)                                     the date on which such Purchase Right is granted will be the “Offering Date” of such Purchase Right for all purposes, including for purposes of determining the exercise price of such Purchase Right;

 

(ii)                                 the period of the Offering with respect to such Purchase Right will begin on its Offering Date and end coincident with the end of such Offering; and

 

(iii)                             the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she will not receive any Purchase Right under that Offering.

 

(c)                                   No Employee will be eligible for the grant of any Purchase Rights if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation.  For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options will be treated as stock owned by such Employee.

 

(d)                                  As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation to accrue at a rate which exceeds $25,000 of the Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.

 

(e)                                   Officers of the Company and any designated Related Corporation, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan.  Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate in Offerings under the Plan.

 

6.                                       PURCHASE RIGHTS; PURCHASE PRICE.

 

(a)                                  On each Offering Date, each Eligible Employee will be granted a Purchase Right under the applicable Offering to purchase up to that number of shares of Common Stock purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding 15% of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.

 

4



 

(b)                                  The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering.

 

(c)                                   In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering.  If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participant’s accumulated Contributions) allocation of the shares of Common Stock available will be made in as nearly a uniform manner as will be practicable and equitable.

 

(d)                                  The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be not less than the lesser of:

 

(i)                                     an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the Offering Date; and

 

(ii)                                 an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.

 

7.                                       PARTICIPATION; WITHDRAWAL; TERMINATION.

 

(a)                                  An Eligible Employee may elect to authorize payroll deductions as the means of making Contributions by completing and delivering to the Company, within the time specified in the Offering, an enrollment form provided by the Company.  The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board.  Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where applicable law requires that Contributions be deposited with a third party.  If permitted in the Offering, a Participant may begin such Contributions with the first payroll date occurring on or after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior Offering but before the Offering Date of the next new Offering, Contributions from such payroll period will be included in the new Offering).  If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase the Participant’s Contributions.  If specifically provided in the Offering, in addition to making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash or check prior to a Purchase Date.

 

(b)                                  During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company a withdrawal form provided by the Company.  The Company may impose a deadline before a Purchase Date for withdrawing.  Upon such withdrawal, such Participant’s Purchase Right in that Offering will immediately terminate and

 

5



 

the Company will distribute to such Participant all of the Participant’s accumulated but unused Contributions and such Participant’s Purchase Right in that Offering shall thereupon terminate.  A Participant’s withdrawal from that Offering will have no effect upon the Participant’s eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.

 

(c)                                   Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason (subject to any post-employment participation period required by law) or (ii) is otherwise no longer eligible to participate in the Offering or the Plan.  The Company will distribute to such individual all of the Participant’s accumulated but unused Contributions.

 

(d)                                  During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant.  Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10.

 

(e)                                   Unless otherwise specified in the Offering, the Company will have no obligation to pay interest on Contributions.

 

8.                                       EXERCISE OF PURCHASE RIGHTS.

 

(a)                                  On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares of Common Stock, up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering.  No fractional shares will be issued unless specifically provided for in the Offering.

 

(b)                                  If any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from or is not eligible to participate in such Offering, in which case such amount will be distributed to such Participant after the final Purchase Date, without interest.  If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one whole share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will not roll over to the next Offering and will instead be distributed in full to such Participant after the final Purchase Date of such Offering without interest.

 

(c)                                   No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan.  If on a Purchase Date the shares of Common Stock are not so registered or the Plan is not in such

 

6



 

compliance, no Purchase Rights will be exercised on such Purchase Date, and the Purchase Date will be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in material compliance with applicable laws, except that the Purchase Date will in no event be more than 27 months after the Offering Date.  If, on the Purchase Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all applicable laws, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed to the Participants without interest.

 

9.                                       COVENANTS OF THE COMPANY.

 

The Company will seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder.  If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.

 

10.                                DESIGNATION OF BENEFICIARY.

 

(a)                                  The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any shares of Common Stock and/or Contributions from the Participant’s account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant.  The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company.

 

(b)                                  If a Participant dies, in the absence of a valid beneficiary designation, the Company will deliver any shares of Common Stock and/or Contributions to the executor or administrator of the estate of the Participant.  If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or Contributions to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

11.                                ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.

 

(a)                                  In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the

 

7



 

purchase limits under each ongoing Offering.  The Board will make these adjustments, and its determination will be final, binding and conclusive.

 

(b)                                  In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock within ten business days prior to the Corporate Transaction under the outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.

 

12.                                AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)                                  The Board may amend the Plan at any time in any respect the Board deems necessary or advisable.  However, except as provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by applicable law or listing requirements, including any amendment that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) above only to the extent stockholder approval is required by applicable law or listing requirements.

 

(b)                                  The Board may suspend or terminate the Plan at any time.  No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.

 

(c)                                   Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including, without limitation, any such regulations or other guidance that may be issued or amended after the Effective Date, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment.  To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code.

 

8


 

13.                                EFFECTIVE DATE OF PLAN.

 

The Plan will become effective on the IPO Date.  No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.

 

14.                                MISCELLANEOUS PROVISIONS.

 

(a)                                  Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the Company.

 

(b)                                  A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).

 

(c)                                   The Plan and Offering do not constitute an employment contract.  Nothing in the Plan or in any Offering will in any way alter the at-will nature of a Participant’s employment or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company or a Related Corporation, or on the part of the Company or a Related Corporation to continue the employment of a Participant.

 

(d)                                  The provisions of the Plan will be governed by the laws of the State of California without regard to that state’s conflicts of laws rules.

 

15.                                DEFINITIONS.

 

As used in the Plan, the following definitions will apply to the capitalized terms indicated below:

 

(a)                                  Board ” means the Board of Directors of the Company.

 

(b)                                  Capital Stock ” means each and every class of common stock of the Company, regardless of the number of votes per share.

 

(c)                                   Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the Effective Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

 

9



 

(d)                                  Code ” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder .

 

(e)                                   Committee ” means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).

 

(f)                                    Common Stock ” means, as of the IPO Date, the common stock of the Company, having one vote per share.

 

(g)                                  Company ” means Adamas Pharmaceuticals, Inc., a Delaware corporation.

 

(h)                                  “Contributions ” means the payroll deductions and other additional payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right.  A Participant may make additional payments into the Participant’s account if specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions.

 

(i)                                     Corporate Transaction ” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)                                     a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

 

(ii)                                 a sale or other disposition of at least 90% of the outstanding securities of the Company;

 

(iii)                             a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

(iv)                              a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

 

(j)                                     Director ” means a member of the Board.

 

(k)                                  Eligible Employee ” means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.

 

(l)                                     Employee ” means any person, including an Officer or Director, who is “employed” for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation.  However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.

 

10



 

(m)                              Employee Stock Purchase Plan ” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.

 

(n)                                  Exchange Act ” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

(o)                                  Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows:

 

(i)                                     If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in such source as the Board deems reliable.  Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing sales price on the last preceding date for which such quotation exists.

 

(ii)                                 In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith in compliance with applicable laws and in a manner that complies with Sections 409A of the Code.

 

(iii)                             Notwithstanding the foregoing, for any Offering that commences on the IPO Date, the Fair Market Value of the shares of Common Stock on the Offering Date will be the price per share at which shares are first sold to the public in the Company’s initial public offering as specified in the final prospectus for that initial public offering.

 

(p)                                  IPO Date ” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

 

(q)                                  Offering ” means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the “ Offering Document ” approved by the Board for that Offering.

 

(r)                                   Offering Date ” means a date selected by the Board for an Offering to commence.

 

(s)                                    Officer ” means a person who is an officer of the Company or a Related Corporation within the meaning of Section 16 of the Exchange Act.

 

(t)                                     Participant ” means an Eligible Employee who holds an outstanding Purchase Right.

 

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(u)                                  Plan ” means this Adamas Pharmaceuticals, Inc. 2014 Employee Stock Purchase Plan.

 

(v)                                  Purchase Date ” means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering.

 

(w)                                Purchase Period ” means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date.  An Offering may consist of one or more Purchase Periods.

 

(x)                                  Purchase Right ” means an option to purchase shares of Common Stock granted pursuant to the Plan.

 

(y)                                  Related Corporation ” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

 

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

 

(aa)                           Trading Day ” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including but not limited to the NYSE, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.

 

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Exhibit 10.5

 

 

ADAMAS PHARMACEUTICALS, INC.

 

FOURTH AMENDED AND RESTATED

 

INVESTORS’ RIGHTS AGREEMENT

 

June 30, 2011

 

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

Section 1 Definitions

2

 

 

 

1.1

Certain Definitions

2

 

 

Section 2 Registration Rights

4

 

 

2.1

Requested Registration

4

2.2

Company Registration

6

2.3

Registration on Form S-3

8

2.4

Expenses of Registration

8

2.5

Registration Procedures

9

2.6

Indemnification

11

2.7

Information by Holder

13

2.8

Restrictions on Transfer

13

2.9

Rule 144 Reporting

15

2.10

Market Stand-Off Agreement

16

2.11

Delay of Registration

16

2.12

Transfer or Assignment of Registration Rights

16

2.13

Limitations on Subsequent Registration Rights

16

2.14

Termination of Registration Rights

17

 

 

Section 3 Covenants of the Company

17

 

 

3.1

Basic Financial Information

17

3.2

Inspection Rights

18

3.3

Confidentiality

18

3.4

Stock Option Vesting

18

3.5

Termination of Covenants

19

3.6

Key Man Insurance

19

3.7

Proprietary Information and Inventions Agreements

19

 

 

Section 4 Right of First Refusal

19

 

 

4.1

Right of First Refusal to Preferred Holders

19

 

 

Section 5 Drag-Along Rights

21

 

 

5.1

Drag-Along Rights

21

5.2

Certain Future Common Holders

22

5.3

Restrictions on Sales of Control of the Company

22

 

 

Section 6 Miscellaneous

23

 

 

6.1

Amendment

23

6.2

[Intentionally Omitted]

23

6.3

Notices

23

6.4

Governing Law

24

6.5

Successors and Assigns

24

6.6

Entire Agreement

24

 

i



 

TABLE OF CONTENTS

 

(continued)

 

 

 

Page

 

 

 

6.7

Delays or Omissions

25

6.8

Severability

25

6.9

Titles and Subtitles

25

6.10

Counterparts

25

6.11

Telecopy Execution and Delivery

25

6.12

Further Assurances

25

6.13

Aggregation of Stock

26

6.14

Termination of Prior Agreement

26

6.15

Waiver of Pro Rata

26

 

ii



 

ADAMAS PHARMACEUTICALS, INC.

 

FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

This Fourth Amended and Restated Investors’ Rights Agreement (this “ Agreement ”) is made as of June 30, 2011, by and among Adamas Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”) and the persons and entities listed on Exhibit A hereto (each, an “ Investor ” and collectively, the “ Investors ” or “ Preferred Holders ”) and the persons and entities listed on Exhibit B hereto (each, a “ Common Holder ” and collectively, the “ Common Holders ”).  Unless otherwise defined herein, capitalized terms used in this Agreement have the meanings ascribed to them in Section 1.

 

RECITALS

 

WHEREAS :  In connection with the sale and issuance of its Series D Convertible Preferred Stock, par value $.001 per share, the Company entered into that certain Third Amended and Restated Investors’ Rights Agreement dated June 25, 2008 (the “ Prior Agreement ”) with the purchasers of such Series D Preferred Stock and the holders of the Existing Preferred (as defined below) (collectively, the “ Parties to the Prior Agreement ”);

 

WHEREAS :  the Investors are purchasing shares of the Company’s Series AA Convertible Preferred Stock, par value $.001 per share (the “ Series AA Preferred Stock ”) pursuant to that certain Series AA Convertible Preferred Stock Purchase Agreement (the “ Purchase Agreement ”) of even date herewith, and it is a condition to the closing of the sale of the Series AA Preferred Stock to the Investors listed on such Schedule of Investors that such Investors and the Company execute and deliver this Agreement;

 

WHEREAS :  the requisite holders of the Company’s outstanding shares of Series A Convertible Preferred Stock, par value $.001 per share, Series B Convertible Preferred Stock, par value $.001 per share, Series C Convertible Preferred Stock, par value $.001 per share, Series C-1 Convertible Preferred Stock, $.001 par value per share and Series D Convertible Preferred Stock, par value $.001 per share (collectively referred to herein as the “ Old Preferred ”) converted all such outstanding shares into shares of the Company’s common stock , par value $.001 per share (the “ Converted Common ”) in accordance with the Purchase Agreement;

 

WHEREAS:  the Company and the Parties to the Prior Agreement who together hold (i) not less than a majority of the outstanding Registrable Securities (as defined in the Prior Agreement), and (ii) no less than a majority of the Old Preferred now desire to amend and restate the Prior Agreement in its entirety as set forth below.

 

NOW, THEREFORE:  In consideration of the mutual promises and covenants set forth herein, and other consideration, the receipt of and adequacy of which is hereby acknowledged, the parties hereto further agree as follows:

 



 

Section 1
Definitions

 

1.1                                Certain Definitions As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)                                  Commission ” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

(b)                                  Common Stock ” shall mean the Common Stock, par value $0.001 per share of the Company, including without limitation the Converted Common.

 

(c)                                   Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

 

(d)                                  Free Writing Prospectus ” means a free-writing prospectus, as defined in Rule 405.

 

(e)                                   Holder ” shall mean (i) any Preferred Holder that holds Registrable Securities and (ii) any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been duly and validly transferred in accordance with Section 2.12 of this Agreement.

 

(f)                                    Indemnified Party ” shall have the meaning set forth in Section 2.6(c) hereof.

 

(g)                                   Indemnifying Party ” shall have the meaning set forth in Section 2.6(c) hereof.

 

(h)                                  “Initial Closing” shall mean the date of the initial sale of shares of the Company’s Series AA Convertible Preferred Stock pursuant to the Purchase Agreement.

 

(i)                                      Initial Public Offering ” shall mean the closing of the Company’s first firm commitment underwritten public offering of the Company’s Common Stock registered under the Securities Act.

 

(j)                                     Initiating Holders ” shall mean any Holder or Holders who in the aggregate hold not less than thirty percent (30%) of the outstanding Registrable Securities, provided that for the purpose of Section 2.3 the term “Initiating Holders” shall mean any Holder or Holders who in the aggregate hold not less than twenty percent (20%) of the outstanding Registrable Securities.

 

(k)                                  Investors ” shall mean the persons and entities listed on Exhibit A hereto.

 

(l)                                      New Securities ” shall have the meaning set forth in Section 4.1(a) hereof.

 

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(m)                              Preferred Holders ” shall have the meaning set forth in the Preamble hereto.

 

(n)                                  Preferred Stock ” shall mean the Series AA Preferred Stock.

 

(o)                                  Purchase Agreement ” shall have the meaning set forth in the Recitals hereto.

 

(p)                                  Registrable Securities ” shall mean (i) shares of Converted Common, (ii) shares of Common Stock issuable or issued pursuant to the conversion of the Shares and (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above; provided , however , that Registrable Securities shall not include any shares of Common Stock described in clause (i), (ii) or (iii) above which have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights under this Agreement are not validly assigned in accordance with this Agreement.

 

(q)                                  The terms “ register ,” “ registered ” and “ registration ” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

 

(r)                                     Registration Expenses ” shall mean all expenses incurred by the Company in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, accounting fees, escrow fees, fees and disbursements of counsel for the Company, fees and disbursements of one special counsel for the Holders (selected by a majority-in-interest of the Holders) not to exceed $50,000, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of other counsel for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company.

 

(s)                                    Restricted Securities ” shall mean any Registrable Securities required to bear the first legend set forth in Section 2.8(b) hereof.

 

(t)                                     Rule 144 ” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(u)                                  Rule 145 ” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

(v)                                  Rule 415 ” shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

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(w)                                Rule 405 ” shall mean Rule 405 under the Securities Act.

 

(x)                                  Securities Act ” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

 

(y)                                  Selling Expenses ” shall mean 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 (other than the fees and disbursements of one special counsel to the Holders not to exceed $50,000 included in Registration Expenses).

 

(z)                                   Series AA Preferred Conversion Stock ” shall mean shares of Common Stock issued upon conversion of the Series AA Preferred Stock.

 

(aa)                           Series AA Preferred Stock ” shall have the meaning set forth in the Preamble hereto.

 

(bb)                           Shares ” shall mean (i) the Company’s Series AA Preferred Stock, and (ii) any securities issued with respect to the foregoing upon any stock split, stock dividend, recapitalization, or similar event or upon any conversion.

 

(cc)                             Significant Holder ” shall have the meaning set forth in Section 3.2 hereof.

 

Section 2
Registration Rights

 

2.1                                Requested Registration .

 

(a)                                  Request for Registration .  Subject to the conditions set forth in this Section 2.1, if the Company shall receive from Initiating Holders a written request signed by such Initiating Holders that the Company effect any registration with respect to at least thirty percent (30%) of the Registrable Securities (or a lesser amount if such offering shall have an aggregate offering price to the public of not less than Ten Million Dollars ($10,000,000) net of underwriting discounts and commissions) (such request shall state the number of shares of Registrable Securities to be disposed of by such Initiating Holders), the Company will:

 

(i)                                      within twenty (20) days of receipt of such request, give written notice of the proposed registration to all other Holders; and

 

(ii)                                   as soon as practicable, file and use its commercially reasonable efforts to effect such registration (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) and to permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after such written notice from the Company is mailed or delivered; provided that, unless a

 

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registration pursuant to this Section 2.1 is the Company’s Initial Public Offering, the Company also shall use its reasonable best efforts to file the registration statement within ninety (90) days of the receipt of the request from the Initiating Holders.

 

(b)                                  Limitations on Requested Registration.   The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 2.1:

 

(i)                                      Prior to the earlier of (A) the five (5) year anniversary of the date of this Agreement or (B) six (6) months following the effective date of the Company’s Initial Public Offering;

 

(ii)                                   In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(iii)                                After the Company has initiated two (2) such registrations pursuant to this Section 2.1 (counting for these purposes only registrations which have been declared or ordered effective and pursuant to which securities have been sold); or

 

(iv)                               During the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a Company-initiated registration (other than a registration on Form S-4 or S-8 or any successor form); provided that the Company is actively employing in good faith all commercially reasonable efforts to cause such registration statement to become effective.

 

(c)                                   Deferral .  If (i) in the good faith judgment of the Board of Directors of the Company, the filing of a registration statement covering the Registrable Securities would be materially detrimental to the Company, and the Board of Directors of the Company concludes, as a result, that it is in the best interests of the Company to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company for such registration statement to be filed in the near future and that it is, therefore, in the best interests of the Company to defer the filing of such registration statement, then (in addition to the limitations set forth in Section 2.1(b)(iv) above) the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders, and, provided further , that the Company shall not defer its obligation in this manner more than twice in any twelve-month period.

 

(d)                                  Underwriting .  If 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 this Section 2.1 and the Company shall include such information in the written notice referred to in subsection 2.1(a)(i).  In such event, the right of any Holder to include all or any portion of its Registrable Securities in a registration

 

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pursuant to this Section 2.1 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities to the extent provided herein.  If the Company shall request inclusion in any registration pursuant to Section 2.1 of securities being sold for its own account, the Initiating Holders shall, on behalf of all Holders, offer to include such securities in the underwriting and such offer shall be conditioned upon the participation of the Company or such other persons in such underwriting and the inclusion of the Company’s and such person’s other securities of the Company and their acceptance of the further applicable provisions of this Section 2 (including Section 2.10).  The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by the majority-in-interest of the Initiating Holders, which underwriters shall be reasonably acceptable to the Company.

 

Notwithstanding any other provision of this Section 2.1, if the underwriters advise the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten (including Registrable Securities), the number of Registrable Securities that may be so included shall be apportioned pro rata among the selling Holders based on the number of Registrable Securities held by all selling Holders or in such other proportions as shall mutually be agreed to by all such selling Holders.  In no event shall Registrable Securities be excluded from such registration unless all other stockholders’ securities (including securities for the account of the Company) have been first excluded.

 

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders.  The securities so excluded shall also be withdrawn from registration.  Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall also be withdrawn from such registration.  If shares are so withdrawn from the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 2.1(d), then the Company shall then offer to all Holders who have retained rights to include securities in the registration the right to include additional Registrable Securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among such Holders requesting additional inclusion, as set forth above.

 

2.2                                Company Registration .

 

(a)                                  Company Registration .  If the Company shall determine to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its securities either for its own account or the account of a security holder or holders, other than a registration pursuant to Section 2.1 or 2.3, a registration relating solely to employee benefit plans, a registration relating to the offer and sale of debt securities, a registration relating to a corporate reorganization or other Rule 145 transaction, or a registration on any registration form that does not permit secondary sales, the Company will:

 

(i)                                      promptly give written notice of the proposed registration to all Holders; and

 

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(ii)                                   use its commercially reasonable efforts to include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 2.2(b) below, and in any underwriting involved therein, all of such Registrable Securities as are specified in a written request or requests made by any Holder or Holders received by the Company within twenty (20) days after such written notice from the Company is mailed or delivered.  Such written request may specify all or a part of a Holder’s Registrable Securities.

 

(b)                                  Underwriting .  If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.2(a)(i).  In such event, the right of any Holder to registration pursuant to this Section 2.2 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 and the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Company.

 

Notwithstanding any other provision of this Section 2.2, if the underwriters advise the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set forth below) limit the number of Registrable Securities to be included in the registration and underwriting.  In no event shall any Registrable Securities be excluded from such registration and underwriting unless all other stockholders’ securities have been first excluded.  In the event that the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such registration and underwriting, then the Registrable Securities that are included in such registration and underwriting shall be apportioned pro rata among the selling Holders based on the number of Registrable Securities held by all selling Holders or in such other proportions as shall mutually be agreed to by all such selling Holders.  Notwithstanding the foregoing, in no event shall the amount of securities of the selling Holders included in the registration and underwriting be reduced below thirty percent (30%) of the total amount of securities included in such registration and underwriting, unless such registration is the Company’s Initial Public Offering, in which case the selling Holders may be excluded if the underwriters make the determination described above.

 

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall also be excluded therefrom by written notice from the Company or the underwriter.  The securities so excluded shall also be withdrawn from such registration.  Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.

 

(c)                                   Right to Terminate Registration .  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration.  The expenses of such withdrawn registration shall be borne by the Company.

 

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2.3                                Registration on Form S-3 .

 

(a)                                  Request for Form S-3 Registration .  If the Company is then qualified for the use of Form S-3, in addition to the rights contained in the foregoing provisions of this Section 2 and subject to the conditions set forth in this Section 2.3, if the Company shall receive from Initiating Holders a written request signed by such Initiating Holders that the Company effect any registration on Form S-3 or any similar short form registration statement with respect to all or part of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Holder or Holders), the Company will take all such action with respect to such Registrable Securities as required by Section 2.1(a)(i) and (ii); provided, that in the case of a registration pursuant to this Section 2.3, the Company also shall use its reasonable best efforts to file the registration statement within ninety (90) days of the receipt of the request from the Initiating Holders.

 

(b)                                  Limitations on Form S-3 Registration .  The Company shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Section 2.3:

 

(i)                                      In the circumstances described in either Sections 2.1(b)(ii) or 2.1(b)(iv);

 

(ii)                                   If the Initiating Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) on Form S-3 at an aggregate price to the public (net of any underwriters’ discounts and commissions) of less than Three Million Dollars ($3,000,000); or

 

(iii)                                If, in a given six-month period, the Company has effected one (1) such registration in such period.

 

(c)                                   Deferral .  The provisions of Section 2.1(c) shall apply to any registration pursuant to this Section 2.3.

 

(d)                                  Underwriting .  If the Initiating Holders requesting registration under this Section 2.3 intend to distribute the Registrable Securities covered by their request by means of an underwriting, the provisions of Section 2.1(d) shall apply to such registration.  Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this Section 2.3 shall not be counted as requests for registration or registrations effected pursuant to Section 2.1.

 

2.4                                Expenses of Registration .  All Registration Expenses incurred in connection with registrations pursuant to Sections 2.1, 2.2 and 2.3 hereof shall be borne by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Sections 2.1 and 2.3 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered or because a sufficient number of Holders shall have withdrawn so that the minimum offering conditions set forth in Sections 2.1 and 2.3 are no longer satisfied (in which case all participating Holders shall bear such expenses pro rata among each other based on the number of Registrable Securities requested to be so registered), unless the Holders of a majority

 

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of the Registrable Securities agree to forfeit their right to a demand registration pursuant to Section 2.1; and provided further , however , that if at the time of such withdrawal, the Holders 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 following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 2.1 or 2.3.  All Selling Expenses shall be borne pro rata by the selling Holders based on the number of Registrable Securities requested to be so registered.

 

2.5                                Registration Procedures .  In the case of each registration effected by the Company pursuant to Section 2, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof.  At its expense, the Company will use its commercially reasonable efforts to:

 

(a)                                  Keep such registration effective for a period ending on the earlier of the date which is one hundred twenty (120) days from the effective date of the registration statement or such time as the Holder or Holders have completed the distribution described in the registration statement relating thereto;

 

(b)                                  Prepare and file with the Commission 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 provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above;

 

(c)                                   Furnish such number of prospectuses, including any preliminary prospectuses and any Free Writing Prospectus,  and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;

 

(d)                                  Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdiction as shall be reasonably requested by the Holders; provided , that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

 

(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 managing underwriter, underwriters, or managing underwriter on behalf of the underwriters, of such offering;

 

(f)                                    Notify each seller of Registrable Securities covered by such registration statement at any time when a prospectus or Free Writing Prospectus (to the extent prepared by or on behalf of the Company) relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus or Free Writing Prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make

 

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the statements therein not misleading or incomplete in light of the circumstances then existing, and following such notification promptly prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in light of the circumstances then existing, and, at the request of any such Holder, the Company will, as soon as reasonably practicable, file and furnish to all such Holders a supplement or amendment to such prospectus or Free Writing Prospectus (to the extent prepared by or on behalf of the Company) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in light of the circumstances under which they were made;

 

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

 

(h)                                  Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed;

 

(i)                                      Otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission;

 

(j)                                     In connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 2.1 hereof, enter into an underwriting agreement in form reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains reasonable and customary provisions, and provided further , that each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement;

 

(k)                                  Use its reasonable best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 2, if such securities are being sold through underwriters, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters;

 

(l)                                      Take all reasonable actions to ensure that any prospectus or Free Writing Prospectus utilized in connection with any registration effected pursuant to this Section 2 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related registration statement, will not

 

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contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and

 

(m)                              Use all reasonable efforts to prevent the issuance of any stop order (“ Stop Order ”) suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in such registration statement for sale in any jurisdiction, and, in the event of such issuance, the Company shall immediately notify the Holders of Registrable Securities covered by such registration statement of the receipt by the Company of such notification and shall use all reasonable efforts promptly to obtain the withdrawal of such order, and, in the event of the withdrawal of such order, the Company shall immediately notify such Holders thereof.

 

2.6                                Indemnification .

 

(a)                                  To the extent permitted by law, the Company will indemnify and hold harmless each Holder, each of its officers, directors and partners, legal counsel, and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, or compliance has been effected pursuant to this Section 2, and each underwriter, if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any prospectus, offering circular, or other document (including any related registration statement, notification, or the like) incident to any such registration, qualification, or compliance; (ii) any 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 Company of the Securities Act, the Exchange Act, any state securities laws or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any offering covered by such registration, qualification, or compliance, and the Company will reimburse each such Holder, each of its officers, directors, partners, legal counsel, and accountants and each person controlling such Holder, each such underwriter, and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action as they are incurred; provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability, or action arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder, any of such Holder’s officers, directors, partners, legal counsel or accountants, any person controlling such Holder, such underwriter or any person who controls any such underwriter and stated to be specifically for use therein; and provided further that, the indemnity agreement contained in this Section 2.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

 

(b)                                  To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification, or

 

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compliance is being effected, indemnify and hold harmless the Company, each of its directors, officers, partners, legal counsel, and accountants and each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other such Holder, and each of their officers, directors, and partners, and each person controlling such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any such registration statement, prospectus, offering circular, or other document, or (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, directors, officers, partners, legal counsel, and accountants, persons, underwriters, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action as they are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided , however , that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld); and provided that in no event shall any indemnity under this Section 2.6 exceed the net proceeds from the offering received by such Holder.

 

(c)                                   Each party entitled to indemnification under this Section 2.6 (the “ Indemnified Party ”) shall give notice to the party required to provide indemnification (the “ Indemnifying Party ”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense; provided , further , 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 proceeding; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2.6, to the extent such failure is not prejudicial.  No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.  Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

 

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(d)                                  If the indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided , however , that no contribution by any Holder, when combined with any amounts paid by such Holder pursuant to Section 2.6(b), shall exceed the net proceeds from the offering received by such Holder.  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 alleged untrue statement of a material fact or the omission to state 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.

 

(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.

 

2.7                                Information by Holder .  Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Section 2.

 

2.8                                Restrictions on Transfer

 

(a)                                  The holder of each certificate representing Registrable Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 2.8.  Each Holder agrees not to make any sale, assignment, transfer, pledge or other disposition of all or any portion of the Restricted Securities, or any beneficial interest therein, unless and until (x) the transferee thereof has agreed in writing for the benefit of the Company to take and hold such Restricted Securities subject to, and to be bound by, the terms and conditions set forth in this Agreement, including, without limitation, this Section 2.8 and Section 2.10, and (y):

 

(i)                                      There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

 

(ii)                                   Such Holder shall have given prior written notice to the Company of such Holder’s intention to make such disposition and shall have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition, and, if requested by the Company, such Holder shall have furnished the Company, at such Holder’s expense, with (A) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such disposition will not require registration of such Restricted Securities under the

 

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Securities Act or (B) a “no action” letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company.  It is agreed that the Company will not require opinions of counsel or “no action” letters for transactions made pursuant to Rule 144, except in unusual circumstances.

 

(iii)                                Notwithstanding the provisions of subsections (a)(i) and (a)(ii) above, no such registration statement or opinion of counsel or “no action” letter shall be necessary for: (A) a transfer by a Holder to any of its affiliates (including an affiliated fund managed by the same manager or managing member or general partner or management company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company, each an “ Affiliated Fund ”); (B) a transfer by a Holder that is a partnership, limited liability company or corporation to a partner, limited partner, retired partner, member, retired member or stockholder of a Holder; (C) a transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her spouse; or (D) the transfer by a Holder exercising its co-sale rights under the Fourth Amended and Restated Right of First Refusal and Co-Sale Agreement by and among the Company and the Investors and Common Holders named therein of even date herewith, as amended from time to time, if in each transfer under clauses (A), (B) or (C) the prospective transferee agrees in all such instances in writing to be subject to the terms hereof to the same extent as if he or she were an original Holder hereunder.

 

(b)                                  Each certificate representing Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.  THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO (1) RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD OF UP TO 180

 

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DAYS IN THE EVENT OF A PUBLIC OFFERING, AS SET FORTH IN A FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT, AND (2) VOTING RESTRICTIONS AS SET FORTH IN A STOCKHOLDERS’ VOTING AGREEMENT AMONG THE COMPANY AND THE ORIGINAL HOLDERS OF THESE SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

The Holders consent to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer established in this Section 2.8.

 

(c)                                   The first legend referring to federal and state securities laws identified in Section 2.8(b) hereof stamped on a certificate evidencing the Restricted Securities and the stock transfer instructions and record notations with respect to such Restricted Securities shall be removed and the Company shall issue a certificate without such legend to the holder of such Restricted Securities if (i) such securities are registered under the Securities Act; or (ii) such holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that a public sale or transfer of such securities may be made without registration under the Securities Act; or (iii) such holder provides the Company with reasonable assurances, which may, at the option of the Company, include an opinion of counsel reasonably satisfactory to the Company, that such securities can be sold pursuant to Rule 144 under the Securities Act.

 

2.9                                Rule 144 Reporting .  With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

 

(a)                                  Make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the effective date of the first registration under the Securities Act filed by the Company for an offering of its securities to the general public;

 

(b)                                  File with the Commission 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 it has become subject to such reporting requirements; and

 

(c)                                   So long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

 

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2.10                         Market Stand-Off Agreement .  Each Preferred Holder hereby agrees that such Holder shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale of any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of the Company’s Initial Public Offering without the consent of the underwriter of such Initial Public Offering.  The obligations described in this Section 2.10 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future.  The Company may impose stop-transfer instructions and may stamp each such certificate with the second legend set forth in Section 2.8(b) hereof with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such one hundred eighty (180) day period.  Notwithstanding the foregoing, if (x) during the last seventeen (17) days of the one hundred eighty (180) day restricted period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (y) prior to the expiration of the one hundred eighty (180) day restricted period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the one hundred eighty (180) day period, the restrictions imposed by this Section 2.10 shall continue to apply until the expiration of the eighteen (18) day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.  Each Holder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 2.10.

 

2.11                         Delay of Registration .  No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.12                         Transfer or Assignment of Registration Rights .  The rights to cause the Company to register securities granted to a Holder by the Company under this Section 2 may be transferred or assigned by a Holder only to: (a) a transferee or assignee of not less than 100,000 shares of Registrable Securities (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits, and the like); (b) an affiliate of a Holder (including an Affiliated Fund) or a subsidiary, parent, partner, limited partner, retired partner, member, retired member or stockholder of a Holder; or (c) a Holder’s family member or trust for the benefit of an individual Holder or Holder’s family member; provided that (i) any such transfer or assignment of Registrable Securities is effected in accordance with the terms of Section 2.8 hereof, and applicable securities laws; (ii) the Company is given written notice prior to said transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are intended to be transferred or assigned; (iii) the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement, including without limitation the obligations set forth in Section 2.10; and (iv) any such transferee is not engaged in competition with the Company as reasonably determined by the Board of Directors.

 

2.13                         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 holding a

 

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majority of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder the right to include any of such securities in any registration filed under Section 2.1, Section 2.2, or Section 2.3 hereof, unless under the terms of such agreement (i) such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included, (ii) in the case of demand or required registration rights, any such rights may not be exercised prior to the demand rights of the Holders of Registrable Securities hereunder and (iii) any grant of demand or required registration rights shall provide that the Holders of Registrable Securities hereunder have incidental or “piggyback” registration rights with respect thereto in accordance with the provisions of Section 2.2 hereof.

 

2.14                         Termination of Registration Rights .  The right of any Holder to request registration or inclusion in any registration pursuant to Section 2.1, 2.2 or 2.3 shall terminate on the earlier of (i) such date, on or after the closing of the Company’s Initial Public Offering, on which (x) all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any ninety (90)-day period and (y) such Holder holds less than .5% of the Company’s Common Stock (on an as-converted basis) on a fully-diluted basis; and (ii) five (5) years after the closing of the Company’s Initial Public Offering.

 

Section 3
Covenants of the Company

 

The Company hereby covenants and agrees, as follows:

 

3.1                                Basic Financial Information .  The Company shall deliver to each holder of at least 10,000 shares (as adjusted for stock splits, stock dividends, reverse stock splits and the like) of Converted Common the following financial information:

 

(a)                                  as soon as practicable, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholder’s equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles (“ GAAP ”), and audited and certified by an independent public accounting firm of nationally recognized standing selected by the Company;

 

(b)                                  as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three quarters of each fiscal year of the Company, an unaudited profit or loss statement, a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment; and

 

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(c)                                   as soon as practicable, but in any event within thirty (30) days prior to the commencement of each new fiscal year of the Company, an annual budget and operating plan for such fiscal year.

 

3.2                                Inspection Rights The Company will afford to each Significant Holder reasonable access during normal business hours to all of the Company’s properties, books and records.  Significant Holders may exercise their rights under this Section 3.2 only for purposes reasonably related to their interests as a stockholder.  The rights granted pursuant to this Section 3.2 may not be assigned or otherwise conveyed by any Significant Holder or by any subsequent transferee of any such rights to any transferee reasonably deemed by the Company to be a competitor of the Company.

 

3.3                                Confidentiality . Anything in this Agreement to the contrary notwithstanding, no Holder by reason of this Agreement shall have access to any trade secrets or classified information of the Company.  The Company shall not be required to comply with any information rights or inspection rights of Section 3 in respect of any Holder whom the Company reasonably determines to be a competitor or an officer, employee, director or holder of more than ten percent (10%) of a competitor, nor shall the Company be obligated to disclose any information which the Board of Directors of the Company determines in good faith is attorney-client privileged and should not, therefore, be disclosed.  The Company shall not be obligated to disclose details of contracts with, or work performed for, specific customers and other business partners where to do so would violate confidentiality obligations to those parties.  Each Holder agrees that it will not use any information received by it pursuant to this Agreement in violation of the Exchange Act or reproduce, disclose or disseminate such information to any other person (other than its employees, agents or partners having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement, unless the Company has made such information available to the public generally.  Notwithstanding the foregoing, the Company recognizes that certain of the Holders or their affiliates are engaged in the business of providing venture capital financing and management advice to companies in which they invest (the “Venture Holders”), and that in their business the Venture Holders may seek to invest in and/or provide advice to companies that may be competitive to the Company.  Accordingly, the Company understands and agrees that nothing in this Agreement will restrict the Venture Holders from investing or participating in the management of any business or entity which competes or may compete, directly or indirectly, with the Company so long as such Venture Holder does not disclose any confidential information to such business or entity in violation hereof.  The Company further agrees that, provided a Venture Holder does not disclose confidential information to a third-party in violation hereof, such Venture Holder shall be free to use in its normal operations as a venture capital fund any information it has obtained or will obtain from the Company for such limited purpose.

 

3.4                                Stock Option Vesting .  Unless otherwise decided by the Board of Directors, all option grants to employees and consultants of the Company made after the date of this Agreement shall vest over a four year period with 25% of the shares subject to each option vesting a year after the vesting commencement date and the remainder of the shares vesting in equal amounts on a monthly, quarterly or annual basis thereafter.

 

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3.5                                Termination of Covenants .  The covenants set forth in this Section 3 shall terminate and be of no further force and effect after the closing of the Company’s Initial Public Offering or upon a Liquidation Event or Deemed Liquidation Event, as those terms are defined in the Amended and Restated Certificate of Incorporation of the Company (the “ Restated Certificate ”).

 

3.6                                Key Man Insurance .  The Company will maintain key-man life insurance with respect to the life of Gregory T. Went, Ph.D., having a death benefit of at least $5,000,000, payable to the Company.  The Company will maintain this key-man life insurance with respect to Gregory T. Went, Ph.D., for so long as he continues to be employed by the Company.

 

3.7                                Proprietary Information and Inventions Agreements .  The Company shall require all employees and consultants with access to confidential information to execute and deliver a proprietary information and inventions agreement in substantially the form delivered or made available to the Investors, or substantially the form of prior agreements containing substantially equivalent provisions in favor of the Company.

 

Section 4
Right of First Refusal

 

4.1                                Right of First Refusal to Preferred Holders .  The Company hereby grants to each holder of at least 60,000 shares (as adjusted for stock splits, stock dividends, reverse stock splits and the like) of Series AA Preferred Stock the right of first refusal to purchase its pro rata share of New Securities (as defined in Section 4.1(a)) which the Company may, from time to time, propose to sell and issue after the date of this Agreement.  A Significant Holder’s pro rata share, for purposes of this right of first refusal, is equal to the ratio of (A) the number of shares of Common Stock owned by such Significant Holder on the date hereof (assuming (I) full conversion of the Shares and exercise of all outstanding convertible securities, rights, options and warrants, directly or indirectly, into Common Stock held by said Holder and (II) the issuance of all shares of Series AA Preferred Stock and Common Stock to such Holder as provided for in the Purchase Agreement, whether at the Initial Closing or a Subsequent Closing (each as defined in the Purchase Agreement)) to (B) the total number of shares of Common Stock outstanding on the date hereof (assuming (1) full conversion of the Series AA Preferred Stock and exercise of all outstanding convertible securities, rights, options and warrants, directly or indirectly, into Common Stock, and (2) the issuance of all shares of Series AA Preferred Stock and Common Stock as provided for in the Purchase Agreement, whether at the Initial Closing or a Subsequent Closing). For purposes of this Section 4.1, a Significant Holder includes any general partner, managing member and affiliates (including Affiliated Funds) of a Significant Holder.  A Significant Holder who chooses to exercise the right of first refusal may designate as purchasers under such right itself and/or its partners or affiliates (including Affiliated Funds), in such proportions as it deems appropriate.

 

(a)                                  New Securities ” shall mean any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, exercisable or convertible into capital stock; provided that the term “ New Securities ” does not include:

 

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(i)                                      the Shares and the Series AA Preferred Conversion Stock;

 

(ii)                                   securities issued or issuable to employees, officers or directors, of, or consultants or advisors to the Corporation or any subsidiary pursuant to stock grants, option plans or similar arrangements which vest over a period of 4 years at a rate of 25% after the first year with 1/48 of the remainder vesting monthly, unless otherwise determined by a unanimous vote of the Board of Directors of the Company;

 

(iii)                                securities issued upon the conversion or exercise of any convertible or exercisable securities outstanding as of the date of this Agreement;

 

(iv)                               securities issued or issuable as a dividend or distribution on Preferred Stock of the Company or pursuant to any event for which adjustment is made pursuant to Sections 4(f), (g) or (h) of the Restated Certificate of Incorporation of the Company;

 

(v)                                  securities issued in a registered public offering under the Securities Act in connection with which all outstanding shares of Preferred Stock are converted into Common Stock;

 

(vi)                               securities issued or issuable pursuant to the bona fide acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization, which acquisition is approved by a unanimous vote of the Board of Directors of the Company;

 

(vii)                            securities issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing, equipment lease or bank credit arrangement entered into for primarily non-equity financing purposes and approved by a unanimous vote of the Board of Directors of the Company;

 

(viii)                         securities of the Company which the Board of Directors of the Company unanimously determines shall be excluded from the definition of New Securities and which are not offered to any existing stockholder of the Company;

 

(ix)                               any right, option or warrant to acquire any security convertible solely into the securities excluded from the definition of New Securities pursuant to subsections (i) through (vii) above;

 

(x)                                  securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by a unanimous vote of the Board of Directors of the Corporation;

 

(xi)                               securities issued to strategic suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by a unanimous vote of the Board of Directors of the Corporation; and

 

(xii)                            securities issued in connection with a Subsequent Closing (as defined in the Purchase Agreement).

 

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(b)                                  In the event the Company proposes to undertake an issuance of New Securities, it shall give each Significant Holder written notice of its intention, describing the type of New Securities, their price, the number of New Securities to be offered, and the general terms upon which the Company proposes to issue the same.  Each Significant Holder shall have twenty (20) calendar days after any such notice is mailed or delivered to agree to purchase (i) such Holder’s pro rata share of such New Securities (each, a “ Basic Amount ” and collectively, the “ Basic Amounts ”) and (ii) any additional portion of the New Securities as such Significant Holder shall indicate it will purchase should the other Significant Holders subscribe for less than their pro rata share of the New Securities (each, an “ Undersubscription Amount ” and collectively, the “ Undersubscription Amounts ”) for the price and upon the terms specified in the notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased.  If the Basic Amounts subscribed for by all Significant Holders are less than the Basic Amounts to which all Significant Holders are entitled, then each Significant Holder who has agreed to purchase an Undersubscription Amount shall be entitled to purchase, in addition to the Basic Amount subscribed for, the Undersubscription Amount it has subscribed for; provided, that should the Undersubscription Amounts subscribed for exceed the difference between the Basic Amounts to which all Significant Holders are entitled and the Basic Amounts subscribed for (the “ Available Undersubscription Amount ”), each Significant Holder who has subscribed for any Undersubscription Amount shall be entitled to purchase only that portion of the Available Undersubscription Amount as the Undersubscription Amount subscribed for by such Significant Holder bears to the total Undersubscription Amounts subscribed for by all Significant Holders, subject to rounding by the Board of Directors to the extent it reasonably deems necessary.

 

(c)                                   In the event the Significant Holders fail to exercise fully the right of first refusal within said twenty (20) day period (the “ Election Period ”), the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within ninety (90) days from the date of said agreement) to sell that portion of the New Securities with respect to which the Significant Holders’ right of first refusal option set forth in this Section 4.1 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company’s notice to Significant Holders delivered pursuant to Section 4.1(b).  In the event the Company has not sold within such ninety (90) day period following the Election Period, or such ninety (90) day period following the date of said agreement, the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the Significant Holders in the manner provided in this Section 4.1.

 

(d)                                  The right of first refusal granted under this Agreement shall expire upon, and shall not be applicable to, (i) the Company’s Initial Public Offering or (ii) on the first date upon which no Shares are outstanding with respect to the Significant Holders.

 

Section 5
Drag-Along Rights

 

5.1                                Drag-Along Rights .  If the holders of a majority of the outstanding shares of Series AA Preferred Stock and Common Stock (including the Converted Common), each voting as a separate class, approve (i) an acquisition of the Company by another entity by means of any

 

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transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation) that would result in the transfer of fifty percent (50%) or more of the outstanding voting power of the Company or in which the stockholders of the Company immediately prior to such transaction would own, as a result of such transaction, less than a majority of the voting securities, in the same relative proportions, of the successor or surviving corporation immediately thereafter or a sale of all or substantially all of Company’s assets, whether by means of a merger, consolidation, sale of stock or assets or otherwise (a “ Sale of the Company ”) or (ii) a proposed round of equity financing by the Company (the “ Equity Financing ”), then all Common Holders shall consent to and vote their shares of Common Stock in favor of the Equity Financing or the Sale of the Company, and if the Sale of the Company is structured as (a) a merger or consolidation of the Company, or a sale of all or substantially all of the Company’s assets, each Common Holder shall waive any dissenters’ rights, appraisal rights or similar rights in connection with such merger, consolidation or asset sale, or (b) a sale of the stock of the Company, the Common Holders shall agree to sell their shares of Common Stock on the terms and conditions approved by the holders of a majority of the outstanding shares of Preferred Stock and Common Stock, each voting as a separate class.  Each Common Holder hereby irrevocably constitutes and appoints the Company and any representative or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Common Holder and in the name of such Common Holder or in its own name, for the purpose of carrying out the terms of this Section 5, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Section 5.  Such Common Holder hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  The rights under this Section 5 shall expire upon the Company’s Initial Public Offering.

 

5.2                                Certain Future Common Holders .  The Company will require anyone who, after the date of this Agreement, is granted a stock option or other equity award and subsequently becomes the holder of shares of Common Stock equaling one percent (1%) or more of the Company’s then outstanding capital stock to, as a condition to such acquisition, execute a counterpart signature page hereto as a Common Holder, and such person shall thereby be bound by, and subject to, all the terms and provisions of this Agreement applicable to Common Holders; provided, however, that this Section 5.2 shall not apply to holders of Converted Common.

 

5.3                                Restrictions on Sales of Control of the Company .   No stockholder shall be a party to any Stock Sale (as defined below) unless all holders of Preferred Stock are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in the Certificate of Incorporation (as if such transaction were a Deemed Liquidation Event under the Certificate of Incorporation), unless the holders of at least a majority of the Preferred Stock elect otherwise by written notice given to the Company at least ten (10) days prior to the effective date of any such transaction or series of related transactions.  For the purposes hereof, “Stock Sale” means 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.

 

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Section 6
Miscellaneous

 

6.1                                Amendment .  Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and the Holders holding a majority of the Registrable Securities held by the Preferred Holders and the holders of Converted Common (excluding any of such shares that have been sold to the public or pursuant to Rule 144); provided , however , that (a) Holders purchasing shares of Series AA Preferred Stock in a Closing after the Initial Closing (each as defined in the Purchase Agreement) may become parties to this Agreement, by executing a counterpart of this Agreement without any amendment of this Agreement pursuant to this paragraph or any consent or approval of any other Holder and (b) this Agreement may be amended by the Company from time to time to add additional Common Holders to this Agreement under Section 5.2 without the consent of the other parties hereto; provided , further , however , (i) that Sections 4, 5 and 6 may not be amended without the consent of at least a majority of the holders of the Series AA Preferred Stock , and (ii) Sections 5 and 6 may not be amended, if such amendment would adversely affect the rights of the Common Holders, without the consent of the Common Holders holding at least a majority of the Common Stock; and provided , further , that if a waiver or amendment of any provision contained herein would adversely affect any holder of Registrable Securities in a manner that does not similarly adversely affect all other holders of Registrable Securities, the written consent of such holder shall be required.  Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each Holder and each future holder of all such securities of Holder.  Each Holder acknowledges that by the operation of this paragraph, the Holders of a majority of the Registrable Securities held by the Preferred Holders (excluding any of such shares that have been sold to the public or pursuant to Rule 144) will have the right and power to diminish or eliminate all rights of such Holder under this Agreement.

 

6.2                                [ Intentionally Omitted ]

 

6.3                                Notices .  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger addressed:

 

(a)                                  if to an Investor, at the Investor’s address, facsimile number or electronic mail address as shown in the Company’s records, as may be updated in accordance with the provisions hereof; if such Investor is aeris CAPITAL Equity Investments L.P. (“ Aeris ”), then a copy to Peter M. Rosenblum, Foley Hoag LLP, at 155 Seaport Boulevard, Boston, MA 02210;

 

(b)                                  if to any Holder, at such address, facsimile number or electronic mail address as shown in the Company’s records, or, until any such holder so furnishes an address, facsimile number or electronic mail address to the Company, then to and at the address of the last holder of such shares for which the Company has contact information in its records; or

 

(c)                                   if to the Company, one copy should be sent to Adamas Pharmaceuticals, Inc., 1900 Powell Street, Suite 1050, Emeryville, CA 94608, Attn: Chief Executive Officer, or at such other address as the Company shall have furnished to the Investors, with a copy to

 

23



 

Ivan A. Gaviria, Esq., Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, 1200 Seaport Boulevard, Redwood City, CA 94063.

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address set forth in the Company’s records.

 

6.4                                Governing Law .  This Agreement shall be governed in all respects by the internal laws of the State of Delaware, without regard to principles of conflicts of law.

 

6.5                                Successors and Assigns .  This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Investor without the prior written consent of the Company; provided , however , that notwithstanding the foregoing or any other provision of this Agreement, Mohr, Davidow Ventures (“ MDV ”) and any MDV affiliate shall be permitted to transfer all or any portion of the Shares (and any and all accompanying rights, duties and obligations) it owns to MDV or any affiliate of MDV or any entity or vehicle including a partnership in which MDV and/or its affiliate has a majority economic interest and which is managed by MDV or any of its affiliates; and provided , however , that notwithstanding the foregoing or any other provision of this Agreement, DAG Ventures (“ DAG ”) and any DAG affiliate shall be permitted to transfer all or any portion of the Shares (and any and all accompanying rights, duties and obligations) it owns to DAG or any affiliate of DAG or any entity or vehicle including a partnership in which DAG and/or its affiliate has a majority economic interest and which is managed by DAG or any of its affiliates; and provided , further , that notwithstanding the foregoing or any other provision of this Agreement, BioMedical Sciences Investment Fund Pte Ltd. (“ BMSIF ”) and any BMSIF affiliate shall be permitted to transfer all or any portion of the Shares (and any and all accompanying rights, duties and obligations) it owns to any affiliate of BMSIF or any entity or vehicle including a partnership in which BMSIF and/or its affiliate has a majority economic interest and which is managed by BMSIF or any of its affiliates; and provided , further , that notwithstanding the foregoing or any other provision of this Agreement, that Aeris and any Aeris affiliate shall be permitted to transfer all or any portion of the Shares (and any and all accompanying rights, duties and obligations) it owns to Aeris or any affiliate of Aeris or any entity or vehicle including a partnership in which Aeris and/or its affiliate has a majority economic interest and which is managed by Aeris or any of its affiliates.  Any attempt by an Investor without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void.  Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

 

6.6                                Entire Agreement .  This Agreement and the exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and supersedes all prior written or oral agreements and understandings relating to such subject matter.  No party hereto shall be liable or bound to any other party in any manner with regard to

 

24



 

the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein.

 

6.7                                Delays or Omissions .  Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in 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.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.

 

6.8                                Severability .  If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision.  The balance of this Agreement shall be enforceable in accordance with its terms.

 

6.9                                Titles and Subtitles .  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.  All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

 

6.10                         Counterparts .  This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument.

 

6.11                         Telecopy Execution and Delivery .  A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen.  Such execution and delivery shall be considered valid, binding and effective for all purposes.  At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

 

6.12                         Further Assurances .  Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

 

25



 

6.13                         Aggregation of Stock .  All shares of Common Stock and Preferred Stock held or acquired by affiliated entities or persons or entities under common investment management or control shall be aggregated together for the purpose of determining the availability of any rights or obligations under this Agreement.

 

6.14                         Termination of Prior Agreement .  Upon the effectiveness of this Agreement, the Prior Agreement shall terminate and be of no further force and effect, and shall be superseded and replaced in its entirety by this Agreement.

 

6.15                         Waiver of Pro Rata .  The undersigned, which holders together (i) hold at least a majority of the Registrable Securities that are currently held by Holders and (ii) hold at least a majority of the Company’s Preferred Stock and the Converted Common, on behalf of themselves and all Holders, hereby unconditionally waive all rights to notice and of first offer as set forth in Section 4.1 of the Prior Agreement with respect to the issuance and sale of the Series AA Preferred Stock (and the Common Stock issuable upon conversion hereof) pursuant to the Purchase Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

26



 

IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amended and Restated Investors’ Rights Agreement effective as of the day and year first above written.

 

 

 

ADAMAS PHARMACEUTICALS, INC.

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Gregory T. Went

 

 

Gregory T. Went, Chief Executive Officer

 


 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

DAG Ventures III-QP, L.P.

 

By: DAG Ventures Management III, LLC, its General Partner

 

 

 

 

 

by:

/s/ Greg Williams

 

 

Greg Williams, Managing Director

 

 

 

 

 

DAG Ventures III, L.P.

 

By: DAG Ventures Management III, LLC, its General Partner

 

 

 

 

 

by:

/s/ Greg Williams

 

 

Greg Williams, Managing Director

 

 

 

 

 

DAG Ventures GP Fund III, LLC

 

By: DAG Ventures Management III, LLC, its Managing Member

 

 

 

 

 

by:

/s/ Greg Williams

 

 

Greg Williams, Managing Director

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

MDV VII, L.P.

 

as nominee for

 

MDV VII, L.P.,

 

MDV VII Leaders’ Fund, L.P.,

 

MDV ENF VII(A), L.P. and

 

MDV ENF VII(B), L.P.

 

 

 

 

 

By:

Seventh MDV Partners, L.L.C.,

 

 

General Partner

 

 

 

 

 

By:

/s/PB Cleveland

 

 

Member

 

 

 

 

Address:        

Mohr, Davidow Ventures

 

3000 Sand Hill Road

 

Bldg. 3, Suite 290

 

Menlo Park, CA 94025

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

MDV IX, L.P.

 

as nominee for

 

MDV IX, L.P.,

 

and MDV ENF IX, L.P.

 

 

 

 

 

By: Ninth MDV Partners, L.L.C., General Partner

 

 

 

 

 

By:

/s/ PB Cleveland

 

 

Member

 

 

 

 

Address:       

Mohr, Davidow Ventures

 

3000 Sand Hill Road

 

Bldg. 3, Suite 290

 

Menlo Park, CA 94025

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

BLACKBOARD VENTURES INC.

 

 

 

 

 

By:

/s/ Imtiaz Khan

 

 

 

 

Name:

Imtiaz Khan

 

 

 

 

Title:

Authorized Signatory

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

DAVID MAHONEY

 

 

 

 

 

/s/ David Mahoney

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

aeris CAPITAL Equity Investments, L.P.

 

 

 

 

 

By:

/s/ Gregory Link

 

 

 

 

Print Name:

Gregory Link

 

 

 

 

Its:

Director

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

NCD Investors, a Delaware Multiple Series LLC

 

 

 

 

 

By:

/s/ Brent Jones

 

 

 

 

Print Name:

Brent Jones

 

 

 

 

Its:

Managing Director

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

GRANITE POINT CAPITAL, L.P.

 

 

 

By:

/s/ Warren Lammert

 

 

 

 

Print Name:

Warrant Lammert

 

 

 

 

Its:

Managing Member

 

 

 

 

 

GRANITE POINT CAPITAL OFFSHORE FUND, LTD

 

 

 

By:

/s/ Warren Lammert

 

 

 

 

Print Name:

Warrant Lammert

 

 

 

 

Its:

Managing Member

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

Gregory T. Went

 

 

 

 

 

/s/ Gregory T. Went

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

By:

/s/ Patricia C. Went

 

 

 

 

Name:

Patricia C. Went

 

 

 

 

Title:

 

 


 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

By:

/s/ M. Curtis Young   /s/ Jane L. Young

 

 

 

 

Name:

M. Curtis Young   Jane L. Young

 

 

 

 

Title:

 

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

COMMON HOLDER:

 

 

 

 

 

GREGORY WENT

 

 

 

 

 

/s/ Gregory Went

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

COMMON HOLDER:

 

 

 

 

 

MICHAEL S. URDEA

 

 

 

 

 

/s/ Michael S. Urdea

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

COMMON HOLDER:

 

 

 

 

 

IVAN LIEBERBURG

 

 

 

 

 

/s/ Ivan Lieberburg

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

WS INVESTMENT COMPANY, LLC
(2011A)

 

 

 

By:  

/s/ WS Investment Company, LLC (2011A)

 

 

 

Name:

 

 

 

 

Title:

 

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

By: 

/s/ A. V. Katdare

 

 

 

 

Name: 

A. V. Katdare

 

 

 

 

Title:

 

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

FIELDS FAMILY REVOCABLE TRUST

 

 

 

 

 

By: 

/s/ Robert Fields

 

 

 

 

Name: 

Robert Fields

 

 

 

 

Title:

Trustee

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

NANCY M. GIRAGOSIAN

 

 

 

 

 

 

By: 

/s/ Nancy M. Giragosian

 

 

 

 

Name:

Nancy M. Giragosian

 

 

 

 

Title:

 

 



 

ADAMAS PHARMACEUTICALS, INC.

 

COUNTERPART SIGNATURE PAGE

 

TO FOURTH AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

By execution and delivery of this signature page, the undersigned hereby agrees to become a party to that certain Fourth Amended and Restated Investors’ Rights Agreement (the “ Rights Agreement ”) by and among Adamas Pharmaceuticals, Inc., a Delaware corporation, the Investors (as defined in the Rights Agreement) and the Common Holders (as defined in the Rights Agreement) dated as of June 30, 2011 and is entitled to all of the benefits under and subject to all of the obligations, restrictions and limitations set forth in the Rights Agreement that are applicable to the Investors and/or the Common Holders, as the case may be.  This Counterpart Signature Page shall take effect and shall become a part of said Rights Agreement immediately upon execution.

 

 

INVESTOR:

 

 

 

 

 

BURTON W. WENT

 

 

 

 

 

By: 

/s/ Burton W. Went

 

 

 

 

Name: 

Burton W. Went

 

 

 

 

Title:

 

 



 

EXHIBIT A

 

INVESTORS

 

aeris CAPITAL Equity Investments, Inc.

 

DAG Ventures III-QP, L.P.

 

DAG Ventures III, L.P.

 

DAG Ventures GP Fund III, LLC

 

MDV VII, L.P., as nominee for MDV IX, L.P., and MDV ENF IX, L.P.

 

Blackboard Ventures Inc.

 

Granite Point Capital, L.P.

 

Granite Point Capital Master Fund, L.P. (and/or its affiliates)

 

NCD Investors, a Delaware Multiple Series LLC

 

WS Investment Company, LLC

 

Patricia C. Went

 

M. Curtis Young

 

David Mahoney

 

The Ashok V. Katdare, Declaration of Trust dated 9/21/05

 

Gregory T. Went

 

Fields Family Revocable Trust

 

Nancy M. Giragosian

 

Burton W. Went

 



 

EXHIBIT B

 

COMMON HOLDERS

 

Gregory Went

 

Michael S. Urdea

 

Ivan Lieberburg

 




Exhibit 10.6

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

LICENSE AGREEMENT

 

BY AND BETWEEN

 

FOREST LABORATORIES HOLDINGS LIMITED

 

AND

 

ADAMAS PHARMACEUTICALS, INC.

 

DATED AS OF NOVEMBER 13, 2012

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS

1

 

 

 

ARTICLE II

GRANTS OF RIGHTS

15

 

 

 

2.1

Grants of Rights

15

2.2

Rights Retained by the Parties

17

2.3

Section 365(n) of the Bankruptcy Code

17

2.4

Exclusivity; [*]

18

2.5

Ownership of Regulatory Filings; Transfer of Regulatory Filings

18

2.6

Assignment of Contracts

18

 

 

 

ARTICLE III

MANUFACTURING AND TECH TRANSFER

19

 

 

 

3.1

Transfer of Adamas Know-How

19

3.2

Supply of Donepezil [*]

21

3.3

Coordination of Certain Supply

21

3.4

Regulatory Inspection

21

 

 

 

ARTICLE IV

DEVELOPMENT

22

 

 

 

4.1

General

22

4.2

Development of the Memantine-Donepezil FDC Product

22

4.3

Development of Other Products

26

4.4

Avoiding Conflicting Development Activities

26

 

 

 

ARTICLE V

COMMERCIALIZATION

28

 

 

 

5.1

General

28

5.2

Commercialization Updates

28

5.3

Conduct of Commercialization

28

5.4

Promotion of the FDC Products

29

 

 

 

ARTICLE VI

FINANCIAL PROVISIONS

29

 

 

 

6.1

Initial License Payments

29

6.2

Development and Commercialization Costs

29

6.3

Event Milestone Payments

29

6.4

Product Royalties and Other Payments

30

6.5

Reports; Payments

35

6.6

Books and Records; Audit Rights

35

6.7

Tax Matters

36

6.8

Payment Method and Currency Conversion

37

6.9

Late Payments

37

6.10

Other Amounts Due

38

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE VII

INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS

38

 

 

 

7.1

Joint IP Working Group

38

7.2

Joint Know-How and Patents

38

7.3

Prosecution and Maintenance of Patent Rights

39

7.4

Third Party Infringement of Adamas Patent Rights

43

7.5

Enforcement of Joint Intellectual Property

45

7.6

Patent Invalidity Claim

45

7.7

Claimed Infringement

46

7.8

Patent Term Extensions

47

7.9

Patent Marking

47

7.10

Interpretation of Patent Judgments

47

7.11

Certification under Drug Price Competition and Patent Restoration Act

48

7.12

Adamas Product Trademark Rights

49

7.13

Privileged Communications

50

 

 

 

ARTICLE VIII

CONFIDENTIAL INFORMATION

51

 

 

 

8.1

Treatment of Confidential Information

51

8.2

Confidential Information

51

8.3

Registration, Filing and Disclosure of the Agreement

52

8.4

Publications

52

8.5

Press Releases and Other Disclosures

53

8.6

Product Information

54

 

 

 

ARTICLE IX

REPRESENTATIONS, WARRANTIES AND COVENANTS

54

 

 

 

9.1

Adamas’ Representations

54

9.2

Forest’s Representations

58

9.3

Adamas Covenants

59

9.4

Forest Covenants

59

9.5

Mutual Covenants

60

9.6

No Warranty

60

 

 

 

ARTICLE X

INDEMNIFICATION

60

 

 

 

10.1

Indemnification in Favor of Adamas

60

10.2

Indemnification in Favor of Forest

61

10.3

General Indemnification Procedures

62

10.4

Insurance

63

10.5

No Consequential or Punitive Damages

63

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

ii



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE XI

TERM AND TERMINATION

64

 

 

 

11.1

Term

64

11.2

Termination Rights for FDC Products

64

11.3

Damages In Lieu of Termination for Cause

65

11.4

Termination for Cause

65

11.5

Termination for Insolvency

66

11.6

Effect of Termination; Accrued Rights and Obligations

66

11.7

Survival

67

 

 

 

ARTICLE XII

MISCELLANEOUS

67

 

 

 

12.1

Governing Law; Jurisdiction

67

12.2

Dispute Resolution; Arbitration

67

12.3

Waiver

69

12.4

Notices

69

12.5

Entire Agreement

70

12.6

Severability

70

12.7

Assignment

70

12.8

Counterparts; Exchange by Facsimile

71

12.9

Force Majeure

71

12.10

Third-Party Beneficiaries

72

12.11

Relationship of the Parties

72

12.12

Performance by Affiliates

72

12.13

Further Assurance

72

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

iii



 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT is entered into this 13 th  day of November, 2012 (the “ Effective Date ”), by and between Forest Laboratories Holdings Limited, a corporation organized under the laws of the Republic of Ireland, having a business address at Cumberland House, 9th Floor, 1 Victoria Street, Hamilton HM11, Bermuda (“ Forest ”), an indirect, wholly owned subsidiary of Forest Laboratories, Inc. (“ Forest Parent ”), and Adamas Pharmaceuticals, Inc., a corporation organized under the laws of the State of Delaware, having a business address at 2200 Powell Street, Suite 220, Emeryville, California 94608  (“ Adamas ”).

 

WHEREAS, Adamas has developed rights to Adamas Know-How (as hereinafter defined) and Adamas Patent Rights (as hereinafter defined); and

 

WHEREAS, Forest desires to obtain a license under the Adamas Patent Rights, Adamas Product Trademark Rights and the Adamas Know-How to Develop, Manufacture and Commercialize Products (as hereinafter defined), under the terms and conditions set forth herein, and Adamas desires to grant such a license.

 

NOW, THEREFORE, the Parties agree as follows:

 

ARTICLE I
DEFINITIONS

 

The following terms, whether used in the singular or plural, shall have the following meanings:

 

1.1          “ Act ”.  Act means both the US Federal Food, Drug, and Cosmetic Act, as amended from time to time, and the regulations promulgated under the foregoing.

 

1.2          “ Adamas Donepezil Formulation ”.  Adamas Donepezil Formulation means: (a) that certain [*] formulation of Donepezil existing as of the Effective Date that is proprietary to Adamas, as transferred by Adamas to Forest after the Effective Date pursuant to Section 3.1(c), and (b) any Adamas Donepezil Formulation Modifications.

 

1.3          “ Adamas Donepezil Formulation Modification ”.  Adamas Donepezil Formulation Modification has the meaning set forth in Section 4.1.

 

1.4          “ Adamas Ex-US Patent Rights ”.  Adamas Ex-US Patent Rights means all Patent Rights outside the Territory Controlled by Adamas or its Affiliates as of the Effective Date or at any time during the Term that are necessary or useful for the Development or Manufacture of any Product(s).

 

1.5          “ Adamas Intellectual Property ”.  Adamas Intellectual Property means the Adamas Know-How and the Adamas Patent Rights.

 

1.6          “ Adamas Know-How ”.  Adamas Know-How means subject to Section 2.1(d), all Know-How (a) Controlled by Adamas or its Affiliates as of the Effective Date; or (b) Controlled by Adamas or its Affiliates at any time after the Effective Date during the Term that (in the case

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 



 

of (b)) is developed, created, conceived or first reduced to practice by or on behalf of Adamas or its Affiliates in connection with the Development, Manufacture or Commercialization of the Product(s); in each case of (a) and (b) above, to the extent necessary for the Development, Manufacture or Commercialization of any Product(s).  Without limiting the foregoing, all Know-How listed on Schedule 1.6 are included within Adamas Know-How.  For clarity, the Adamas Know-How excludes the [*].  Any and all Adamas Donepezil Formulations are included as part of the Adamas Know-How, whether or not satisfying the other requirements of this definition.

 

1.7          “ Adamas Memantine Patent Rights ”.  Adamas Memantine Patent Rights means those Adamas Patent Rights in the Territory that [*] and [*].  The Adamas Memantine Patent Rights as of the Effective Date are listed on Schedule 1.7 .

 

1.8          “ Adamas Patent Rights ”.  Adamas Patent Rights means subject to Section 2.1(d), all Patent Rights in the Territory that (a) are Controlled by Adamas or its Affiliates as of the Effective Date or at any time during the Term and (b) are necessary or useful for the Development, Manufacture or Commercialization of any Product(s).  For clarity, the Parties acknowledge that Adamas owns certain Patent Rights as of the Effective Date that are [*], but [*] (“ Related Adamas Patent Rights ”); consequently, the Parties agree that such Related Adamas Patent Rights are [*] and that [*] (except as expressly set forth in Section [*] or as otherwise expressly provided herein), under this Agreement with respect to such Related Adamas Patent Rights, as long as [*].  The Adamas Patent Rights shall [*] and to the extent [*] and [*].  For clarity, the Adamas Patent Rights exclude the [*].

 

1.9          “ Adamas Product Trademark Rights ”.  Adamas Product Trademark Rights means: (a) the Trademark Rights with respect to the ARIMENDA™ trade mark that are Controlled by Adamas or its Affiliates; and (b) the domain names Controlled by Adamas incorporating the ARIMENDA™ trade mark as their URL address or any part of such address for domains (other than country-specific domains outside the Territory), in each case, as listed on Schedule 1.9 .

 

1.10        “ Affiliate ”.  Affiliate means any Person directly or indirectly controlled by, controlling or under common control with, a Party, but only for so long as such control shall continue.  For purposes of this definition, “control” (including, with correlative meanings, “controlled by”, “controlling” and “under common control with”) means, with respect to a Person, possession, direct or indirect, of (a) the power to direct or cause direction of the management and policies of such Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), or (b) at least 50% of the voting securities or other comparable equity interests.  For clarity, neither of the Parties shall be deemed to be an “Affiliate” of the other.

 

1.11        “ Authorized Generics ”.  Authorized Generics means, with respect to a particular Product being sold in a particular country, a pharmaceutical product that (a) is the same formulation and [*] the applicable Product, (b) is Commercialized by Forest, its Affiliate or a Third Party that has been granted a right to sell such pharmaceutical product by Forest or its Affiliates or Sublicensees under an NDA for such Product for which Forest, its Affiliate or Sublicensee is the applicant, (c) is [*] such Product (as sold by Forest and its Affiliates [*]), and (d) [*] for such Product (other than [*]).

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

2



 

1.12        “ Bankruptcy Code ”.  Bankruptcy Code means Title 11 of the US Code, as amended from time to time.

 

1.13        “ Business Day ”.  Business Day means a day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York or Dublin, Ireland are authorized by Law to remain closed.

 

1.14        “ Calendar Quarter ”.  Calendar Quarter means each of the periods ending on March 31, June 30, September 30 and December 31 of any Calendar Year.

 

1.15        “ Calendar Year ”.  Calendar Year means each calendar year during the Term.

 

1.16        “ Change of Control ”.  Change of Control means, with respect to a Party or other Person:

 

(a)           the bona fide acquisition by any Person or group (within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) of beneficial ownership of any capital stock of such Party (or any direct or indirect parent thereof), if after such acquisition, such Person or group would be the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of such Party or any direct or indirect parent of such Party representing more than fifty percent (50%) of the combined voting power of such Party’s then-outstanding securities entitled to vote generally in the election of directors;

 

(b)           the consummation after approval by a Party’s (or any direct or indirect parent’s thereof) stockholders of a bona fide merger or consolidation of such Party (or any direct or indirect parent thereof), with any other Person, other than a merger or consolidation which would result in such Party’s (or any direct or indirect parent’s thereof) voting securities outstanding immediately prior to such consummation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of such Party’s (or any direct or indirect parent’s thereof) voting securities or such surviving entity’s voting securities outstanding immediately after such merger or consolidation; or

 

(c)           the bona fide sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by a Party (or any direct or indirect parent thereof) of all or substantially all the assets of such Party.

 

1.17        “ Cholinesterase Inhibitor ”.  Cholinesterase Inhibitor means a drug or compound that has as a mode of pharmacological activity the inhibition of any cholinesterase enzyme from breaking down acetylcholine (which such mode of pharmacological activity is not incidental to its primary mode of pharmacological activity).

 

1.18        “ Commercialization ” or “ Commercialize ”.  Commercialization or Commercialize means activities directed to obtaining pricing and reimbursement approvals, marketing, promoting, Manufacturing commercial supplies of, distributing, importing, offering for sale or selling a product.  For clarity, Commercialization includes conducting Phase IV Clinical Trials.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

3



 

1.19        “ Commercially Reasonable Efforts ”.  Commercially Reasonable Efforts means, with respect to an objective, the reasonable, diligent, good faith efforts of a Party (including the efforts of its Affiliates and, in the case of Forest, its Sublicensees) of the type to accomplish such objective that [*] would normally use to accomplish a similar objective, and, specifically with respect to obligations hereunder relating to a Product, the carrying out of such obligations with those efforts and resources that [*] would use in Developing or Commercializing its own pharmaceutical products that are of similar market potential as the Product, in each case taking into account product labeling or anticipated labeling, present and future market potential, past performance of the Product, financial return, medical and clinical considerations, the extent of legal exclusivity relating to such Product, present and future regulatory environment and competitive market conditions, all as measured by the facts and circumstances at the time such efforts are due.

 

1.20        “ Control ” or “ Controlled ”.  Control or Controlled means, with respect to any tangible property or intellectual property right or other intangible property, the possession (whether by ownership or license (other than pursuant to this Agreement)) by, (a) in the case of Adamas, Adamas or any of its Affiliates or (b) in the case of Forest, Forest or any of its Affiliates, as applicable, in each case ((a) and (b)) of the ability to grant to the other Party access to such tangible property or access to or a license or sublicense to such intellectual property right or other intangible property, as provided herein without violating the terms of any agreement with any Third Party; provided , however , that any subject matter, tangible property or intellectual property right or other intangible property shall not be considered Controlled by a Party or any of its Affiliates if it was Controlled by a Third Party acquirer of such Party (or an Affiliate of such a Third Party (excluding such Party or its Affiliates as of the Effective Date)) (collectively, the “ Acquirer ”) immediately prior to the date of the closing or consummation of such Change of Control of such Party, nor shall any improvement thereto or other subject matter that was developed by the Acquirer after such Change of Control, in each case, without use of any Confidential Information comprising Know-How of the Party that is subject to the Change of Control (or of an entity that was an Affiliate thereof prior to the Change of Control) or the Confidential Information comprising Know-How of the other Party, in each case, unless such use is [*].  In addition, if rights to a Party’s Know-How were granted to the Acquirer [*] (“[*]”), then the use of such Party’s Know-How in accordance with such grant (and consistent with the exclusive licenses granted under this Agreement) shall not be deemed [*] for purposes of the foregoing; provided that such [*] were granted [*] that would permit exercise of the licenses [*] and were not granted [*] or [*] from the provisions of this Section 1.20.

 

1.21        “ Cover ”, “ Covering ” or “ Covered ”.  Cover, Covering or Covered means, with respect to a compound, product, technology, process or method that, in the absence of ownership of or a license granted under a Valid Claim or Patent Right, as the case may be, the manufacture, use, offer for sale, sale or importation of such compound or product or the practice of such technology, process or method would infringe such Valid Claim or Patent Right (or, in the case of a claim in a Patent Right that has not yet issued, would infringe such claim if it were to issue without modification).

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

4



 

1.22        “ CREATE Act ”.  CREATE Act means the Cooperative Research and Technology Enhancement Act of 2004, as codified in 35 U.S.C. §§ 103(c)(2)-(c)(3) or, after March 16, 2013, 35 U.S.C. § 102(c) as set forth in the Leahy-Smith America Invents Act of 2011.

 

1.23        “ Detail ”.  Detail means that part of [*] sales call during which a sales representative of Forest or any of its Affiliates or Sublicensees makes a presentation of the FDC Franchise to a physician or other medical professional with prescribing authority (including a nurse practitioner or physician assistant with prescribing authority) provided, that the [*].  A “ Primary Detail ” means a Detail during a sales call in which the FDC Franchise is presented first and a “ Secondary Detail ” means a Detail during a sales call in which the FDC Franchise is presented second.

 

1.24        “ Development ” or “ Develop ”.  Development or Develop means pre-clinical and clinical drug development activities with respect to Memantine or any Product, including IND-enabling toxicology and other IND-enabling pre-clinical development efforts, stability testing, process development, compound property optimization, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, clinical pharmacology, Manufacturing supplies of compounds and products for pre-clinical and clinical use, clinical studies (including pre- and post-approval studies and investigator sponsored clinical studies, but excluding Phase IV Clinical Trials), regulatory affairs, and Regulatory Approval and clinical study regulatory activities (excluding regulatory activities directed to obtaining pricing and reimbursement approvals).

 

1.25        “ Development Plan ”.  Development Plan means the plan for the Development of the Memantine-Donepezil FDC Products in the Field as agreed to by the Parties in writing as of the Effective Date (the “ Initial Development Plan ”), as it may be modified from time to time in accordance with this Agreement.  The Initial Development Plan is hereby incorporated into this Agreement by reference.

 

1.26        “ DM104 ”.  DM104 means that certain clinical study of Memantine-Donepezil FDC Product designated as such in the Development Plan, as may be modified from time to time in accordance with this Agreement, a synopsis of which is set forth in the Development Plan.

 

1.27        “ DM105 ”.  DM105 means that certain clinical study of Memantine-Donepezil FDC Product designated as such in the Development Plan, as may be modified from time to time in accordance with this Agreement, a synopsis of which is set forth in the Development Plan.

 

1.28        “ DM303 ”.  DM303 means that certain clinical study of Memantine-Donepezil FDC Product designated as such in the Development Plan, as may be modified from time to time in accordance with this Agreement, a synopsis of which is set forth in the Development Plan.

 

1.29        “ DM304 ”.  DM304 means that certain clinical study of Memantine-Donepezil FDC Product designated as such in the Development Plan, as may be modified from time to time in accordance with this Agreement, a synopsis of which is set forth in the Development Plan.

 

1.30        “ DOJ ”.  DOJ means the US Department of Justice.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

5



 

1.31        “ Donepezil ”.  Donepezil means that certain compound known as donepezil with a chemical structure specified in Schedule 1.31 and each prodrug, solvate, hydrate, ester, salt, stereoisomer, racemate, tautomer, polymorph and metabolite thereof.

 

1.32        “ Donepezil [*] ”.  Donepezil [*] means [*] Donepezil in the Adamas Donepezil Formulation existing as of the Effective Date.

 

1.33        “ End of Phase II Meeting ”.  End of Phase II Meeting means that certain end of phase II meeting between Adamas and the FDA with respect to Adamas’ IND for the Memantine-Donepezil FDC Product[*].

 

1.34        “ End of Phase II Meeting Minutes ”.  End of Phase II Meeting Minutes means the official written minutes of the End of Phase II Meeting as provided to Adamas by the FDA [*].

 

1.35        “ ER Product ”.  ER Product means a Product containing an extended release formulation of Memantine as its sole active ingredient.  For clarity, Namenda shall not constitute an ER Product, but Namenda XR shall constitute an ER Product.

 

1.36        “ FDA ”.  FDA means the US Food and Drug Administration and any successor agency.

 

1.37        “ FDC Franchise ”.  FDC Franchise means (a) an FDC Product or (b) an FDC Product and Namenda XR.

 

1.38        “ FDC Product ”.  FDC Product means a fixed dose combination product that contains both Memantine and a Cholinesterase Inhibitor as its sole active ingredients.

 

1.39        “ Field ”.  Field means the prevention, treatment, control, mitigation or palliation of diseases or conditions in humans.

 

1.40        “ First Commercial Launch ”.  First Commercial Launch means: (a) with respect to Forest, with respect to a Product in the Territory, the first shipment of such Product in commercial quantities for commercial sale by Forest, its Affiliates or its Sublicensees to a Third Party after approval of the NDA therefor by the FDA and (b) with respect to Adamas, with respect to a Product in a particular country or region, the first shipment of such Product in commercial quantities for commercial sale by Adamas, its Affiliates or its (sub)licensees to a Third Party after receipt of Regulatory Approval therefor by the applicable Regulatory Authority in such country or region.

 

1.41        “ Forest Intellectual Property ”.  Forest Intellectual Property means the Forest Patent Rights and Forest Know-How.

 

1.42        “ Forest Know-How ”.  Forest Know-How means: all Know-How Controlled by Forest or its Affiliates at any time after the Effective Date during the Term that (a) is [*] or [*] and [*] or (b) constitutes [*].  For clarity, the Forest Know-How shall include all Program Data, [*] and [*].

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

6


 

1.43        “ Forest Patent Rights ”.  Forest Patent Rights means: (a) all Patent Rights that are Controlled by Forest or its Affiliates at any time after the Effective Date during the Term and that Cover the Forest Know-How and (b) [*].  For clarity, Forest Patent Rights shall [*] to the extent [*].

 

1.44        “ FTE ”.  FTE means the equivalent of the work of one (1) employee full time for one (1) Calendar Year (consisting of at least a total of [*] hours per Calendar Year) of work performed by Adamas directly related to the activities for which reimbursement by Forest is sought hereunder, or a portion thereof on a proportional basis.

 

1.45        “ FTE Cost ”.  FTE Cost means, for any period, the product of (a) the actual total FTEs (or applicable portion thereof) during such period, and (b) the applicable FTE Rate.

 

1.46        “ FTE Rate ”.  FTE Rate means, with respect to any Adamas employee, [*] for an FTE during the period during which such FTE was performed, [*] an employee to perform an activity pursuant to this Agreement for which Adamas will seek reimbursement from Forest at the FTE Cost.

 

1.47        “ Generic Competition .”  Generic Competition, with respect to a Product in a particular country, shall exist, on a Calendar Quarter-by-Calendar Quarter basis, after Generic Launch of one or more Generic Versions of such Product in such country, in any particular Calendar Quarter in which: (a) with respect to Generic Versions approved for sale [*] (or [*] approved outside the Territory), the [*] Generic Version(s) of such Product [*] in such country is [*] such Product and such Generic Version(s) [*]; or (b) with respect to Generic Versions approved for sale [*] (or [*] approved outside the Territory), (i) the [*] Generic Version(s) of such Product [*] in such country is [*] such Product and such Generic Version(s) [*], and (ii) the [*] such Product in such country during such Calendar Quarter sold by Forest, its Affiliates or Sublicensees or Adamas, its Affiliates or (sub)licensees, as applicable, [*] such Product [*] for such Product in such country.

 

1.48        “ Generic Launch ”.  Generic Launch means, with respect to a Product, the first commercial sale of a Generic Version of such Product, which sale is not authorized directly (as an Authorized Generic or foreign equivalent thereof) or indirectly (through a chain of distribution) by: (a) with respect to a Product in the Territory, Forest or any of its Affiliates or Sublicensees; or (b) with respect to a Product outside the Territory, Adamas or any of its Affiliates or (sub)licensees.

 

1.49        “ Generic Version ”.  Generic Version of a Product in a particular country means any Product, other than a Product sold by or under authority of, directly (as an Authorized Generic or foreign equivalent thereof) or indirectly (through a chain of distribution), Forest or its Affiliates or Sublicensees with respect to a Product in the Territory, or by Adamas or its Affiliates or (sub)licensees with respect to a Product outside the Territory, that: (a) with respect to a Generic Version approved for sale [*] (or [*] approved outside the Territory), (i) is approved for sale in such country in reliance on the prior approval of such Product as determined by the applicable Regulatory Authority, or (ii) is [*] under applicable Laws in such country [*], or (b) with respect to a Generic Version approved for sale [*] (or [*] approved outside the Territory), (i) is approved for sale in such country in reliance on the prior approval of such Product as

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

7



 

determined by the applicable Regulatory Authority, and (ii) is [*] under applicable Laws in such country [*], and (c) is not sold under a Trademark Right Controlled by Forest, its Affiliate or Sublicensee or a Trademark Right Controlled by Adamas, its Affiliate or (sub)licensee, as applicable.  Generic Version of a Product expressly excludes any Authorized Generics for such Product.

 

1.50        “ Governmental Authority ”.  Governmental Authority means any US federal, state or local or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or arbitral body.

 

1.51        “ IND ”.  IND means an investigational new drug application filed with the FDA with respect to a Product, or an equivalent application filed with the Regulatory Authority of a country other than the US.

 

1.52        “ Initial FDC Product ”.  Initial FDC Product means a Memantine-Donepezil FDC Product that combines the following two active ingredients (and no other active ingredients) in the following forms: (a) Memantine formulated as Namenda XR; and (b) Donepezil [*].  For clarity, the terms of this Section 1.52 are subject to the provisions of Section 4.1.

 

1.53        “ Joint Intellectual Property ”.  Joint Intellectual Property means the Joint Know-How and Joint Patent Rights.

 

1.54        “ Know-How ”.  Know-How means proprietary or non-public information or materials, whether patentable or not, including (a) ideas, discoveries, inventions, improvements or trade secrets, (b) pharmaceutical, chemical or biological materials, products or compositions, (c) tests, assays, techniques, data, methods, procedures, formulas or processes, (d) technical, medical, clinical, toxicological or other scientific data or other information relating to any of the foregoing, and (e) drawings, plans, designs, diagrams, sketches, specifications or other documents containing or relating to such information or materials.

 

1.55        “ Law ” or “ Laws ”.  Law or Laws means all laws, statutes, rules, regulations, orders, judgments or ordinances of any Governmental Authority.

 

1.56        “ Losses ”.  Losses means any and all (a) claims, losses, liabilities, damages, fines, royalties, governmental penalties or punitive damages, deficiencies, interest, awards, judgments, and settlement amounts (including special, indirect, incidental, and consequential damages, lost profits, and Third Party punitive and multiple damages), and (b) in connection with all of the items referred to in clause (a) above, any and all costs and expenses (including reasonable counsel fees and all other expenses reasonably incurred in investigating, preparing or defending any litigation or proceeding, commenced or threatened).

 

1.57        “ Major Market ”.  Major Market means with respect to Forest, the United States, and with respect to Adamas, Japan, the United Kingdom, France, Germany, Spain or Italy.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

8



 

1.58        “ Manufacture ” or “ Manufacturing ”.  Manufacture or Manufacturing means activities directed to producing, manufacturing, processing, filling, finishing, packaging, labeling, quality assurance testing and release, shipping and storage of a product.

 

1.59        “ Memantine ”.  Memantine means that certain compound known as memantine with a chemical structure specified in Schedule 1.59 and each [*] thereof.

 

1.60        “ Memantine-Donepezil FDC Product ”.  Memantine-Donepezil FDC Product means a fixed dose combination Product containing Memantine and Donepezil as its sole active ingredients.

 

1.61        “[*]”.  [*] means [*] or any of [*].

 

1.62        “[*] Agreements ”.  [*] Agreements means that certain [*] Agreement entered into between [*], dated [*], relating to the [*] for the [*] (“[*] Agreement ”), and that certain [*] Agreement entered into between [*], dated [*], relating to the [*] for the [*], each as amended from time to time consistent with this Agreement (“[*] Agreement ”), in each case as amended, modified or qualified by the [*].

 

1.63        “ Namenda ”.  Namenda means a pharmaceutical product containing [*] Memantine as its sole active ingredient and Commercialized by or on behalf of Forest under the trademark NAMENDA® as of the Effective Date and any improvements thereto that contain [*] Memantine as the sole active ingredient and are made by or on behalf of Forest, its Affiliates or Sublicensees on or after such date.

 

1.64        “ Namenda XR ”.  Namenda XR means that certain ER Product containing [*] Memantine as its sole active ingredient that has been Developed by Forest and approved by the FDA as of the Effective Date and any improvements thereto made by or on behalf of Forest, its Affiliates or Sublicensees on or after such date.

 

1.65        “ NDA ”.  NDA means a New Drug Application as defined in the Act, filed with the FDA with respect to a Product.

 

1.66        “ Net Sales ”.  Net Sales means the gross amounts billed or invoiced by Forest, its Affiliates and Sublicensees to any Third Party that is not a Sublicensee with respect to sales of ER Products or Other Products (in the case of royalties under Section 6.4(b)) or FDC Products (in the case of royalties under Section 6.4(a) or Section 6.4(c)(ii), as the case may be) in the Territory, calculated in the same manner as reported in its audited financial statements, less the sum of the following for the applicable class of Products ( i.e. , ER Products, Other Products or FDC Products, as the case may be):

 

[*].

 

Net Sales shall not include transfers or dispositions of Products for charitable, pre-clinical, clinical or regulatory purposes that are without material profit.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

9



 

1.67        “ Orange Book ”.  Orange Book means the Approved Drug Products with Therapeutic Equivalence Evaluation published by the FDA’s Center for Drug Evaluation and Research, as updated and modified from time to time.

 

1.68        “ Other Product ”.  Other Product means any Product, other than an ER Product or FDC Product, but excluding Namenda.

 

1.69        “ Party ”.  Party means either Adamas or Forest; “ Parties ” means both Adamas and Forest.

 

1.70        “ Patent Rights ”.  Patent Rights means the rights and interest in and to (a) all issued patents and pending patent applications in any country, including provisional patent applications, in any country; (b) all patent applications that claim, directly or indirectly, priority to any patent or patent applications described in clause (a), including all provisionals, divisionals, continuations, continuations-in-part, patents of addition, renewals, continued prosecution applications and requests for continued examination; (c) any and all patents that have issued or in the future issue from any of the patent applications described in clause (a) or clause (b), including utility models, petty patents and design patents and certificates of invention; and (d) any and all extensions or restorations by existing or future extension or restoration mechanisms, including any re-examination, registrations or confirmation patents, letters of patent and reissues thereof, or other extensions, or restorations of patent terms resulting from any other post-grant proceedings (including, without limitation, any proceedings that will come into effect through full implementation of the Leahy-Smith America Invents Act of 2011, and any supplementary protection certificates and the like), with respect to any of the patents or patent applications described in clause (a), clause (b), or clause (c).

 

1.71        “ Payments ”.  Payments means royalties, milestones and other amounts payable by Forest to Adamas pursuant to this Agreement.

 

1.72        “ Person ”.  Person means any natural person or any corporation, company, partnership, joint venture, firm, Governmental Authority or other entity, including a Party.

 

1.73        “ Phase IV Clinical Trial ”.  Phase IV Clinical Trial means a human clinical trial conducted for purposes of further characterizing and supporting a Product for marketing but not for purposes of seeking Regulatory Approval or of otherwise fulfilling a requirement of a Regulatory Authority.

 

1.74        “ Primary Detail Equivalent ” or “ PDE ”.  Primary Detail Equivalent or PDE means a primary Detail equivalent where (a) a Primary Detail has a value of 1.0 primary Detail equivalent and (b) a Secondary Detail has the value of [*] primary Detail equivalents.

 

1.75        “ Product ”.  Product means any pharmaceutical preparation containing Memantine as a single active ingredient or in combination with one or more other active ingredient(s).

 

1.76        “ Product Information ”.  Product Information means (a) all data generated by Adamas or its Affiliates under the Development Plan, (b) all Adamas Know-How that is a trade secret related to a Product and (c) any Adamas Know-How that is patentable.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

10



 

1.77        “ Program Data ”.  Program Data means collectively, all proprietary data and results that are generated by or on behalf of either Party on any Memantine-Donepezil FDC Product under the Development Plan, including DM104, DM105, DM303 and DM304 studies.

 

1.78        “ Regulatory Approval ”.  Regulatory Approval means the granting, whether through lapse of time or otherwise, by the FDA or by a comparable Regulatory Authority of approval to market a drug product in a country in the Territory or other jurisdiction.

 

1.79        “ Regulatory Authority ”.  Regulatory Authority means any Governmental Authority, including the FDA, with responsibility for granting licenses or approvals (with the exception of price approvals) necessary for the marketing and sale of pharmaceutical products in a country or region of the Territory.

 

1.80        “ Regulatory Plan ”.  Regulatory Plan means the regulatory strategy with respect to the Development of Memantine-Donepezil FDC Product as agreed to by the Parties in writing as of the Effective Date, as it may be modified from time to time in accordance with this Agreement.  The Regulatory Plan as agreed as of the Effective Date is attached hereto as Schedule 1.80 .

 

1.81        “ Sales Year ”.  Sales Year means, with respect to ER Products, FDC Products and Other Products (each, a “ Product Category ”), each successive twelve (12)-month period in which a Product within such Product Category is sold; provided that, with respect to the first Sales Year for a Product Category, Sales Year means the period commencing on the date of First Commercial Launch of the first Product in such Product Category and ending on the last day of the fourth full Calendar Quarter after such First Commercial Launch (the “ First Sales Year ”), and for subsequent Sales Years for such Product, the period of four (4) sequential Calendar Quarters commencing on the day after the expiration of the First Sales Year or the anniversary thereof.

 

1.82        “ Senior Executive ”.  Senior Executive means, with respect to Adamas, the [*] of Adamas [*], and, with respect to Forest, the [*] of Forest Parent [*].

 

1.83        “ Sublicensee ”.  Sublicensee means a Third Party that has been granted a right or sublicense by Forest, its Affiliates or (sub)licensees under the rights and licenses granted or assigned to Forest pursuant to Section 2.1 of this Agreement or other rights and licenses pertaining to an FDC Product, which rights include [*].  Third Parties that are permitted only to (a) distribute and resell a Product, or (b) Manufacture a Product solely for supply to Forest (or its Affiliates or its Sublicensees) (and have no other rights to Develop or Commercialize such Product) are not “Sublicensees”.  [*] Sublicensees of Forest or any of its Affiliates [*] under the [*], but [*] Sublicensees of Forest [*], or [*] a sublicense under the license granted to Forest under Section 2.1.

 

1.84        “ Sublicensing Revenue ”.  Sublicensing Revenue means any cash payment (including upfront fees, milestone payments and royalties) or the fair market value of any other consideration received [*] in consideration for or otherwise based upon a Transaction.  Notwithstanding the foregoing, Sublicensing Revenues shall exclude all amounts received as bona fide consideration: (a) with respect to any [*]; (b) as loans [*], and solely for so long as

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

11



 

such obligation of repayment exists; (c) in consideration of any issuance of equity or debt securities [*], except to the extent that such payments are in excess of fair market value for such securities (in which case such excess shall be deemed Sublicensing Revenue); (d) as reimbursement of costs and expenses incurred [*] (except to the extent such amounts exceed market rates, in which case such excess shall be deemed Sublicensing Revenue); (e) for the supply of Products or other materials (except to the extent that such payments exceed the cost of supplying such Products plus a customary margin, in which case such excess shall be deemed Sublicensing Revenue); or (f) in consideration for [*]; and shall be net of all withholding taxes or other amounts withheld or deducted from the amounts received [*], provided that if [*] withholding taxes or other such amounts withheld or deducted from the amounts received [*], the amount of any such benefit shall be included in Sublicensing Revenue.

 

1.85        “ Territory ”.  Territory means the United States of America (including its territorial possessions, territories and the Commonwealth of Puerto Rico).

 

1.86        “ Third Party ”.  Third Party means any Person other than Adamas or Forest or any of their respective Affiliates.

 

1.87        “ Trademark Rights ”.  Trademark Rights means any word, name, symbol, color, shape, designation or device or any combination thereof, including any trademark, service mark, trade name, trade dress, brand name, product configuration, logo, design or business symbol, that functions as an identifier of source, origin, membership, whether or not registered, and all statutory and common law rights therein, and all registrations and applications therefor, together with all goodwill associated with, or symbolized by, any of the foregoing.

 

1.88        “ US ”.  US means the United States of America (including its territorial possessions, territories and the Commonwealth of Puerto Rico).

 

1.89        “ Valid Claim ”.  Valid Claim means any claim from an issued and unexpired patent that has not been revoked or held unenforceable or invalid by a final decision of a court or other Governmental Authority of competent jurisdiction, or that has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.

 

1.90        Additional Definitions .  Each of the following definitions is set forth in the Section of this Agreement indicated below:

 

Definition:

 

Section:

 

 

 

[*]

 

Section 6.3(a)(iii)

Acquirer

 

Section 1.20

[*]

 

Section 2.4(b)

[*]

 

Section 1.62

Adamas

 

Preamble

[*]

 

Section 6.4(d)(iv)

Adamas FDC and ER Patent Rights

 

Schedule 11.6

Adamas FDC Patent Rights

 

Schedule 11.6

Adamas IP Infringement Claim

 

Section 7.4(a)

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

12



 

Definition:

 

Section:

 

 

 

Adamas Manufacturing Know-How

 

Section 3.1(c)

Adamas Paragraph IV Claim

 

Section 7.11(a)

Adamas Patent Challenge

 

Section 7.3(d)(ii)

[*]

 

Section 6.4(d)(iv)

Agents

 

Section 8.1

Alliance Manager

 

Section 4.2(c)

Antitrust Action

 

Section 11.2(c)

Antitrust Law

 

Section 11.2(c)

Approval Milestone

 

Section 6.3(a)(iv)

Arbitrators

 

Section 12.2(b)(i)

Assignment and Assumption Agreement

 

Section 2.6

Bayh-Dole Act

 

Section 9.1(l)

[*]

 

Section 6.3(a)(i)

Cessation Notice

 

Section 11.2(a)

Claim

 

Section 12.2(b)(i)

Confidential Information

 

Section 8.2

Confidentiality Agreement

 

Section 8.2

Courts

 

Section 12.1

[*]

 

Section 3.3

Effective Date

 

Preamble

ER Royalty Term

 

Section 6.4(c)(iii)

Existing Supply Agreement

 

Section 3.3

FDC Launch Assumptions

 

Section 5.4

FDC Royalty Term

 

Section 6.4(c)(i)

First Sales Year

 

Section 1.81

Forest

 

Preamble

Forest Blocking Patent

 

Section 6.4(c)(vii)

[*]

 

Section 9.2(e)

Forest Parent

 

Preamble

Forest Parties

 

Section 10.2

Forest Patent Challenge

 

Section 7.3(b)

Forest Reversion Intellectual Property

 

Schedule 11.6

Forest Third Party Patent Licenses

 

Section 6.4(c)(vii)

Indemnified Party

 

Section 10.3(a)

Indemnifying Party

 

Section 10.3(a)

Initial Development Plan

 

Section 1.25

Invalidity Claim

 

Section 7.5

JAMS

 

Section 12.2(b)(i)

JDC

 

Section 4.1

Joint IP Working Group; JIPWG

 

Section 7.1

Joint Know-How

 

Section 7.2

Joint Manufacture Committee; JMC

 

Section 3.3

Joint Patent Rights

 

Section 7.2

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

13



 

Definition:

 

Section:

 

 

 

Late Payment Notice

 

Section 6.9

[*]

 

Section 5.4

Letter Agreement

 

Section 4.2(a)

[*]

 

Section 6.4(d)(iii)

Milestone Event

 

Section 6.3(a)

Milestone Payment

 

Section 6.3(a)

[*]

 

Section 1.62

[*]

 

Section 6.3(b)

Paragraph IV Claim

 

Section 7.11(a)

Payment Date

 

Section 2.1(b)

Pre-Change of Control Rights

 

Section 1.20

[*]

 

Section 2.4(b)

Primary Detail

 

Section 1.23

Product Category

 

Section 1.81

Proprietary Non-Donepezil FDC Product

 

Section 6.4(c)(ii)

Proprietary Non-Donepezil FDC Royalty Term

 

Section 6.4(c)(ii)

Regulatory Filings

 

Section 2.5

Regulatory Plan

 

Section 1.80

Regulatory Plan Change

 

Section 4.2(d)(ii)

Related Adamas Patent Rights

 

Section 1.8

Reverted FDC Products

 

Schedule 11.6

Royalty Commencement Date

 

Section 6.4(c)(iv)

Rules

 

Section 12.2(b)(i)

Secondary Detail

 

Section 1.23

[*]

 

Section 6.3(a)(ii)

Technology Transfer Plan

 

Section 3.1(a)

Term

 

Section 11.1

Termination Effective Date

 

Schedule 11.6

Third Party Claims

 

Section 10.1

Third Party Infringement Claims

 

Section 7.7

Third Party Technology

 

Section 2.1(d)

Transaction

 

Section 6.4(d)(i)

Transferable Contracts

 

Section 2.6

Triggering Act

 

Section 6.4(d)(i)

 

1.91      Captions; Certain Conventions; Construction .  All headings and captions herein are for convenience only and shall not be interpreted as having any substantive meaning.  The Schedules to this Agreement are incorporated herein by reference and shall be deemed a part of this Agreement.  Unless otherwise expressly provided herein or the context of this Agreement otherwise requires:

 

(a)           words of any gender include each other gender;

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

14



 

(b)           words such as “herein”, “hereof” and “hereunder” refer to this Agreement as a whole and not merely to the particular provision in which such words appear;

 

(c)           words using the singular shall include the plural, and vice versa;

 

(d)           the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “but not limited to”, “without limitation”, “inter alia” or words of similar import;

 

(e)           the word “or” shall be deemed to include the word “and” ( i.e. , shall mean “and/or”);

 

(f)            references to “Article,” “Section,” “Exhibit,” “subsection”, “paragraph”, “clause” or other subdivision, or to a Schedule, without reference to a document, are to the specified provision or Schedule or Exhibit of this Agreement;

 

(g)           references to “$” or “dollars” shall be references to US Dollars; and

 

(h)           the phrase “have the right” means “have the right, without the obligation”, unless expressly stated otherwise.

 

This Agreement shall be construed as if the Parties drafted it jointly.

 

ARTICLE II
GRANTS OF RIGHTS

 

2.1          Grants of Rights .

 

(a)           License Grant by Adamas .

 

(i)            Adamas hereby grants, on behalf of itself and its Affiliates, to Forest (A) a co-exclusive (with Adamas and its Affiliates) right and license under the Adamas Intellectual Property to Develop and Manufacture Products in the Field in the Territory in accordance with Articles III and IV, (B) an exclusive (even as to Adamas and its Affiliates) right and license under the Adamas Intellectual Property to Commercialize Products in the Field in the Territory in accordance with Article V, and (C) a non-exclusive right and license under the Adamas Ex-US Patent Rights and Adamas Know-How to Develop and Manufacture (but not sell or otherwise Commercialize) Products in the Field outside the Territory in accordance with Articles III and IV solely in support of the Development or Commercialization of the Products in the Field in the Territory.  Notwithstanding the foregoing, Adamas shall retain rights under the Adamas Intellectual Property and the Adamas Ex-US Patent Rights (X) to Develop Products in the Field in the Territory in accordance with Article IV, and (Y) to Develop and Manufacture the Products anywhere in the world solely in support of the Development or Commercialization of the Products outside the Territory.

 

(ii)           Adamas hereby grants, on behalf of itself and its Affiliates, to Forest (A) an exclusive (even as to Adamas and its Affiliates), non-royalty-bearing right and license, to use the Adamas Product Trademark Rights in connection with the Development,

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

15



 

Manufacture and Commercialization of the Products in the Field in the Territory in accordance with this Agreement and (B) a non-exclusive, non-royalty-bearing right and license to use the Adamas Product Trademark Rights to Develop and Manufacture the Products in the Field outside the Territory in accordance with this Agreement in support of the Development or Commercialization of the Products in the Field in the Territory.  Notwithstanding the foregoing, Adamas shall retain a non-exclusive, non-royalty-bearing right to use the Adamas Product Trademark Rights (X) to Develop Products in the Field in the Territory in accordance with Article IV, and (Y) to Develop and Manufacture the Products anywhere in the world in support of the Development or Commercialization of the Products outside the Territory.  In the event that Forest elects to use an Adamas Product Trademark Right in the Development, Manufacture or Commercialization of a Product, the Parties shall coordinate the use of domain names incorporating such Adamas Product Trademark Right so as to avoid confusion in the Commercialization of such Product in the Territory and outside the Territory.  For clarity, Adamas shall retain all right, title and interest in and to the domain names within the Adamas Product Trademark Rights for country-specific domains outside of the Territory ( e.g. , .uk, .jp, .eu), while Forest shall be granted rights under this Section 2.1(a)(ii) to the domain names within the Adamas Product Trademark Rights in the Territory ( e.g. , .com, .net, .org).  If elected by Forest at any time, Forest shall have the right to terminate the rights and licenses granted by Adamas to Forest under this Section 2.1(a)(ii) upon written notice to Adamas, in which case all rights to the Adamas Product Trademark Rights granted to Forest under this Agreement shall revert to Adamas, in which case Adamas agrees not to use the Adamas Product Trademark Rights in the Territory.

 

(iii)          Adamas hereby grants, on behalf of itself and its Affiliates, to Forest a non-exclusive, non-royalty-bearing right and license to use the corporate names of Adamas and its Affiliates as required by Law or as otherwise reasonably required in connection with the performance of Forest’s obligations or exercise of its rights hereunder.

 

(iv)          Sublicenses .  Forest shall have the right to grant sublicenses through multiple tiers under the licenses to Adamas Intellectual Property and the Adamas Product Trademark Rights granted to Forest under this Section 2.1(a) to its Affiliates and, [*], to Third Parties [*], provided that Forest shall not have the right to grant a sublicense [*] unless [*].

 

(b)           Payment Date; Forest’s Election to [*] .  Upon payment by Forest or its designee to Adamas of all Milestone Payments that have or may come due under Section 6.3 (the date Adamas receives the last of such payments, the “ Payment Date ”), Forest shall have the right (but not the obligation) to request that [*] and [*] and [*] and [*], and Forest shall make such request by providing written notification to Adamas thereof within [*] after the Payment Date.  In the event Adamas receives such written notification from Forest within [*] after the Payment Date, Adamas shall: (i) promptly [*] within [*] of receipt of written notification from Forest requesting [*]; and (ii) cooperate fully with Forest [*] or [*] and [*] as contemplated in this Section 2.1(b), including [*].  For any [*] and [*] (either [*] or [*], or [*]), the [*] shall [*] following the Payment Date and [*].

 

(c)           Possible License from Forest .  In the event [*] Adamas perform any Development activities under this Agreement that would require a license to any Patent Rights, Know-How or Trademark Rights Controlled by Forest or its Affiliates, Forest agrees that Forest

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

16


 

shall grant Adamas a non-exclusive, royalty-free license under the relevant Patent Rights, Know-How or Trademark Rights Controlled by Forest or its Affiliates, in each case, that are necessary for Adamas to perform the activities requested to be performed under this Agreement solely for such purpose.

 

(d)           Third Party Technology .  With respect to any Patent Rights or Know-How that Adamas or its Affiliate acquires from a Third Party (by license or otherwise) after the Effective Date that would be subject to a license granted to Forest pursuant to this Section 2.1 (collectively, “ Third Party Technology ”), Adamas shall promptly notify Forest in writing of such Third Party Technology, the associated obligations applicable to Forest (including payment obligations that would be triggered by Forest’s exercise of the rights and licenses granted to it under this Section 2.1).  Such Third Party Technology shall be included in the Adamas Patent Rights (including the Adamas Memantine Patent Rights, if applicable), Adamas Know-How, and Adamas Intellectual Property, provided that, subject to Section 6.4(c)(vii), Forest shall be responsible for any obligations applicable to Forest under the applicable agreement (including any payment owed to such Third Party by Adamas or its Affiliate that would be triggered by Forest’s exercise of the rights and licenses granted to it under this Section 2.1).  With respect to Article VII, Forest may exercise the rights set forth in Article VII with respect to such Third Party Technology to the extent consistent with the terms and conditions of the license agreement pursuant to which Adamas or its Affiliate first acquired rights to such Third Party Technology.  If Forest has a reimbursement obligation under this Section 2.1(d), Adamas shall provide Forest with documentation of Forest’s reimbursement obligations under this Section 2.1(d) and Forest shall pay any such amounts owed within [*] of receipt thereof.  Forest may [*] Third Party Technology acquired by Adamas or its Affiliate [*] Adamas thereof at any time [*]; upon [*], such Third Party Technology [*].  For clarity, Forest shall be responsible for any above described payment owed to the Third Party by Adamas or its Affiliate for such Third Party Technology accruing [*] under this Section 2.1.

 

2.2          Rights Retained by the Parties .  Any rights of Adamas or Forest (or their respective Affiliates), as the case may be, not expressly granted to the other Party under the provisions of this Agreement shall be retained by such Party, and no right or license, other than those expressly granted hereunder, under either Party’s Know-How, Patent Rights or other subject matter is granted or shall be deemed granted by implication or estoppel.  Notwithstanding any provision to the contrary herein, no right or license is granted to either Party herein with respect to, and none of the Forest Intellectual Property, the Forest Reversion Intellectual Property and the Adamas Intellectual Property shall include any Patent Rights or Know-How to the extent specifically Covering or solely relating to, any active ingredients other than (a) Memantine, (b) Donepezil (including the Donepezil [*]) for use in an FDC Product, or (c) Memantine and Donepezil (or Donepezil [*]) in combination with one another.

 

2.3          Section 365(n) of the Bankruptcy Code .  All rights and licenses granted under or pursuant to any section of this Agreement, including the licenses granted under Section 2.1 to Patent Rights and Know-How (including any data included in the Know-How), are and will otherwise be deemed to be for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined in Section 101(35A) of the Bankruptcy Code.  Each Party will retain and may fully exercise all of its respective rights and elections under the

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

17



 

Bankruptcy Code.  The Parties agree that each Party, as licensee of such rights under this Agreement, will retain and may fully exercise all of its rights and elections under the Bankruptcy Code or any other provisions of applicable Law outside the United States that provide similar protection for “intellectual property.”  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against the licensor Party under the Bankruptcy Code or analogous provisions of applicable Law outside the United States, the licensee Party will be entitled to a complete duplicate of (or complete access to, as the licensee Party deems appropriate) such intellectual property and all embodiments of such intellectual property, which, if not already in the licensee Party’s possession, will be promptly delivered to it upon the licensee Party’s written request thereof.  Any agreements supplemental hereto will be deemed to be “agreements supplementary to” this Agreement for purposes of Section 365(n) of the Bankruptcy Code.

 

2.4          Exclusivity; [*] .

 

(a)           Exclusivity .  During the Term, subject to Section 2.4(b) below, neither Adamas nor any of its Affiliates shall, alone or in collaboration with any other Person, [*], or grant a license to any other Person to [*]; provided , however , that neither this clause (a) (nor any other provision of this Agreement) shall preclude Adamas or its Affiliates from [*] that [*], [*] and [*], if Adamas or such Affiliate has the legal right to do so.

 

(b)           [*] .  [*], in the event [*] Section 2.4(a) with respect to any [*] or [*] or [*]; provided , that (i) [*] (or [*]) [*] and [*] (unless [*]) or [*], and (ii) [*] that [*] or [*], in each case of (i) and (ii), [*].  In addition, if [*], then the [*], in accordance with [*] shall [*] pursuant to the foregoing; provided that [*] that would [*] and [*] or in order to [*].  [*] shall [*].  If at any time, any of the foregoing conditions ((i) and (ii)) are not met with respect to [*], then [*] shall automatically and thereafter [*] and the [*] shall [*] with respect to [*].

 

2.5          Ownership of Regulatory Filings; Transfer of Regulatory Filings .  As soon as practicable following the Effective Date, Adamas shall (a) assign and transfer to Forest all INDs and other filings with Regulatory Authorities in the Territory (such filings, the “ Regulatory Filings ”) pertaining to any Product in the Field that are Controlled by Adamas or its Affiliates as of such date and (b) deliver to Forest copies of all such Regulatory Filings, including copies of all correspondence with Regulatory Authorities and all written minutes of meetings and memoranda of conversations with Regulatory Authorities, in each case, relating thereto and not previously provided to Forest or its Affiliate.  [*].  Forest shall, as between the Parties, be the owner of all Regulatory Filings (including all INDs) in the Territory for the Products in the Field, provided that Adamas shall have the right to file and own its own IND in the Territory for the Products in connection with the Development of the Product in the Territory by Adamas, its Affiliates or (sub)licensees solely to support the Commercialization of the Products outside the Territory.  The exchange of safety information between the Parties relating to the Development of Products in the Territory carried out by each Party under its own Regulatory Filings will be subject to the provisions of Section 4.5.

 

2.6          Assignment of Contracts .  As soon as practicable following the Effective Date, Adamas shall assign to Forest those written agreements by and between Adamas and Third Parties set forth on Schedule 2.6 (the “ Transferable Contracts ”) that Forest explicitly requests to

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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be assigned to Forest, pursuant to an assignment and assumption agreement to be agreed by the Parties (the “ Assignment and Assumption Agreement ”); provided that Forest shall make such request within [*] after the Effective Date. With respect to any Transferable Contract not promptly assigned to Forest under this Section 2.6, the Parties shall coordinate to ensure that Forest obtains the benefits under such contracts as reasonably necessary or useful to perform the Development activities contemplated to be performed by Forest hereunder in a manner consistent with such contracts or to facilitate an agreement directly between Forest and the other party to such Transferable Contract providing such benefits, and [*].  This Agreement does not constitute an agreement to assign or transfer any Transferable Contract that is not assignable or transferable without the consent of or action by a Third Party or action by a Governmental Authority, to the extent that such consent has not been given or such action has not been taken prior to the Effective Date; provided , however , that Adamas shall, and shall cause its Affiliates to, use Commercially Reasonable Efforts to obtain, and Forest shall assist and cooperate with Adamas in connection therewith, all necessary consents to the assignment and transfer thereof.  Subject to Section 3.3, Forest shall not be responsible for any obligations under any Adamas contracts with Third Parties related to the Development or Manufacture of Products, other than the Transferable Contracts that are assigned or transferred to Forest pursuant to this Section 2.6 and, with respect to such Transferable Contracts, Forest shall only be responsible for costs incurred by Forest under the Transferable Contracts after the Effective Date or otherwise as expressly set forth in this Agreement or the Assignment and Assumption Agreement.  From and after the Effective Date until the assignment of a Transferable Contract to Forest pursuant to this Section 2.6, Adamas shall [*] such Transferable Contract [*].

 

ARTICLE III
MANUFACTURING AND TECH TRANSFER

 

3.1          Transfer of Adamas Know-How .

 

(a)           Initial Transfer of Adamas Know-How .  In order to fully enable Forest to practice the Adamas Know-How with respect to Products in accordance with this Agreement and to otherwise exercise the rights granted to it under this Agreement, Adamas shall promptly deliver to Forest as further set forth below copies of Adamas Know-How existing in written form, including [*], in the media and form that such material exists in Adamas’ Control as of the Effective Date to the extent that any such item [*] to disclose or embody Adamas Know-How, to the extent not previously provided to Forest.  Without limiting the foregoing, Adamas shall deliver to Forest copies of all correspondence filed with or received from the United States Patent and Trademark Office in connection with the prosecution of the Adamas Memantine Patent Rights that are in Adamas’ Control promptly after the Effective Date and in a timely manner [*].  Notwithstanding the foregoing, Adamas shall not be obligated to transfer to Forest any quantities of GMP-grade materials other than pursuant to Section 3.2 below.  The content and mode of transfers of Adamas Know-How to Forest shall be conducted, in accordance with this Section 3.1 and a technology transfer plan and budget to be reasonably agreed by the Parties within [*] of the Effective Date (the “ Technology Transfer Plan ”), within [*] after the Effective Date (and Adamas’ obligations under this Section 3.1 apply whether or not a Technology Transfer Plan is agreed).  Without limitation to the foregoing, with respect to the Adamas Know-How related to Memantine-Donepezil FDC Products, the Parties shall coordinate any such

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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transfer of Adamas Know-How to enable each Party to carry out the Development activities with respect to the Development of Memantine-Donepezil FDC Products assigned to such Party under the Development Plan.  The foregoing transfers of Adamas Know-How to Forest shall [*].  Without limitation of the foregoing, during such [*] period, Adamas shall deliver to Forest copies of all Adamas Know-How [*] as of the Effective Date, including copies of any relevant portions of the documents, files and other written or graphic materials disclosing or embodying Adamas Know-How specified to be transferred to Forest during such [*] period as agreed pursuant to the Technology Transfer Plan, if any, to the extent not previously provided to Forest, and shall make employees of Adamas who are familiar with such Adamas Know-How reasonably available to [*] in accordance with the Technology Transfer Plan.  Adamas’ failure to deliver to Forest [*] in the Adamas Know-How (i.e., [*]) during such [*] period shall not constitute a breach of this Agreement if Adamas delivers such document to Forest promptly following Adamas’ becoming aware of the omission.

 

(b)           Additional Transfer of Adamas Know-How .  In the event that Forest desires additional transfer assistance from Adamas beyond the [*] period set forth in Section 3.1(a) (though this period of additional assistance shall last only until [*]), upon Forest’s reasonable request or as new Adamas Know-How becomes available, Adamas shall deliver to Forest [*] or as reasonably requested by Forest all Adamas Know-How, and Adamas shall [*] Adamas [*] Adamas Know-How [*] at such times, and in the case of [*], to be agreed upon by the Parties as reasonably necessary [*] to transfer such Adamas Know-How to Forest to enable Forest to understand and implement the Adamas Know-How with respect to the Products in accordance with this Agreement.  In addition, promptly after [*], Adamas shall deliver to Forest copies of all [*] (including [*]) to the extent not previously provided to Forest.  Forest shall [*].

 

(c)           Transfer of Adamas Manufacturing Know-How .  Specifically without limiting the foregoing, upon Forest’s request, Adamas shall transfer or arrange for the transfer to Forest: (i) the Adamas Donepezil Formulation existing as of the Effective Date; (ii) the then-current Manufacturing process Controlled by Adamas that is necessary to enable Forest to Manufacture [*]; (iii) the formulation and then-current Manufacturing process Controlled by Adamas for the Manufacturing of [*]; and (iv) the then-current Manufacturing process for [*] (collectively, the “ Adamas Manufacturing Know-How ”).  The Adamas Manufacturing Know-How shall be deemed Adamas Know-How under this Agreement.  Forest shall reimburse Adamas for Adamas’ FTE Costs and any reasonable, documented, out-of-pocket costs, in each case incurred directly in connection with the technology transfer in accordance with this Section 3.1(c).

 

(d)           Confidentiality of Adamas Know-How .  Forest expressly acknowledges and agrees that Adamas Know-How shall remain Adamas’ Confidential Information throughout the Term (unless any of Section 8.2(a) through (d) apply), and the use and disclosure of such Confidential Information shall be governed under the terms and conditions of Article VIII hereunder.  Specifically and without limiting the foregoing, Forest shall not disclose any Adamas Know-How: (i) [*] unless and only to the extent [*]; or (ii) to any other Third Party except solely in furtherance of the Development, Manufacture and Commercialization of the Products in the Territory under this Agreement on behalf of Forest, its Affiliates and Sublicensees, in each case of (i) and (ii), only if such disclosure is under written confidentiality and non-use obligations

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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binding upon [*] recipient of any Adamas Know-How: (A) to prevent any further disclosure by [*] recipient of such Adamas Know-How; and (B) to restrict the use of such Adamas Know-How, [*] solely in furtherance of the Development, Manufacture and Commercialization of the Products in the Territory under this Agreement on behalf of Forest, its Affiliates and Sublicensees.

 

3.2          Supply of Donepezil [*] .  Prior to the earlier of: (a) the [*] anniversary of the Effective Date, which such period shall be extended to the [*] anniversary of the Effective Date for so long as Forest is negotiating in good faith an agreement for the supply of Donepezil [*]; and (b) the assignment of the applicable Transferable Contracts relating to the Manufacture and supply of Donepezil [*] to Forest pursuant to Section 2.6, Adamas shall, upon Forest’s reasonable request (including for any studies to be performed by Forest hereunder), obtain Donepezil [*] from the applicable Third Party supplier(s) and supply such Donepezil [*] to Forest for use in performing the Development Plan or any other use hereunder.  Forest shall pay to Adamas [*] for such Donepezil [*].  Adamas shall not be liable with respect to such supply for amounts in excess of amounts that Adamas recovers from any such Third Party supplier with respect to any failure regarding such supply (to the extent caused by such Third Party supplier); provided that Adamas shall use reasonable efforts to recover any such amounts from such Third Party supplier(s).

 

3.3          Coordination of Certain Supply .  Promptly after the Effective Date, the Parties shall establish a joint working group to oversee and coordinate the Parties’ activities with respect to the supply of [*] for each Party’s respective territory (the “ Joint Manufacture Committee ” or “ JMC ”), including coordination of supply, chemistry, manufacturing, and controls (CMC) information , and Third Party suppliers of [*] to the benefit of each Party.  The JMC shall review and determine, [*] how to coordinate supply of the [*] either under existing arrangements with Third Party suppliers of [*] (“ Existing Supply Agreements ”) or under new arrangements with such Third Party suppliers, in light of each Party’s requirements in its respective territory.  For clarity, the JMC shall not have the power to [*].  If the JMC determines to [*], or to otherwise [*] in a manner that would result in [*], or if [*] or otherwise [*], which [*] results in [*], then the Parties shall [*].  Notwithstanding the foregoing, the Parties agree to use good faith efforts to cooperate to [*].

 

3.4          Regulatory Inspection .  In connection with a request from a Regulatory Authority related to obtaining and maintaining Regulatory Approval with respect to a Product, each Party shall permit the other Party, or an authorized representative of the other Party reasonably acceptable to such Party, to enter the relevant facilities of such Party and its Affiliates during normal business hours and upon reasonable advance notice to inspect and verify compliance with applicable regulatory and other requirements as well as with this Agreement, with respect to all matters relating to the Development of the Products under this Agreement.  Each Party shall give the other Party or its authorized representative, all necessary and reasonable assistance for a full and correct carrying out of the inspection.  Such inspection shall not relieve a Party of any of its obligations under this Agreement.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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ARTICLE IV
DEVELOPMENT

 

4.1          General .  From and after the Effective Date, except as otherwise expressly provided in Section 2.1 above or this ARTICLE IV (or the Development Plan), Forest shall have the sole right to conduct Development of the Products in the Field in the Territory.  Forest shall, directly or indirectly through its Affiliates or Sublicensees, use Commercially Reasonable Efforts to Develop and obtain Regulatory Approval for a Memantine-Donepezil FDC Product in the Field in the Territory in accordance with the Development Plan and the Regulatory Plan, including the conduct of the DM303 and DM304 studies.  In exercising such efforts, Forest shall first use the Initial FDC Product as the first FDC Product, unless it determines in good faith that: (a) [*] an alternative formulation of Donepezil; or (b) [*] an alternative formulation of Donepezil (or if [*]); or (c) [*] an alternative formulation of Donepezil instead of such Adamas Donepezil Formulation.  If Forest desires to use an alternative formulation of Donepezil for one or more of the foregoing reasons, then prior to implementing such alternative formulation, Forest shall notify Adamas in writing and shall discuss in good faith with Adamas any such proposed change, and Forest shall consider in good faith any commercially reasonable proposal by Adamas for overcoming such reasons, prior to effecting any change in formulation; provided , however , that [*] an alternative formulation of Donepezil if [*] would [*] set forth in the Development Plan for the Development of the Memantine-Donepezil FDC Product. [*] or [*] or [*] under this Section 4.1, whether or not [*], shall be deemed an “ Adamas Donepezil Formulation Modification .” Forest hereby represents and warrants that, as of the Effective Date, it is [*], and has [*] pertaining to, [*].  The Development of the Memantine-Donepezil FDC Products for Commercialization in the Field in the Territory (including all regulatory interactions with the FDA and the appointment of all contract research organizations engaged in connection with the Develop or Manufacture the Memantine-Donepezil FDC Products) shall be managed by a Joint Development Committee (the “ JDC ”), subject to the terms of this Agreement.  Adamas and its Affiliates may not conduct Development of a Product in the Field in the Territory for Commercialization of such Product in the Field in the Territory except as explicitly set forth in this Agreement or as otherwise determined by the JDC.  The conduct of Development of any Product for Commercialization in the Territory in the Field other than any Memantine-Donepezil FDC Product shall [*].

 

4.2          Development of the Memantine-Donepezil FDC Products .

 

(a)           Joint Development Plan .  All Development of the Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field shall be conducted in accordance with the Development Plan [*].  The Development Plan shall set forth the activities to be performed by each Party with respect to the Development of the Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field.  The Development Plan may be amended by the JDC from time to time in good faith and as reasonably necessary or useful for the Development of the Memantine-Donepezil FDC Products; provided that the JDC shall not [*] except [*] and the JDC shall not [*].  In the event that the Development Plan does not specify which Party shall be responsible for a particular Development activity, the JDC shall assign the activity to one of the Parties.  Each Party shall act in a manner consistent with the Development Plan and with the Regulatory Plan.  Forest shall, [*] in connection with the Development

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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activities assigned to Adamas in the Development Plan, which Development activities shall include activities assigned to Adamas under a certain letter agreement between Adamas and Forest, dated [*] (the “ Letter Agreement ”).  The following shall apply to Adamas’ activities under such Letter Agreement: (i) until [*] the cessation of any ongoing activities under the Letter Agreement, Adamas shall continue to conduct such activities; (ii) such activities are deemed to be conducted under the Development Plan and subject to the foregoing reimbursement by Forest to Adamas; and (iii) such reimbursed amounts shall consist of: (A) the amounts consistent with the budget set forth in the Letter Agreement; (B) the amounts incurred by or on account of Adamas [*] with respect to such activities; and (C) the amounts incurred by Adamas for its FTEs and consultants as required to support the activities set forth in subsection (A) and/or (B) above; provided , however , that any amounts in (B) or (C) shall be only for activities specifically requested by Forest, and the Parties shall cooperate in good faith to agree on a written budget therefor within [*] Business Days after the Effective Date.  If Adamas is assigned any activities other than those set forth in the Letter Agreement, the Parties shall agree in advance to a budget and such expenses shall be reimbursable to the extent consistent with the budget.  If [*] or [*] the activities assigned to Adamas under this Section 4.2(a) (including the activities described in the Letter Agreement), Adamas shall [*].  Each Party shall conduct or cause to be conducted all activities assigned to it under the Development Plan in accordance with applicable Law and best industry practices.

 

(b)           Joint Development Committee .  The Parties hereby establish the JDC to oversee and coordinate the Parties’ activities with respect to the Development of the Memantine-Donepezil FDC Product in the Field in the Territory as follows:

 

(i)            Composition of the Joint Development Committee; Decision Making .  The Development Plan activities shall be conducted under the oversight of the JDC comprised of three (3) named senior representatives of Forest and three (3) named senior representatives of Adamas.  Each Party shall notify the other within [*] after the Effective Date of the appointment of its representatives to the JDC.  Each Party may change its representatives to the JDC from time to time in its sole discretion, effective upon notice to the other Party of such change.  These representatives shall have appropriate technical credentials, experience and knowledge, and ongoing familiarity with Development Plan activities as well as sufficient authority to take actions on behalf of a Party to the extent permitted under this Agreement.  Additional representatives or consultants may from time to time, by mutual consent of the Parties, be invited to attend JDC meetings.  Alliance Managers shall be invited to attend all JDC meetings.  The JDC shall be chaired [*].  Each Party shall have collectively one (1) vote in all decisions and the Parties shall attempt to make decisions by consensus.  In the event the JDC cannot reach consensus on any matter within the scope of its oversight, disputes shall be referred to the Parties’ respective Senior Executives.  If the Senior Executives cannot resolve the dispute within [*] after the dispute has been referred to them, then Forest shall have the final decision-making authority with respect to such dispute, except that Forest shall not have any final decision-making authority with respect to [*] or [*], any dispute with respect to which shall be [*].  Notwithstanding the foregoing, Forest shall not exercise such final decision-making authority in any manner that (A) [*] unless [*] and [*], or (B) is inconsistent with this Agreement.  Each Party shall bear its own expenses related to the attendance of such meetings by its representatives.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(ii)           Meetings; Disbandment .  [*], the JDC shall meet in accordance with a schedule established by mutual written agreement of the JDC representatives, but no less frequently than [*] unless otherwise agreed by the Parties. The location for meetings of the JDC shall alternate between Adamas and Forest facilities in the US (or such other location as may be agreed by the Parties).  Alternatively, the JDC may meet by means of teleconference, videoconference or other similar communications equipment.  [*], or [*], the JDC shall disband [*] the Development of the Memantine-Donepezil FDC Products for Commercialization in the Field in the Territory, in accordance with the terms and conditions of this Agreement.

 

(iii)          Scope of Joint Development Committee Oversight .  The JDC’s oversight responsibilities shall [*].  Within such scope and subject to the other provisions of this Section 4.2, the JDC may take any action reasonably necessary for the Development of the Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field (including obtaining Regulatory Approval therefor) in accordance with this Agreement.  Such actions may include, but are not limited to (A) conferring regarding the status of Development Plan activities; (B) reviewing and approving amendments to the Development Plan; (C) approving any contract research organization or other service provider engaged by Adamas to Develop Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field, to the extent such entities are not so engaged prior to the Effective Date; (D) establishing any changes to the Regulatory Plan for the Development of Memantine-Donepezil FDC Products in accordance with Section 4.2(d); (E) establishing guidelines and strategies for publications involving Products; and (F) addressing such other matters relating to the Development of Memantine-Donepezil FDC Products in the Field for Commercialization in the Territory in the Field as are specified in this Agreement to be brought before the JDC.  Each Party shall keep the JDC informed as to its activities under the Development Plan, but shall have the right to make day-to-day operational decisions in performing activities assigned to it under the Development Plan, provided that those decisions are not contrary to the Development Plan and that any protocols for studies to be conducted under the Development Plan shall be subject to review and approval of the JDC.  Notwithstanding anything to the contrary in this Agreement, the JDC shall have no authority to (X) determine [*], (Y) make any decision expressly allocated herein to either or both Parties, or (Z) amend or interpret any provision of this Agreement, other than the Development Plan pursuant and subject to this Section 4.2.

 

(c)           Alliance Managers .  In addition to the JDC, Adamas and Forest each acknowledge and agree that it would be beneficial to each to have a representative with a general understanding of the Development, Manufacturing and Commercialization issues relating to Memantine-Donepezil FDC Products to act as an alliance manager (“ Alliance Manager ”) and shall appoint such a person promptly after the Effective Date.  It is envisioned that the Alliance Managers will serve as a single point of contact within each Party with responsibility for facilitating communication and collaboration between the Parties hereunder.  The Alliance Managers shall work together to manage and facilitate the resolution (in accordance with the terms of this Agreement) of business issues between the Parties that arise in connection with this Agreement.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(d)           Regulatory Plan .

 

(i)            The Parties acknowledge that the Regulatory Plan is based upon the Development of the Memantine-Donepezil FDC Product [*] to support [*] for such Memantine-Donepezil FDC Product, and the Parties intend to conduct the Initial Development Plan, using the efforts specified in Section 4.1, to submit [*] based upon the results of such conduct of the Initial Development Plan.

 

(ii)           In the event that [*] any modification to the Regulatory Plan that would result in [*] or [*], [*] or [*] or [*] for the Memantine-Donepezil FDC Product (excluding [*]), as compared with the Regulatory Plan in existence as of the Effective Date (a “ Regulatory Plan Change ”), the JDC may amend the Regulatory Plan accordingly in good faith and [*].  In the event any Regulatory Plan Change requires [*], for the [*] Memantine-Donepezil FDC Product, the JDC shall [*].

 

(iii)          In addition to a Regulatory Plan Change, Forest may amend the Regulatory Plan in good faith and [*]; provided that [*] (A) such amendment by Forest (unless it results from a Regulatory Plan Change) or (B) [*], in each case ((A) or (B)) shall [*].

 

(e)           Regulatory Responsibilities .

 

(i)            Generally .  The Parties’ joint regulatory strategy with respect to the Development of the Memantine-Donepezil FDC Products for Commercialization in the Field in the Territory is as specified in the Regulatory Plan and further detailed in the Development Plan.  Notwithstanding anything to the contrary in this Section 4.2(e), [*] all substantive submissions and communications made to Regulatory Authorities in the Territory (including the FDA) with respect to any Memantine-Donepezil FDC Product shall be subject to the prior approval of the JDC in writing and shall be provided to the JDC at least [*] (or less time as may be required by Regulatory Authorities in the Territory) prior to the intended date of submission or communication.

 

(ii)           Interaction with Regulatory Authorities .  Forest shall be responsible for[*] (subject to the oversight of the JDC [*]), interactions with Regulatory Authorities in the Territory (including the FDA) with respect to the Development of the Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field.  Notwithstanding the foregoing, [*], Forest shall promptly provide Adamas with prior written or email notice of all meetings, conferences and discussions scheduled with the FDA concerning all Memantine-Donepezil FDC Products (including advisory committee meetings and any other meeting of experts convened with the FDA concerning the Memantine-Donepezil FDC Products) within [*] after Forest or its Affiliate first receives notice of the scheduling of such meeting, conference or discussion (or within such shorter period as may be practicable and necessary in order to give Adamas a reasonable opportunity to attend such meetings, conferences and discussions).  Adamas shall be entitled to have representatives of Adamas (or its Affiliates) with appropriate expertise [*] at all such meetings, conferences or discussions with the FDA relating to Memantine-Donepezil FDC Products, which at a minimum shall mean that Adamas and its Affiliates shall have the right to have [*].  Forest shall provide Adamas with reasonable advance notice, as set forth above, of all such meeting, conferences or discussions with the FDA and

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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advance copies of all substantive submissions and written communications to the FDA in advance of such meetings, conferences or discussions, as well as any written correspondence received by Forest from the FDA with respect to such meetings, conferences or discussions.  Forest shall promptly forward to Adamas copies of all minutes thereof and summaries of all such meetings, conferences and discussions with the FDA, including copies of all contact reports produced by or on behalf of Forest or its Affiliates.  Forest shall consider in good faith Adamas’ reasonable proposals or comments to any substantive submissions or communications made by Forest to Regulatory Authorities in the Territory (including the FDA) with respect to the Development of Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field [*] Adamas’ proposal or comments with respect to any such submissions or communications made by Forest to Regulatory Authorities in the Territory.

 

(f)            Exchange of Information Regarding Development; Use of Program Data .  Each Party shall provide the other Party, at each meeting of the JDC until the JDC is disbanded in accordance with Section 4.2(b)(ii), with all material information and data relating to its Development of Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field.  In addition, from time to time, each Party shall provide to the other Party all material information and data relating to such Party’s Development of Memantine-Donepezil FDC Products for Commercialization in the Territory in the Field upon the other Party’s reasonable request.  In addition to its rights under and pursuant to Section 4.5, Adamas shall have the right to use such information received from Forest or its Affiliates to comply with all applicable Laws, including requirements by Regulatory Authorities.  However, without limiting its rights under and pursuant to Section 4.5, Adamas shall not have the right to use any Program Data (i) in a manner that would [*], without [*] (including any [*] in connection therewith) or (ii) in support of any Regulatory Approvals in the Field in the Territory; provided , however , that Adamas shall have the right to use Program Data for such purpose in clause (ii) in a manner consistent with this Agreement if [*] and [*]. Nothing in this Section 4.2(f) shall be construed as an implied license to any intellectual property rights of Forest, its Affiliates or any Third Party. As and to the extent set forth in Section [*], the use of Program Data to support Regulatory Approval or Commercialization of any Product [*] shall [*] with respect to such Product.

 

4.3          Development of Other Products .  As between the Parties, Forest shall have the sole right, at its sole cost and expense, to Develop Products other than the Memantine-Donepezil FDC Products for Commercialization in the Field in the Territory.  The Development of such Products in the Field in the Territory shall [*].  All interactions with Regulatory Authorities in the Territory, including the FDA, with respect to any Product in the Field of Forest or its Affiliates other than Memantine-Donepezil FDC Products in the Field shall [*].

 

4.4          Avoiding Conflicting Development Activities .

 

(a)           Prohibition .  Each Party shall not, and shall cause its Affiliates to not, and shall use Commercially Reasonable Efforts to cause each of its and its Affiliates’ licensees and (sub)licensees to not, conduct any Development activity regarding the Products that could reasonably be expected to result in a material adverse impact on the Development or Commercialization of the Products in the other Party’s respective Major Market(s) ( i.e. , in the case of Forest, with respect to a Product in the Field in the United States, and in the case of Adamas, with respect to a Product in the Field in Japan, the United Kingdom, France, Germany,

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Spain or Italy); provided that [*] shall not be deemed itself to be a material adverse impact on such Development or Commercialization of the Products.  Each Party shall require each of its and its Affiliates’ (sub)licensees that are conducting Development of Products to be subject to the provisions of this Section 4.4(a) (or analogous provisions with substantially the same terms set forth in this Section 4.4(a)).  Notwithstanding the foregoing, the restrictions and obligations set forth in this Section 4.4(a) shall only apply to the extent that [*] or [*].

 

(b)           Development Updates .

 

(i)            [*], Adamas shall provide Forest with a summary of all [*] to be conducted by Adamas or any of its Affiliates, licensees or (sub)licensees and provide copies of all material information and data within the Adamas Know-How in the possession of Adamas as of such time and relating to the Development of any such Product that would [*] by Adamas, its Affiliates, licensees or (sub)licensees [*].  Without limiting the generality of the foregoing, [*] for so long as Adamas or its Affiliates, licensees or (sub)licensees continues to Develop such Product for Commercialization [*], Adamas shall provide Forest with [*], in each case to the extent it has the right to provide such information; provided , however , that Adamas shall [*].

 

(ii)           [*], Forest shall provide Adamas with [*] to be conducted by Forest or any of its Affiliates or Sublicensees regarding any FDC Product for Commercialization in the Field in the Territory and provide copies of all material information and data within the Forest Know-How in the possession of Forest and relating to the Development of any such FDC Product by Forest, its Affiliates or Sublicensees for Commercialization within the Territory.  Without limiting the generality of the foregoing, [*] for so long as Forest or its Affiliates or Sublicensees continue to Develop such FDC Product for Commercialization [*], Forest shall provide Adamas with [*], in each case to the extent it has the right to provide such information; provided , however , that Forest shall [*].  Adamas’ use of any Program Data received from Forest shall be subject to Section 4.2(f).

 

(c)           Coordination of Development Activities within the Territory .  The Parties will work together in good faith to avoid conflicts between their respective Development activities for Products within the Territory and, if applicable, between their respective Development activities for the Products outside of the Territory, including coordinating each Party’s use of clinical trial sites in the Development of the Products.

 

4.5          Pharmacovigilance and Recalls .  Upon request by either Party to the extent required by Law, the Parties shall enter into a pharmacovigilance agreement containing reasonable and customary terms no less stringent than those required by FDA (or any applicable Regulatory Authority outside the Territory) governing the Parties’ respective responsibilities relating to the exchange of safety information and data with respect to some or all Products (as required by Law). Forest shall determine whether to conduct and shall be responsible for conducting any recall or withdrawal of a Product sold by or on behalf of Forest, its Affiliates and Sublicensees in the Field in the Territory.  Forest shall be responsible for all of its costs and expenses associated with any recall or withdrawal of Products pursuant to this Section 4.5; provided , however that to the extent any such recall or withdrawal resulted from Adamas’ breach of its obligations hereunder or the gross negligence or willful misconduct of Adamas or any of its Affiliates, Adamas shall bear the expense of such recall or withdrawal.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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ARTICLE V
COMMERCIALIZATION

 

5.1          General .  From and after the Effective Date, Forest shall have the sole right, at its sole cost and expense, to Commercialize the Products in the Field in the Territory in accordance with this Agreement.  During the Term, Forest shall, directly or indirectly through its Affiliates or Sublicensees, use Commercially Reasonable Efforts to Commercialize a Memantine-Donepezil FDC Product in the Field in the Territory.  Without limiting the foregoing, Forest agrees to [*] in good faith and in a manner that [*] for [*].

 

5.2          Commercialization Updates .  For any Calendar Year prior to the end of the ER Royalty Term, FDC Royalty Term or Proprietary Non-Donepezil FDC Royalty Term, as applicable, in which Forest or its Affiliates or Sublicensees is Commercializing a Product in the Field in the Territory, Forest shall, on [*] basis, provide Adamas with a reasonably detailed report describing such Commercialization activities completed since the last report and planned for the next [*], no later than [*].  Following the receipt of the first approval by the FDA of an NDA for the first Memantine-Donepezil FDC Product in the Field in the Territory, the Parties shall meet [*] during each Calendar Year to discuss the Commercialization of the Products in the Field [*].

 

5.3          Conduct of Commercialization .

 

(a)           Each Party shall not, and shall cause its Affiliates not to, and shall use Commercially Reasonable Efforts to cause each of its and its Affiliates’ licensees and (sub)licensees not to, conduct any Commercialization activity regarding any Products in its respective territory that could reasonably be expected to result in a material adverse impact on the Development or Commercialization of any Products in the other Party’s respective Major Market(s) ( i.e. , in the case of Forest, with respect to a Product in the Field in the United States, and in the case of Adamas, with respect to a Product in the Field in Japan, the United Kingdom, France, Germany, Spain or Italy).  Each Party shall require each of its and its Affiliates’ licensees and (sub)licensees in its territory that are conducting Commercialization of any Products to be subject to the provisions of this Section 5.3(a) (or analogous provisions with substantially the same terms set forth in this Section 5.3(a)) with respect to the other Party’s territory.  Notwithstanding the foregoing, (i) neither Party shall be subject to any such restriction or obligation with respect to [*]; and (ii) such restrictions and obligations shall only apply to the extent that [*] or [*].  Without limiting Section 5.2, each Party shall provide the other Party, upon such other Party’s reasonable request, with [*] by such first Party or any of its Affiliates, licensees or (sub)licensees, in each case to the extent such first Party has the right to provide such information; provided , however , that each Party shall [*].  Without limiting the generality of the foregoing, [*] for so long as a Party or its Affiliates, licensees or (sub)licensees continues to Commercialize any Product in which the other Party has an economic interest under this Agreement, such Party shall [*].

 

(b)           Each Party agrees not to, and agrees to cause it Affiliates not to and agrees to use Commercially Reasonable Efforts to cause its and its Affiliates’ distributors, licensees and Sublicensees (in the case of Forest) or (sub)licensees (in the case of Adamas) not to, promote or sell Products intended for its respective territory in, or otherwise encourage sales of Products

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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into, the other Party’s territory, subject to [*] and [*].  To the extent either Party becomes aware of such promotion or sales of Products into the other Party’s territory, the Party who becomes aware shall promptly notify the other Party of such promotion or sale.  Notwithstanding the foregoing, nothing in this clause (b) shall be construed to [*] or [*] or [*] as to which [*].  For clarity, the foregoing shall not be construed to [*].

 

(c)           The Parties acknowledge and agree that Forest has been granted exclusive rights under the Adamas Intellectual Property to Commercialize the Products in the Field in the Territory under the licenses in Section 2.1, and Adamas has retained the exclusive rights under the Adamas Intellectual Property to Commercialize the Products in the Field outside the Territory, and the restrictions set forth in this Section 5.3 are in furtherance of the Parties’ respective rights in the Territory and outside of the Territory.

 

5.4          Promotion of the FDC Products . The Parties acknowledge and agree, that based on their assumptions as of the Effective Date regarding (a)[*], in each case with respect to the first FDC Product and (b) [*] (collectively, the “ FDC Launch Assumptions ”), Forest, its Affiliates and Sublicensees, collectively shall [*].  If [*], [*] Commercially Reasonable Efforts diligence obligation set forth in Section 5.1 with respect to Commercialization of the FDC Products prior to [*] of the First Commercial Launch of the first FDC Product.  In the event of a material change in any of the FDC Launch Assumptions, as compared with the relevant conditions as of the Effective Date, such that it would no longer constitute Commercially Reasonable Efforts for Forest to undertake [*], Forest [*]; provided that [*] to [*] with respect to the Commercialization of a FDC Product in the Field in the Territory.  Upon Adamas’ request, Forest shall review and discuss with Adamas the nature of any [*] and any basis for any [*].  Any disagreement between the Parties as to whether [*] and [*] with respect to the Commercialization of a FDC Product [*] shall be [*].  If Forest fails to meet [*] for any FDC Product, Adamas shall have the right to [*] and [*], including [*] in accordance with [*].  In connection with any [*], each Party shall have the right to [*] with respect to the [*] or [*].

 

ARTICLE VI
FINANCIAL PROVISIONS

 

6.1          Initial License Payments .  Forest shall make a non-refundable, non-creditable payment to Adamas of Sixty-Five Million Dollars ($65,000,000) no later than five (5) Business Days after the Effective Date.

 

6.2          Development and Commercialization Costs .  Except as otherwise expressly provided in Sections 4.1 or 4.2, each Party shall be responsible for its costs in connection with its Development of Products hereunder, and Forest shall be solely responsible for its costs in Commercializing Products in the Field in the Territory.

 

6.3          Event Milestone Payments .

 

(a)           Forest shall make the milestone payments, as specified below (each, a “ Milestone Payment ”), to Adamas, based on the achievement of the corresponding milestone event specified below (each, a “ Milestone Event ”).  Forest shall notify Adamas in writing promptly after the achievement of such Milestone Event and, subject to Section 6.3(b), pay to

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Adamas the corresponding Milestone Payment within [*] of the achievement of such Milestone Event.

 

Milestone Event

 

Milestone Payment

(i)

 

The completion of final study report for [*]

 

$20,000,000

(ii)

 

The completion of a study report [*] to support the submission of an NDA for an FDC Product [*]

 

$20,000,000

(iii)

 

[*]

 

1. $[*] if [*]; or

 

2. $[*] if [*].

(iv)

 

The receipt of the first approval by the FDA of an NDA for an FDC Product (“ Approval Milestone ”)

 

1. $[*] if [*]; or

 

2. $[*] if [*].

 

For purposes of the foregoing: only one Milestone Payment shall be paid for the achievement of each corresponding Milestone Event under this Section 6.3(a), with the maximum total Milestone Payments (if scenario 1 applies in both cases of the Acceptance Milestone and the Approval Milestone) totaling $95,000,000 regardless of the number of acceptances or approvals for the FDC Products and no milestone payments shall be due for any other Product.  For the purpose of milestones (i) and (ii) above, Forest agrees that it shall use Commercially Reasonable Efforts to [*] as soon as practicable but in any event within [*].

 

(b)           In the event [*], then: (i) Forest shall [*] under [*] or [*] when [*] until the earlier of (1) the [*] or (2) [*], provided that if [*], [*] shall [*]; and (ii) Forest shall [*] and [*].  In the event Forest [*] or [*] by the earlier of (1) the [*] or (2) the [*], then, if Adamas [*] and Forest [*], this Agreement shall [*] with respect to [*].

 

6.4          Product Royalties and Other Payments .

 

(a)           Royalties on FDC Products .  Subject to Section 6.4(c)(ii) below, during the FDC Royalty Term, subject to Section 6.4(c) and any other applicable terms of this Agreement, Forest shall pay royalties on aggregate Net Sales in the Territory of FDC Products by Forest and its Affiliates and Sublicensees, as follows:

 

Portion of Sales Year Net Sales of FDC Products in the Territory
(for the portion during the FDC Royalty Term)

 

Royalty Rate

 

Less than or equal to $[*]

 

[*]

%

Greater than $[*]

 

[*]

%

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

30



 

(b)           Royalties on ER Products and Other Products .  During the ER Royalty Term, subject to Section 6.4(c), Forest shall pay royalties on aggregate Net Sales in the Territory of ER Products and Other Products by Forest and its Affiliates and Sublicensees, as follows:

 

Portion of Sales Year Net Sales of ER Products and Other
Products in the Territory (for the portion during the ER Royalty
Term)

 

Royalty Rate

 

Less than or equal to $[*]

 

[*]

%

Greater than $[*]

 

[*]

%

 

(c)           Royalty Term and Adjustments .

 

(i)            Forest’s royalty obligations to Adamas with respect to Net Sales of FDC Products in the Territory under Section 6.4(a) shall commence upon the Royalty Commencement Date (as defined in Section 6.4(c)(iv) below) for the first FDC Product in the Territory and shall continue thereafter, on a Product-by-Product basis, until the later of: (A) fifteen (15) years after First Commercial Launch of the first FDC Product in the Field in the Territory; and (B) the expiration of the last-to-expire Valid Claim of an Adamas Patent Right, including any Adamas Memantine Patent Right, that is listed in the Orange Book for such FDC Product in the Territory, except that in no event shall any royalty be due in any Calendar Quarter in which there is Generic Competition with respect to the applicable FDC Product in the Field in the Territory (the “ FDC Royalty Term ”).  Upon expiration of Forest’s royalty obligations with respect to an FDC Product under Section 6.4(a), the licenses granted by Adamas to Forest with respect to such FDC Product under Section 2.1(a)(i) and Section 2.1(a)(ii) shall become fully-paid, perpetual and irrevocable with respect to such FDC Product.

 

(ii)           Notwithstanding Section 6.4(a) above, with respect to any FDC Product that contains, as its sole active ingredients, Memantine and a proprietary Cholinesterase Inhibitor owned or Controlled by Forest or its Affiliates, other than Donepezil (a “ Proprietary Non-Donepezil FDC Product ”), in lieu of the royalty under Section 6.4(a), Forest shall pay Adamas [*] of the Net Sales of such Proprietary Non-Donepezil FDC Products in the Territory, and such payment obligation shall commence upon the Royalty Commencement Date and shall continue, on a Product-by-Product basis, for so long as there is at least one Valid Claim of an Adamas Patent Right, including an Adamas Memantine Patent Right, in each case, that is listed in the Orange Book for such Proprietary Non-Donepezil FDC Product, as applicable, in the Territory, except that in no event shall any royalty be due in any Calendar Quarter in which there is Generic Competition with respect to the applicable Product in the Territory (the “ Proprietary Non-Donepezil FDC Royalty Term ”).  Upon expiration of Forest’s royalty obligations with respect to a particular Proprietary Non-Donepezil FDC Product hereunder, the licenses granted by Adamas to Forest under Section 2.1(a)(i) and Section 2.1(a)(ii) shall become fully-paid and shall remain perpetual and irrevocable with respect to such Proprietary Non-Donepezil FDC Product, respectively.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(iii)          Forest’s royalty obligations to Adamas with respect to Net Sales of ER Products and Other Products in the Territory under Section 6.4(b) shall commence on the Royalty Commencement Date in the Field in the Territory and shall continue, on a Product-by-Product basis, for so long as there is at least one Valid Claim of an Adamas Patent Right, including an Adamas Memantine Patent Right, in each case, that is listed in the Orange Book for such ER Product or Other Product, as applicable, in the Territory, except that in no event shall any royalty be due in any Calendar Quarter in which there is Generic Competition with respect to the applicable ER Product or Other Product, as the case may be, in the Territory (the “ ER Royalty Term ”).  Upon expiration of Forest’s royalty obligations with respect to a particular ER Product or Other Product under Section 6.4(b), the licenses granted by Adamas to Forest under Section 2.1(a)(i) and Section 2.1(a)(ii) shall become fully-paid and shall remain perpetual and irrevocable with respect to such ER Product or Other Product, respectively.

 

(iv)          The “ Royalty Commencement Date ” shall mean: (A) with respect to an ER Product and Other Product, the date that is five (5) years after the First Commercial Launch of the first ER Product or Other Product, whichever is earlier, in the Field in the Territory; and (B) with respect to an FDC Product, the date that is five (5) years after the First Commercial Launch of the first FDC Product in the Field in the Territory.

 

(v)           Orange Book Listing .  The Parties shall cooperate in good faith in determining which Adamas Patent Rights will be listed in the Orange Book for each Product (other than Namenda), and the Parties agree that [*] in the Orange Book for each Product [*].  Notwithstanding the foregoing, [*] shall have the right to [*] a particular Adamas Patent Right in the Orange Book for a particular Product [*]: (A) there is [*] listing such Adamas Patent Right; or (B) listing such Adamas Patent Right would be [*], provided that [*] shall [*] at least thirty (30) days prior to [*] and shall [*], further provided that [*] shall [*] for the purpose of [*] under this Agreement.

 

(vi)          [*] Payments by Forest .  Forest shall [*] sales of an FDC Product [*] payable to Adamas pursuant to Section 6.4(a) or Section 6.4(c)(ii), as applicable, [*] Net Sales of such FDC Product after the applicable Royalty Commencement Date; provided , however , [*] the royalties on sales of such FDC Product paid to Adamas for any particular Calendar Quarter [*], provided , further , that any royalties [*] with respect to such Net Sales of such FDC Product after the Royalty Commencement Date [*] sales of such FDC Product paid to Adamas in such Calendar Quarter [*].  Forest hereby represents and warrants that, [*], there shall [*] with respect to the Net Sales of the FDC Products in the Field in the Territory[*].

 

(vii)         Blocking Patents .  If [*] cannot Manufacture or Commercialize an FDC Product in the Field in the Territory without infringing Patent Rights other than Patent Rights Controlled by Forest or its Affiliate (including those [*]) and not licensed to Forest hereunder, which Patent Rights Covers such FDC Product, unless it obtains a license to such patent from a Third Party (other than [*]) (a “ Forest Blocking Patent ”) and pays a royalty under such license (including in connection with settlement of a patent infringement claim in accordance with Section 7.7), or (B) becomes subject to a final court or other binding order or ruling requiring the payment of a royalty to a Third Party with respect to a Forest Blocking Patent in order to Manufacture or Commercialize an FDC Product in the Field in the Territory (collectively, “ Forest Third Party Patent Licenses ”), [*] of any royalties paid under Forest Third

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

32



 

Party Patent Licenses by Forest, its Affiliates or Sublicensees on Net Sales of such FDC Products after the applicable Royalty Commencement Date shall be fully creditable against royalties payable to Adamas hereunder with respect to such FDC Product; provided , however , that in no event shall such credit, together with any offset under Section 6.4(c)(vi), cause the royalties paid to Adamas with respect to such FDC Product for any particular Calendar Quarter to be reduced to less than [*] of the amount that would otherwise be payable to Adamas for such Calendar Quarter pursuant to Section 6.4(a) or Section 6.4(c)(ii), as applicable, provided , further , that any such royalty paid on sales of such FDC Product after the Royalty Commencement Date under Forest Third Party Patent Licenses by Forest that is not used by Forest in a particular Calendar Quarter to reduce royalties on sales of such FDC Product paid to Adamas in such Calendar Quarter may be carried over to subsequent Calendar Quarters until fully used in accordance with this Section 6.4(c)(vii).

 

(viii)        Authorized Generics .  In the event Forest, either by itself or through its Affiliates or Sublicensees, Commercializes one (1) or more products that are Authorized Generics with respect to a Product, then Forest shall pay to Adamas royalties on the Net Sales of such Authorized Generics in an amount [*].

 

(d)           Consideration [*] .

 

(i)            Payments .  (A) In the event that (x) [*] grants, sells or transfers to any Third Party rights, or otherwise enables such Third Party, to Develop or Commercialize any Product in the Field [*] and (y) [*], in connection with or pursuant to such Transaction, (1) [*] or [*], unless [*] have the right to [*], without [*] and [*] or [*] in order to [*] or [*], or (2) [*], unless [*] would [*] without [*], but excluding in each case ((1) and (2)) [*] (any of the foregoing [*], a “ Triggering Act ”), then [*] of Sublicensing Revenues received [*] from such Third Party for the Transaction that is reasonably allocated to such Product (which payment shall be made within [*] after the receipt of the corresponding Sublicensing Revenue from the Third Party); and (B) in the event that [*] Triggering Act, [*] of such Product in such countries [*] (where such [*] shall be calculated [*], but [*], rather than [*] and [*]) (which payment shall be made within [*] after the [*]).  For clarity, [*] Sublicensing Revenue sharing obligation under clause (A) above shall not apply to any amounts received [*] with respect to [*], and [*] clause (B) above shall [*].  In the event that any payments required to be made [*] pursuant to this Section 6.4(d)(i) are subject to additional withholding tax, [*] to obtain any tax benefit (including through the use of foreign tax credit) with respect to any amounts withheld or deducted for purposes of calculating Sublicensing Revenue and to defend such benefit in a tax audit (and the amount of any such benefit shall be included in Sublicensing Revenue).

 

(ii)           Payment Term .  [*] shall commence on the First Commercial Launch [*] Product that would give rise to a payment obligation [*] and shall continue thereafter on a Product-by- Product basis and country-by-country basis until [*] such first Product in the Field [*], except that in no event shall [*] in which there is [*] the applicable Product in the applicable country.

 

(iii)          [*] Payments and other Third Party Payments [*] .  [*] any amounts otherwise payable [*] pursuant to this Section 6.4(d) on a Product-by-Product basis an amount equal to [*] of any amounts paid [*] as consideration for a grant of rights from [*] with respect to

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

33



 

the applicable Product [*]; provided , however , that in no event shall such offset, together with any offset under Section 6.4(d)(iv), cause the amounts due [*] pursuant to this Section 6.4(d) for any particular Calendar Quarter for any country to be reduced (A) in any case of Section 6.4(d)(i)(A), to less than [*] of the amount that would otherwise be payable [*] for such Calendar Quarter for such country pursuant to such clause, or (B) in any case of Section 6.4(d)(i)(B), to less than [*] of the amount that would otherwise be payable [*] for such Calendar Quarter pursuant to such clause; and provided , further, that any [*] Payments that are not able to be used [*] Calendar Quarter as deductions under this Section 6.4(d) due to the foregoing limits on deductions [*] in accordance with this Section 6.4(d)(iii)(A) or (B), as applicable. [*]. In addition, to the extent that any amounts paid [*] are required to be paid [*] or [*] or [*] or [*], [*] may deduct [*] of such amounts from any payments [*] under this Section 6.4(d), [*] shall [*] when calculating the Sublicensing Revenue and royalty floor amounts under Section 6.4(d)(iii)(A) and (B) above.

 

(iv)          Blocking Patents .  If [*] without infringing Patent Rights other than Patent Rights [*], which Patent Rights Cover such Product unless it obtains a license to such patent from a Third Party (other than [*]) (an “[*]”) and pays a royalty under such license (including in connection with settlement of a patent infringement claim in accordance with Section 7.7), or (B) becomes subject to a final court or other binding order or ruling requiring the payment of a royalty to a Third Party with respect to [*] (collectively, “[*]”), [*] of any royalties [*] on net sales of such Product [*] under Section 6.4(d)(i)(B) shall be [*] under Sections 6.4(d)(i)(A) and (B) with respect to such Product; provided , however , that in no event shall such offset, together with any offset under Section 6.4(d)(iii), cause the amounts [*] pursuant to Section 6.4(d)(i) for any particular Calendar Quarter for any country to be reduced (A) in any case of Section 6.4(d)(i)(A), to less than [*] of the amount that would otherwise be payable [*] for such Calendar Quarter for such country pursuant to such clause or (B) in any case of Section 6.4(d)(i)(B), to less than [*] of the amount that would otherwise be payable [*] for such Calendar Quarter pursuant to such clause; provided , further , that any such royalty paid under [*] in such Calendar Quarter [*] in accordance with this Section 6.4(d)(iv).

 

(e)           Acknowledgement of Blended Royalty .

 

(i)            The Parties hereby acknowledge and agree that royalties may become payable by Forest to Adamas hereunder for Products for which there are no Valid Claims of an Adamas Patent Right, including any Adamas Memantine Patent Right, and that such royalties are in consideration of each of the following, separately and together:  (A) Adamas’ expertise and Know-How relating to the Products and (B) licenses granted to Forest with respect to the Adamas Know-How that is not within the claims of any Adamas Patent Right, including any Adamas Memantine Patent Right.  The Parties agree that the royalty rates set forth in Section 6.4(a), (b) and (c) reflect an efficient and reasonable blended allocation of the value provided by Adamas to Forest.

 

(ii)           The Parties hereby acknowledge and agree that [*] hereunder for Products are in consideration of the [*] if and when applicable in connection with the applicable Product.  The Parties agree that the [*] reflect an appropriate allocation of the value provided [*].

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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6.5          Reports; Payments .

 

(a)           Within [*] after the end of each Calendar Quarter during which there are Net Sales giving rise to a payment obligation under Section 6.4(a), 6.4(b), 6.4(c)(ii) or 6.4(c)(viii), Forest shall submit to Adamas a report identifying, for each Product for which a royalty is due thereupon, the Net Sales for such Product in the Territory for such Calendar Quarter, the applicable royalty rate, any royalty payable to Adamas and the basis for any reduction in royalties pursuant to any subsection of Section 6.4; provided that the first such report (and the associated payment) with respect to a Product Category shall not be due until after the end of the first full Calendar Quarter after the First Commercial Launch of the first Product in such Product Category and shall cover the period from such First Commercial Launch until the end of such first full Calendar Quarter.  Concurrently with each such report, Forest shall pay to Adamas all royalties payable by it under Section 6.4.  Notwithstanding the foregoing, Forest shall have the right to deduct from any amounts otherwise owed to Adamas under Section 6.4(a), 6.4(b), 6.4(c)(ii), or 6.4(c)(viii) any damages that Forest has been awarded under Section 12.2(b)(ii) or (b)(iii) as a result of Adamas’ breach of this Agreement that have not then been paid by Adamas or previously deducted under this sentence.  Prior to the time that a royalty report is due under this Section 6.5(a) above for a particular Product, Forest shall provide Adamas with reports for each half Calendar Year setting forth its Net Sales of such Product during such half Calendar Year, within [*] after the end of such half Calendar Year.

 

(b)           Within [*] after the end of each Calendar Quarter during which there are net sales of Products (which shall be determined in the same manner as Net Sales as described in Section 6.4(d)) [*], [*] a report identifying such net sales of such Products [*] under Section 6.4(d)(i)(B) for such Calendar Quarter, the applicable royalty rate, any royalty payable [*] any reduction in royalties pursuant to any subsection of Section 6.4, or the amount of [*] described in Section 6.4(d)(i)(A) for such Calendar Quarter.  Concurrently with each such report, [*] payable by it in accordance with Section 6.4(d).

 

6.6          Books and Records; Audit Rights .

 

(a)           Forest shall keep complete and accurate records of the underlying revenue and expense data relating to the calculations of Net Sales and Payments, including those required by Sections 6.4(a), (b), and (c).  Adamas shall have the right, once annually at its own expense, to have an independent, certified public accounting firm, selected by Adamas and reasonably acceptable to Forest, review any such records of Forest in the location(s) where such records are maintained by Forest upon reasonable notice (which shall be no less than [*] prior notice) and during regular business hours and under reasonable obligations of confidence, for the sole purpose of verifying the basis and accuracy of Payments made or due under Sections 6.4(a), (b), and (c) or otherwise under this Agreement within the [*] period preceding the date of the request for review.  The report of such accounting firm shall be limited to a certificate stating whether any report made or Payment submitted by Forest during such period is accurate or inaccurate and the actual amounts of Net Sales, and royalties or other Payment due, for such period.  Should such inspection lead to the discovery of a discrepancy to Adamas’ detriment, Forest shall pay within [*] after its receipt from the accounting firm of the certificate the amount of the discrepancy plus interest calculated in accordance with Section 6.9.  Adamas shall pay the full cost of the review unless the underpayment of royalties is greater than [*] of the amount due for

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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the applicable period, in which case Forest shall pay the reasonable cost charged by such accounting firm for such review.  Any overpayment by Forest revealed by an examination shall be fully creditable against future Payments.

 

(b)           [*] shall [*] relating to the calculations [*] under Section 6.4(d)(i)(B) (as calculated pursuant to Section 6.4(d)) and the Sublicensing Revenue payments required [*] under Section 6.4(d)(i)(A).  [*] shall have the right, once annually at its own expense, to have an independent, certified public accounting firm, selected by [*] and reasonably acceptable to [*], review any such records [*] in the location(s) where such records are maintained [*] upon reasonable notice (which shall be no less than [*] prior notice) and during regular business hours and under reasonable obligations of confidence, for the sole purpose of verifying the basis and accuracy of payments made under Section 6.4(d) within the [*] period preceding the date of the request for review.  The report of such accounting firm shall be limited to a certificate stating whether any report made or payment [*] during such period is accurate or inaccurate and the actual amounts of [*] for which [*] under Section 6.4(d)(i)(B) (calculated in accordance with Section 6.4(d)), royalties due, and Sublicensing Revenue payments [*] under Section 6.4(d)(i)(A) for such period.  Should such inspection lead to the discovery of a discrepancy [*] shall pay within [*] after its receipt from the accounting firm of the certificate the amount of the discrepancy plus interest calculated in accordance with Section 6.9.  [*] shall pay the full cost of the review unless the underpayment of royalties or other amounts due is greater than [*] of the amount due for the applicable period, in which case [*] shall pay the reasonable cost charged by such accounting firm for such review.  Any overpayment by [*] revealed by an examination shall be fully creditable against future payments [*].

 

6.7          Tax Matters .  No payments required to be made hereunder shall be reduced on account of any taxes unless required by Law.  [*].  The Parties shall cooperate in good faith to obtain the benefit of any relevant tax treaties to minimize as far as reasonably possible any taxes that may be levied on any Payments or payments received by Forest.  Each Party shall deduct or withhold from the payments made to the other Party any taxes that it is required by Law to deduct or withhold.  Notwithstanding the foregoing, if either Party is entitled under any applicable tax treaty to a reduction of the rate of, or the elimination of, applicable withholding tax, it may deliver to the other Party or the appropriate Governmental Authority (with the assistance of the other Party to the extent that this is reasonably required and is expressly requested in writing) the prescribed forms necessary to reduce the applicable rate of withholding or to relieve the other Party of its obligation to withhold tax, and the other Party shall apply the reduced rate of withholding tax, or dispense with withholding tax, as the case may be, provided that such other Party has received evidence of the first Party’s delivery of all applicable forms (and, if necessary, its receipt of appropriate governmental authorization) at least [*] prior to the time that the payment to the first Party is due.  If, in accordance with the foregoing, the paying Party withholds any amount, it shall make timely payment to the proper taxing authority of the withheld amount, and send to the other Party proof of such payment within [*] following that latter payment.  Forest represents and warrants that, to its knowledge, no withholding tax will be due on the payments made by Forest pursuant to Section 6.1, 6.3 or 6.4 based on the jurisdictions of the Parties and Law, in each case, in effect as of the Effective Date.  In the event that either Party assigns this Agreement to an Affiliate or Third Party and, as a result of such assignment, payments made hereunder are subject to additional withholding tax, such assigning Party shall be

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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responsible for the resulting additional withholding taxes; provided , that if the non-assigning Party derives a tax benefit (including through the use of foreign tax credit) determined on a with and without basis as a result of such additional withholding, then the non-assigning Party shall promptly reimburse the assigning Party for the amount of such benefit; provided further that the non-assigning Party shall take all actions necessary to obtain any tax benefit (including through the use of foreign tax credit) with respect to such additional withholding taxes and to defend such benefit in a tax audit.

 

6.8                                Payment Method and Currency Conversion .  All payments made pursuant to this Agreement shall be made in US dollars in immediately available funds via either a bank wire transfer, an ACH (automated clearing house) mechanism, or any other means of electronic funds transfer, in the case of payments to Adamas, to Adamas’ bank account at [*], or to such other bank account as Adamas shall designate in a notice at least ten (10) days before the payment is due, or, in the case of payments to Forest, to Forest’s bank account at [*] or to such other bank account as Forest shall designate in a notice at least ten (10) days before the payment is due.  Each Party’s wiring instructions are set forth on Schedule 6.8 .  For the purposes of determining the amount of any consideration payable [*], the amount of any such consideration in any foreign currency shall be converted into another currency in accordance with the prevailing rates of exchange for the relevant month for converting such first currency into such other currency used by such paying Party’s internal accounting systems, which are independently audited on an annual basis.  Upon request by the non-paying Party, the paying Party shall disclose the bases for the rates of exchange used for purposes of assuring that such rates reflect prevailing rates of exchange.

 

6.9                                Late Payments .  If a Party shall fail to make a timely payment pursuant to the terms of this Agreement, the other Party shall provide written notice of such failure to the non-paying Party (a “ Late Payment Notice ”), and interest shall accrue on the past due amount starting on the date of the Late Payment Notice as follows:

 

(a)                                  for amounts [*] or fewer days past due, the rate applied shall be the [*] US dollar LIBOR rate effective for the date that payment was due (as published in the Wall Street Journal), computed for the actual number of days after the date of the Late Payment Notice that the payment was past due; and

 

(b)                                  for amounts greater than [*] past due, the rate applied shall be the [*] US dollar LIBOR rate effective for the date that payment was due (as published in the Wall Street Journal) plus [*] per annum, computed for the actual number of days after the date of the Late Payment Notice that the payment was past due; provided , however , in the event of any dispute with respect to any amount payable by a Party under this Agreement, such Party, at its option, may (i) pay such disputed amount to the other Party and if the dispute is resolved in favor of the paying Party, then within [*] after the resolution of such dispute, the non-paying Party shall reimburse the paying Party for the amount of such payment plus interest at the [*] US dollar LIBOR rate effective for the date that the paying Party made such payment (as published in the Wall Street Journal) plus [*] per annum, computed for the actual number of days after the date the paying Party made such payment until the date the non-paying Party reimburses the paying Party or (ii) elect to withhold payment during the pendency of the dispute, in which case if the dispute is resolved against such Party this Section 6.9(b) shall apply.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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6.10                         Other Amounts Due . Unless otherwise specified in this Agreement, all amounts required to be paid by a Party under this Agreement shall be paid by such Party within [*] after receipt of an invoice therefor.

 

ARTICLE VII
INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION
 AND RELATED MATTERS

 

7.1                                Joint IP Working Group .  Promptly following the Effective Date, the Parties shall establish a joint working group consisting of at least one (1) designee of Adamas and at least one (1) designee of Forest, each of which shall have experience in the prosecution, enforcement and defense of intellectual property rights in the pharmaceutical field (the “ Joint IP Working Group ” or “ JIPWG ”).  Each Party may change its designee(s) on the JIPWG upon written notice to the other Party.  The JIPWG shall be responsible for coordinating all material activities and material communications relating to the prosecution, maintenance and enforcement of the Adamas Memantine Patent Rights in the Territory and for coordinating all other material communications between the Parties with respect to the Adamas Patent Rights that are not Adamas Memantine Patent Rights and the Forest Patent Rights.  The JIPWG shall strive to reach consensus with respect to such matters; provided , however , that, in the event that consensus cannot be reached, (a) subject to any applicable provisions of Section 7.3, [*] the applicable Adamas Patent Right, including any Adamas Memantine Patent Right, or Forest Patent Right, as the case may be, shall [*] with respect to such prosecution and maintenance and (b) [*] any Adamas IP Infringement Claim or Invalidity Claim shall [*] with respect to such action; in each case as more fully described in, and subject to, this ARTICLE VII.

 

7.2                                Ownership of Know-How and Patents .  Subject to the rights and obligations of the Parties hereunder: (a) [*] shall own all Know-How (and all Patent Rights in such Know-How) that is developed, created, conceived or first reduced to practice by employees or agents or subcontractors of [*] or its Affiliates in carrying out any Development activity pursuant to ARTICLE IV of this Agreement during the Term, with or without employees or agents or subcontractors of [*] or its Affiliates, that [*] (such Know-How, the “ Joint Know-How ” and such Patent Rights, the “ Joint Patent Rights ”), on a worldwide basis, and (b) [*] shall own all [*], on a worldwide basis.  For clarity, without limitation of any rights of [*] hereunder, [*] shall have the right to practice the Joint Know-How and the Joint Patent Rights for any purpose, and to license others to do the same, without obtaining the consent of or accounting to [*].  For clarity, Joint Know-How shall exclude any [*].  The determination of whether any invention is conceived or reduced to practice by or on behalf of a Party or an Affiliate thereof for the purpose of determining whether it constitutes Joint Know-How shall, for purposes of this Agreement, be made in accordance with the laws of inventorship under the US patent laws as such laws exist as of the Effective Date. Each Party hereby assigns to the other Party such of its right, title and interest in any Know-How developed, created, conceived or first reduced to practice under this Agreement as necessary to effect the ownership rights set forth above.  [*] shall execute and deliver to [*], without additional compensation, all documents that are necessary to assign and otherwise transfer the [*] to [*] as is necessary to fully effect the ownership thereof by [*].  [*] shall execute and deliver to [*], without additional compensation, all documents that are necessary to assign and otherwise transfer the [*] to [*] as is necessary to fully effect the

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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ownership thereof by [*].  Notwithstanding anything to the contrary [*], [*] shall not [*] any [*], except that [*] may [*] included in [*] to the extent legally required or necessary [*] for Products, but in no event shall [*] for the purpose of [*], including any [*] and any [*].

 

7.3                                Prosecution and Maintenance of Patent Rights .

 

(a)                                  Prosecution of Adamas Memantine Patent Rights .

 

(i)                                      Prosecution and Maintenance .  [*] prepare, file, prosecute and maintain (including with respect to related interference, derivation, re-issuance, re-examination, opposition and other post-grant proceedings) the Adamas Memantine Patent Rights in the Territory.  Adamas and Forest shall cooperate through the JIPWG in connection with the continued prosecution and maintenance [*] of the Adamas Memantine Patent Rights, and the JIPWG shall discuss and shall strive to agree upon a strategy for the prosecution and maintenance [*] of the Adamas Memantine Patent Rights.  Subject to this Section 7.3(a)(i), if consensus cannot be reached by the JIPWG with respect to any matter relating to the prosecution and maintenance of the Adamas Memantine Patent Rights in the Territory, including whether to file a patent application in the Territory, [*] shall have the final decision-making authority regarding such prosecution and maintenance; provided that [*] shall consider in good faith [*] reasonable proposals or comments as part of such filing, prosecution and maintenance.  At all times during the Term, [*] shall have the right to review and comment on the documentation, filings and communications to or from the US Patent and Trademark Office (or any successor agency) (including reasonable access thereto) related to the Adamas Memantine Patent Rights, and [*] shall keep [*] reasonably informed of the status of all pending patent applications that pertain to the Adamas Memantine Patent Rights.  [*]: (1) [*] shall incorporate [*] reasonable proposals or comments as part of such filing, prosecution or maintenance, and (2) [*] shall use for the filing and prosecution of the Adamas Memantine Patent Rights patent counsel [*], which [*] patent counsel for the Adamas Memantine Patent Rights [*]; provided , however , in the event that [*] reasonably believes that [*] is [*] the Adamas Memantine Patent Rights, [*] shall have the right to elect to change patent counsel to patent counsel [*], such [*].  On and after the Effective Date, such [*] patent counsel shall [*], and [*] with respect to such filing and prosecution.  If, [*], [*] decides to abandon any Adamas Memantine Patent Rights, [*] shall, at its sole expense, have the option to continue to prosecute and maintain such Patent Rights, in which case such Patent Rights shall [*], but, for clarity, shall [*].  If, [*], [*] decides to abandon any Adamas Memantine Patent Rights, [*] shall, at its sole expense, have the option to continue to prosecute and maintain such Patent Rights [*], provided that (1) any such prosecution and maintenance by [*] shall [*] with respect to the other Adamas Memantine Patent Rights; (2) [*] shall (A) keep [*] reasonably informed of the status of all pending patent applications that pertain to such Adamas Memantine Patent Rights, (B) incorporate [*] reasonable proposals or comments as part of such filing, prosecution or maintenance, and (C) use for the filing and prosecution of such Adamas Memantine Patent Rights patent counsel [*]; and (3) for clarity, such Adamas Memantine Patent Rights shall [*].  If (A) the prosecuting Party’s intended position in the prosecution or maintenance of an Adamas Memantine Patent Right would be reasonably expected to have a material adverse effect on the non-prosecuting Party’s interest in and rights to the [*] (including the licenses granted hereunder), the [*] (in case of [*] an Adamas Memantine Patent Right), or the Commercialization of the Products in the Field in the non-

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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prosecuting Party’s territory and (B) the non-prosecuting Party notifies the prosecuting Party of its objection to such prosecution or maintenance position, the Parties shall meet and discuss the non-prosecuting Party’s objection in good faith and use reasonable efforts to determine a mutually agreeable prosecution or maintenance strategy, provided that if the Parties fail to agree and the non-prosecuting Party maintains its objection, [*].

 

(ii)                                   General Provisions .  With respect to [*] prosecution and maintenance of the Adamas Memantine Patent Rights under Section 7.3(a)(i), [*] and its Affiliates will not take (and shall not grant to any Third Party the right to take) any action (including by reissue or reexamination) to [*] any Adamas Memantine Patent Rights to [*].  In the event [*] any Adamas Memantine Patent Rights to any of its Affiliates or a Third Party, [*] shall (A) condition [*] upon an express written agreement of such Affiliate or Third Party to be bound by the restrictions of Section 7.3(a) to the same extent as [*], (B) be responsible for such Affiliate’s or Third Party’s compliance with such restrictions, (C) promptly provide to [*] written evidence of compliance with the obligation set forth in Section 7.3(a)(ii)(A), and (D) cooperate with [*] regarding the enforcement of such restrictions.

 

(b)                                  No Challenge .  Except to the extent required under applicable Law, if: (i) Forest or any of its Affiliates or Sublicensees (including [*] under this Agreement), or (ii) [*], [*] or any [*] (if [*] under this Agreement), intentionally commences, participates in, solicits, actively supports or encourages any challenge to the validity or enforceability of any Patent Rights in the Territory within the Adamas Patent Rights (including the Adamas Memantine Patent Rights) before any Governmental Authority, or causes or requests a review of the same by any such Governmental Authority (a “ Forest Patent Challenge ”) and does not effectively withdraw and eliminate such Forest Patent Challenge within [*] after written notice by Adamas to Forest, then, effective upon the end of such [*] period: (A) [*] set forth in [*] shall [*] with respect to [*] and [*] with respect to [*]; (B) any [*] shall [*]; and (C) [*] shall [*] of the [*] and any [*].  For clarity, if [*] an Adamas Patent Rights that [*] as a result of a Forest Patent Challenge, then [*], such [*] will [*] for purposes of [*] hereunder.  During the Term, Adamas shall provide Forest from time to time with a list of Patent Rights constituting the Adamas Patent Rights (including the Adamas Memantine Patent Rights) in the Territory to enable Forest to comply with the terms of this Section 7.3(b).  Notwithstanding anything to the contrary in this Agreement, Forest shall have the right to [*] for the sole purpose of [*] compliance with the terms of this Section 7.3(b).  Further, unless and until an Adamas Patent Right is included on such list, the provisions of this Section 7.3(b) shall not apply to such Adamas Patent Right.

 

(c)                                   Prosecution of Adamas Patent Rights; Related Adamas Patent Rights .

 

(i)                                      Adamas shall have the sole right, but not the obligation, at its cost and expense, to prepare, file, prosecute and maintain (including with respect to related interference, derivation, re-issuance, re-examination, opposition and other post-grant proceedings) the Adamas Patent Rights (other than the Adamas Memantine Patent Rights) anywhere in the world.  Adamas shall keep Forest informed as to prosecution matters with respect to Adamas Patent Rights, to the extent such Adamas Patent Rights [*], through the JIPWG, and Adamas shall consider in good faith any comments provided by Forest with respect to such prosecution matters.  In the event any such Adamas Patent Right [*], Adamas shall [*].  [*] shall [*].  If Adamas’ intended position in the prosecution or maintenance of the Adamas

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended

 

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Patent Rights pursuant to this Section 7.3(c)(i) would be reasonably expected to have a material adverse effect on the Commercialization of the Products in the Field in the Territory and Forest notifies Adamas of its objection to such prosecution or maintenance position, the Parties shall meet and discuss such objection in good faith and use reasonable efforts to determine a mutually agreeable prosecution or maintenance strategy, provided that if the Parties fail to agree and Forest maintains its objection, [*].

 

(ii)                                   If Adamas’ intended position in the prosecution or maintenance of the Related Adamas Patent Rights would be reasonably expected to have a material adverse effect on the Commercialization of the Products in the Field in the Territory and Forest notifies Adamas of its objection to such prosecution or maintenance position, the Parties shall meet and discuss such objection in good faith and use reasonable efforts to determine a mutually agreeable prosecution or maintenance strategy, provided that if the Parties fail to agree and Forest maintains its objection, [*].

 

(d)                                  Prosecution of Forest Patent Rights .

 

(i)                                      Forest shall have the sole right, but not the obligation, at its cost and expense, to prepare, file, prosecute and maintain (including with respect to related interference, derivation, re-issuance, re-examination, opposition and other post-grant proceedings) the Forest Patent Rights (other than the [*] as to which [*], [*] as described in [*]) anywhere in the world.  Forest will keep Adamas reasonably informed with respect to the prosecution and maintenance of the Forest Patent Rights through the JIPWG, and Forest shall consider in good faith any comments provided by Adamas with respect to such prosecution matters.  If Forest’s intended position in the prosecution or maintenance of the Forest Patent Rights pursuant to this Section 7.3(d)(i) would be reasonably expected to have a material adverse effect on effect on the Commercialization of the Products in the Field outside the Territory and Adamas notifies Forest of its objection to such prosecution or maintenance position, the Parties shall meet and discuss such objection in good faith and use reasonable efforts to determine a mutually agreeable prosecution or maintenance strategy, provided that if the Parties fail to agree and Adamas maintains its objection, [*].

 

(ii)                                   No Challenge .  Except to the extent required under Law, in the event that Adamas or any of its Affiliates or (sub)licensees intentionally commences, solicits or encourages any challenge to the validity or enforceability of any Patent Rights in the Territory owned or Controlled by Forest that Cover a Product before any Governmental Authority, or causes or requests a review of the same by any such Governmental Authority (an “ Adamas Patent Challenge ”) and does not effectively withdraw and eliminate such Adamas Patent Challenge within [*] after written notice by Forest to Adamas, then, effective upon the end of such [*] period, (A) [*] set forth in [*] shall [*], (B) any [*] shall [*], and (C) [*] shall [*] of the [*] and any [*].  During the Term, Forest shall provide Adamas from time to time with a list of Patent Rights Controlled by Forest and subject to this Section 7.3(d)(ii) to enable Adamas to comply with the terms of this Section 7.3(d)(ii).  Notwithstanding anything to the contrary in this Agreement, Adamas shall have the right to [*] for the sole purpose of [*] compliance with the terms of this Section 7.3(d)(ii).  Further, unless and until a Patent Right is included on such list, the provisions of this Section 7.3(d)(ii) shall not apply to such Patent Right.  In the event Forest or any of its Affiliates or (sub)licensees initiates any claim, suit or proceeding that asserts or

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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enforces any Patent Rights owned or Controlled by Forest in the Territory against Adamas or any of its Affiliates or (sub)licensees with respect to any product other than a Product, then Adamas (or its Affiliate or (sub)licensee, as applicable) shall have the right to defend such claim, suit or proceeding with respect to such product (subject to the other provisions of this Agreement), notwithstanding this Section 7.3(d)(ii), and the foregoing [*] shall not apply by reason of such defense.

 

(iii)                                Forest shall not, and shall ensure that its Affiliates shall not, and shall not enable any licensees, collaborators or Sublicensees to, without the prior written consent of Adamas, file, prosecute or maintain any Patent Right with respect to the Forest Know-How outside the Territory that [*], or [*] or [*], or [*] in accordance with [*] or [*] or [*] under this Agreement, either [*] or [*].

 

(e)                                   Prosecution of Joint Patent Rights .  If [*] decides not to file or to abandon any Joint Patent Right, [*] shall, at its sole expense, have the option to file or continue to prosecute and maintain such Joint Patent Right [*], and [*] shall consider in good faith any comments provided by [*] with respect to such prosecution matters; provided , however , that if [*] any such Joint Patent Right [*] for [*], [*] prosecute any such Joint Patent Rights pursuant to this Section 7.3(e). Any Joint Patent Right prosecuted and maintained by [*] pursuant to this Section 7.3(e) shall [*] and shall [*] and [*], as applicable. If [*] intended position in the prosecution or maintenance of the Joint Patent Rights pursuant to this Section 7.3(e) would be reasonably expected to have a material adverse effect on the Commercialization of the Products in the Field [*] and [*] notifies [*] of its objection to such prosecution or maintenance position, the Parties shall meet and discuss such objection in good faith and use reasonable efforts to determine a mutually agreeable prosecution or maintenance strategy, provided that if the Parties fail to agree and [*] maintains its objection, [*].

 

(f)                                    Cooperation .  The Parties shall coordinate so that, to the extent practicable, there are separate patent applications for the Forest Patent Rights [*], on the one hand, and the Adamas Patent Rights, including Adamas Memantine Patent Rights, on the other.

 

(g)                                   Notices and Encumbrances .  Each Party shall execute and file those notices and other filings as the other Party shall reasonably request be made from time to time with the US Patent and Trademark Office (or any successor agency or any corresponding Governmental Authority outside the Territory) with respect to the rights granted to the other Party under this Agreement, with associated reasonable, documented, out-of-pocket costs and expenses to be reimbursed promptly by the requesting Party.

 

(h)                                  CREATE Act .  The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in the CREATE Act (or, after March 16, 2013, 35 U.S.C. § 100(h)).  Notwithstanding anything to the contrary in this ARTICLE VII, each Party may at any time make an election under the CREATE Act when exercising its rights under this ARTICLE VII without the prior written consent of the other Party.  In the event a Party makes an election under the CREATE Act in accordance with this Section 7.3(h), the other Party shall cooperate and coordinate its activities with the electing Party with respect to any submissions, filings or other activities in support thereof.  Without limiting the foregoing, each Party may use

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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the contents of Schedule 7.3(h)  in exercising its rights hereunder with respect to any such election under the CREATE Act.

 

7.4                                Third Party Infringement of Adamas Patent Rights .

 

(a)                                  Notice .  Each Party shall promptly report in writing to the other Party during the Term any known or suspected (i) infringement of any of the Adamas Patent Rights by a Product in the Field in the Territory, or (ii) unauthorized use or misappropriation of any of the Adamas Know-How with respect to a Product in the Field in the Territory (each case, except with respect to any Adamas Paragraph IV Claim subject to Section 7.11, an “ Adamas IP Infringement Claim ”), of which such Party becomes aware, and shall provide the other Party with all available evidence supporting such Adamas IP Infringement Claim.  Adamas shall also promptly report in writing to Forest during the Term any infringement of any Forest Patent Right by an FDC Product or any unauthorized use or misappropriation with respect to an FDC Product of any Forest Know-How anywhere in the world, in each case of which Adamas becomes aware.

 

(b)                                  Initial Right to Enforce .  Subject to Sections 7.4(c) through 7.4(f), Forest shall have the first right, but not the obligation, to initiate a suit, or take other appropriate action that it believes is reasonably required to protect ( i.e. , prevent or abate actual or threatened infringement or misappropriation of) or otherwise enforce the Adamas Intellectual Property relating to a Product in the Field in the Territory, with respect to an Adamas IP Infringement Claim; provided that the provisions of Section 7.6 shall govern the right to defend any challenge to the validity or enforceability of any Adamas Patent Right brought in connection with such action.  Any such suit by Forest shall be brought either in the name of Adamas or its Affiliate, the name of Forest or its Affiliate, or jointly by Forest, Adamas and their respective Affiliates, as may be required by the Law of the forum and Adamas shall join any action brought by Forest pursuant to this Section 7.4(b) if requested by Forest, at Forest’s expense, and otherwise shall have the right to participate, at its sole expense, in such action.  Adamas shall execute such legal papers and cooperate in the prosecution of any such suit as may be reasonably requested by Forest; provided that Forest shall promptly reimburse Adamas’ reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by Adamas in connection with such cooperation.  In respect of any enforcement action brought by Forest pursuant to this Section 7.4(b), except to the extent prohibited by Laws or a court order, Forest shall (i) keep Adamas reasonably informed regarding Forest’s actions with respect to the enforcement of the Adamas Intellectual Property and (ii) promptly provide Adamas with copies of all documents and other materials filed by any party to such enforcement action with the court before which such enforcement action is pending.  [*], Forest shall [*] Adamas’ reasonable proposals or comments with respect to such enforcement.  [*], Forest shall [*] Adamas’ reasonable proposals or comments with respect to such enforcement.

 

(c)                                   Step-In Right .  [*], if Forest does not initiate a suit or take other appropriate action that it has the initial right to initiate or take with respect to an Adamas IP Infringement Claim pursuant to Section 7.4(b) within [*] of a Party providing notice of such Adamas IP Infringement Claim under Section 7.4(a), then Adamas may, in its discretion, provide Forest with notice of Adamas’ intent to initiate a suit or take other appropriate action.  If Adamas provides such notice and Forest does not initiate a suit within [*] after receipt of such notice

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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from Adamas, then Adamas shall, subject to Section 7.4(d), have the right to initiate a suit or take other appropriate action that it believes is reasonably required to protect or enforce the Adamas Intellectual Property; provided that the provisions of Section 7.6 shall govern the right to defend any challenge to the validity or enforceability of any Adamas Patent Right brought in connection with such action. Notwithstanding the foregoing, if [*] a suit or taking other action to protect or enforce the Adamas Intellectual Property pursuant to this Section 7.4(c) that [*], [*] enforce such Adamas Intellectual Property pursuant to this Section 7.4(c); provided , however , that [*] an enforcement action with respect to the Adamas Intellectual Property based on considerations of [*] under this Agreement.  Any suit by Adamas shall be either in the name of Adamas or its Affiliate, the name of Forest or its Affiliate, or jointly by Forest, Adamas and their respective Affiliates, as may be required by the Law of the forum.  Forest shall join any action brought by Adamas pursuant to this Section 7.4(c) if requested by Adamas, at Adamas’ expense, and otherwise shall have the right to participate, at its sole expense, in such action.  Forest shall execute such legal papers and cooperate in the prosecution of any such suit as may be reasonably requested by Adamas; provided that Adamas shall promptly reimburse all reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by Forest in connection with such cooperation.  In respect of any enforcement action brought by Adamas pursuant to this Section 7.4(c), Adamas shall (i) keep Forest reasonably informed regarding Adamas’ actions with respect to the enforcement of the Adamas Patent Rights or Adamas Know-How in respect of such Adamas IP Infringement Claim and (ii) promptly provide Forest with copies of all documents and other materials filed by any party to such enforcement action with the court before which such enforcement action is pending.  Adamas’ step-in rights to initiate suit under this Section 7.4(c) with respect to the [*] shall [*].

 

(d)                                  Restrictions on Enforcement .  Notwithstanding anything herein to the contrary, if (A) the enforcing Party’s intended position in any enforcement action with respect to an Adamas IP Infringement Claim or settlement thereof under Section 7.4(b) or 7.4(c), in either case, would be reasonably expected to have a material adverse effect on the non-enforcing Party’s interest in and rights to the Adamas Intellectual Property (including the licenses granted hereunder), or the Commercialization of the Products or in the case of [*], other products that [*] in the Field in the non-enforcing Party’s respective territory and (B) the non-enforcing Party notifies the enforcing Party of its objection to such enforcement position, the Parties shall meet and discuss the non-enforcing Party’s objection in good faith and use reasonable efforts to determine a mutually agreeable enforcement position, provided that if the Parties fail to agree and the non-enforcing Party maintains its objection, [*].  Notwithstanding the foregoing sentence, this Section 7.4(d) shall [*].

 

(e)                                   Conduct of Certain Actions; Costs .  The Party initiating suit with respect to an Adamas IP Infringement Claim shall, subject to Sections 7.4(b) and 7.4(d), have the sole and exclusive right to select counsel for, and otherwise control, any suit initiated by it pursuant to Section 7.4(b) or 7.4(c).  The initiating Party shall assume and pay all of its own out-of-pocket costs incurred in connection with any litigation or proceedings initiated by it pursuant to Sections 7.4(b) and 7.4(c), including the fees and expenses of the counsel selected by it.  The non-initiating Party shall have the right to participate, but not control, and be represented in, any such suit by its own counsel at its own expense.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(f)                                    Recoveries .  Any damages, settlements, accounts of profits, or other financial compensation recovered from a Third Party by the Party that assumes control over enforcing any Adamas IP Infringement Claim shall be allocated between the Parties as follows:

 

(i)                                      first, the Party that assumes control over enforcing such Adamas IP Infringement Claim shall retain an amount equal to its actual reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred in pursuing such Adamas IP Infringement Claim;

 

(ii)                                   second, to the extent the remaining amount is sufficient, the Party that assumes control over enforcing such Adamas IP Infringement Claim shall promptly pay to the other Party the other Party’s actual reasonable, documented, out-of-pocket expenses (including reasonable counsel fees and expenses) actually and reasonably incurred in connection with enforcement of such Adamas IP Infringement Claim, to the extent not paid already pursuant to Section 7.4(b) or 7.4(c), or 7.11(b) as applicable; and

 

(iii)                                third, any remaining amount recovered shall be allocated between the Parties as follows: (A) with respect to any amounts related to FDC Products, other than Proprietary Non-Donepezil FDC Products, [*] to Forest and [*] to Adamas, (B) with respect to any amounts related to ER Products or Other Products, [*] to Forest and [*] to Adamas, and (C) with respect to any amounts related to Proprietary Non-Donepezil FDC Products, [*] to Forest and [*] to Adamas.

 

7.5                                Enforcement of Joint Intellectual Property .  [*] shall have the sole right, but not the obligation, to initiate a suit or take other appropriate action that it believes is reasonably required to protect or otherwise enforce and defend the Joint Intellectual Property with respect to any infringement of or unauthorized use or misappropriation of such Joint Intellectual Property anywhere in the world (including in connection with a Paragraph IV Claim or foreign equivalent); provided , however , that [*] shall not enforce the Joint Intellectual Property outside the Territory against (a) [*] or its Affiliates or (b) [*] or its Affiliates’ respective (sub)licensees of a Product with respect to their activities with respect to any Product.  [*] shall execute such legal papers and cooperate in the enforcement of any such suit against a Third Party as may be reasonably requested by [*]; provided that [*] shall promptly reimburse all reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by [*] in connection with such cooperation.

 

7.6                                Patent Invalidity Claim .  Each of the Parties shall promptly notify the other in the event of any challenge of invalidity or unenforceability by any Third Party against an Adamas Memantine Patent Right of which it becomes aware, including any nullity, revocation, reexamination or compulsory license proceeding (each, an “ Invalidity Claim ”).  Adamas and Forest will cooperate through the JIPWG with respect to developing a strategy for the defense of any Invalidity Claim.  [*] shall have the first right, but not the obligation, to defend against any such action against an Adamas Memantine Patent Right in the Territory, in its own name, and the costs of any such defense shall be at [*] expense; provided that [*] shall have the right to review and comment on the documentation, filings and communications related to such defense and, provided further that, [*] shall [*] [*] reasonable proposals or comments with respect to such documentation, filings and communications; and [*] shall [*] Adamas’ proposals or comments

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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[*].  [*], upon request of [*], agrees to join in any such action and to cooperate reasonably with [*]; provided that [*] shall promptly reimburse all reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by [*] in connection with such cooperation.  [*], if [*] does not defend against any such action involving such Adamas Memantine Patent Right within [*] of a request from [*] to do so, then [*] shall have the right, but not the obligation, to defend such action and any such defense shall be at [*] expense.  [*], upon request of [*], agrees to join in any such action and to cooperate reasonably with [*], provided that [*] shall promptly reimburse all reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by [*] in connection with such cooperation.  [*] right to defend against any such action involving an Adamas Memantine Patent Right under this Section 7.6 shall [*].  Notwithstanding the foregoing, if (A) the defending Party’s intended position in the defense of any Invalidity Claim would be reasonably expected to have a material adverse effect on the non-defending Party’s interest in and rights to the Adamas Intellectual Property (including the licenses granted hereunder) or the Commercialization of the Products in the Field in the non-defending Party’s respective territory and (B) the non-defending Party notifies the defending Party of its objection to such intended position with respect to the defense of such Invalidity Claim, the Parties shall meet and discuss the non-defending Party’s objection in good faith and use reasonable efforts to determine a mutually agreeable position, provided that if the Parties fail to agree and the non-defending Party maintains its objection, [*] in the defense of such Invalidity Claim.  This Section 7.6 shall apply mutatis mutandis with respect to the Adamas Patent Rights that are not Adamas Memantine Patent Rights if the Invalidity Claim arises in connection with the enforcement of an Adamas IP Infringement Claim pursuant to Section 7.4 or an Adamas Paragraph IV Claim pursuant to Section 7.11, with the Party who is controlling such enforcement having the first right to defend against such Invalidity Claim.

 

7.7                                Claimed Infringement .

 

(a)                                  If a Third Party asserts that a Patent Right or other intellectual property right owned or otherwise controlled by it is infringed by the Development, Manufacture or Commercialization of a Product, excluding Namenda (a “ Third Party Infringement Claim ”), the Party first made aware of such a claim shall promptly provide the other Party written notice of such claim along with the related facts in reasonable detail.

 

(b)                                  As between the Parties, Forest shall have the sole right, but not the obligation, to defend and resolve any Third Party Infringement Claim that is asserted against Forest or any of its Affiliates or Sublicensees (including, subject to Section 7.7(e), by entering into any settlement agreement with such Third Party); provided that the provisions of Section  7.4 shall govern the right to assert a counterclaim of infringement of any Adamas Patent Rights in connection with such defense, and the costs of any such defense or resolution shall be at Forest’s expense (except as otherwise provided in ARTICLE X).  If Forest is required, based on a final judgment in any such Third Party Infringement Claim against Forest or settlement thereof, to pay a royalty or other amount with respect to the Development, Manufacture or Commercialization of a Product in the Field in the Territory, such amounts may be offset as set forth in Section 6.4(c)(vii) with respect to such Product, as applicable.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(c)                                   As between the Parties, Adamas shall have the sole right, but not the obligation, to defend and resolve any Third Party Infringement Claim that is asserted against Adamas or any of its Affiliates (including, subject to Section 7.7(e), by entering into any settlement agreement with such Third Party); provided that the provisions of Section  7.4 shall govern the right to assert a counterclaim of infringement of any Adamas Patent Rights in connection with such defense, and the costs of any such defense or resolution shall be at Adamas’ expense (except as otherwise provided in ARTICLE X).  [*]

 

(d)                                  With respect to any Third Party Infringement Claim that is asserted against both Adamas or any of its Affiliates or (sub)licensees, on the one hand, and Forest or any of its Affiliates, on the other hand, Adamas and Forest shall cooperate through the JIPWG with respect to developing and coordinating a strategy for the defense of any such Third Party Infringement Claim (including, subject to Section 7.7(e), by entering into any settlement agreement with such Third Party) and shall use Commercially Reasonable Efforts to comply with any such strategy developed by the JIPWG; provided that each Party shall have the sole right to defend and resolve of any Third Party Infringement Claim that is asserted against it or its Affiliates at its discretion.

 

(e)                                   Neither Party shall enter into a settlement with respect to a Third Party Infringement Claim without the prior consent of the other Party if (i) such settlement would adversely affect or diminish the rights and benefits of the other Party under this Agreement, or impose any new obligations or adversely affect any rights or obligations of the other Party under this Agreement or (ii) in connection with such settlement, a Party makes an admission regarding the infringement, validity or enforceability of such Third Party’s Patent Rights that would be reasonably expected to have a material adverse effect on the Commercialization of the Products in the Field in the other Party’s respective territory.

 

7.8                                Patent Term Extensions .  [*] seek patent term extensions or supplemental patent protection, including supplementary protection certificates, in the Territory in relation to the Products [*].  Adamas and Forest shall cooperate in connection with all such activities, and [*], its agents and attorneys will give due consideration to all timely suggestions and comments of [*] regarding any such activities; provided that [*].

 

7.9                                Patent Marking .  If reasonably requested by Adamas, with respect to the Adamas Patent Rights, Forest shall comply with the patent marking statutes in the Territory with respect to a Product that is sold in the Territory by Forest, its Affiliates or its Sublicensees.

 

7.10                         Interpretation of Patent Judgments .  If any claim in a patent under the Adamas Patent Rights, including any Adamas Memantine Patent Right, or Forest Patent Rights becomes the subject of a judgment, decree or decision of a court, tribunal, or other authority of competent jurisdiction in the Territory, which judgment, decree, or decision is or becomes final (there being no further right of review) and adjudicates the validity, enforceability, scope or infringement of the same, the construction of such claim in such judgment, decree or decision shall be followed thereafter in the Territory in determining whether a Product is subject to a royalty hereunder, not only as to such claim but also as to all other claims in the Territory to which such construction reasonably applies.  If at any time there are two or more conflicting final judgments, decrees, or decisions with respect to the same claim, the decision of the higher tribunal shall thereafter

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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control, but if the tribunals be of equal rank, then the final judgment, decree, or decision more favorable to such claim shall control unless and until the majority of such tribunals of equal rank adopt or follow a less favorable final judgment, decree, or decision, in which event the latter shall control.

 

7.11                         Certification under Drug Price Competition and Patent Restoration Act .

 

(a)                                  Notice .  If a Party becomes aware of any certification filed pursuant to 21 U.S.C. § 355(b)(2)(A) or 355(j)(2)(A)(vii)(IV) or its successor provisions (a “ Paragraph IV Claim ”) claiming that any Adamas Patent Rights Covering a Product in the Field in the Territory are invalid or otherwise unenforceable, or that infringement of any Adamas Patent Right will not arise from the manufacture, use, import or sale of a Product by a Third Party in the Field in the Territory (a “ Adamas Paragraph IV Claim ”), such Party shall promptly notify the other Party in writing within five (5) Business Days after its receipt thereof.

 

(b)                                  Control of Response; Recoveries .  [*] shall have the first right, but not the obligation, to initiate and control patent infringement litigation for an Adamas Paragraph IV Claim; provided that the provisions of Section 7.6 shall govern the right to defend any challenge to the validity or enforceability of any Adamas Patent Right brought in connection with such action.  Any suit by [*] shall be brought either in the name of Adamas or its Affiliate, the name of Forest or its Affiliate, or jointly by Forest, Adamas and their respective Affiliates, as may be required by the Law of the forum and [*] shall join any action brought by [*] pursuant to this Section 7.11 if requested by [*], at [*] expense, and otherwise shall have the right to participate, at its sole expense, in such action. [*] shall execute such legal papers and cooperate in the prosecution of such suit as may be reasonably requested by [*]; provided that [*] shall promptly reimburse [*] reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by [*] in connection with such cooperation.  In respect of any patent infringement litigation for such Adamas Paragraph IV Claim controlled by [*], [*] shall (i) keep [*] reasonably informed regarding [*] actions with respect to such action and (ii) promptly provide [*] with copies of all documents and other materials filed by any party to such infringement litigation for such Adamas Paragraph IV Claim with the court before which such infringement action is pending.  [*] shall [*] reasonable proposals or comments with respect to such documents and materials; and [*] shall [*] reasonable proposals or comments.  If [*] elects not to assume control over litigating any Adamas Paragraph IV Claim, [*] shall notify [*] as soon as practicable but in any event not later than [*] before the first action required to litigate such Adamas Paragraph IV Claim so that [*] may, but shall not be required to, assume sole control over litigating such Adamas Paragraph IV Claim using counsel of its own choice.  Notwithstanding the foregoing, if [*] a patent infringement litigation for such Adamas Paragraph IV Claim pursuant to this Section 7.11(b) that [*] and [*], [*] litigation for such Adamas Paragraph IV Claim; provided , however , that [*] with respect to such Adamas Paragraph IV Claim based on considerations of [*] under this Agreement.  Any suit by [*] shall be either in the name of Adamas or its Affiliate, the name of Forest or its Affiliate, or jointly by Forest, Adamas and their respective Affiliates, as may be required by the Law of the forum.  [*] shall join any action brought by [*] pursuant to this Section 7.11 if requested by [*], at [*] expense, and otherwise shall have the right to participate, at its sole expense, in such action.  [*] shall execute such legal papers and cooperate in the

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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prosecution of such suit as may be reasonably requested by [*]; provided that [*] shall promptly reimburse all reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by [*] in connection with such cooperation.  In respect of any patent infringement litigation for such Adamas Paragraph IV Claim for which [*] assumes control under this Section 7.11(b), [*] shall (1) keep [*] reasonably informed regarding [*] actions with respect to such action and (2) promptly provide [*] with copies of all documents and other materials filed by any party to such infringement litigation for such Adamas Paragraph IV Claim with the court before which such infringement action is pending.  Any compensation recovered as a result of such litigation shall be allocated as set forth in Section 7.4(f) above.  In the case of a conflict between this Section 7.11 and Section 7.4 with regard to any action covered by this Section 7.11, this Section 7.11 shall control.

 

(c)                                   Notwithstanding the foregoing, if (i) the litigating Party’s intended position in any infringement litigation for an Adamas Paragraph IV Claim or settlement thereof under this Section 7.11 would be reasonably expected to have a material adverse effect on the non-litigating Party’s interest in and rights to the Adamas Intellectual Property (including the licenses granted hereunder) or the Commercialization of the Products in the Field in the non-litigating Party’s respective territory and (ii) the non-litigating Party notifies the litigating Party of its objection to such position, the Parties shall meet and discuss the non-litigating Party’s objection in good faith and use reasonable efforts to determine a mutually agreeable position, provided that if the Parties fail to agree and the non-litigating Party maintains its objection, [*] with respect to such Adamas Paragraph IV Claim.  Notwithstanding the foregoing sentence, this Section 7.11(c) shall [*].

 

7.12                         Adamas Product Trademark Rights .

 

(a)                                  Prosecution of Adamas Product Trademark Rights .  [*] the prosecution and maintenance of the Adamas Product Trademark Rights in the Territory. [*] shall cooperate with [*] with respect to such prosecution and maintenance, subject to [*] reimbursement of [*] reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by [*] in connection with such cooperation.  [*] shall have the right to review and comment on the documentation, filings and communications to or from the US Patent and Trademark Office (or any successor agency) (including reasonable access thereto) related to the Adamas Product Trademark Rights.

 

(b)                                  Enforcement and Defense of Adamas Product Trademark Rights .

 

(i)                                      Each Party shall provide to the other Party prompt written notice of any actual or threatened infringement of the Adamas Product Trademark Rights in the Territory and of any actual or threatened claim that the use of the Adamas Product Trademark Rights in the Territory infringes, dilutes, misappropriates, or otherwise violates the rights of any Third Party.  Each Party agrees to cooperate fully with the other Party with respect to any enforcement action or defense commenced pursuant to this Section 7.12; provided that the Party controlling such enforcement action or defense shall reimburse the reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by the other Party in connection with such cooperation.  Notwithstanding the foregoing,

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Forest shall have no obligation under this Section 7.12(b)(i) unless it elects to use the Adamas Product Trademark Rights.

 

(ii)                                   Forest shall have the sole right, but not the obligation, to initiate a suit, or take other appropriate action that it believes is reasonably required to protect ( i.e. , prevent or abate actual or threatened infringement or misappropriation of) or otherwise enforce the Adamas Product Trademark Rights relating to a Product in the Field in the Territory.  Any such suit by Forest shall be brought either in the name of Adamas or its Affiliate, the name of Forest or its Affiliate, or jointly by Forest, Adamas and their respective Affiliates, as may be required by the Law of the forum.  For this purpose, Adamas shall join such suit, if requested by Forest, and execute such legal papers and cooperate in the prosecution of such suit as may be reasonably requested by Forest; provided that Forest shall promptly reimburse Adamas’ reasonable, documented, out-of-pocket expenses (including reasonable outside counsel fees and expenses) actually and reasonably incurred by Adamas in connection with such cooperation.  [*] any damages, settlements, accounts of profits, or other financial compensation recovered from a Third Party as a result of Forest’s enforcement of the Adamas Product Trademark Rights pursuant to this Section 7.12(b).

 

(c)                                   Third Party Claims .  [*] defend against any alleged, threatened, or actual claim by a Third Party that the use or registration of the Adamas Product Trademark Rights in the Territory infringes, dilutes, misappropriates, or otherwise violates any Trademark Rights or other right of that Third Party or constitutes unfair trade practices or any other like offense, or any other claims as may be brought by a Third Party in connection with such use of the Adamas Product Trademark Rights with respect to a Product in the Territory.  Any compensation recovered as a result of such litigation shall be allocated as set forth in Section 7.4(f) above.  [*] shall have the right to participate and be in, but not control, any such suit [*] under this Section 7.12(c) by its own counsel at its own expense.  In the event that [*] does not take appropriate action to defend and resolve such suit [*], which suit is covered by this Section 7.12(c), then [*] may, in its discretion, provide [*] with notice of [*] intent to defend such suit. If [*] provides such notice and [*] does not initiate or continue, as applicable, the defense of such suit within [*] after receipt of such notice, then [*] shall have the right to defend and resolve such suit.

 

7.13                         Privileged Communications .  In furtherance of this Agreement, it is expected that Forest and Adamas will, from time to time, disclose to one another privileged communications with counsel, including opinions, memoranda, letters and other written, electronic and verbal communications.  Such disclosures are made with the understanding that they shall remain confidential in accordance with ARTICLE VIII, that they will not be deemed to waive any applicable attorney-client or attorney work product or other privilege and that they are made in connection with the shared community of legal interests existing between Adamas and Forest, including the community of legal interests in avoiding infringement of any valid, enforceable patents of Third Parties and maintaining the validity of Adamas Patent Rights and Forest Patent Rights.  In the event of any litigation (or potential litigation) subject to this ARTICLE VII, the Parties shall, upon either Party’s request, enter into a reasonable and customary joint defense agreement.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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ARTICLE VIII
CONFIDENTIAL INFORMATION

 

8.1                                Treatment of Confidential Information .  During the Term and for [*] thereafter, each Party shall maintain Confidential Information (as defined in Section 8.2) of the other Party in confidence, and shall not disclose, divulge or otherwise communicate such Confidential Information to others (except for agents, directors, officers, employees, consultants, subcontractors, licensees, partners, Affiliates and advisors (collectively, “ Agents ”) under obligations of confidentiality) or use it for any purpose other than in connection with the Development, Manufacture or Commercialization of Products in accordance with this Agreement, and each Party shall exercise Commercially Reasonable Efforts to prevent and restrain the unauthorized use and disclosure of such Confidential Information by any of its Agents, which efforts shall be at least as diligent as those generally used by such Party in protecting its own confidential and proprietary information.  Each Party will be responsible for a breach of this ARTICLE VIII by its Agents.  Forest may disclose Confidential Information of Adamas, and Adamas may disclose Confidential Information of Forest (including any [*]) (a) to Governmental Authorities in order to respond to inquiries, requests or investigations by Governmental Authorities and (b) subject to Section 4.2(f), otherwise to the extent reasonably necessary in order to fulfill its obligations or exercise its rights under Section 4.2(f) and 4.5 under this Agreement (but for clarity, except pursuant to [*] use Confidential Information of [*] for purposes related to [*]).  In addition, Forest may disclose Confidential Information of Adamas (x) to the extent reasonably necessary or useful to obtain or maintain INDs or Regulatory Approvals for any Product consistent with Forest’s rights under this Agreement; (y) to outside consultants, scientific advisory boards, managed care organizations, and non-clinical and clinical investigators to the extent reasonably necessary or reasonably useful to Develop, Manufacture or Commercialize any Product in a manner consistent with Forest’s rights under this Agreement; or (z) to the extent reasonably useful to Develop, Manufacture or Commercialize any Product in a manner consistent with Forest’s rights under this Agreement. With respect to any disclosure of the other Party’s Confidential Information pursuant to this Section 8.1, each Party shall obtain the same confidentiality obligations from any Third Parties (excluding Governmental Authorities) to which it discloses the Confidential Information of the other Party as it obtains with respect to its own similar types of confidential information.

 

8.2                                Confidential Information .  “ Confidential Information ” means all trade secrets or other proprietary information, know-how, including any proprietary data and materials (whether or not patentable or protectable as a trade secret), regarding a Party’s or its Affiliate’s or licensor’s technology, products, business, financial status or prospects or objectives regarding the Products that is disclosed by a Party to the other Party; provided , that, notwithstanding the foregoing, the [*] shall be the Confidential Information of [*].  All information disclosed prior to the Effective Date by either Party or its Affiliates pursuant to the confidentiality agreement between Adamas and Forest Parent dated as of [*], as amended through the Effective Date (the “ Confidentiality Agreement ”) shall be deemed “Confidential Information” of such Party.  For clarity, all data and information regarding Products generated after the Effective Date by Forest or by Third Parties on behalf of Forest, its Affiliates or their Sublicensees, including Forest Know-How [*] shall be deemed “Confidential Information” of Forest, and all data and information regarding Products generated after the Effective Date by Adamas or by Third Parties

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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on behalf of Adamas, its Affiliates or their (sub)licensees [*], including Adamas Know-How, shall be deemed “Confidential Information” of Adamas.  Notwithstanding the foregoing, there shall be excluded from the foregoing definition of Confidential Information any of the foregoing that:

 

(a)                                  was known by the receiving Party or its Affiliate prior to disclosure by the disclosing Party or its Affiliate hereunder or under the Confidentiality Agreement (as evidenced by the receiving Party’s or such Affiliates’ written records or other competent evidence);

 

(b)                                  either before or after the date of the disclosure to the receiving Party is lawfully disclosed to the receiving Party by a Third Party without any violation of any obligation to the other Party; provided that the foregoing exclusion [*]; or

 

(c)                                   either before or after the date of the disclosure to the receiving Party, becomes published or generally known to the public through no fault or omission on the part of the receiving Party or its Agents; or

 

(d)                                  is independently developed by or for the receiving Party without reference to or reliance upon the disclosing Party’s Confidential Information as demonstrated by contemporaneous written records of the receiving Party.

 

Notwithstanding the foregoing, the receiving Party may disclose the disclosing Party’s Confidential Information if it is required to be disclosed to comply with applicable Laws, to defend or prosecute litigation or to comply with governmental regulations or the regulations or requirements of any stock exchange, provided that the receiving Party promptly provides prior notice of such disclosure to the other Party and uses Commercially Reasonable Efforts to avoid or minimize the degree of such disclosure.

 

8.3                                Registration, Filing and Disclosure of the Agreement .  The terms of this Agreement are confidential and shall not be disclosed by either Party except pursuant to this Section 8.3 and Section 8.5.  To the extent a Party determines in good faith that it is required by applicable Law to publicly file, register or notify this Agreement with a Governmental Authority, including public filings pursuant to securities Laws or securities exchange rules, such disclosing Party shall provide the proposed redacted form of this Agreement to the other Party with a reasonable amount of time prior to filing or disclosure for the other Party to review and approve such draft, such approval not to be unreasonably conditioned, withheld or delayed.  The Party making such filing, registration, notification or disclosure shall submit this Agreement in a manner consistent with the agreed redaction and shall use Commercially Reasonable Efforts to seek confidential treatment for the redacted terms, to the extent such confidential treatment is applicable and reasonably available consistent with applicable Law.  Each Party shall be responsible for its own legal and other external costs in connection with any such filing, registration or notification.  In the event that Forest consents to any disclosure of the terms of this Agreement that would otherwise be prohibited under this Section 8.3, such disclosure must be pursuant to obligations of confidentiality no less stringent than set forth in this Agreement.

 

8.4                                Publications .  The Parties recognize the desirability of publishing and publicly disclosing the results of clinical trials of pharmaceutical products.  Accordingly, subject to this

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Section 8.4 and coordination through designated representatives of each Party, each Party shall be free to publicly disclose the results of clinical trials that it sponsors involving Products, subject to [*] prior review by the other Party for protection of its Confidential Information, in a manner consistent with all applicable Laws.  For purposes of this Section 8.4, [*] shall be deemed the sponsor of any clinical trial conducted under the Development Plan.  In addition, if a Party intends to publish articles in scientific or medical journals or to make public presentations of the results of such clinical trials, such Party shall provide to the other Party through the designated representatives of each Party at its earliest opportunity with any such proposed abstracts, manuscripts or summaries of presentations.  The Party receiving such abstract, manuscript or summary shall respond promptly through its designated representative, and in any event no later than [*] after receipt of such proposed publication or presentation, with its comments, including any Confidential Information of such Party to be removed prior to publication or presentation.  The Party making such publication or presentation agrees to remove any Confidential Information identified by the other Party as to which it does not have a right of disclosure hereunder, and will give due regard to comments furnished by such other Party and such comments shall not be unreasonably rejected.  All publications involving Products made pursuant to this Section 8.4 shall be in accordance with any guidelines or strategies promulgated by the JDC and shall include appropriate acknowledgement consistent with standard scientific practice of any contributions of each Party to the results being publicly disclosed (including acknowledgement to Adamas with respect to the design of DM104, DM105, DM303, and DM304).  Notwithstanding the foregoing, [*] publicly disclose the results of clinical trials that [*] compliance with any guidelines or strategies promulgated by the JDC.

 

8.5                                Press Releases and Other Disclosures .  The Parties hereby each approve the form of joint press release set forth in Schedule 8.5 and shall cooperate in the release thereof as soon as practicable after the Effective Date. The Parties also recognize that each Party may from time to time desire to issue additional press releases and make other public statements or public disclosures regarding the subject matter of this Agreement.  In such event, the Party desiring to issue an additional press release or make such a public statement or disclosure shall provide the other Party with a copy of the proposed press release, statement or disclosure for review and approval in advance (except that neither Party shall have any obligation to disclose Confidential Information except to the extent required or permitted pursuant to this ARTICLE VIII).  No other public statement or public disclosure concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either Party, without first obtaining the written approval of the other Party.  Once any public statement or disclosure has been approved in accordance with this Section 8.5, then either Party may appropriately communicate information contained in such permitted statement or disclosure.  Notwithstanding the foregoing provisions of this Section 8.5, Schedule 8.5 or of this ARTICLE VIII, a Party may (a) disclose the existence and terms of this Agreement where required, as reasonably determined by the disclosing Party, by applicable Law, by applicable stock exchange regulation or by order or other ruling of a competent court, (b) disclose the existence and terms of this Agreement under obligations of confidentiality to agents, advisors and contractors, and to potential agents, advisors, and contractors, and (c) publicly announce any of the matters set forth in Schedule 8.5 , provided that the announcing Party provides the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release or publication thereof to afford such other Party a reasonable opportunity to review and comment upon the proposed text. In an

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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effort to facilitate the Parties’ disclosure of the existence and terms of this Agreement to certain Third Parties (under obligations of confidentiality at least as strict as those contained in this Article VIII) not otherwise permitted by this Section 8.5, the Parties agree to use the following staged process in disclosing the existence and terms of this Agreement to existing and potential acquirers, partners and investors.  Each Party may initially disclose to potential acquirers, partners and investors (under obligations of confidentiality) an agreed redacted version of this Agreement, which the Parties shall jointly prepare and use good faith efforts to agree to promptly after the Effective Date; provided, that if either Party seeks to disclose the existence and terms of this Agreement to potential acquirers, partners and investors prior to the Parties’ agreeing on a redacted version of this Agreement in a manner not permitted by this Section 8.5, [*].  Following disclosure of the agreed redacted version of this Agreement to any potential acquirers, partners and investors, if such potential acquirers, partners and investors proceed to an advanced stage of diligence and evaluation of the applicable Party (and in any event after the execution of such transaction), subject to providing the other Party with [*] prior written notice (which such notice shall include the name of such potential acquirer, partner or investor, provided that the other Party agrees in writing to maintain the confidentiality of the fact that such Person is a potential acquirer, partner or investor of such Party, and to not use the knowledge of such fact for any purpose other than maintaining an internal record as to which Third Party has had access to an unredacted version of this Agreement), such Party shall have the right to disclose an unredacted version of the Agreement to such Third Party.

 

8.6                                Product Information .  Adamas recognizes that by reason of, inter alia , Forest’s status as an exclusive licensee pursuant to the grants under Section 2.1(a), Forest has an interest in Adamas’ retention in confidence of the Product Information.  Accordingly, during the Term, except pursuant to its exercise of rights under Section 4.2(f), Adamas shall maintain the Product Information in confidence, and shall not disclose, divulge or otherwise communicate the Product Information to others (except for its Agents under obligations of confidentiality) or use it for any purpose other than in connection with the Development, Manufacture or Commercialization of Products in accordance with this Agreement, and Adamas shall exercise Commercially Reasonable Efforts to prevent and restrain the unauthorized use and disclosure of the Product Information by any of its Agents, which efforts shall be at least as diligent as those generally used by Adamas in protecting its own confidential and proprietary information, except to the extent (a) such disclosure would be permitted under clause (a) or (b) of Section 8.1 or the last sentence of Section 8.2 if the Product Information were Confidential Information of Forest or (b) the Product Information becomes published or generally known to the public through no fault or omission on the part of Adamas or its Agents.

 

ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

9.1                                Adamas’ Representations .  Except as set forth on Schedule 9.1 , Adamas hereby represents and warrants as of the Effective Date as follows:

 

(a)                                  Adamas has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  The execution, delivery and performance of this Agreement has been duly and validly authorized and approved by all necessary corporate action on the part of Adamas.  Adamas has taken all other action required by Law, its certificate

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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of incorporation or by-laws or any agreement to which it is a party or by which it or its assets are bound, to authorize such execution, delivery and performance.  Assuming due authorization, execution and delivery on the part of Forest, this Agreement constitutes a legal, valid and binding obligation of Adamas, enforceable against Adamas in accordance with its terms.

 

(b)                                  The execution and delivery of this Agreement by Adamas and the performance by Adamas contemplated hereunder will not violate any US Law or, to Adamas’ knowledge, any Law of any Governmental Authority outside the US.

 

(c)                                   Neither the execution and delivery of this Agreement nor the performance hereof by Adamas requires Adamas or any of its Affiliates to obtain any permit, authorization or consent from any Governmental Authority or from any other Person, and such execution, delivery and performance by Adamas or any of its Affiliates will not result in the breach of or give rise to any termination of, rescission, renegotiation or acceleration under or trigger any other rights under any agreement or contract to which Adamas or any of its Affiliates may be a party except any that would not, individually or in the aggregate, reasonably be expected to adversely affect Forest’s rights under this Agreement or the ability of Adamas to perform its obligations under this Agreement.

 

(d)                                  To Adamas’ knowledge, there is no actual or threatened infringement by a Third Party of any of the Adamas Patent Rights or Adamas Product Trademark Rights in the Territory, or any other actual infringement or threatened infringement in the Territory by a Third Party that would adversely affect Forest’s rights under this Agreement.  To Adamas’ knowledge, the practice of the Adamas Manufacturing Know-How or the Development, Manufacture, use, sale, offer for sale or importation by Forest of (i) a Memantine-Donepezil FDC Product (but only with respect to the combination of Memantine and Donepezil as active ingredients in such Product and not with respect to any aspect of such Product other than the combination of such active ingredients, such as the formulation or manufacturing process of such Product or its components) or (ii) the Initial FDC Product, in each case in accordance with this Agreement, does not and will not infringe or constitute a misappropriation or other violation of the rights of any Third Party in the Territory existing as of the Effective Date to which Forest does not have a license as of the Effective Date.  To Adamas’ knowledge, the issued patents encompassed within Adamas Patent Rights are valid and enforceable patents and no Third Party has challenged the validity or enforceability of such patents (including through the institution or written threat of institution of interference, nullity, revocation or similar invalidity proceedings before the US Patent and Trademark Office), and Adamas has not received a written opinion of counsel setting forth a reasonable basis for such a claim by a Third Party.

 

(e)                                   The Adamas Patent Rights and Adamas Product Trademark Rights have been filed and are being maintained in accordance with the procedures of the respective offices in which they are filed in the Territory, including the US Patent and Trademark Office, and all applicable fees have been paid.

 

(f)                                    To Adamas’ knowledge, each of the Adamas Patent Rights properly identifies each and every inventor of the claims thereof as determined in accordance with Law in the Territory.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(g)                                   To Adamas’ knowledge, each Person who has or has had any ownership rights in or to any Adamas Patent Rights, Adamas Know-How or the Adamas Product Trademark Rights has assigned and has executed an agreement assigning its entire right, title and interest in and to such Adamas Patent Rights, Adamas Know-How or Adamas Product Trademark Rights, as the case may be, to Adamas.

 

(h)                                  Schedule 1.7 includes: (i) to Adamas’ knowledge, a complete and correct list of all pending or issued Adamas Patent Rights, and (ii) a complete and correct list of all pending or issued Adamas Memantine Patent Rights, in each case Controlled by Adamas or its Affiliates as of the Effective Date.

 

(i)                                      Adamas is the sole and exclusive legal and beneficial owner of, and Controls, all the Adamas Patent Rights and all Adamas Product Trademark Rights, in each case, that exist as of the Effective Date and is entitled to grant the licenses and other rights granted by Adamas herein.  To Adamas’ knowledge, all assignments to Adamas of ownership rights relating to the Adamas Patent Rights, Adamas Know-How and the Adamas Product Trademark Rights are valid and enforceable.  Adamas has not previously assigned, transferred, conveyed or otherwise encumbered its right, title and interest in the Adamas Intellectual Property and the Adamas Product Trademark Rights in the Territory or otherwise in a manner that conflicts with any license, assignment or other rights granted to Forest hereunder.

 

(j)                                     There is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending against or, to Adamas’ knowledge, threatened against Adamas in the Territory in connection with any Adamas Patent Rights, Adamas Know-How, Adamas Product Trademark Rights or against or relating to the transactions contemplated by this Agreement.

 

(k)                                  To Adamas’ knowledge, the conception, development and reduction to practice of (i) the Adamas Patent Rights and (ii) the Adamas Know-How existing as of the Effective Date, in each case (clause (i) and (ii)) have not constituted or involved the misappropriation of trade secrets or other rights or property of any Person.

 

(l)                                      The Adamas Patent Rights and Adamas Know-How (i) were not conceived, discovered, developed or otherwise made in connection with any research activities funded, in whole or in part, by the federal government of the United States or any agency thereof; and (ii) are not otherwise subject to the provisions of the Patent and Trademark Law Amendments Act of 1980, as amended, codified at 35 U.S.C. §§200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. part 401 (the “ Bayh-Dole Act ”).

 

(m)                              No payments to Third Parties for rights under Third Party Technology would be owed with respect to the Adamas Intellectual Property as a result of the Parties’ activities hereunder under agreements existing as of the Effective Date to which Adamas or any of its Affiliates is a party.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(n)                                  All written information, documentation and other materials furnished or made available by Adamas upon the request of Forest during Forest’s period of diligence prior to the Effective Date are true, complete and correct copies of what they purport to be (as redacted for purposes of confidentiality).

 

(o)                                  To Adamas’ knowledge, all Development activities conducted by Adamas with respect to the Products prior to the Effective Date have been and are being conducted in material compliance with experimental protocols, procedures and controls pursuant to generally accepted professional scientific standards, and applicable Law, including applicable requirements of “good laboratory practices” and “good clinical practices,” as applicable, as defined by the FDA.  Adamas has not received any written notices from the FDA or any other Regulatory Authority requiring the termination, suspension or material modification of any clinical trials of the Products that have been or are currently being conducted by Adamas.

 

(p)                                  Adamas has prepared, maintained and retained all Regulatory Filings for the Products in accordance in all material respects with all applicable Laws.

 

(q)                                  Adamas has obtained all required consents from any Person (including any Third Party manufacturer) necessary to transfer the Adamas Manufacturing Know-How to Forest.

 

(r)                                     There are no Trademark Rights (other than the corporate names of Adamas) associated with any Product under Development by Adamas other than the Adamas Product Trademark Rights.

 

(s)                                    Neither Adamas nor, to the knowledge of Adamas, any of its directors, officers, employees, agents or subcontractors has been convicted of any crime or engaged in any conduct that has resulted, or would reasonably be expected to result, in debarment by the FDA under 21 U.S.C. § 335a or any similar state Law.

 

(t)                                     Schedule 9.1(t)  sets forth a complete list of all of the material contracts relating to the Products to which Adamas (or its Affiliate) is a party.

 

(u)                                  Adamas has disclosed or provided access to Forest, as redacted for purposes of confidentiality, all material information known to Adamas regarding Adamas’ Development, Manufacturing and Commercialization of the Products in the Field in the Territory, including all regulatory information regarding the Products in the Field in the Territory (including all adverse information with respect to the safety and efficacy of the Products) known to Adamas or its Affiliates as of the Effective Date and made available to Forest, as redacted for purposes of confidentiality, a full and complete copy of the End of Phase II Meeting Minutes, which minutes include all approval requirements for the NDA for the Initial FDC Product specified by the FDA at or in connection with the End of Phase II Meeting.

 

(v)                                  Adamas has no Affiliates as of the Effective Date other than Adamas India, Ltd. and Adamas Singapore, Ltd.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(w)                                Adamas has disclosed to Forest all material non-public information known to Adamas and its Affiliates with respect to the safety and efficacy of each Product under development by Adamas as of the Effective Date that is not generally related to pharmaceutical products that contain Memantine or Donepezil as an active pharmaceutical ingredient.

 

(x)                                  Adamas has made available to Forest all material regulatory documentation owned or possessed by Adamas regarding or related to the Products in the Field in the Territory.  Adamas has prepared, maintained or retained all such material regulatory documentation required to be maintained or reported pursuant to and in accordance with the applicable requirements of “good laboratory practices” and “good clinical practices,” as applicable, as defined by the FDA, to the extent required, and applicable Law, and such regulatory documentation does not contain any materially false or misleading statements.

 

9.2                                Forest’s Representations .  Except as set forth in Schedule 9.2 , Forest hereby represents and warrants as of the Effective Date as follows:

 

(a)                                  Forest has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  The execution, delivery and performance of this Agreement has been duly and validly authorized and approved by all necessary corporate action on the part of Forest.  Forest has taken all other action required by Law, its certificate of incorporation or by-laws or any agreement to which it is a party or by which it or its assets are bound to authorize such execution, delivery and (subject to obtaining all necessary governmental approvals with respect to the continued Development and Commercialization of Products) performance.  Assuming due authorization, execution and delivery on the part of Adamas, this Agreement constitutes a legal, valid and binding obligation of Forest, enforceable against Forest in accordance with its terms.

 

(b)                                  The execution and delivery of this Agreement by Forest and Forest’s performance hereunder will not violate (subject to obtaining all necessary governmental approvals with respect to the continued Development, Manufacture and Commercialization of Products) any Law in the Territory or, to Forest’s knowledge, any Law of any Governmental Authority outside the Territory.

 

(c)                                   There is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or, to the knowledge of Forest, threatened against Forest in connection with or relating to the transactions contemplated by this Agreement.

 

(d)                                  Neither the execution and delivery of this Agreement nor the performance hereof by Forest requires Forest or any of its Affiliates to obtain any permit, authorization or consent from any Governmental Authority (subject to obtaining all necessary governmental approvals with respect to the continued Development and Commercialization of Products) or from any other Person, and such execution, delivery and performance by Forest or any of its Affiliates will not result in the breach of or give rise to any termination of, rescission, renegotiation or acceleration under or trigger any other rights under any agreement or contract to which Forest or any of its Affiliates may be a party, except any that would not, individually or in

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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the aggregate, reasonably be expected to adversely affect Adamas’ rights under this Agreement or the ability of Forest to perform its obligations under this Agreement.

 

(e)                                   The copy of [*] the consummation of the transaction contemplated by this Agreement attached hereto as Schedule 9.2(e)  is a true and correct copy of such [*].

 

(f)                                    Neither Forest nor, to the knowledge of Forest, any of its directors, officers, employees, agents or subcontractors has been convicted of any crime or engaged in any conduct that has resulted, or would reasonably be expected to result, in debarment by the FDA under 21 U.S.C. § 335a or any similar state Law.

 

(g)                                   To Forest’s knowledge, the Development, Manufacture, use, sale, offer for sale or importation by Forest of a Memantine-Donepezil FDC Product (but only with respect to the combination of Memantine and Donepezil as active ingredients in such Product and not with respect to any aspect of such Product other than the combination of such active ingredients, such as the formulation or manufacturing process of such Product or its components) does not and will not infringe or constitute a misappropriation or other violation of the rights of any Third Party in the Territory to which Forest does not have a license as of the Effective Date.

 

(h)                                  The [*] in a manner that, as compared to the [*], has an adverse effect on the rights of Adamas hereunder (including the scope of the Patent Rights and Know-How that [*] under [*]).  The [*], and [*], in each case in a manner that would have an adverse effect on such rights of Adamas.

 

(i)                                      If and to the extent that [*], the scope of the intellectual property rights [*] that [*] to Develop, Manufacture and Commercialize [*] shall [*] intellectual property rights [*] to Develop, Manufacture and Commercialize [*].

 

9.3                                Adamas Covenants .  Adamas covenants and agrees during the Term that:

 

(a)                                  Adamas shall not grant to any Third Party any rights that would conflict with Forest’s rights hereunder.

 

(b)                                  Adamas shall not assign, transfer, convey or otherwise encumber its right, title and interest in the Adamas Intellectual Property in a manner that conflicts with any rights or licenses granted to Forest hereunder.

 

(c)                                   Adamas shall notify Forest if any of its directors or officers (or any of its employees, agents or subcontractors if such employee, agent or subcontractor is or was involved in the Development of any Product on behalf of Adamas or its Affiliates) is convicted of any crime or engaged in any conduct that results, or would reasonably be expected to result, in debarment by the FDA under 21 U.S.C. § 335a or any similar state Law.

 

9.4                                Forest Covenants .  Forest covenants and agrees during the Term that:

 

(a)                                  Forest shall not grant to any Third Party any rights that would conflict with Adamas’ rights hereunder (including under Schedule 11.6 upon a reversion of the FDC Products).

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(b)                                  Forest shall not assign, transfer, convey or otherwise encumber its right, title and interest in the Forest Intellectual Property in a manner that conflicts with any rights granted to Adamas hereunder (including under Schedule 11.6 upon a reversion of the FDC Products).

 

(c)                                   Forest shall not [*] in a manner that would adversely affect the rights of Adamas hereunder (including under [*]).

 

(d)                                  Within [*] following the Effective Date, if requested by Adamas, Forest shall [*], other than [*], to the extent [*] are reasonably required by Adamas in order to [*], and Forest shall use Commercially Reasonable Efforts to [*].

 

(e)                                   Forest shall notify Adamas if any of its directors or officers (or any of its employees, agents or subcontractors if such employee, agent or subcontractor is or was involved in the Development of any Product for which Forest has a payment obligation to Adamas under this Agreement) is convicted of any crime or engaged in any conduct that results, or would reasonably be expected to result, in debarment by the FDA under 21 U.S.C. § 335a or any similar Law.

 

9.5                                Mutual Covenants .  Each Party shall conduct, and shall use Commercially Reasonable Efforts to cause its contractors and consultants to conduct, all of their activities contemplated under this Agreement in accordance with all applicable Laws of the country in which such activities are conducted, including applicable requirements of “good laboratory practices”, “good clinical practices” and “good manufacturing practices”, as applicable, as defined by the FDA.

 

9.6                                No Warranty .  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION AND EXTENDS NO WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED.

 

ARTICLE X
INDEMNIFICATION

 

10.1                         Indemnification in Favor of Adamas .  Forest shall indemnify, defend and hold harmless the Adamas Parties from and against any and all Losses incurred, suffered or sustained by any of the Adamas Parties or to which any of the Adamas Parties becomes subject as a result of any Third Party claim, action, suit, proceeding, liability or obligation (collectively, “ Third Party Claims ”) arising out of, relating to or resulting from:

 

(a)                                  any misrepresentation or breach of any representation, warranty, covenant or agreement made by Forest in this Agreement; or

 

(b)                                  the Development, Manufacture or Commercialization of Products by or on behalf of Forest, its Affiliates or Sublicensees anywhere in the world at any time (including the conduct of Development activities by Adamas or its Affiliates pursuant to the Development Plan as directed by Forest); or

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(c)                                   any claim under any Transferable Contract, if transferred to Forest, arising from any act or omission by Forest or its Affiliates or Sublicensees that occurs on or after the date such Transferable Contract was assigned to Forest; or

 

(d)                                  the negligence or willful misconduct of any of the Forest Parties (as hereinafter defined) in connection with Forest’s performance of this Agreement; or

 

(e)                                   any claim of product liability related to Products marketed, sold or otherwise Commercialized by or on behalf of Forest, its Affiliates or Sublicensees.

 

For purposes of this ARTICLE X, “ Adamas Parties ” means Adamas, its Affiliates and their respective licensors, agents, directors, officers, licensees, sublicensees and employees.

 

The indemnification obligations set forth in this Section 10.1 shall not apply to the extent that any Loss is the result of (i) a breach of this Agreement by Adamas or (ii) with respect to any Adamas Party, any negligence or willful misconduct of such Adamas Party.

 

10.2                         Indemnification in Favor of Forest .  Adamas shall indemnify, defend and hold harmless the Forest Parties from and against any and all Losses incurred, suffered or sustained by any of the Forest Parties or to which any of the Forest Parties becomes subject, as a result of any Third Party Claim arising out of, relating to or resulting from:

 

(a)                                  any misrepresentation or breach of any representation, warranty, covenant or agreement made by Adamas in this Agreement; or

 

(b)                                  the Development, Manufacture or Commercialization of the Products by or on behalf of Adamas, its Affiliates, licensees or (sub)licensees anywhere in the world at any time (excluding the conduct of Development activities by Adamas or its Affiliates pursuant to the Development Plan, as directed by Forest); or

 

(c)                                   any claim under any Transferable Contract, if transferred to Forest, arising from any act or omission by Adamas, its Affiliates, licensees or (sub)licensees that occurred before the date such Transferable Contract was assigned to Forest; or

 

(d)                                  the negligence or willful misconduct of any of the Adamas Parties in connection with Adamas’ performance of this Agreement; or

 

(e)                                   any claim of product liability related to Products marketed, sold or otherwise Commercialized by or on behalf of Adamas, its Affiliates, licensees or (sub)licensees.

 

For purposes of this ARTICLE X, “ Forest Parties ” means Forest, its Affiliates and their respective licensors (including [*]), agents, directors, officers, licensees, sublicensees and employees.

 

The indemnification obligations set forth in this Section 10.2 shall not apply to the extent that any Loss is the result of (i) a breach of this Agreement by Forest, or (ii)  with respect to any Forest Party, any negligence or willful misconduct of any Forest Party.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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10.3                         General Indemnification Procedures .  Except as otherwise provided herein:

 

(a)                                  A Person seeking indemnification pursuant to this ARTICLE X (an “ Indemnified Party ”) (i) shall give prompt notice to the Party from whom such indemnification is sought (the “ Indemnifying Party ”) of the commencement or assertion of any Third Party Claim (which, in no event, includes any claim by any Forest Party or any Adamas Party) in respect of which indemnity may be sought hereunder, (ii) shall give the Indemnifying Party such information with respect to any indemnified matter as the Indemnifying Party may reasonably request, and (iii) shall not make any admission concerning such Third Party Claim, unless such admission is required by applicable Law or legal process, including in response to questions presented in depositions or interrogatories.  Any admission made by the Indemnified Party or the failure to give such notice shall relieve the Indemnifying Party of any liability hereunder only to the extent that the ability of the Indemnifying Party to defend such Third Party Claim is prejudiced thereby (and no admission required by applicable Law or legal process shall be deemed to result in prejudice).  Except with respect to any Third Party Claim that is a Third Party Infringement Claim, the process for the defense of which shall be governed by Section 7.7, the Indemnifying Party shall have the right to assume and conduct the defense of such Third Party Claim, with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party, only if such Indemnifying Party concedes that such Indemnified Party shall be indemnified from and against such Third Party Claim pursuant to this ARTICLE X or if the Indemnified Party agrees in writing.  Subject to the initial and continuing satisfaction of the terms and conditions of this ARTICLE X, the Indemnifying Party shall have full control of such Third Party Claim, including settlement negotiations and any legal proceedings.  If the Indemnifying Party does not assume the defense of such Third Party Claim in accordance with this Section 10.3, the Indemnified Party may defend the Third Party Claim.  If both Parties are Indemnifying Parties with respect to the same Third Party Claim (other than Third Party Claims that are also Third Party Infringement Claims, which are governed by Section 7.7), the Parties shall determine by mutual agreement, within twenty (20) days following their receipt of notice of commencement or assertion of such Third Party Claim (or such lesser period of time as may be required to respond properly to such claim), which Party shall assume the lead role in the defense thereof.  Should the Indemnifying Parties be unable to mutually agree on which of them shall assume the lead role in the defense of such Third Party Claim, both Indemnifying Parties shall be entitled to participate in such defense through counsel of their respective choosing.

 

(b)                                  Any Indemnified Party or Indemnifying Party not managing the defense of a Third Party Claim shall have the right to participate in (but not control), at its own expense, the defense.  The Indemnifying Party managing the defense shall not be liable for any litigation cost or expense incurred, without its consent, by the Indemnified Party where the action or proceeding is under the control of such Indemnifying Party.

 

(c)                                   The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment against an Indemnified Party arising from any such Third Party Claim to the extent such Third Party Claim involves equitable or other non-monetary relief from the Indemnified Party.  No Party shall, without the prior written consent of the other Party or the Indemnified Party, enter into any compromise or settlement that commits the other Party or the Indemnified Party to take, or to forbear to take, any action.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(d)                                  The Parties shall cooperate in the defense or prosecution of any Third Party Claim and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith; provided , however , that the Indemnifying Party shall reimburse the Indemnified Party for any reasonable, documented, out-of-pocket expenses actually and reasonably incurred in connection with any such cooperation.

 

(e)                                   Any indemnification hereunder shall be made net of any insurance proceeds actually recovered by the Indemnified Party from unaffiliated Third Parties; provided , however , that if, following the payment to the Indemnified Party of any amount under this ARTICLE X, such Indemnified Party recovers any such insurance proceeds in respect of the claim for which such indemnification payment was made, the Indemnified Party shall promptly pay an amount equal to the amount of such proceeds (but not exceeding the amount of such net indemnification payment) to the Indemnifying Party.

 

(f)                                    The Parties agree and acknowledge that the provisions of this ARTICLE X represent the Indemnified Party’s exclusive recourse for any Losses incurred, suffered or sustained by such Indemnified Party arising out of, relating to or resulting from any Third Party Claims for which indemnification is provided to the Indemnified Party under this ARTICLE X.

 

10.4                         Insurance .  During the Term and thereafter for so long as a Third Party Claim may be brought for which Forest must indemnify Adamas pursuant to Section 10.1, or for which Adamas must indemnify Forest pursuant to Section 10.2, each Party shall obtain or maintain, at its sole cost and expense, product liability insurance for the Products in amounts that are reasonable and customary in the pharmaceutical industry or, in case the case Forest, and Adamas following a Change of Control if Adamas’ Acquirer is self insured, a comparable program of self-insurance. Without limiting the generality of the foregoing, each Party shall maintain comprehensive general liability insurance, including product liability insurance, to cover its activities and, unless its Affiliates and (sub) licensees maintain comparable coverage, the activities of its Affiliates and (sub)licensee, with respect to Products.  Each Party shall provide satisfactory evidence of adequate insurance coverage to the other Party upon the request of such other Party prior to the Effective Date and, upon the written request of such other Party, concurrent with any renewal or replacement of such coverage.

 

10.5                         No Consequential or Punitive Damages .  EXCEPT IN THE CASE OF ANY BREACH OF SECTION 2.4 OR ARTICLE VIII OR AS OTHERWISE PROVIDED BELOW, NEITHER PARTY WILL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, MILESTONES OR ROYALTIES, ARISING FROM OR RELATING TO THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.  NOTHING IN THIS SECTION 10.5 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDER THIS AGREEMENT WITH RESPECT TO THIRD PARTY CLAIMS, OR REMEDIES TO A PARTY IN THE CASE OF INFRINGEMENT OR MISAPPROPRIATION OF ITS INTELLECTUAL PROPERTY RIGHTS OR CONFIDENTIAL INFORMATION BY THE OTHER PARTY (INCLUDING UNDER SECTION 3.1(D)), OR THE WILLFUL MISCONDUCT, INTENTIONAL BREACH OR FRAUD OF THE OTHER PARTY.  NOTWITHSTANDING THE FOREGOING, IN THE

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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EVENT THAT EITHER PARTY SEEKS LOST ROYALTY DAMAGES OR OTHER SIMILAR DAMAGES UNDER SECTION 6.3 OR 6.4 OF THIS AGREEMENT FROM THE OTHER PARTY ARISING FROM THE OTHER PARTY’S BREACH OF THIS AGREEMENT, INCLUDING SECTION 5.4, THE LIMITATION OF LIABILITY UNDER THIS SECTION 10.5 SHALL NOT APPLY TO SUCH DAMAGES IF THEY ARE ESTABLISHED, QUANTIFIABLE AND DIRECTLY ARISE FROM SUCH BREACH.

 

ARTICLE XI
TERM AND TERMINATION

 

11.1                         Term .  The term of this Agreement (the “ Term ”) shall commence on the Effective Date and, unless earlier terminated as provided in this ARTICLE XI, shall continue in full force and effect, on a Product-by-Product basis until there is no remaining royalty obligation in the Territory with respect to such Product, at which time this Agreement shall expire in its entirety with respect to such Product.  Upon expiration of this Agreement with respect to all Products, this Agreement shall be considered expired in its entirety.  Upon expiration of this Agreement with respect to a Product, from that time forward, the licenses and other rights granted to Forest in Article 2 shall become fully paid-up and remain irrevocable with respect to such Product.

 

11.2                         Termination Rights for FDC Products .

 

(a)                                  If Forest has not paid to Adamas [*] the Milestone Payments under [*] by the earlier of (i) the [*] or (ii) the [*], then, if Adamas notifies Forest in writing of such failure to pay and Forest has not made this payment within [*] of receipt of such notice, this Agreement shall automatically terminate with respect to all FDC Products at the end of such [*] and the provisions of Section 11.6 below shall apply.

 

(b)                                  If Forest elects to permanently cease its Development or Commercialization of the FDC Products in the Field in the Territory, Forest shall provide written notice to Adamas of its intent to do so (“ Cessation Notice ”).  If such Cessation Notice is delivered prior to the expiration of the FDC Royalty Term, then upon delivery of such Cessation Notice, this Agreement shall automatically terminate as of the date of the Cessation Notice with respect to all FDC Products and the provisions of Section 11.6 below shall apply.

 

(c)                                   In the event a Governmental Authority brings a suit, claim, action, investigation, or proceeding, whether judicial or administrative, challenging any of the rights granted, transferred, or assigned to either of the Parties under Article II of this Agreement as a violation of any Antitrust Laws (as defined below) (“ Antitrust Action ”) and (i) the Governmental Authority issues an order, decree, or ruling against Forest, which order, decree, or ruling is final and non-appealable or (ii) Forest enters into a consent decree with a Governmental Authority to resolve or settle such Antitrust Action; in any case, having the effect of permanently restraining, enjoining, or otherwise prohibiting Forest to Develop and Commercialize FDC Products, then Forest shall notify Adamas in writing of such requirement and, to the extent permitted by Laws, Adamas shall have the right to terminate this Agreement with respect to all FDC Products upon written notice to Forest and the provisions of Section 11.6 below shall apply.  In such event, if Adamas is required to cooperate in connection with any investigation in connection therewith, either at Forest’s request or as required by such Governmental Authority, then Forest shall [*].

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Antitrust Law ” means the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and all other Laws that are designed or intended to prohibit, restrict, or regulate actions having the purpose or effect of monopolization or restraint of trade, significant impediments to or lessening of competition, or the creation or strengthening of a dominant position through acquisition of intellectual property rights, including the granting of licenses, assignment of patents, or transfer of an NDA or other regulatory filings.

 

11.3                         Damages In Lieu of Termination for Cause .  Except as expressly set forth in Section 11.4, Adamas may not terminate this Agreement by reason of a breach of this Agreement by Forest, but may instead bring a claim against Forest seeking damages or equitable relief (in accordance with the provisions of this Agreement), provided that Adamas first complies with the provisions of this Section 11.3, as Adamas’ sole remedy for Forest’s breach.  In the event that Forest breaches this Agreement and Adamas desires to seek any such relief, Adamas shall give to Forest written notice requiring it to cure such breach, which notice shall specify the nature of the breach.  If such breach is not cured within [*] after receipt of such notice (or within [*] in the case of a payment breach), Adamas shall be entitled (without prejudice to any of its other rights conferred on it by this Agreement or under applicable Law) to bring a claim against Forest for damages or equitable relief; provided , however , that if such breach is not capable of being cured within the stated period and the breaching Party uses Commercially Reasonable Efforts to cure such breach during such period and presents a mutually agreeable remediation plan for such breach, the cure period shall be extended for such period provided in the remediation plan, for a maximum of an additional [*], as long as Forest continues to use Commercially Reasonable Efforts to pursue the cure as provided in such remediation plan.

 

11.4                         Termination for Cause .  In the event of a material breach of this Agreement by a Party, the non-breaching Party may give the breaching Party notice requiring it to cure such default, which notice shall specify the nature of the breach.  If such material breach is not cured within [*] after receipt of such notice (or [*] in the case of a payment breach), the non-breaching Party shall be entitled (without prejudice to any of its other rights conferred on it by this Agreement or under applicable Law) to terminate this Agreement (a) in the case of Forest as the non-breaching Party, in its entirety or with respect to one or more Products, or (b) in the case of Adamas, solely with respect to the FDC Products, solely prior to the Payment Date and solely in the case of a material breach of Forest’s obligation to use Commercially Reasonable Efforts with respect to the Development of the FDC Products in the Field in the Territory under Section 4.1, in each case ((a) and (b)) by giving written notice to the breaching Party.  If any breach that is the basis of a Party’s termination under this Section 11.4 is not capable of being cured within the stated cure period and the breaching Party uses Commercially Reasonable Efforts to cure such breach during such period and presents a mutually agreeable remediation plan for such breach, this Agreement shall not terminate and the cure period shall be extended for such period provided in the remediation plan, for a maximum of an additional [*], as long as the breaching Party continues to use Commercially Reasonable Efforts to pursue the cure as provided in such remediation plan.  In the event the breaching Party notifies the other Party that it disputes in good faith the existence of a material breach or a Party’s use of Commercially Reasonable Efforts to cure such a breach, termination of this Agreement shall not be deemed to occur unless and until such dispute has been referred for resolution in accordance with Section 12.2, the applicable material breach of the Agreement or failure to make diligent efforts to cure such breach has been

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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established by an arbitration thereunder and, if such breach can be cured by the payment of money or the taking of specific remedial actions, the defaulting Party does not pay the amount so determined to be due within [*] of receipt of the arbitration decision or otherwise diligently undertake and complete such remedial actions within the timeframe established by such arbitration decision.  In the event of termination of this Agreement by either Party pursuant to this Section 11.4, the licenses and other rights granted to Forest (and all payment obligations to Adamas) hereunder shall remain in effect with respect to the ER Products and the Other Products and Section 11.6 shall apply with respect to the FDC Products. A Party’s termination of the Agreement under this Section 11.4 shall not preclude such Party from pursuing any right or remedy it may have hereunder or at Law or in equity with respect to any breach of this Agreement, including with respect to seeking damages from the defaulting Party.

 

11.5                         Termination for Insolvency .  This Agreement may be terminated by a Party upon written notice to the other Party if (a) the other Party shall make an assignment of substantially all of its assets for the benefit of its creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets, or shall commence any proceeding under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (b) if there shall have been filed against the other Party any such bona fide petition or application, or any such proceeding shall have been commenced against it, in which an order for relief is entered or that remains undismissed or unstayed for a period of [*] or more; or (c) if the other Party by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for it or any substantial part of its assets, or shall suffer any such custodianship, receivership or trusteeship to continue undischarged or unstayed for a period of [*] or more; or (d) anything analogous to any of the foregoing occurs in any applicable jurisdiction.  Termination shall be effective upon the date specified in such notice.

 

11.6                         Effect of Termination; Accrued Rights and Obligations .

 

(a)                                  Notwithstanding anything in this Agreement to the contrary, Adamas shall not have the right to terminate this Agreement with respect to ER Products or Other Products.

 

(b)                                  In the event of termination of this Agreement with respect to the FDC Products, the provisions of Schedule 11.6 shall apply.

 

(c)                                   In the event of a termination by Adamas under Section 11.2(c), Adamas shall pay to Forest an amount equal to the fair market value of the rights that revert to Adamas under this Section 11.6.  In the event that the Parties are unable to reach agreement as to the fair market value of such rights within [*] of such a termination, the Parties shall select and agree upon a mutually acceptable independent Third Party expert who is neutral, disinterested and impartial, and has expertise in pharmaceutical valuations, to determine the fair market value of the rights that revert to Adamas under this Section 11.6, which determination shall be binding on the Parties and Adamas shall pay to Forest such amount within [*] after the determination is provided to both Parties. Forest shall have no obligation under this Section 11.6 (other than those set forth in this paragraph), and the rights and licenses granted to Adamas under this Section 11.6

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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(including those set forth in Schedule 11.6) shall not be effective, until such payment is made to Forest.

 

(d)                                  Expiration or termination of this Agreement in its entirety for any reason shall not release either Party from any liability that, at the time of such termination, has already accrued or that is attributable to a period prior to such expiration or termination (including payment obligations accrued prior to the effective date of termination pursuant to ARTICLE VI) nor preclude either Party from pursuing any right or remedy it may have hereunder or at Law or in equity with respect to any breach of this Agreement.  Notwithstanding the foregoing, the Parties agree that no Milestone Payment under Section 6.3 shall be due if the Milestone Event is not achieved or met prior to the date a notice of termination under this ARTICLE XI is provided by the terminating Party.  It is understood and agreed that monetary damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching Party may be entitled to seek injunctive relief as a remedy for any such breach (including any breach of Section 2.4 by Adamas (or its Affiliates or (sub)licensees)).

 

11.7                         Survival .  The rights and obligations set forth in this Agreement shall survive the expiration or termination of this Agreement in its entirety only to the extent expressly provided for in this Agreement.  Without limiting the generality of the foregoing, it is agreed that the provisions of [*] shall survive expiration or termination of this Agreement in its entirety for any reason.

 

ARTICLE XII
MISCELLANEOUS

 

12.1                         Governing Law; Jurisdiction .  This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of New York, without regard to its conflicts of laws rules.  Subject to Section 12.2, each Party (a) irrevocably submits to the exclusive jurisdiction in the [*] (collectively, the “ Courts ”), for purposes of any action, suit or other proceeding arising out of this Agreement, and (b) agrees not to raise any objection at any time to the laying or maintaining of the venue of any such action, suit or proceeding in any of the Courts, irrevocably waives any claim that such action, suit or other proceeding has been brought in an inconvenient forum and further irrevocably waives the right to object, with respect to such action, suit or other proceeding, that such Court does not have any jurisdiction over such Party.  Either Party may serve any process required by such Courts by way of notice under this Agreement.

 

12.2                         Dispute Resolution; Arbitration .

 

(a)                                  Dispute Resolution .  In the event of a dispute arising out of or relating to this Agreement, either Party shall provide written notice of the dispute to the other, in which event the dispute shall be referred to the Senior Executives of each Party, for attempted resolution by good faith negotiations within [*] after such notice is received. In the event the Senior Executives do not resolve such dispute within the allotted [*], or a Party reasonably believes such matter will not be so resolved, either Party may seek to resolve the dispute through arbitration in accordance with Section 12.2(b).  For clarity, a disagreement regarding the manner in which a Party exercises any of its consent or final decision-making rights under Section 4.2(b)

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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is not a “dispute arising out of or relating to this Agreement” if such exercise was consistent with the terms of this Agreement.

 

(b)                                  Arbitration

 

(i)                                      Claims .  Any claim, dispute, or controversy of whatever nature arising between the Parties out of or relating to this Agreement, or concerning the interpretation, effect, termination, validity, performance or breach of this Agreement (“ Claim ”) that is not resolved under Section 12.2(a) within the required [*] time period, shall be resolved by final and binding arbitration before a panel of three (3) experts with relevant industry experience (the “ Arbitrators ”).  Each of Adamas and Forest shall promptly select one Arbitrator each, which selections shall in no event be made later than [*] after the notice of initiation of arbitration. The third Arbitrator shall be chosen promptly by mutual agreement of the Arbitrator chosen by Adamas and the Arbitrator chosen by Forest, but in no event later than [*] after the date that the last of such Arbitrators was appointed.  The Arbitrators shall determine what discovery will be permitted, consistent with the goal of reasonably controlling the cost and time that the Parties must expend for discovery, provided that the Arbitrators shall permit such discovery as he or she deems necessary to permit an equitable resolution of the dispute.  The arbitration shall be administered by the Judicial Arbitration and Mediation Services (or its successor entity) (“ JAMS ”) under its rules of arbitration then in effect, except as modified in this Agreement (the “ Rules ”).  The arbitration shall be held in [*], and the Parties shall use reasonable efforts to expedite the arbitration if requested by either Party.

 

(ii)                                   Arbitrators’ Award .  The Arbitrators shall, within [*] after the conclusion of the arbitration hearing, issue a written award and statement of decision describing the essential findings and conclusions on which the award is based, including the calculation of any damages awarded.  The decision or award rendered by the Arbitrators shall be final and non-appealable, and judgment may be entered upon it in accordance with applicable Law in the State of New York or any other court of competent jurisdiction.  The Arbitrators shall be authorized to award compensatory damages, but shall not be authorized to reform, modify or materially change this Agreement or any other agreements contemplated hereunder.

 

(iii)                                Costs .  Each Party shall bear its own counsel fees, costs, and disbursements arising out of the arbitration described in this Section 12.2(b), and shall pay an equal share of the fees and costs of the Arbitrators and all other general fees related to the arbitration; provided , however , the Arbitrators shall be authorized to determine whether a Party is the prevailing Party, and if so, to award to that prevailing Party reimbursement for its reasonable counsel fees, costs and disbursements (including expert witness fees and expenses, photocopy charges, or travel expenses), or the fees and costs of the Arbitrators.

 

(iv)                               Compliance with this Agreement .  Unless the Parties otherwise agree in writing, during the period of time that any arbitration proceeding is pending under this Agreement, the Parties shall continue to comply with all those terms and provisions of this Agreement that are not the subject of the pending arbitration proceeding.

 

(v)                                  Injunctive or Other Equity Relief .  Nothing contained in this Agreement shall deny any Party the right to seek injunctive or other equitable relief from a court

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm (including a breach by Adamas or its Affiliate or (sub)licensee of Section 2.4), and such an action may be filed and maintained notwithstanding any ongoing arbitration proceeding.

 

(vi)                               Confidentiality of Proceedings .  All arbitration proceedings and decisions of the Arbitrator under this Section 12.2 shall be deemed Confidential Information of both Parties under ARTICLE VIII.

 

12.3                         Waiver .  Waiver by a Party of a breach hereunder by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provision.  No delay or omission by a Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder shall operate as a waiver of any right, power or privilege by such Party.  No waiver shall be effective unless made in writing with specific reference to the relevant provision(s) of this Agreement and signed by a duly authorized representative of the Party granting the waiver.

 

12.4                         Notices .  All notices, instructions and other communications hereunder or in connection herewith shall be in writing, shall be sent to the address specified in this Section 12.4 and shall be:  (a) delivered personally; (b) sent by registered or certified mail, return receipt requested, postage prepaid; (c) sent via a reputable nationwide overnight courier service; or (d) sent by facsimile transmission.  Any such notice, instruction or communication shall be deemed to have been delivered upon receipt if delivered by hand, three (3) Business Days after it is sent by registered or certified mail, return receipt requested, postage prepaid, one (1) Business Day after it is sent via a reputable nationwide overnight courier service, or when transmitted with electronic confirmation of receipt, if transmitted by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission).

 

Notices to Forest shall be addressed to :

 

Forest Laboratories Holdings Limited
Cumberland House

9th Floor

1 Victoria Street
Hamilton HM 11, Bermuda
Attention:  Chairman
Facsimile:  [*]

 

with a copy to:

 

Forest Laboratories, Inc.
909 Third Avenue
New York, NY 10022
Attention:  General Counsel
Facsimile:  [*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Notices to Adamas shall be addressed to :

 

Adamas Pharmaceuticals, Inc.

2200 Powell Street, Suite 220

Emeryville, CA 94608

Attention: Chief Financial Officer

Facsimile: [*]

 

with a copy to:

 

Cooley LLP

3175 Hanover Street

Palo Alto, CA 94304

Attention: Robert L. Jones, Esq.

Facsimile: 650-849-7400

 

Either Party may change its address by giving notice to the other Party in the manner provided above.

 

12.5                         Entire Agreement .  This Agreement (including Schedules) contains the complete understanding of the Parties with respect to the Development and Commercialization of Products and supersedes all prior understandings and writings between the Parties relating to such subject matter.  In particular, and without limitation, it supersedes and replaces the Confidentiality Agreement and any and all term sheets relating to the transactions contemplated by this Agreement and exchanged between the Parties prior to the Effective Date.

 

12.6                         Severability .  If any provision of this Agreement is held unenforceable by a court or tribunal of competent jurisdiction because it is invalid or conflicts with any Law of any relevant jurisdiction, the validity of the remaining provisions shall not be affected.  In such event, the Parties shall negotiate a substitute provision that, to the extent possible, accomplishes the original business purpose.

 

12.7                         Assignment .  Neither this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred, whether by operation of law or otherwise, by either Party without the consent of the other Party; provided , however , that (a) either Party may, without such consent, assign this Agreement or any of its rights or obligations hereunder to any of its respective Affiliates, provided that such Party shall remain jointly and severally liable with such Affiliate in respect of all obligations so assigned and such Affiliate has acknowledged and confirmed in writing that effective as of such assignment or other transfer, such Affiliate shall be bound by this Agreement as if it were a party to it as and to the identical extent applicable to the transferor; and (b) either Party may, without such consent, assign this Agreement, including its rights and obligations hereunder, to any successor in interest by way of merger or acquisition, or other Change of Control (other than an asset sale, which shall be covered by clause (c)), including by operation of law, provided that such successor has acknowledged and confirmed in writing that effective as of such assignment or other transfer such successor shall be bound by this Agreement as if it were a party to it as and to the identical extent applicable to the applicable Party; and (c) a Third Party acquirer of all or substantially all of its assets of such Party; provided

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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that such acquirer has acknowledged and confirmed in writing that effective as of such assignment or other transfer such acquirer shall be bound by this Agreement as if it were a party to it as and to the identical extent applicable to the applicable Party and such Party shall remain bound by [*] and ARTICLE VIII.  Notwithstanding the foregoing, Adamas may assign its rights to payments to an entity owned by the stockholders of Adamas, which entity shall be a permitted assignee of such rights; provided, that no other rights of Adamas shall be assigned to such entity and that such assignment shall not affect the rights of Forest under this Agreement, including by the imposition of any lien or other encumbrance on any Adamas Intellectual Property.  In the event Forest assigns or otherwise transfers any [*] or Forest Patent Rights to the extent necessary for the Development, Manufacture or Commercialization of the Products to any of its Affiliate or Third Party, Forest shall (A) condition such assignment or transfer upon an express written agreement of such Affiliates or Third Party to be bound by the terms and conditions of this Agreement to the same extent as Forest with respect to such [*] or Forest Patent Rights, as applicable (including terms and conditions of termination of this Agreement in accordance with Section 11.2); (B) be responsible for such Affiliate’s or Third Party’s compliance with such terms and conditions; (C) promptly provide to Adamas written evidence of compliance with the obligation set forth in subsection (A) above; and (D) cooperate with Adamas regarding the enforcement of such terms and conditions.  Any purported assignment in violation of this Section 12.7 shall be void.  Any permitted assignee shall assume all obligations of its assignor under this Agreement.  Notwithstanding the foregoing, Adamas shall have the right to, without Forest’s consent, assign, sell, pledge, contribute or otherwise transfer to one or more Third Party(ies), in whole or in part, its rights to receive any of the payments under this Agreement, together with the right to receive reports pertaining to such payments and other information relating to the calculation of such payments, including any audit reports; provided , however , that if [*], Adamas shall [*].

 

12.8                         Counterparts; Exchange by Facsimile .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and that together shall constitute one and the same instrument.  Such counterparts may be exchanged by facsimile or PDF ( provided that each executed counterpart is transmitted in one complete transmission or electronic mail message).  Where there is an exchange of executed counterparts by facsimile or PDF, each Party shall be bound by this Agreement notwithstanding that original copies of this Agreement may not be exchanged immediately.  The Parties shall cooperate after execution of this Agreement and exchange by facsimile or PDF to ensure that each Party obtains an original executed copy of this Agreement with reasonable promptness.

 

12.9                         Force Majeure .  No Party shall be liable for failure of or delay in performing obligations set forth in this Agreement, and no Party shall be deemed in breach of its obligations, if such failure or delay is due to a natural disaster, explosion, fire, flood, tornadoes, thunderstorms, earthquake, war, terrorism, riots, embargo, losses or shortages of power, labor stoppage, substance or material shortages, damage to or loss of product in transit not due to a failure by such Party or its Affiliates to exercise reasonable care, events caused by reason of Laws of any Governmental Authority, events caused by acts or omissions of a Third Party not induced or solicited by such Party or its Affiliates, or any other cause reasonably beyond the control of such Party or its Affiliates.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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12.10                  Third-Party Beneficiaries .  None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party except for ARTICLE X with respect to an Indemnified Party.  No such Third Party shall obtain any right under any provision of this Agreement or shall by reason of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against either Party.

 

12.11                  Relationship of the Parties .  Each Party shall bear its own costs incurred in the performance of its obligations hereunder without charge or expense to the other, except as expressly provided in this Agreement.  Neither Party shall have any responsibility for the hiring, termination or compensation of the other Party’s employees or for any employee compensation or benefits of the other Party’s employees.  No employee or representative of a Party shall have any authority to bind or obligate the other Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said other Party’s approval.  For all purposes, and notwithstanding any other provision of this Agreement to the contrary, the legal relationship under this Agreement of each Party to the other Party shall be that of independent contractor.  Nothing in this Agreement shall be construed to establish a relationship of partners or joint venturers between the Parties.  For purposes of this Agreement, except as expressly provided otherwise, in no event shall the conduct of activities hereunder (a) by Adamas or any of its Affiliates be deemed to be “on behalf of” Forest or its Affiliates or (b) by Forest or any of its Affiliates be deemed to be “on behalf of” Adamas or its Affiliates.

 

12.12                  Performance by Affiliates .  Each Party shall have the right to exercise its rights and perform its obligations under this Agreement either itself or through any of its Affiliates.  To the extent that this Agreement imposes obligations on Affiliates of a Party, such Party agrees to cause its Affiliates to perform such obligations.

 

12.13                  Further Assurance . 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.

 

{Signature page follows}

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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IN WITNESS WHEREOF, the Parties have signed this Agreement as of the Effective Date.

 

FOREST LABORATORIES HOLDINGS LIMITED

ADAMAS PHARMACEUTICALS, INC.

 

 

By:

/s/ David Solomon

 

By:

/s/ Gregory T. Went

Name:

David Solomon

 

Name:

Gregory T. Went

Title:

Assistant Secretary

 

Title:

CEO

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 


 

TABLE OF CONTENTS

 

Schedule 1.6

Certain Adamas Know-How

 

 

Schedule 1.7

Adamas Memantine Patent Rights

 

 

Schedule 1.9

Adamas Product Trademark Rights

 

 

Schedule 1.31

Donepezil

 

 

Schedule 1.59

Memantine

 

 

Schedule 1.80

Regulatory Plan

 

 

Schedule 2.6

Transferable Contracts

 

 

Schedule 6.8

Wiring Instructions

 

 

Schedule 7.3(h)

CREATE Act Subject Matter

 

 

Schedule 8.5

Form of Joint Press Release

 

 

Schedule 9.1

Adamas Schedule of Exceptions

 

 

Schedule 9.1(t)

Material Contracts

 

 

Schedule 9.2

Forest Schedule of Exceptions

 

 

Schedule 9.2(e)

[*]

 

 

Schedule 9.2(h)

[*]

 

 

Schedule 11.6

Reversion of Certain FDC Products

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

1



 

Schedule 1.6

 

Certain Adamas Know How(1)

 

Document

 

Document Name

[*]

 

[*]

 


(1) Note: The documents set forth in this Schedule 1.6 and the data contained therein constitute Adamas Know-How to the extent they are proprietary or non-public and otherwise satisfy the definition of Know-How.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

2



 

Schedule 1.7

 

Adamas Memantine Patent Rights

 

Case

 

Application No.

 

Patent No.

 

Status

 

Country

[*]

 

[*]

 

[*]

 

[*]

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

3



 

Schedule 1.9

 

Adamas Product Trademark Rights

 

ARIMENDA TM

 

http://www.arimenda.com

http://www.arimenda.net

http://www.arimenda.org

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Schedule 1.31

 

Donepezil

 

 

Donepezil hydrochloride

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

5



 

Schedule 1.59

 

Memantine

 

 

Memantine hydrochloride

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

6



 

Schedule 1.80

 

Regulatory Plan

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

7



 

Schedule 2.6

 

Transferable Contracts

 

·                   [*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

8



 

Schedule 6.8

 

Adamas Wiring Instructions

 

DOMESTIC WIRE TRANSFER:

 

TO:

[*]

ROUTING #:

[*]

FOR CREDIT OF:

Adamas Pharmaceuticals, Inc.

CREDIT ACCOUNT #:

[*]

BY ORDER OF:

[Name of Sender]

 

INTERNATIONAL WIRE TRANSFER :

 

TO:

[*]

ROUTING #:

[*]

SWIFT CODE:

SVBKUS6S

FOR CREDIT OF:

Adamas Pharmaceuticals, Inc.

CREDIT ACCOUNT #:

[*]

BY ORDER OF:

[Name of Sender]

 

Forest Wiring Instructions

 

[*]

 

IBAN:  [*]

 

SWIFT:  [*]

 

Intermediary SWIFT:  [*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

9



 

Schedule 7.3(h)

 

CREATE Act Subject Matter

 

To facilitate CREATE Act filings pursuant to Section 7.3(h), the Parties agree that each Party may include a reference to this Agreement in a patent application in order to exercise its rights under Section 7.3(h), which reference consists essentially of the following statement:

 

“The contents of this application are under a joint research agreement within the meaning of 35 U.S.C. § 103(c) and 37 C.F.R. § 1.104(c)(4)(ii) (or after March 16, 2013, 35 U.S.C. § 100(h) and § 102(c) and corresponding regulations) entered into by and between Forest Laboratories Holdings Limited and Adamas Pharmaceuticals, Inc. on November 13, 2012 (the ‘ Joint Research Agreement ’). The Joint Research Agreement was in effect on or before the date that the invention claimed in this application was made, and the invention claimed in this application was made as a result of activities undertaken within the scope of the Joint Research Agreement.”

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

10


 

Schedule 8.5

 

Form of Joint Press Release

 

Forest Laboratories and Adamas Pharmaceuticals Enter into Licensing Agreement for the Development and Commercialization of a Fixed Dosed Combination of Namenda XR® and Donepezil for Alzheimer’s Disease

 

NEW YORK & EMERYVILLE, CA — Forest Laboratories, Inc. (NYSE: FRX), an international pharmaceutical company, and Adamas Pharmaceuticals, Inc. announced today that they have entered into an agreement for the development and commercialization of a fixed dosed combination (FDC) of Namenda XR® (memantine HCl extended release) and donepezil HCl as a once daily therapy for the treatment of moderate to severe dementia of the Alzheimer’s type in the United States.  Under the agreement, Forest and Adamas will collaborate on the development of the FDC and Forest will have exclusive US commercialization rights.  Forest is responsible for all development and commercialization activities.  Namenda XR® is Forest’s FDA approved, once daily formulation of its successful Alzheimer’s therapy Namenda®.    Based on a development plan agreed to by Adamas and the FDA, the FDC is expected to launch in 2015 following FDA approval.  The product will be covered by multiple Adamas patents that extend to 2029.  Forest sells Namenda in the US under a 2000 license from Merz + Co. GmbH & Co.

 

Pursuant to the agreement, Forest will pay Adamas $65 million upfront and up to $95 million in future development and FDA approval milestones. Adamas will receive royalties on US net sales beginning 5 years after launch for FDC products and any additional memantine products for which Adamas’ patents are listed in the FDA’s Orange Book.

 

“We are pleased to enter into this partnership with Adamas, which will enable us to enhance our life cycle program for Namenda,” said Howard Solomon, Chairman, Chief Executive Officer and President of Forest.  “Adamas has made impressive progress with its combination extended release memantine and donepezil program.  Forest is the ideal company to complete the development of this product and commercialize it in the US, in light of our successful track record in the field of Alzheimer’s disease with Namenda.  Over 60% of Namenda patients already take Namenda together with an acetylcholinesterase inhibitor like donepezil, which creates a substantial market opportunity for this fixed dose combination product.  Namenda and donepezil work in different ways and studies support that when used together they improve cognition, function, and behavior in some patients with moderate to severe Alzheimer’s disease.  This new fixed combination, which reduces the pill requirement from three tablets to one and the dosing frequency from two times per day to once per day, can benefit physicians, caregivers, and patients.”

 

Gregory T. Went, Chief Executive Officer of Adamas Pharmaceuticals said: “We are pleased to partner with Forest, the market leader in Alzheimer’s products, to bring our fixed dose combination of extended release memantine and donepezil — the first such combination therapy for Alzheimer’s disease —  to the US market.  This collaboration will accelerate this innovative product’s development towards a 2014 US NDA filing, and allow Adamas to focus our attention

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

11



 

on the ex-US market for the product and to continue the ongoing development of Nurelin TM , our late-stage product candidate for the treatment of CNS disorders, including Parkinson’s disease.”

 

About Adamas Pharmaceuticals

 

Adamas Pharmaceuticals, based in Emeryville, California with operations in Bangalore, India, is the leading developer of aminoadamantane-based therapeutics for CNS disorders. The company’s research and development platform is focused on developing controlled release versions and optimized fixed dose combinations of aminoadamantanes to address major dosing and titration challenges that limit the use of currently available therapeutics. Adamas is advancing two programs from this platform.  Nurelin (amantadine HCl extended release capsules) is currently in Phase 3 clinical studies, initially for levodopa-induced dyskinesia in patients with Parkinson’s disease.  A registration program is also underway for the fixed dose combination of memantine HCl extended release and donepezil HCl for Alzheimer’s disease. Both products are designed to improve tolerability and clinical efficacy, and to provide superior clinical and health economic benefits. For more information about Adamas, please visit www.adamaspharma.com.

 

About Forest Laboratories

 

Forest Laboratories’ (NYSE: FRX) longstanding global partnerships and track record developing and marketing pharmaceutical products in the United States have yielded its well-established central nervous system and cardiovascular franchises and innovations in anti-infective, respiratory, gastrointestinal, and pain management medicine. Forest’s pipeline, the most robust in its history, includes product candidates in all stages of development across a wide range of therapeutic areas. Forest is headquartered in New York, NY. To learn more, visit www.FRX.com.

 

Except for the historical information contained herein, this release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks and uncertainties, including the difficulty of predicting FDA approvals, the acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, the timely development and launch of new products, and the risk factors listed from time to time in Forest Laboratories’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and any subsequent SEC filings. Forest assumes no obligation to update forward looking statements contained in this release to reflect new information or future events or developments.

 

Contacts:

 

 

 

 

 

Forest Laboratories, Inc.

 

Adamas Pharmaceuticals, Inc.

Frank J. Murdolo, 212 224-6714

 

Kim Kraemer, 510 450-3572

Vice President — Investor Relations

 

Corporate Communications

media.relations@frx.com

 

press@adamaspharma.com

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Schedule 9.1

 

Adamas Schedule of Exceptions

 

This Schedule of Exceptions and the information and disclosures contained herein are intended only to qualify and limit the representations, warranties and covenants of Adamas contained in the Agreement, and shall not be deemed to expand in any way the scope or effect of any of such representations, warranties or covenants.  The section numbers in this Schedule correspond to the section numbers in the Agreement.  The headings used in this Schedule are for reference only and shall not be considered when interpreting the scope of disclosure.  Disclosure of any information or document herein is not a statement or admission that it is material or required to be disclosed herein.  Nothing in this Schedule of Exceptions constitutes an admission of any liability or obligation of Adamas to any third party, or an admission to any third party against the interests of Adamas.  No disclosure in this Schedule of Exceptions relating to any possible breach or violation of any agreement, law or regulation shall be construed as an admission or indication to any third party that any such breach or violation exists or has actually occurred.  References to any document do not purport to be complete and are qualified in their entirety by the document itself.  Capitalized terms used but not defined herein shall have the same meanings given them in the Agreement.

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

13



 

Schedule 9.1(t)

 

Material Contracts

 

Reference is made to those Transferable Contracts set forth in Schedule 2.6.

 

Contracted Party

 

Document Description

[*]

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

14



 

Schedule 9.2

 

Forest Schedule of Exceptions

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

15



 

Schedule 9.2(e)

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

16



 

Schedule 9.2(h)

 

[*]

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Schedule 11.6

 

Reversion of Certain FDC Products

 

In the event of termination of this Agreement with respect to the FDC Products, the following provisions shall apply upon the effective date of such termination of this Agreement (or such later date as applies pursuant to Section 11.6(c) of the Agreement) (“ Termination Effective Date ”):

 

(a)           Regulatory Filings .  Forest shall, and shall cause each of its Affiliates and Sublicensees to, promptly assign and transfer to Adamas all filings with Regulatory Authorities in the Territory, including copies of all correspondence, written minutes of meetings and memoranda of conversations with such Regulatory Authorities, and all Regulatory Approvals in the Territory, in each case made or obtained in connection with the Development, Manufacture, and Commercialization of FDC Products that are then being Developed or Commercialized by Forest or its Affiliates or Sublicensees [*] or, if no FDC Products are then being Developed or Commercialized by Forest or its Affiliates or Sublicensees, the FDC Product most recently Developed or Commercialized by Forest or its Affiliates or Sublicensees (such products, as well as any improvements or modifications made by Adamas thereafter, the “ Reverted FDC Products ”) (including INDs and NDAs), in each case, that are Controlled by or under the authority of Forest or its Affiliates as of the Termination Effective Date and pertain solely to the Reverted FDC Products (“ Reverted FDC Product Regulatory Filings ”), and for clarity such transfer of rights under the Reverted FDC Product Regulatory Filings shall include an irrevocable right to access and reference any filings referenced in such Reverted FDC Product Regulatory Filings (together with [*] to the extent related to the Reverted FDC Products). Forest shall, and shall cause its Affiliates and Sublicensees to, take such actions and execute such other instruments, assignments and documents as may be necessary to effect the transfer of rights under such Reverted FDC Product Regulatory Filings to Adamas.  Forest shall also promptly transfer all safety information and data with respect to the Reverted FDC Products as they exist as of the Termination Effective Date that are Controlled by or under the authority of Forest or its Affiliates as of Termination Effective Date .  If applicable Law prevents or delays the assignment of any such Reverted FDC Product Regulatory Filings to Adamas, Forest shall grant (and shall cause each of its Affiliates and Sublicensees to grant), and does hereby grant, to Adamas an exclusive and irrevocable right of access and reference to such Reverted FDC Product Regulatory Filings (including any filings referenced in such Reverted FDC Product Regulatory Filings, together with [*] to the extent related to the Reverted FDC Product ) for the purpose of Developing and Commercializing Reverted FDC Products in the Territory, and shall cooperate fully to make such benefits of such Reverted FDC Product Regulatory Filings available to Adamas or its designee(s).  In each case, unless otherwise required by any applicable Law, the foregoing assignment and transfer shall be made within [*] after the Termination Effective Date, including providing to Adamas copies of all such Reverted FDC Product Regulatory Filings.  The activities under this Paragraph (a) shall [*].  Adamas acknowledges that, unless and until the execution of a Sublicense Agreement (as defined below), Forest shall have no obligation under this Paragraph (a) with respect to any information or other intellectual property [*] and all rights under this Paragraph (a) are subject to [*].

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

18



 

(b)           Licenses .

 

(i)            Termination and Grant of Licenses .

 

(A)          All rights and licenses granted to Forest under Article 2 shall terminate solely with respect to the FDC Products, but shall remain in effect with respect to the Reverted FDC Products to the extent and for so long as necessary to allow Forest to perform its obligations under this Schedule 11.6.  Forest shall return to Adamas all Confidential Information of Adamas related solely to the FDC Products within [*] after the Termination Effective Date.

 

(B)          Forest, on behalf of itself and its Affiliates, agrees to grant to Adamas, effective upon the Termination Effective Date, an exclusive (subject to any (sub)licenses granted by Forest consistent with this Agreement as of the Termination Effective Date), irrevocable ([*] or the [*]), perpetual right and license, with the right to grant and authorize sublicenses, in the Territory under (1) the Forest Know-How and Forest Patent Rights and (2) all other Patent Rights and Know-How Controlled by Forest or its Affiliates ([*], which is [*]) (provided that such exclusivity shall be limited to the extent that any of such rights [*] for so long as [*]), in each case of (1) and (2), that are necessary to Develop, Manufacture and Commercialize the Reverted FDC Products as they exist as of the Termination Effective Date in the Territory (the “ Forest Reversion Intellectual Property ”) solely for use to Develop, Manufacture and Commercialize the Reverted FDC Products in the Territory in accordance with this Schedule 11.6 and the surviving terms of the Agreement.  Such license shall be royalty-free and fully paid except as provided in Section 2.1(d), the terms of which such Section 2.1(d) shall apply to Forest with respect to the Forest Reversion Intellectual Property as if it were Adamas and to Adamas as if it were Forest, mutatis mutandis .  In the event that [*], such license shall be granted pursuant to the Sublicense Agreement (as defined in Paragraph (b)(i)(C)).  The Parties’ rights and obligations with respect to the prosecution, maintenance and enforcement of the Forest Reversion Intellectual Property, including any Patent Rights and Know-How that may be [*], shall [*] Article 7 of the Agreement with respect to the Forest Reversion Intellectual Property.

 

(C)          Adamas acknowledges that the Development and Commercialization in the Territory of the Reverted FDC Product [*] and that the license described in Paragraph (b)(i)(B) [*], and Forest shall [*] to Adamas, [*] and [*], provided that, if, [*], [*] without [*], then [*].  If [*], the Parties shall [*] to the terms of [*], including any obligation of [*], in each case as such terms exist as of the Termination Effective Date (any such agreement, the “ Sublicense Agreement ”).

 

(ii)           Adamas Memantine Patent Rights .

 

(A)          If [*] the Agreement, [*] and [*] (1) the Adamas Memantine Patent Rights that solely relate to the FDC Products (the “ Adamas FDC Patent Rights ”) and (2) unless [*], the Adamas Product Trademark Rights, in each case ((1) and (2)) that [*] the Agreement, and shall [*] in order to [*] and [*] and [*] pursuant to this clause (b)(ii)(A), including [*].  Further, in the case of any such termination, [*], on behalf of itself and its Affiliates, [*], effective upon the Termination Effective Date, [*] and [*] and [*] any Adamas Memantine

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

19



 

Patent Rights [*] (the “ Adamas FDC and ER Patent Rights ”) [*] (but for clarity, [*] such patents with respect to any Products other than FDC Products).

 

(B)          The Adamas FDC Patent Rights shall for purposes of this Agreement be [*].  Adamas shall have the sole right to enforce the Adamas FDC Patent Rights with respect to an infringement by FDC Products under Section [*] of the Agreement, subject to any other applicable terms of this Agreement, including the [*] provisions of Sections [*]. For purposes of clarity, the Parties agree that the Adamas FDC Patent Rights existing as of the Effective Date are as follows: [*].

 

(C)          Without limiting the Parties’ obligations under Section 7.3, with regard to any Adamas FDC and ER Patent Rights, the Party that has the right to prosecute or maintain such Patent Rights shall notify the other Party in advance of any prosecution or maintenance action with respect to such Patent Rights that would be reasonably expected to have a material adverse effect on the other Party’s Products in the Territory.  Notwithstanding Section [*], [*] shall [*] any Adamas FDC and ER Patent Right in the Territory with respect to the FDC Products under Section [*], with [*] and [*], in each case subject to [*].  If [*], (A) any such [*] shall [*] with respect to the other Adamas FDC and ER Patent Rights (including with respect to a [*] Adamas FDC and ER Patent Right); and (B) [*] shall (1) keep [*] reasonably informed of the status of [*] activities that pertain to such Adamas FDC and ER Patent Right, and (2) [*] reasonable proposals or comments as part of such [*].

 

(c)           Trademark Rights .  If the Termination Effective Date occurs after the launch of the Reverted FDC Product(s) in the Territory, then, subject to any required consents of [*], Forest agrees to grant to Adamas [*] an exclusive, irrevocable, perpetual right and (sub)license, with the right to grant and authorize sublicenses, in the Territory in and to (i) any Trademarks Rights under which the Reverted FDC Products were being Commercialized in the Territory as of the Termination Effective Date ([*], if applicable), and (ii) all Internet domain names containing only such Trademark Right and no other Trademark Rights as its URL address or any part of such address, in each case ((i) and (ii)) Controlled by Forest or its Affiliates, subject to customary trademark conditions, including the trademark conditions set forth in [*]. Such license shall be royalty-free and fully paid except that Adamas shall be responsible for any payment owed to any Third Party by Forest that arises from the use of the Trademark Rights licensed to Adamas under this Paragraph (c).  It is understood that the license set forth in this Paragraph (c) do not include the name of Forest or any of its Affiliates or any Third Party, nor the corporate logo, service mark, or trademark for Forest or for any of its Affiliates or any Third Party as a corporate entity, nor any Trademark Rights used in connection with any Products other than the Reverted FDC Products.

 

(d)           Data and Know-How .  Forest shall, at the request of Adamas, provide Adamas access to, and/or copies of, all Know-How in its or its Affiliates’ possession and Control pertaining to any Reverted FDC Product, or the Manufacture or use thereof, to the extent actually used in connection with a Reverted FDC Product during the Term, in each case as necessary for Adamas to Develop, Manufacture and Commercialize the Reverted FDC Products as of the date of such termination (including all Know-How pertaining to the Manufacture of the Reverted FDC Product(s) as so used (including active pharmaceutical ingredients or other raw materials or

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

20



 

work-in-process related thereto)), to the extent such Know-How has not been provided previously to Adamas under this Agreement, except that any disclosures of Know-How [*] shall be made solely pursuant to the Sublicense Agreement.

 

(e)           Development; Clinical Trials .  Subject to the provisions set forth below relating to safety risks, the following shall apply.  Adamas may, at its election, assume the conduct of any or all Development activities set forth under the then-current Development Plan for the Reverted FDC Products [*].  In addition, if any clinical trial (including any Phase IV Clinical Trial) has been initiated (i.e., first patient dosed) and is being conducted as of the Termination Effective Date for a Reverted FDC Product (each, an “ On-Going Clinical Study ”) by or under authority of Forest or its Affiliate, Forest agrees, as Adamas may request, to (i) promptly transition to Adamas or its designee some or all of such On-Going Clinical Studies (including all results and data generated therefrom) and the activities related to or supporting such trials , (ii) continue to conduct such On-Going Clinical Studies and provide to Adamas any and all results and data generated therefrom for a period requested by Adamas [*], or (iii) terminate such On-Going Clinical Studies in a manner consistent with applicable Laws; provided , however , that in the event that Forest reasonably determines that an On-Going Clinical Study being run by Forest or its Affiliate would pose an unacceptable safety risk for subjects participating in such On-Going Clinical Study, then Forest shall not be obligated to continue such On-Going Clinical Study or to transfer control of such On-Going Clinical Study to Adamas, and Forest shall provide Adamas with a full explanation of Forest’s safety issue concern and, if requested by Adamas, reasonable documentation thereof and such additional information in the Control of Forest or its Affiliates as of the Termination Effective Date (i.e., Forest shall not be required to generate or collect any new data) as may be necessary to permit Adamas to fully understand and assess the safety issue raised by Forest.  Forest shall be responsible for all of its own costs and expenses associated with Forest’s activities under this Paragraph (e) for a period of [*] after the Termination Effective Date and Adamas shall be responsible for all of its own costs and expenses (including all out-of-pocket costs and FTE Costs) associated with Adamas’ activities under this Paragraph (e) and for all of Forest’s costs and expenses after the specified [*] period.

 

(f)            Supply .  If Forest or its Affiliate is Manufacturing, itself or through a Third Party, any Reverted FDC Product(s) (including any active pharmaceutical ingredient(s) related thereto) as of the Termination Effective Date, then Forest (or its Affiliate) shall, or shall use Commercially Reasonable Efforts to cause such Third Party to, at Adamas’ request, continue to provide such Reverted FDC Product(s) (and/or any active pharmaceutical ingredient(s) included therein solely for use in Manufacturing such Reverted FDC Product(s)) for sale in in the Territory to Adamas, at a price equal to (i) in the case of supply by Forest or its Affiliate, [*] or (ii) in the case of supply by such Third Party, [*], in each case ((i) and (ii) from the Termination Effective Date until such time as Adamas is able to secure an acceptable alternative manufacturing source from which sufficient quantities of such Reverted FDC Product may be procured, but in any event [*] after the Termination Effective Date (or for a longer period if agreed upon by the Parties in writing); provided that Adamas shall use Commercially Reasonable Efforts to secure an acceptable alternative manufacturing source for the Reverted FDC Product(s) as promptly as practicable; provided further that the provisions of this Paragraph

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

21



 

(f) shall be subject to [*] and [*] arising from the sale of such Reverted FDC Product(s) pursuant to this Paragraph (f) or any subsequent sale of such Reverted FDC Product(s) by Adamas.

 

(g)           Commercialization Wind-Down .  To avoid disruption of supply of any Reverted FDC Product(s) to patients if this Agreement is terminated after the launch of such Reverted FDC Product(s) in the Territory, subject to the last sentence of this Paragraph (g), Forest and its Affiliates and Sublicensees shall continue to use Commercially Reasonable Efforts to distribute and sell such Reverted FDC Product(s) in the Territory, in accordance with the terms and conditions of this Agreement, until the date on which Adamas notifies Forest that Adamas has arranged for an alternate method for distributing the Reverted FDC Product(s) in the Territory, but [*] from the Termination Effective Date (the “ Wind-Down Period ”), provided that Adamas may terminate such activities upon [*] notice to Forest; provided further that Adamas shall use Commercially Reasonable Efforts to secure such alternate arrangements as promptly as practicable.  If Adamas requests that Forest and its Affiliates and Sublicensees distribute and sell such Reverted FDC Product(s) during the Wind-Down Period, Adamas shall grant, and hereby grants, to Forest for the duration of the Wind-Down Period, a non-exclusive license under any and all applicable Patent Rights and Trademark Rights Controlled by Adamas or its Affiliates to use, sell, offer to sell, have sold, import and otherwise Commercialize such Reverted FDC Product(s) in the Field in the Territory, solely to perform such distribution and sale with respect to such Reverted FDC Product(s) as requested by Adamas during the Wind-Down Period.  For the avoidance of doubt, during the Wind-Down Period, Adamas shall have the right to engage one or more other partner(s) or distributor(s) for Reverted FDC Products in the Territory during the Wind-Down Period.  Any Reverted FDC Products sold or disposed by Forest or its Affiliates or Sublicensees during the Wind-Down Period shall constitute Net Sales of FDC Products and shall be subject to any applicable payment obligations under Article VI.  Within [*] following the expiration of the Wind-Down Period, Forest shall notify Adamas of any quantities of such Reverted FDC Product(s) (including any active pharmaceutical ingredients or other raw materials or work-in-process inventory specifically allocated by Forest or its Affiliates or Sublicensees to the Manufacture of such Reverted FDC Product(s)) remaining in Forest’s or its Affiliate’s or Sublicensee’s inventory for the Territory, and Adamas shall purchase such quantities of such Reverted FDC Product(s) and such raw materials or work-in—process inventory from Forest at a price equal to [*].  Upon receipt of payment therefor, Forest shall promptly transfer to Adamas such quantities of inventory. Notwithstanding anything in this Paragraph (g), Forest may immediately cease Commercialization of any Reverted FDC Product in the Territory for a safety reason at any time.

 

(h)           Agreements .  Upon Adamas’ request, any agreement to which Forest or its Affiliate or Sublicensee is a party and which relates solely to one or more Reverted FDC Product(s) in the form existing as of the Termination Effective Date shall (subject to obtaining any Third Party’s consent to such assignment) be assigned to Adamas, and if not so assigned, the Parties shall coordinate to ensure that Adamas obtains the benefits under such contracts as reasonably necessary to exercise its rights and licenses hereunder until Adamas is able to execute a written agreement directly with the other party to such agreement providing such benefits or a comparable alternate arrangement, but in no event more than [*] from the Termination Effective Date; provided that Adamas shall use Commercially Reasonable Efforts to execute a written agreement directly with the other party to such agreement during such [*] period.  Forest shall

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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use Commercially Reasonable Efforts to assist Adamas in negotiating and executing such an agreement with such counterparty.  Without limiting the foregoing, Forest’s (and any of its Affiliates’) sublicenses to Third Parties with respect to the Reverted FDC Products shall be assigned to Adamas to the extent possible under the terms of the applicable sublicense and to the extent that the applicable sublicense solely relates to the Reverted FDC Products, subject to such Sublicensee’s prior written consent (in which case, such Sublicensee shall be exempt from the other provisions of this Schedule 11.2(e)) .

 

(i)            Transition .  With respect to matters not already covered above in Paragraphs (a) through (h), the Parties agree, and agree on behalf of their Affiliates, at each Party’s expense, to reasonably cooperate with each other (and their designees) as necessary to facilitate a smooth, orderly and prompt transition of the ongoing Development, Manufacturing and Commercialization of the Reverted FDC Products in the Territory within [*] of the Termination Effective Date.

 

(j)            Additional Matters .  Upon the Termination Effective Date, the Parties’ rights and obligations under this Agreement shall terminate with respect to the FDC Products (including any license granted to Forest hereunder with respect to such FDC Products), except that (A) those provisions expressly set forth in this ARTICLE XI as surviving such termination shall survive; and (B) the following provisions shall survive with respect to the FDC Products (until expiration of this Agreement, after which such provisions shall survive solely as set forth in Section 11.7): [*]. In addition, [*] survives as set forth therein, including for clarity with regard to Development of FDC Products by Adamas, its Affiliates and (sub)licensees for the Territory if [*] or [*], and [*] survives as set forth therein, [*] or [*] with regard to the FDC Products [*] or [*].  Finally, for clarity, Adamas’ obligations in Section [*] shall apply with respect to the Adamas FDC Patent Rights.  Subject to the foregoing, all provisions of this Agreement with respect to Products other than FDC Products shall, for clarity, survive such a termination and in no event shall such a termination be construed to modify or limit any rights or obligations of a Party with respect to any Product other than an FDC Product.

 

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

 

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Exhibit 10.7

 

WATERGATE OFFICE TOWERS

EMERYVILLE TOWER 1

EMERYVILLE, CALIFORNIA

 

OFFICE LEASE AGREEMENT

 

BETWEEN

 

CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership

(“ LANDLORD ”)

 

AND

 

NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware Corporation

(“ TENANT ”)

 



 

OFFICE LEASE AGREEMENT

 

THIS OFFICE LEASE AGREEMENT (the “Lease”) is made and entered into as of October 25, 2006, by and between, CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) .  The following exhibits and attachments are incorporated into and made a part of the Lease:  Exhibit A (Outline and Location of Premises), Exhibit B (Expenses and Taxes), Exhibit C (Intentionally Omitted), Exhibit D (Commencement Letter), Exhibit E (Building Rules and Regulations), Exhibit F (Additional Provisions), Exhibit G (Parking Agreement) and Exhibit H (Asbestos Notification).

 

1.               Basic Lease Information.

 

1.01        “ Building ” shall mean the building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.  “ Rentable Square Footage of the Building ” is deemed to be 217,054 square feet.

 

1.02        “ Premises ” shall mean the area shown on Exhibit A to this Lease.  The Premises is located on the 10 th  floor and known as suite 1050.  If the Premises include one or more floors in their entirety, all corridors and restroom facilities located on such full floor(s) shall be considered part of the Premises.  The “ Rentable Square Footage of the Premises ” is deemed to be 9,172 square feet.  Landlord and Tenant stipulate and agree that the Rentable Square Footage of the Building and the Rentable Square Footage of the Premises are correct.

 

1.03     “ Base Rent ”:

 

Period

 

Annual Rate
Per Square Foot

 

Monthly
Base Rent

 

12/01/06 — 11/30/07

 

$

25.20

 

$

19,261.20

 

12/01/07 — 11/30/08

 

$

26.21

 

$

20,033.18

 

 

1.04                         Tenant’s Pro Rata Share ”:  4.2257%.

 

1.05                         Base Year ” for Taxes (defined in Exhibit B ):  2007; “ Base Year ” for Expenses (defined in Exhibit B ):  2007.

 

1.06                         Term ”:  A period of 24 months.  Subject to Section 3, the Term shall commence on December 1, 2006 (the “ Commencement Date ”) and, unless terminated early in accordance with this Lease, end on November 30, 2008 (the “ Termination Date ”).

 

1.07                         Allowance(s) :  None.

 

1.08                         Security Deposit ”:  $20,000.00, as more fully described in Section 6.

 

1.09                         Guarantor(s) ”:  As of the date of this Lease, there are no Guarantors.

 

1.10                         Broker(s) ”:  None.

 

1.11                         Permitted Use ”:  General office use; provided that in no event shall the Premises, or any portion of the Premises, be used (i) for the sale of prepackaged gourmet salads and sandwiches, soup and baked goods for on or off Premises consumption; (ii) for the operation of a quick printing business; and (iii) for the operation of a full table service, sit-down restaurant selling Mexican food and/or South American style food.

 

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1.12                         Notice Address(es) ”:

 

Landlord:
CA-Emeryville Properties Limited
Partnership

c/o Equity Office Management, L.L.C.
One Market, Spear Tower
Suite 600 San Francisco, California 94105
Attn: Property Manager

Tenant
Prior to the Commencement Date:

Neuromolecular Pharmaceuticals, Inc.
1900 Powell Street, Suite 1050
Emeryville, California 94608

From and after the Commencement
Date:


Neuromolecular Pharmaceuticals, 
Inc.
1900 Powell Street, Suite 1050
Emeryville, California 94608

 

A copy of any notices to Landlord shall be sent to Equity Office, One Market, 600 Spear Tower, San Francisco, CA 94105, Attn: Managing Counsel — San Francisco Region.

 

1.13                         Business Day(s) ” are Monday through Friday of each week, exclusive of New Years Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day (“ Holidays ”).  Landlord may designate additional Holidays that are commonly recognized by other office buildings in the area where the Building is located.  “ Building Service Hours ” are 8:00 a.m. to 6:00 p.m. on Business Days.

 

1.14                         [Intentionally Omitted].

 

1.15                         Property ” means the Building and the parcel(s) of land on which it is located and, at Landlord’s discretion, the parking facilities and other improvements, if any, serving the Building and the parcel(s) of land on which they are located.

 

2.               Lease Grant.

 

The Premises are hereby leased to Tenant from Landlord, together with the right to use any portions of the Property that are designated by Landlord for the common use of tenants and others (the “ Common Areas ”).

 

3.               Adjustment of Commencement Date; Possession.

 

3.01     At Landlord’s request, Landlord and Tenant shall enter into a commencement letter agreement in the form attached as Exhibit D .  Tenant’s failure to execute and return the commencement letter, or to provide written objection to the statements contained in the letter, within 30 days after the date of the letter shall be deemed an approval by Tenant of the statements contained therein.  If the Termination Date does not fall on the last day of a calendar month, Landlord and Tenant may elect to adjust the Termination Date to the last day of the calendar month in which the Termination Date occurs by the mutual execution of a commencement letter agreement setting forth such adjusted date.

 

3.02     The Premises are accepted by Tenant in “as is” condition and configuration without any representations or warranties by Landlord.  By taking possession of the Premises, Tenant agrees that the Premises are in good order and satisfactory condition.  Landlord shall not be liable for a failure to deliver possession of the Premises or any other space due to the holdover or unlawful possession of such space by another party, however Landlord shall use reasonable efforts to obtain possession of the space.  The commencement date for the space, in such event, shall be postponed until the date Landlord delivers possession of the Premises to Tenant free from occupancy by any party.  If Tenant takes possession of the Premises before the Commencement Date, such possession shall be subject to the terms and conditions of this Lease and Tenant shall pay Rent (defined in Section 4.01) to Landlord for each day of possession before the Commencement Date.  However, except for the cost of services requested by Tenant (e.g. freight elevator usage), Tenant shall not be required to pay Rent for any days of possession before the Commencement Date during which Tenant, with the approval of Landlord, is in possession of the Premises for the sole purpose of performing improvements or installing furniture, equipment or other personal property.

 

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4.               Rent.

 

4.01     Tenant shall pay Landlord, without any setoff or deduction, unless expressly set forth in this Lease, all Base Rent and Additional Rent due for the Term (collectively referred to as “ Rent ”).  “ Additional Rent ” means all sums (exclusive of Base Rent) that Tenant is required to pay Landlord under this Lease.  Tenant shall pay and be liable for all rental, sales and use taxes (but excluding income taxes), if any, imposed upon or measured by Rent.  Base Rent and recurring monthly charges of Additional Rent shall be due and payable in advance on the first day of each calendar month without notice or demand, provided that the installment of Base Rent for the first full calendar month of the Term, and the first monthly installment of Additional Rent for Expenses and Taxes, shall be payable upon the execution of this Lease by Tenant All other items of Rent shall be due and payable by Tenant on or before 30 days after billing by Landlord. Rent shall be made payable to the entity, and sent to the address, Landlord designates and shall be made by good and sufficient check or by other means acceptable to Landlord.  Tenant shall pay Landlord an administration fee equal to 5% of all past due Rent, provided that Tenant shall be entitled to a grace period of 5 days for the first 2 late payments of Rent in a calendar year.  In addition, past due Rent shall accrue interest at 12% per annum.  Landlord’s acceptance of less than the correct amount of Rent shall be considered a payment on account of the earliest Rent due.  Rent for any partial month during the Term shall be prorated.  No endorsement or statement on a check or letter accompanying payment shall be considered an accord and satisfaction.  Tenant’s covenant to pay Rent is independent of every other covenant in this Lease.

 

4.02     Tenant shall pay Tenant’s Pro Rata Share of Taxes and Expenses in accordance with Exhibit B of this Lease.

 

5.               Compliance with Laws; Use.

 

The Premises shall be used for the Permitted Use and for no other use whatsoever.  Tenant shall comply with all statutes, codes, ordinances, orders, rules and regulations of any municipal or governmental entity whether in effect now or later, including the Americans with Disabilities Act (“ Law(s) ”), regarding the operation of Tenant’s business and the use, condition, configuration and occupancy of the Premises.  In addition, Tenant shall, at its sole cost and expense, promptly comply with any Laws that relate to the “Base Building” (defined below), but only to the extent such obligations are triggered by Tenant’s use of the Premises, other than for general office use, or Alterations or improvements in the Premises performed or requested by Tenant.  “ Base Building ” shall include the structural portions of the Building, the public restrooms and the Building mechanical, electrical and plumbing systems and equipment located in the internal core of the Building on the floor or floors on which the Premises are located.  Except to the extent properly included in Expenses, Landlord shall be responsible for the cost of correcting any violations of Title III of the Americans with Disabilities Act (ADA) with respect to the Common Areas of the Building.  Notwithstanding the foregoing, Landlord shall have the right to contest any alleged violation in good faith, including, without limitation, the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by Law and the right to appeal any decisions, judgments or rulings to the fullest extent permitted by Law.  Landlord, after the exhaustion of any and all rights to appeal or contest, will make all repairs, additions, alterations or improvements necessary to comply with the terms of any final order or judgment.  Tenant shall promptly provide Landlord with copies of any notices it receives regarding an alleged violation of Law.  Tenant shall comply with the rules and regulations of the Building attached as Exhibit E and such other reasonable rules and regulations adopted by Landlord from time to time, including rules and regulations for the performance of Alterations (defined in Section 9).

 

6.               Security Deposit.

 

The Security Deposit shall be delivered to Landlord upon the execution of this Lease by Tenant and held by Landlord without liability for interest (unless required by Law) as security for the performance of Tenant’s obligations.  The Security Deposit is not an advance payment of Rent or a measure of damages.  Landlord may use all or a portion of the Security Deposit to satisfy past due Rent or to cure any Default (defined in Section 18) by Tenant, or to satisfy any other loss or damage resulting from Tenant’s Default as provided in Section 19.  If Landlord uses any portion of the Security Deposit, Tenant shall, within 5 days after demand, restore the Security Deposit to its original amount.  Landlord shall return any unapplied portion of the Security Deposit to Tenant within 45 days after the later to occur of: (a) determination of the final Rent due from Tenant: or (b) the later to occur of the Termination Date or the date Tenant surrenders the Premises to Landlord in compliance with Section 25.  Landlord may assign the Security Deposit to a successor or transferee and, following the assignment, Landlord shall have no further liability for the return of the Security Deposit.  Landlord shall not be required to keep

 

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the Security Deposit separate from its other accounts.  Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, or any similar or successor Laws now or hereinafter in effect.

 

7.               Building Services.

 

7.01     Landlord shall furnish Tenant with the following services: (a) water for use in the Base Building lavatories; (b) customary heat and air conditioning in season during Building Service Hours, although Tenant shall have the right to receive HVAC service during hours other than Building Service Hours by paying Landlord’s then standard charge for additional HVAC service and providing such prior notice as is reasonably specified by Landlord; (c) standard janitorial service on Business Days; (d) elevator service; (e) electricity in accordance with the terms and conditions in Section 7.02; (f) access to the Building and Premises for Tenant and its employees 24 hours per day/7 days per week, subject to the terms of this Lease and such protective services or monitoring systems, if any, as Landlord may reasonably impose, including, without limitation, sign-in procedures and/or presentation of identification cards; and (g) such other services as Landlord reasonably determines are necessary or appropriate for the Property.

 

7.02     Electricity used by Tenant in the Premises shall be paid for by Tenant through inclusion in Expenses (except as provided for excess usage).  Without the consent of Landlord, Tenant’s use of electrical service shall not exceed, either in voltage, rated capacity, use beyond Building Service Hours or overall load, that which Landlord reasonably deems to be standard for the Building.  Landlord shall have the right to measure electrical usage by commonly accepted methods, including the installation of measuring devices such as submeters and check meters.  If it is determined that Tenant is using excess electricity, Tenant shall pay Landlord Additional Rent for the cost of such excess electrical usage and for the cost of purchasing and installing the measuring device(s).

 

7.03     Landlord’s failure to furnish, or any interruption, diminishment or termination of services due to the application of Laws, the failure of any equipment, the performance of repairs, improvements or alterations, utility interruptions or the occurrence of an event of Force Majeure (defined in Section 26.03) (collectively a “ Service Failure ”) shall not render Landlord liable to Tenant, constitute a constructive eviction of Tenant, give rise to an abatement of Rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement.  However, if the Premises, or a material portion of the Premises, are made untenantable for a period in excess of 3 consecutive Business Days as a result of a Service Failure that is reasonably within the control of Landlord to correct, than Tenant, as its sole remedy, shall be entitled to receive an abatement of Rent payable hereunder during the period beginning on the 4 th  consecutive Business Day of the Service Failure and ending on the day the service has been restored.  If the entire Premises have not been rendered untenantable by the Service Failure, the amount of abatement shall be equitably prorated.

 

8.               Leasehold Improvements.

 

All improvements in and to the Premises, including any Alterations (defined in Section 9.03) (collectively, “ Leasehold Improvements ”) shall remain upon the Premises at the end of the Term without compensation to Tenant, provided that Tenant, at its expense, in compliance with the National Electric Code or other applicable Law, shall remove any Cable (defined in Section 9.01 below).  In addition, Landlord, by written notice to Tenant at least 30 days prior to the Termination Date, may require Tenant, at its expense, to remove any Alterations that, in Landlord’s reasonable judgment, are of a nature that would require removal and repair costs that are materially in excess of the removal and repair costs associated with standard office improvements (the Cable and such other items collectively are referred to as “ Required Removables ”).  Required Removables shall include, without limitation, internal stairways, raised floors, personal baths and showers, vaults, rolling file systems and structural alterations and modifications.  The Required Removables shall be removed by Tenant before the Termination Date.  Tenant shall repair damage caused by the installation or removal of Required Removables.  If Tenant fails to perform its obligations in a timely manner, Landlord may perform such work at Tenant’s expense.  Tenant, prior to execution of this Lease, and thereafter at any time Tenant requests approval for a proposed Alteration, may request in writing that Landlord advise Tenant whether the Alteration, or any portion thereof, is a Required Removable.  Within 10 days after receipt of Tenant’s request, Landlord shall advise Tenant in writing as to which portions of the alteration or other improvements are Required Removables.

 

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9.               Repairs and Alterations.

 

9.01     Tenant shall periodically inspect the Premises to identify any conditions that are dangerous or in need of maintenance or repair.  Tenant shall promptly provide Landlord with notice of any such conditions.  Tenant shall, at its sole cost and expense, perform all maintenance and repairs to the Premises that are not Landlord’s express responsibility under this Lease, and keep the Premises in good condition and repair, reasonable wear and tear excepted.  Tenant’s repair and maintenance obligations include, without limitation, repairs to: (a) floor covering; (b) interior partitions; (c) doors; (d) the interior side of demising walls; (e) electronic, fiber, phone and data cabling and related equipment that is installed by or for the exclusive benefit of Tenant (collectively, “ Cable ”); (f) supplemental air conditioning units, kitchens, including hot water heaters, plumbing, and similar facilities exclusively serving Tenant; and (g) Alterations.  Subject to the terms of Section 15 below, to the extent Landlord is not reimbursed by insurance proceeds, Tenant shall reimburse Landlord for the cost of repairing damage to the Building caused by the acts of Tenant, Tenant Related Parties and their respective contractors and vendors.  If Tenant fails to make any repairs to the Premises for more than 15 days after notice from Landlord (although notice shall not be required in an emergency), Landlord may make the repairs, and Tenant shall pay the reasonable cost of the repairs, together with an administrative charge in an amount equal to 10% of the cost of the repairs.

 

9.02     Landlord shall keep and maintain in good repair and working order and perform maintenance upon the: (a) structural elements of the Building; (b) mechanical (including HVAC), electrical, plumbing and fire/life safety systems serving the Building in general; (c) Common Areas; (d) roof of the Building; (e) exterior windows of the Building; and (1) elevators serving the Building. Landlord shall promptly make repairs for which Landlord is responsible.  Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932, and Sections 1941 and 1942 of the California Civil Code, or any similar or successor Laws now or hereinafter in effect.

 

9.03     Tenant shall not make alterations, repairs, additions or improvements or install any Cable (collectively referred to as “ Alterations ”) without first obtaining the written consent of Landlord in each instance, which consent shall not be unreasonably withheld or delayed.  However, Landlord’s consent shall not be required for any Alteration that satisfies all of the following criteria (a “ Cosmetic Alteration ”): (a) is of a cosmetic nature such as painting, wallpapering, hanging pictures and installing carpeting; (b) is not visible from the exterior of the Premises or Building; (c) will not affect the Base Building; and (d) does not require work to be performed inside the walls or above the ceiling of the Premises. Cosmetic Alterations shall be subject to all the other provisions of this Section 9.03.  Prior to starting work, Tenant shall furnish Landlord with plans and specifications; names of contractors reasonably acceptable to Landlord (provided that Landlord may designate specific contractors with respect to Base Building); required permits and approvals; evidence of contractor’s and subcontractor’s insurance in amounts reasonably required by Landlord and naming Landlord as an additional insured; and any security for performance in amounts reasonably required by Landlord.  Changes to the plans and specifications must also be submitted to Landlord for its approval.  Alterations shall be constructed in a good and workmanlike manner using materials of a quality reasonably approved by Landlord.  Tenant shall reimburse Landlord for any sums paid by Landlord for third party examination of Tenant’s plans for non-Cosmetic Alterations.  In addition, Tenant shall pay Landlord a fee for Landlord’s oversight and coordination of any non-Cosmetic Alterations equal to 10% of the cost of the non-Cosmetic Alterations.  Upon completion, Tenant shall furnish “as-built” plans for non-Cosmetic Alterations, completion affidavits and full and final waivers of lien.  Landlord’s approval of an Alteration shall not be deemed a representation by Landlord that the Alteration complies with Law.

 

10.        Entry by Landlord.

 

Landlord may enter the Premises to inspect, show or clean the Premises or to perform or facilitate the performance of repairs, alterations or additions to the Premises or any portion of the Building.  Except in emergencies or to provide Building services, Landlord shall provide Tenant with reasonable prior verbal notice of entry and shall use reasonable efforts to minimize any interference with Tenant’s use of the Premises.  If reasonably necessary, Landlord may temporarily close all or a portion of the Premises to perform repairs, alterations and additions.  However, except in emergencies, Landlord will not close the Premises if the work can reasonably be completed on weekends and after Building Service Hours.  Entry by Landlord shall not constitute a constructive eviction or entitle Tenant to an abatement or reduction of Rent, except to the extent that as a result of such entry and activity by Landlord, the Premises, or a portion of the Premises, are rendered untenantable, in which case Tenant shall be entitled to an abatement of Rent as provided in Section 7.03.

 

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11.        Assignment and Subletting.

 

11.01  Except in connection with a Business Transfer (defined in Section 11.04), Tenant shall not assign, sublease, transfer or encumber any interest in this Lease or allow any third party to use any portion of the Premises (collectively or individually, a “ Transfer ”) without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed if Landlord does not exercise its recapture rights under Section 11.02. Without limitation, it is agreed that Landlord’s consent shall not be considered unreasonably withheld if the proposed transferee is an occupant of the Building or if the proposed transferee, whether or not an occupant of the Building, is in discussions with Landlord regarding the leasing of space within the Building.  If the entity(ies) or individual(s) or any combination thereof which directly or indirectly owns or controls the voting shares/rights of Tenant such that such entity(ies) or individual(s) can select a majority of the seats on Tenant’s board of directors, changes, whether in a single transaction or a set of integrated transactions, such change of ownership or control shall constitute a Transfer unless Tenant is an entity whose outstanding stock is listed on a recognized securities exchange or if at least 80% of its voting stock is owned by another entity, the voting stock of which is so listed.  Tenant hereby waives the provisions of Section 1995.310 of the California Civil Code, or any similar or successor Laws, now or hereinafter in effect, and all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all applicable Laws, on behalf of the proposed transferee.  Any Transfer in violation of this Section shall, at Landlord’s option, be deemed a Default by Tenant as described in Section 18, and shall be voidable by Landlord as between Landlord and Tenant.  In no event shall any Transfer, including a Business Transfer, release or relieve Tenant from any obligation under this Lease, and Tenant shall remain primarily liable for the performance of the tenant’s obligations under this Lease, as amended from time to time.

 

11.02  Tenant shall provide Landlord with financial statements for the proposed transferee, a fully executed copy of the proposed assignment, sublease or other Transfer documentation and such other information as Landlord may reasonably request.  Within 15 Business Days after receipt of the required information and documentation, Landlord shall either: (a) consent to the Transfer by execution of a consent agreement in a form reasonably designated by Landlord; (b) reasonably refuse to consent to the Transfer in writing; or (c) in the event of an assignment of this Lease or subletting of more than 20% of the Rentable Square Footage of the Premises for more than 50% of the remaining Term (excluding unexercised options), recapture the portion of the Premises that Tenant is proposing to Transfer.  If Landlord exercises its right to recapture, this Lease shall automatically be amended (or terminated if the entire Premises is being assigned or sublet) to delete the applicable portion of the Premises effective on the proposed effective date of the Transfer, although Landlord may require Tenant to execute a reasonable amendment or other document reflecting such reduction or termination.  Tenant shall pay Landlord a review fee of $1,500.00 for Landlord’s review of any requested Transfer.

 

11.03  Tenant shall pay Landlord 50% of all rent and other consideration which Tenant receives as a result of a Transfer that is in excess of the Rent payable to Landlord for the portion of the Premises and Term covered by the Transfer.  Tenant shall pay Landlord for Landlord’s share of the excess within 30 days after Tenant’s receipt of the excess.  Tenant may deduct from the excess, on a straight-line basis, all reasonable and customary expenses directly incurred by Tenant attributable to the Transfer.  If Tenant is in Default, Landlord may require that all sublease payments be made directly to Landlord, in which case Tenant shall receive a credit against Rent in the amount of Tenant’s share of payments received by Landlord.

 

11.04  Tenant may assign this Lease to a successor to Tenant by stock transfer or sale, merger, consolidation or the purchase of substantially all of Tenant’s assets, or assign this Lease or sublet all or a portion of the Premises to an Affiliate (defined below), without the consent of Landlord, provided that all of the following conditions are satisfied (a “ Business Transfer ”): (a) Tenant must not be in Default; (b) Tenant must give Landlord written notice at least 15 Business Days before such Transfer; and (c) if such Transfer will result from a stock transfer or sale, merger, stock transfer, sale or consolidation of Tenant with another entity or entities, then the Credit Requirement (defined below) must be satisfied.  Tenant’s notice to Landlord shall include information and documentation evidencing the Business Transfer and showing that each of the above conditions has been satisfied.  If requested by Landlord, Tenant’s successor shall sign a commercially reasonable form of assumption agreement.  “ Affiliate ” shall mean an entity controlled by, controlling or under common control with Tenant.  The “ Credit Requirement ” shall be deemed satisfied if, as of the date immediately preceding the date of the Transfer, the financial strength of the entity with which Tenant is to merge or consolidate is not less than the greater of that of Tenant (i) as of the date of this Lease, and (ii) as of the day prior to the proposed Ownership Change, as determined (x) based on credit ratings of such entity and Tenant by both Moody’s and Standard & Poor’s (or by either such agency alone, if applicable ratings by the other agency do not exist), or (y) if such credit ratings do not exist, then either (1) if the

 

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successor entity has been in existence for two or more fiscal years, in accordance with Moody’s KMV RiskCalc (i.e., the on-line software tool offered by Moody’s for analyzing credit risk) based on CFO-certified financial statements for such entity and Tenant covering their last two fiscal years ending before the Transfer, or (2) if the successor entity has been in existence for less than two fiscal years, the Credit Requirement shall be deemed satisfied if, as of the date immediately preceding the date of the Transfer, Tenants successor shall have a net worth which is at least equal to the greater of Tenants net worth (i) as of the date of this Lease, or (ii) as of the day prior to the proposed Ownership Change.

 

12.        Liens.

 

Tenant shall not permit mechanics’ or other liens to be placed upon the Property, Premises or Tenants leasehold interest in connection with any work or service done or purportedly done by or for the benefit of Tenant or its transferees.  Tenant shall give Landlord notice at least 15 days prior to the commencement of any work in the Premises to afford Landlord the opportunity, where applicable, to post and record notices of non-responsibility.  Tenant, within 10 days of notice from Landlord, shall fully discharge any lien by settlement, by bonding or by insuring over the lien in the manner prescribed by the applicable lien Law and, if Tenant fails to do so, Tenant shall be deemed in Default under this Lease and, in addition to any other remedies available to Landlord as a result of such Default by Tenant, Landlord, at its option, may bond, insure over or otherwise discharge the lien.  Tenant shall reimburse Landlord for any amount paid by Landlord, including, without limitation, reasonable attorneys’ fees.

 

13.        Indemnity and Waiver of Claims.

 

Except to the extent caused by the negligence or willful misconduct of Landlord or any Landlord Related Parties (defined below), Tenant shall indemnify, defend and hold Landlord and Landlord Related Parties harmless against and from all liabilities, obligations, damages, penalties, claims, actions, costs, charges and expenses, including, without limitation, reasonable attorneys’ fees and other professional fees (if and to the extent permitted by Law) (collectively referred to as “ Losses ”), which may be imposed upon, incurred by or asserted against Landlord or any of the Landlord Related Parties by any third party and arising out of or in connection with any damage or injury occurring in the Premises or any acts or omissions (including violations of Law) of Tenant, the Tenant Related Parties (defined below) or any of Tenant’s transferees, contractors or licensees.  Except to the extent caused by the negligence or willful misconduct of Tenant or any Tenant Related Parties, Landlord shall indemnify, defend and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees and agents (“ Tenant Related Parties ”) harmless against and from all Losses which may be imposed upon, incurred by or asserted against Tenant or any of the Tenant Related Parties by any third party and arising out of or in connection with the acts or omissions (including violations of Law) of Landlord or the Landlord Related Parties.  Tenant hereby waives all claims against and releases Landlord and its trustees, members, principals, beneficiaries, partners, officers, directors, employees, Mortgagees (defined in Section 23) and agents (the “ Landlord Related Parties ”) from all claims for any injury to or death of persons, damage to property or business loss in any manner related to (a) Force Majeure, (b) acts of third parties, (c) the bursting or leaking of any tank, water closet, drain or other pipe, (d) the inadequacy or failure of any security or protective services, personnel or equipment, or (e) any matter not within the reasonable control of Landlord.

 

14.        Insurance.

 

Tenant shall maintain the following insurance (“ Tenant’s Insurance ”): (a) Commercial General Liability Insurance applicable to the Premises and its appurtenances providing, on an occurrence basis, a minimum combined single limit of $2,000,000.00; (b) Property/Business Interruption Insurance written on an All Risk or Special Cause of Loss Form, including earthquake sprinkler leakage, at replacement cost value and with a replacement cost endorsement covering all of Tenant’s business and trade fixtures, equipment, movable partitions, furniture, merchandise and other personal property within the Premises (“ Tenant’s P roperty”) and any Leasehold Improvements performed by or for the benefit of Tenant; (c) Workers’ Compensation Insurance in amounts required by Law; and (d) Employers Liability Coverage of at least $1,000,000.00 per occurrence.  Any company writing Tenant’s Insurance shall have an A.M. Best rating of not less than A-VIII.  All Commercial General Liability insurance policies shall name as additional insureds Landlord (or its successors and assignees), the managing agent for the Building (or any successor), EOP Operating Limited Partnership, Equity Office Properties Trust and their respective members, principals, beneficiaries, partners, officers, directors, employees, and agents, and other designees of Landlord and its successors as the interest of such designees shall appear. In addition, Landlord shall be named as a loss payee with respect to Property/Business Interruption Insurance on the Leasehold Improvements.  All policies of Tenant’s Insurance shall contain

 

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endorsements that the insurer(s) shall give Landlord and its designees at least 30 days’ advance written notice of any cancellation, termination, material change or lapse of insurance.  Tenant shall provide Landlord with a certificate of insurance evidencing Tenant’s Insurance prior to the earlier to occur of the Commencement Date or the date Tenant is provided with possession of the Premises, and thereafter as necessary to assure that Landlord always has current certificates evidencing Tenants Insurance.  So long as the same is available at commercially reasonable rates, Landlord shall maintain so called All Risk property insurance on the Building at replacement cost value as reasonably estimated by Landlord, together with such other insurance coverage as Landlord, in its reasonable judgment, may elect to maintain.

 

15.        Subrogation.

 

Landlord and Tenant hereby waive and shall cause their respective insurance carriers to waive any and all rights of recovery, claims, actions or causes of action against the other for any loss or damage with respect to Tenant’s Property, Leasehold Improvements, the Building, the Premises, or any contents thereof, including rights, claims, actions and causes of action based on negligence, which loss or damage is (or would have been, had the insurance required by this Lease been carried) covered by insurance.  For the purposes of this waiver, any deductible with respect to a party’s insurance shall be deemed covered by and recoverable by such party under valid and collectable policies of insurance.

 

16.        Casualty Damage.

 

16.01  If all or any portion of the Premises becomes untenantable by fire or other casualty to the Premises (collectively a “ Casualty ”), Landlord, with reasonable promptness, shall cause a general contractor selected by Landlord to provide Landlord and Tenant with a written estimate of the amount of time required using standard working methods to Substantially Complete (as defined below) the repair and restoration of the Premises and any Common Areas necessary to provide access to the Premises (“ Completion Estimate ”).  If the Completion Estimate indicates that the Premises or any Common Areas necessary to provide access to the Premises cannot be made tenantable within 270 days from the date the repair is started, then either party shall have the right to terminate this Lease upon written notice to the other within 10 days after receipt of the Completion Estimate.  Tenant, however, shall not have the right to terminate this Lease if the Casualty was caused by the negligence or intentional misconduct of Tenant or any Tenant Related Parties.  In addition, Landlord, by notice to Tenant within 90 days after the date of the Casualty, shall have the right to terminate this Lease if:  (1) the Premises have been materially damaged and there is less than 2 years of the Term remaining on the date of the Casualty; (2) any Mortgagee requires that the insurance proceeds be applied to the payment of the mortgage debt; or (3) a material uninsured loss to the Building or Premises occurs.

 

For purposes hereof, “ Substantially Complete ” shall mean the date that the repair and restoration of the Premises and any Common Areas necessary to provide access to the Premises has been performed, other than any details of construction, mechanical adjustment or any other similar matter, the non-completion of which does not materially interfere with Tenant’s use of the Premises.

 

16.02  If this Lease is not terminated, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord’s reasonable control, restore the Premises and Common Areas.  Such restoration shall be to substantially the same condition that existed prior to the Casualty, except for modifications required by Law or any other modifications to the Common Areas deemed desirable by Landlord.  Upon notice from Landlord, Tenant shall assign or endorse over to Landlord (or to any party designated by Landlord) all property insurance proceeds payable to Tenant under Tenants Insurance with respect to any Leasehold Improvements performed by or for the benefit of Tenant; provided if the estimated cost to repair such Leasehold Improvements exceeds the amount of insurance proceeds received by Landlord from Tenant’s insurance carrier, the excess cost of such repairs shall be paid by Tenant to Landlord prior to Landlords commencement of repairs.  Within 15 days of demand, Tenant shall also pay Landlord for any additional excess costs to repair such Leasehold Improvements that are determined during the performance of the repairs.  In no event shall Landlord be required to spend more for the restoration than the proceeds received by Landlord, whether insurance proceeds or proceeds from Tenant.  Landlord shelf not be liable for any inconvenience to Tenant, or injury to Tenants business resulting in any way from the Casualty or the repair thereof.  Provided that Tenant is not in Default, during any period of time that all or a material portion of the Premises is rendered untenantable as a result of a Casualty, the Rent shall abate for the portion of the Premises that is untenantable and not used by Tenant.

 

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16.03  The provisions of this Lease, including this Section 16, 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 the Property, and any Laws, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any similar or successor Laws now or hereinafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises or the Property.

 

17.        Condemnation.

 

Either party may terminate this Lease if any material part of the Premises is taken or condemned for any public or quasi-public use under Law, by eminent domain or private purchase in lieu thereof (a “ Taking ”). Landlord shall also have the right to terminate this Lease if there is a Taking of any portion of the Building or Property which would have a material adverse effect on Landlord’s ability to profitably operate the remainder of the Building.  The terminating party shall provide written notice of termination to the other party within 45 days after it first receives notice of the Taking.  The termination shall be effective as of the effective date of any order granting possession to, or vesting legal title in, the condemning authority.  If this Lease is not terminated, Base Rent and Tenant’s Pro Rata Share shall be appropriately adjusted to account for any reduction in the square footage of the Building or Premises.  All compensation awarded for a Taking shall be the property of Landlord.  The right to receive compensation or proceeds are expressly waived by Tenant, however, Tenant may file a separate claim for Tenant’s Property and Tenant’s reasonable relocation expenses, provided the filing of the claim does not diminish the amount of Landlord’s award.  If only a part of the Premises is subject to a Taking and this Lease is not terminated, Landlord, with reasonable diligence, will restore the remaining portion of the Premises as nearly as practicable to the condition immediately prior to the Taking.  Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure, or any similar or successor Laws.

 

18.        Events of Default.

 

In addition to any other default specifically described in this Lease, each of the following occurrences shall be a “ Default ”: (a) Tenant’s failure to pay any portion of Rent when due, if the failure continues for 3 days after written notice to Tenant (“ Monetary Default ”); (b) Tenant’s failure (other than a Monetary Default) to comply with any term, provision, condition or covenant of this Lease, if the failure is not cured within 10 days after written notice to Tenant provided, however, if Tenant’s failure to comply cannot reasonably be cured within 10 days, Tenant shall be allowed additional time (not to exceed 60 days) as is reasonably necessary to cure the failure so long as Tenant begins the cure within 10 days and diligently pursues the cure to completion; (c) Tenant permits a Transfer without Landlord’s required approval or otherwise in violation of Section 11 of this Lease; (d) Tenant or any Guarantor becomes insolvent, makes a transfer in fraud of creditors, makes an assignment for the benefit of creditors, admits in writing its inability to pay its debts when due or forfeits or loses its right to conduct business; (e) the leasehold estate is taken by process or operation of Law; (f) in the case of any ground floor or retail Tenant, Tenant does not take possession of or abandons or vacates all or any portion of the Premises; or (g) Tenant is in default beyond any notice and cure period under any other lease or agreement with Landlord at the Building or Property.  If Landlord provides Tenant with notice of Tenant’s failure to comply with any specific provision of this Lease on 3 separate occasions during any 12 month period, Tenant’s subsequent violation of such provision shall, at Landlord’s option, be an incurable Default by Tenant.  All notices sent under this Section shall be in satisfaction of, and not in addition to, notice required by Law.

 

19.        Remedies.

 

19.01  Upon the occurrence of any Default under this Lease, whether enumerated in Section 18 or not, Landlord shall have the option to pursue any one or more of the following remedies without any notice (except as expressly prescribed herein) or demand whatsoever (and without limiting the generality of the foregoing, Tenant hereby specifically waives notice and demand for payment of Rent or other obligations, except for those notices specifically required pursuant to the terms of Section 18 or this Section 19, and waives any and all other notices or demand requirements imposed by applicable law):

 

(a)                                  Terminate this Lease and Tenant’s right to possession of the Premises and recover from Tenant an award of damages equal to the sum of the following:

 

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(i)                                      The Worth at the Time of Award of the unpaid Rent which had been earned at the time of termination;

 

(ii)                                   The Worth at the Time of Award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Tenant affirmatively proves could have been reasonably avoided;

 

(iii)                                The Worth at the Time of Award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant affirmatively proves could be reasonably avoided;

 

(iv)                               Any other amount necessary to compensate Landlord for all the detriment either proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which in the ordinary course of things would be likely to result therefrom; and

 

(v)                                  All such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law.

 

The “ Worth at the Time of Award ” of the amounts referred to in parts (i) and (ii) above, shall be computed by allowing interest at the lesser of a per annum rate equal to: (A) the greatest per annum rate of interest permitted from time to time under applicable law, or (B) the Prime Rate plus 5%.  For purposes hereof, the “ Prime Rate ” shall be the per annum interest rate publicly announced as its prime or base rate by a federally insured bank selected by Landlord in the State of California.  The “ Worth at the Time of Award ” of the amount referred to in part (iii), above, shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%;

 

(b)                                  Employ the remedy described in California Civil Code § 1951.4 (Landlord may continue this Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations); or

 

(c)                                   Notwithstanding Landlord’s exercise of the remedy described in California Civil Code § 1951.4 in respect of an event or events of default, at such time thereafter as Landlord may elect in writing, to terminate this Lease and Tenant’s right to possession of the Premises and recover an award of damages as provided above in Paragraph 19.01(a).

 

19.02  The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent.  No waiver by Landlord of any breach hereof shall be effective unless such waiver is in writing and signed by Landlord.

 

19.03  TENANT HEREBY WAIVES ANY AND ALL RIGHTS CONFERRED BY SECTION 3275 OF THE CIVIL CODE OF CALIFORNIA AND BY SECTIONS 1174 (c) AND 1179 OF THE CODE OF CIVIL PROCEDURE OF CALIFORNIA AND ANY AND ALL OTHER LAWS AND RULES OF LAW FROM TIME TO TIME IN EFFECT DURING THE LEASE TERM PROVIDING THAT TENANT SHALL HAVE ANY RIGHT TO REDEEM, REINSTATE OR RESTORE THIS LEASE FOLLOWING ITS TERMINATION BY REASON OF TENANT’S BREACH.  TENANT ALSO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS LEASE.

 

19.04  No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing by agreement, applicable law or in equity.  In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by applicable law, to injunctive relief, or to a decree compelling performance of any of the covenants, agreements, conditions or provisions of this Lease, or to any other remedy allowed to Landlord at law or in equity.  Forbearance by

 

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Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default.

 

19.05  If Tenant is in Default of any of its non-monetary obligations under the Lease, Landlord shall have the right to perform such obligations.  Tenant shall reimburse Landlord for the cost of such performance upon demand together with an administrative charge equal to 10% of the cost of the work performed by Landlord.

 

19.06  This Section 19 shall be enforceable to the maximum extent such enforcement is not prohibited by applicable law, and the unenforceability of any portion thereof shall not thereby render unenforceable any other portion.

 

20.        Limitation of Liability.

 

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR LANDLORD) SHALL BE LIMITED TO THE LESSER OF (A) THE INTEREST OF LANDLORD IN THE PROPERTY, OR (B) THE EQUITY INTEREST LANDLORD WOULD HAVE IN THE PROPERTY IF THE PROPERTY WERE ENCUMBERED BY THIRD PARTY DEBT IN AN AMOUNT EQUAL TO 70% OF THE VALUE OF THE PROPERTY.  TENANT SHALL LOOK SOLELY TO LANDLORD’S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY JUDGMENT OR AWARD AGAINST LANDLORD OR ANY LANDLORD RELATED PARTY.  NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY, AND IN NO EVENT SHALL LANDLORD OR ANY LANDLORD RELATED PARTY BE LIABLE TO TENANT FOR ANY LOST PROFIT, DAMAGE TO OR LOSS OF BUSINESS OR ANY FORM OF SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGE. BEFORE FILING SUIT FOR AN ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE MORTGAGEE(S) WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES (DEFINED IN SECTION 23 BELOW), NOTICE AND REASONABLE TIME TO CURE THE ALLEGED DEFAULT.

 

21.        Relocation.

 

Landlord, at its expense, at any time before or during the Term, may relocate Tenant from the Premises to space of reasonably comparable size and utility (“ Relocation Space ”) within the Building or other buildings within the same project upon 60 days’ prior written notice to Tenant.  The Relocation Space must contain similar finishes as the Premises, and approximately the same Rentable Square Footage as the Premises and the same number of work stations, offices, breakrooms and reception areas as are contained in the Premises as of the date Tenant receives Landlord’s notice of relocation.  From and after the date of the relocation, the Base Rent and Tenant’s Pro Rata Share shall be adjusted based on the rentable square footage of the Relocation Space, provided that the total monthly Base Rent for the Relocation Space shall in no event exceed the total monthly Base Rent for the Premises prior to the relocation.  Landlord shall pay Tenant’s reasonable costs of relocation, including all costs for moving Tenant’s furniture, equipment, supplies and other personal property, as well as the cost of printing and distributing change of address notices to Tenant’s customers and one month’s supply of stationery showing the new address.

 

22.        Holding Over.

 

If Tenant fails to surrender all or any part of the Premises at the termination of this Lease, occupancy of the Premises after termination shall be that of a tenancy at sufferance.  Tenant’s occupancy shall be subject to all the terms and provisions of this Lease, and Tenant shall pay an amount (on a per month basis without reduction for partial months during the holdover) equal to 150% of the sum of the Base Rent and Additional Rent due for the period immediately preceding the holdover.  No holdover by Tenant or payment by Tenant after the termination of this Lease shall be construed to extend the Term or prevent Landlord from immediate recovery of possession of the Premises by summary proceedings or otherwise.  If Landlord is unable to deliver possession of the Premises to a new tenant or to perform improvements for a new tenant as a result of Tenant’s holdover and Tenant fails to vacate the Premises within 15 days after notice from Landlord, Tenant shall be liable for all damages that Landlord suffers from the holdover.

 

23.        Subordination to Mortgages; Estoppel Certificate.

 

Tenant accepts this Lease subject and subordinate to any mortgage(s), deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising upon the Premises, the Building or the Property, and to renewals, modifications, refinancings and extensions thereof (collectively

 

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referred to as a “ Mortgage ”).  The party having the benefit of a Mortgage shall be referred to as a “ Mortgagee ”.  This clause shall be self-operative, but upon request from a Mortgagee, Tenant shall execute a commercially reasonable subordination agreement in favor of the Mortgagee.  As an alternative, a Mortgagee shall have the right at any time to subordinate its Mortgage to this Lease.  Upon request, Tenant, without charge, shall attorn to any successor to Landlord’s interest in this Lease.  Landlord and Tenant shall each, within 10 days after receipt of a written request from the other, execute and deliver a commercially reasonable estoppel certificate to those parties as are reasonably requested by the other (including a Mortgagee or prospective purchaser).  Without limitation, such estoppel certificate may include a certification as to the status of this Lease, the existence of any defaults and the amount of Rent that is due and payable.

 

24.        Notice.

 

All demands, approvals, consents or notices (collectively referred to as a “notice”) shall be in writing and delivered by hand or sent by registered or certified mail with return receipt requested or sent by overnight or same day courier service at the party’s respective Notice Address(es) set forth in Section 1.  Each notice shall be deemed to have been received on the earlier to occur of actual delivery or the date on which delivery is refused, or, if Tenant has vacated the Premises or any other Notice Address of Tenant without providing a new Notice Address, 3 days after notice is deposited in the U.S. mail or with a courier service in the manner described above.  Either party may, at any time, change its Notice Address (other than to a post office box address) by giving the other party written notice of the new address.

 

25.        Surrender of Premises.

 

At the termination of this Lease or Tenant’s right of possession, Tenant shall remove Tenant’s Property from the Premises, and quit and surrender the Premises to Landlord, broom clean, and in good order, condition and repair excepting damage from Casualty and ordinary wear and tear and damage which Landlord is obligated to repair hereunder.  If Tenant fails to remove any of Tenant’s Property within 2 days after termination of this Lease or Tenant’s right to possession, Landlord, at Tenant’s sole cost and expense, shall be entitled (but not obligated) to remove and store Tenant’s Property.  Landlord shall not be responsible for the value, preservation or safekeeping of Tenant’s Property.  Tenant shall pay Landlord, upon demand, the expenses and storage charges incurred.  If Tenant fails to remove Tenant’s Property from the Premises or storage, within 30 days after notice, Landlord may deem all or any part of Tenant’s Property to be abandoned and title to Tenant’s Property shall vest in Landlord.

 

26.        Miscellaneous.

 

26.01  This Lease shall be interpreted and enforced in accordance with the Laws of the state or commonwealth in which the Building is located and Landlord and Tenant hereby irrevocably consent to the jurisdiction and proper venue of such state or commonwealth.  If any term or provision of this Lease shall to any extent be void or unenforceable, the remainder of this Lease shall not be affected.  If there is more than one Tenant or if Tenant is comprised of more than one party or entity, the obligations imposed upon Tenant shall be joint and several obligations of all the parties and entities, and requests or demands from any one person or entity comprising Tenant shall be deemed to have been made by all such persons or entities.  Notices to any one person or entity shall be deemed to have been given to all persons and entities.  Tenant represents and warrants to Landlord that each individual executing this Lease on behalf of Tenant is authorized to do so on behalf of Tenant and that Tenant is not, and the entities or individuals constituting Tenant or which may own or control Tenant or which may be owned or controlled by Tenant are not, (i) in violation of any laws relating to terrorism or money laundering, or (ii) among the individuals or entities identified on any list compiled pursuant to Executive Order 13224 for the purpose of identifying suspected terrorists or on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.goviofackilsdn.pdf or any replacement website or other replacement official publication of such list.

 

26.02  If either party institutes a suit against the other for violation of or to enforce any covenant, term or condition of this Lease, the prevailing party shall be entitled to reimbursement of all of its costs and expenses, including, without limitation, reasonable attorneys’ fees. Landlord and Tenant hereby waive any right to trial by jury in any proceeding based upon a breach of this Lease. No failure by either party to declare a default immediately upon its occurrence, nor any delay by either party in taking action for a default, nor Landlord’s acceptance of Rent with knowledge of a default by Tenant, shall constitute a waiver of the default, nor shall it constitute an estoppel.

 

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26.03  Whenever a period of time is prescribed for the taking of an action by Landlord or Tenant (other than the payment of the Security Deposit or Rent), the period of time for the performance of such action shall be extended by the number of days that the performance is actually delayed due to strikes, acts of God, shortages of labor or materials, war, terrorist acts, civil disturbances and other causes beyond the reasonable control of the performing party (“ Force Majeure ”).

 

26.04  Landlord shall have the right to transfer and assign, in whole or in part, all of its rights and obligations under this Lease and in the Building and Property.  Upon transfer Landlord shall be released from any further obligations hereunder and Tenant agrees to look solely to the successor in interest of Landlord for the performance of such obligations, provided that, any successor pursuant to a voluntary, third party transfer (but not as part of an involuntary transfer resulting from a foreclosure or deed in lieu thereof) shall have assumed Landlord’s obligations under this Lease.

 

26.05  Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option. Tenant represents that it has dealt directly with and only with the Broker as a broker in connection with this Lease.  Tenant shall indemnify and hold Landlord and the Landlord Related Parties harmless from all claims of any other brokers claiming to have represented Tenant in connection with this Lease.  Landlord shall indemnify and hold Tenant and the Tenant Related Parties harmless from all claims of any brokers claiming to have represented Landlord in connection with this Lease. Equity Office Properties Management Corp. (“ EOPMC ”) is an affiliate of Landlord and represents only the Landlord in this transaction.  Any assistance rendered by any agent or employee of EOPMC in connection with this Lease or any subsequent amendment or modification hereto has been or will be made as an accommodation to Tenant solely in furtherance of consummating the transaction on behalf of Landlord, and not as agent for Tenant.

 

26.06  Time is of the essence with respect to Tenant’s exercise of any expansion, renewal or extension rights granted to Tenant.  The expiration of the Term, whether by lapse of time, termination or otherwise, shall not relieve either party of any obligations which accrued prior to or which may continue to accrue after the expiration or termination of this Lease.

 

26.07  Tenant may peacefully have, hold and enjoy the Premises, subject to the terms of this Lease, provided Tenant pays the Rent and fully performs all of its covenants and agreements.  This covenant shall be binding upon Landlord and its successors only during its or their respective periods of ownership of the Building.

 

26.08  This Lease does not grant any rights to light or air aver or about the Building. Landlord excepts and reserves exclusively to itself any and all rights not specifically granted to Tenant under this Lease.  This Lease constitutes the entire agreement between the parties and supersedes all prior agreements and understandings related to the Premises, including all lease proposals, letters of intent and other documents.  Neither party is relying upon any warranty, statement or representation not contained in this Lease.  This Lease may be modified only by a written agreement signed by an authorized representative of Landlord and Tenant.

 

[SIGNGATURES ARE ON THE FOLLOWING PAGE].

 

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Landlord and Tenant have executed this Lease as of the day and year first above written.

 

LANDLORD:

 

CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership

 

By:

EOM GP, LL.D., a Delaware limited liability company, its general partner

 

 

 

By:

Equity Office Management, LL.D., a Delaware limited liability company, its non-member manager

 

 

 

 

 

By:

/s/ Kenneth J. Churich

 

 

 

 

 

 

Name:

Kenneth J. Churich

 

 

 

 

 

 

Title:

Vice-President, Leasing

 

 

 

TENANT:

 

NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation

 

By:

/s/ Gregory T. Went

 

/s/ Deborah Foy

 

 

Name:

Gregory T. Went

 

Deborah Foy

 

 

Title:

CEO

 

Assistant Treasurer

 

 

Tenant’s Tax ID Number (SSN or FEIN):

 

 

 

42-1560076

 

 

 

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EXHIBIT A

 

OUTLINE AND LOCATION OF PREMISES

 

This Exhibit is attached to and made a part of the Lease by and between CA- EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California. commonly known as Emeryville Tower I.

 

 

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EXHIBIT B

 

EXPENSES AND TAXES

 

This Exhibit is attached to and made a part of the Lease by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.

 

1.     Payments.

 

1.01    Tenant shall pay Tenant’s Pro Rata Share of the amount, if any, by which Expenses (defined below) for each calendar year during the Term exceed Expenses for the Base Year (the “ Expense Excess’’ ) and also the amount, if any, by which Taxes (defined below) for each calendar year during the Term exceed Taxes for the Base Year (the “ Tax Excess ”).  If Expenses or Taxes in any calendar year decrease below the amount of Expenses or Taxes for the Base Year, Tenant’s Pro Rata Share of Expenses or Taxes, as the case may be, for that calendar year shall be $0.  Landlord shall provide Tenant with a good faith estimate of the Expense Excess and of the Tax Excess for each calendar year during the Term.  On or before the first day of each month, Tenant shall pay to Landlord a monthly installment equal to one-twelfth of Tenant’s Pro Rata Share of Landlord’s estimate of both the Expense Excess and Tax Excess.  After its receipt of the revised estimate, Tenant’s monthly payments shall be based upon the revised estimate.  If Landlord does not provide Tenant with an estimate of the Expense Excess or the Tax Excess by January 1 of a calendar year, Tenant shall continue to pay monthly installments based on the previous year’s estimate(s) until Landlord provides Tenant with the new estimate.

 

1.02    As soon as is practical following the end of each calendar year, Landlord shall furnish Tenant with a statement of the actual Expenses and Expense Excess and the actual Taxes and Tax Excess for the prior calendar year.  if the estimated Expense Excess or estimated Tax Excess for the prior calendar year is more than the actual Expense Excess or actual Tax Excess, as the case may be, for the prior calendar year, Landlord shall either provide Tenant with a refund or apply any overpayment by Tenant against Additional Rent due or next becoming due, provided if the Term expires before the determination of the overpayment, Landlord shall refund any overpayment to Tenant after first deducting the amount of Rent due.  If the estimated Expense Excess or estimated Tax Excess for the prior calendar year is less than the actual Expense Excess or actual Tax Excess, as the case may be, for such prior year, Tenant shall pay Landlord, within 30 days after its receipt of the statement of Expenses or Taxes, any underpayment for the prior calendar year.

 

2.     Expenses.

 

2.01    “ Expenses ” means all costs and expenses incurred in each calendar year in connection with operating, maintaining, repairing, and managing the Building and the Property.  Expenses include, without !imitation: (a) all labor and labor related costs, including wages, salaries, bonuses, taxes, insurance, uniforms, training, retirement plans, pension plans and other employee benefits; (b) management fees; (c) the cost of equipping, staffing and operating an on-site and/or off-site management office for the Building, provided if the management office services one or more other buildings or properties, the shared costs and expenses of equipping, staffing and operating such management office(s) shall be equitably prorated and apportioned between the Building and the other buildings or properties; (d) accounting costs; (e) the cost of services; (f) rental and purchase cost of parts, supplies, tools and equipment; (g) insurance premiums and deductibles; (h) electricity, gas and other utility costs; and (i) the amortized cost of capital improvements (as distinguished from replacement parts or components installed in the ordinary course of business) made subsequent to the Base Year which are: (1) performed primarily to reduce current or future operating expense costs, upgrade Building security or otherwise improve the operating efficiency of the Property; or (2) required to comply with any Laws that are enacted, or first interpreted to apply to the Property, after the date of this Lease.  The cost of capital improvements shall be amortized by Landlord over the lesser of the Payback Period (defined below) or the useful life of the capital improvement as reasonably determined by Landlord.  The amortized cost of capital improvements may, at Landlord’s option, include actual or imputed interest at the rate that Landlord would reasonably be required to pay to finance the cost of the capital improvement.  “ Payback Period ” means the reasonably estimated period of time that it takes for the cost savings resulting from a capital improvement to equal the total cost of the capital improvement.  Landlord, by itself or through an affiliate, shall have the right to directly perform, provide and be compensated for any services under this Lease.  If Landlord incurs Expenses for the Building or Property together with one or more other buildings or

 

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properties, whether pursuant to a reciprocal easement agreement, common area agreement or otherwise, the shared costs and expenses shall be equitably prorated and apportioned between the Building and Property and the other buildings or properties.

 

2.02    Expenses shall not include: the cost of capital improvements (except as set forth above); depreciation; principal payments of mortgage and other non-operating debts of Landlord; the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; costs in connection with leasing space in the Building, including brokerage commissions; lease concessions, rental abatements and construction allowances granted to specific tenants; costs incurred in connection with the sale, financing or refinancing of the Building; fines, interest and penalties incurred due to the late payment of Taxes or Expenses; organizational expenses associated with the creation and operation of the entity which constitutes Landlord; or any penalties or damages that Landlord pays to Tenant under this Lease or to other tenants in the Building under their respective leases.

 

2.03    If at any time during a calendar year the Building is not at least 95% occupied or Landlord is not supplying services to at least 95% of the total Rentable Square Footage of the Building, Expenses shall, at Landlord’s option, be determined as if the Building had been 95% occupied and Landlord had been supplying services to 95% of the Rentable Square Footage of the Building.  If Expenses for a calendar year are determined as provided in the prior sentence, Expenses for the Base Year shall also be determined in such manner.  Notwithstanding the foregoing, Landlord may calculate the extrapolation of Expenses under this Section based on 100% occupancy and service so long as such percentage is used consistently for each year of the Term.  The extrapolation of Expenses under this Section shall be performed in accordance with the methodology specified by the Building Owners and Managers Association.

 

3.     “‘Taxes ” shall mean: (a) all real property taxes and other assessments on the Building and/or Property, including, but not limited to, gross receipts taxes, assessments for special improvement districts and building improvement districts, governmental charges, fees and assessments for police, fire, traffic mitigation or other governmental service of purported benefit to the Property, taxes and assessments levied in substitution or supplementation in whole or in part of any such taxes and assessments and the Property’s share of any real estate taxes and assessments under any reciprocal easement agreement, common area agreement or similar agreement as to the Property; (b) all personal property taxes for property that is owned by Landlord and used in connection with the operation, maintenance and repair of the Property; and (c) all costs and fees incurred in connection with seeking reductions in any tax liabilities described in (a) and (b), including, without limitation, any costs incurred by Landlord for compliance, review and appeal of tax liabilities. Without limitation, Taxes shall not include any income, capital levy, transfer, capital stock, gift, estate or inheritance tax.  If a change in Taxes is obtained for any year of the Term during which Tenant paid Tenant’s Pro Rata Share of any Tax Excess, then Taxes for that year will be retroactively adjusted and Landlord shall provide Tenant with a credit, if any, based on the adjustment. Likewise, if a change is obtained for Taxes for the Base Year, Taxes for the Base Year shall be restated and the Tax Excess for all subsequent years shall be recomputed. Tenant shall pay Landlord the amount of Tenant’s Pro Rata Share of any such increase in the Tax Excess within 30 days after Tenant’s receipt of a statement from Landlord.

 

4.     Audit Rights.   Tenant, within 365 days after receiving Landlord’s statement of Expenses, may give Landlord written notice (“ Review Notice ”) that Tenant intends to review Landlord’s records of the Expenses for the calendar year to which the statement applies.  Within a reasonable time after receipt of the Review Notice, Landlord shall make all pertinent records available for inspection that are reasonably necessary for Tenant to conduct its review.  If any records are maintained at a location other than the management office for the Building, Tenant may either inspect the records at such other location or pay for the reasonable cost of copying and shipping the records.  If Tenant retains an agent to review Landlord’s records, the agent must be with a CPA firm licensed to do business in the state or commonwealth where the Property is located.  Tenant shall be solely responsible for all costs, expenses and fees incurred for the audit. However, notwithstanding the foregoing, if Landlord and Tenant determine that Expenses for the Building for the year in question were less than stated by more than 5%, Landlord, within 30 days after its receipt of paid invoices therefor from Tenant, shall reimburse Tenant for the reasonable amounts paid by Tenant to third parties in connection with such review by Tenant.  Within 90 days after the records are made available to Tenant, Tenant shall have the right to give Landlord written notice (an “ Objection Notice ”) stating in reasonable detail any objection to Landlord’s statement of Expenses for that year.  If Tenant fails to give Landlord an Objection Notice within the 90 day period or fails to provide Landlord with a Review Notice within the 365 day period described above, Tenant shall be deemed to have approved Landlord’s statement of Expenses and shall be barred from raising any claims regarding the Expenses for that year.  If Tenant provides Landlord with a timely Objection Notice, Landlord and Tenant shall work together in good faith to resolve any issues raised in Tenant’s Objection Notice.  If Landlord

 

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and Tenant determine that Expenses for the calendar year are less than reported, Landlord shall provide Tenant with a credit against the next installment of Rent in the amount of the overpayment by Tenant.  Likewise, if Landlord and Tenant determine that Expenses for the calendar year are greater than reported, Tenant shall pay Landlord the amount of any underpayment within 30 days.  The records obtained by Tenant shall be treated as confidential. In no event shall Tenant be permitted to examine Landlord’s records or to dispute any statement of Expenses unless Tenant has paid and continues to pay all Rent when due.

 

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EXHIBIT C

 

[INTENTIONALLY OMITTED].

 



 

EXHIBIT D

 

COMMENCEMENT LETTER

 

This Exhibit is attached to and made a part of the Lease by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.

 

(EXAMPLE)

 

Date

 

 

 

 

Tenant

NEUROMOLECULAR PHARMACEUTICALS, INC.

Address

 

 

 

 

Re:                              Commencement Letter with respect to that certain Lease dated as of the                day of                  , 2006, by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership, as Landlord, and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation, as Tenant, for 9,172 rentable square feet on the 10th floor of the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.

 

Lease id:                            

Business Unit Number:                           

 

Dear

 

:

 

In accordance with the terms and conditions of the above referenced Lease, Tenant accepts possession of the Premises and agrees:

 

1.             The Commencement Date of the Lease is                                        ;

 

2.             The Termination Date of the Lease is                                           .

 

Please acknowledge your acceptance of possession and agreement to the terms set forth above by signing all 3 counterparts of this Commencement Letter in the space provided and returning 2 fully executed counterparts to my attention.  Tenant’s failure to execute and return this letter, or to provide written objection to the statements contained in this letter, within 30 days after the date of this letter shall be deemed an approval by Tenant of the statements contained herein.

 

Sincerely,

 

 

 

Authorized Signatory

 

Agreed and Accepted.

 

Tenant:  NEUROMOLECULAR PHARMACEUTICALS, INC.

 

By:

 

 

Name:

 

 

Title:

 

 

Date:

 

 

 

 

cc:

EOP Lease Administration

 

EOP Leasing AA

 

EOP Legal

 

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EXHIBIT E

 

BUILDING RULES AND REGULATIONS

 

This Exhibit is attached to and made a part of the Lease by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.

 

The following rules and regulations shall apply, where applicable, to the Premises, the Building, the parking facilities (if any), the Property and the appurtenances.  In the event of a conflict between the following rules and regulations and the remainder of the terms of the Lease, the remainder of the terms of the Lease shall control.  Capitalized terms have the same meaning as defined in the Lease.

 

1.                                       Sidewalks, doorways, vestibules, hails, stairways and other similar areas shall not be obstructed by Tenant or used by Tenant for any purpose other than ingress and egress to and from the Premises.  No rubbish, litter, trash, or material shall be placed, emptied, or thrown in those areas.  At no time shall Tenant permit Tenants employees to loiter in Common Areas or elsewhere about the Building or Property.

 

2.                                       Plumbing fixtures and appliances shall be used only for the purposes for which designed and no sweepings, rubbish, rags or other unsuitable material shall be thrown or placed in the fixtures or appliances.

 

3.                                       No signs, advertisements or notices shall be painted or affixed to windows, doors or other parts of the Building, except those of such color, size, style and in such places as are first approved in writing by Landlord.  All tenant identification and suite numbers at the entrance to the Premises shall be installed by Landlord, at Tenants cost and expense, using the standard graphics for the Building.  Except in connection with the hanging of lightweight pictures and wall decorations, no nails, hooks or screws shall be inserted into any part of the Premises or Building except by the Building maintenance personnel without Landlord’s prior approval, which approval shall not be unreasonably withheld.

 

4.                                       Landlord may provide and maintain in the first floor (main lobby) of the Building an alphabetical directory board or other directory device listing tenants and no other directory shall be permitted unless previously consented to by Landlord in writing.

 

5.                                       Tenant shall not place any lock(s) on any door in the Premises or Building without Landlord’s prior written consent, which consent shall not be unreasonably withheld, and Landlord shall have the right at all times to retain and use keys or other access codes or devices to all locks within and into the Premises.  A reasonable number of keys to the locks on the entry doors in the Premises shall be furnished by Landlord to Tenant at Tenant’s cost and Tenant shall not make any duplicate keys.  All keys shall be returned to Landlord at the expiration or early termination of the Lease.

 

6.                                       All contractors, contractor’s representatives and installation technicians performing work in the Building shall be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld, and shall be required to comply with Landlord’s standard rules, regulations, policies and procedures, which may be revised from time to time.

 

7.                                       Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by Tenant of merchandise or materials requiring the use of elevators, stairways, lobby areas or loading dock areas, shall be restricted to hours reasonably designated by Landlord.  Tenant shall obtain Landlord’s prior approval by providing a detailed listing of the activity, which approval shall not be unreasonably withheld.  If approved by Landlord, the activity shall be under the supervision of Landlord and performed in the manner required by Landlord.  Tenant shall assume all risk for damage to articles moved and injury to any persons resulting from the activity.  If equipment, property, or personnel of Landlord or of any other party is damaged or injured as a result of or in connection with the activity, Tenant shall be solely liable for any resulting damage, loss or injury.

 

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8.                                       Landlord shall have the right to approve the weight, size, or location of heavy equipment or articles in and about the Premises, which approval shall not be unreasonably withheld.  Damage to the Building by the installation, maintenance, operation, existence or removal of Tenant’s Property shall be repaired at Tenant’s sole expense.

 

9.                                       Corridor doors, when not in use, shall be kept closed.

 

10.                                Tenant shall not:  (1) make or permit any improper, objectionable or unpleasant noises or odors in the Building, or otherwise interfere in any way with other tenants or persons having business with them; (2) solicit business or distribute or cause to be distributed, in any portion of the Building, handbills, promotional materials or other advertising; or (3) conduct or permit other activities in the Building that might, in Landlord’s sole opinion, constitute a nuisance.

 

11.                                No animals, except those assisting handicapped persons, shall be brought into the Building or kept in or about the Premises.

 

12.                                No inflammable, explosive or dangerous fluids or substances shall be used or kept by Tenant in the Premises, Building or about the Property, except for those substances as are typically found in similar premises used for general office purposes and are being used by Tenant in a safe manner and in accordance with all applicable Laws.  Tenant shall not, without Landlord’s prior written consent, use, store, install, spill, remove, release or dispose of, within or about the Premises or any other portion of the Property, any asbestos-containing materials or any solid, liquid or gaseous material now or subsequently considered toxic or hazardous under the provisions of 42 U.S.C. Section 9601 et seq. or any other applicable environmental Law which may now or later be in effect.  Tenant shall comply with all Laws pertaining to and governing the use of these materials by Tenant and shall remain solely liable for the costs of abatement and removal.

 

13.                                Tenant shall not use or occupy the Premises in any manner or for any purpose which might injure the reputation or impair the present or future value of the Premises or the Building.  Tenant shall not use, or permit any part of the Premises to be used for lodging, sleeping or for any illegal purpose.

 

14.                                Tenant shall not take any action which would violate Landlord’s labor contracts or which would cause a work stoppage, picketing, labor disruption or dispute or interfere with Landlord’s or any other tenant’s or occupant’s business or with the rights and privileges of any person lawfully in the Building (“ Labor Disruption ”).  Tenant shall take the actions necessary to resolve the Labor Disruption, and shall have pickets removed and, at the request of Landlord, immediately terminate any work in the Premises that gave rise to the Labor Disruption, until Landlord gives its written consent for the work to resume.  Tenant shall have no claim for damages against Landlord or any of the Landlord Related Parties nor shall the Commencement Date of the Term be extended as a result of the above actions.

 

15.                                Tenant shall not install, operate or maintain in the Premises or in any other area of the Building, electrical equipment that would overload the electrical system beyond its capacity for proper, efficient and safe operation as determined solely by Landlord.  Tenant shall not furnish cooling or heating to the Premises, including, without limitation, the use of electric or gas heating devices, without Landlord’s prior written consent. Tenant shall not use more than its proportionate share of telephone lines and other telecommunication facilities available to service the Building.

 

16.                                Tenant shall not operate or permit to be operated a coin or token operated vending machine or similar device (including, without limitation, telephones, lockers, toilets, scales, amusement devices and machines for safe of beverages, foods, candy, cigarettes and other goods), except for machines for the exclusive use of Tenant’s employees and invitees.

 

17.                                Bicycles and other vehicles are not permitted inside the Building or on the walkways outside the Building, except in areas designated by Landlord.

 

18.                                Landlord may from time to time adopt systems and procedures for the security and safety of the Building and Property, its occupants, entry, use and contents. Tenant, its

 

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agents, employees, contractors, guests and invitees shall comply with Landlord’s systems and procedures.

 

19.                                Landlord shall have the right to prohibit the use of the name of the Building or any other publicity by Tenant that in Landlord’s sole opinion may impair the reputation of the Building or its desirability.  Upon written notice from Landlord, Tenant shall refrain from and discontinue such publicity immediately.

 

20.                                Neither Tenant nor its agents, employees, contractors, guests or invitees shall smoke or permit smoking in the Common Areas, unless a portion of the Common Areas have been declared a designated smoking area by Landlord, nor shall the above parties allow smoke from the Premises to emanate into the Common Areas or any other part of the Building. Landlord shall have the right to designate the Building (including the Premises) as a non-smoking building.

 

21.                                Landlord shall have the right to designate and approve standard window coverings for the Premises and to establish rules to assure that the Building presents a uniform exterior appearance.  Tenant shall ensure, to the extent reasonably practicable, that window coverings are closed on windows in the Premises while they are exposed to the direct rays of the sun.

 

22.                                Deliveries to and from the Premises shall be made only at the times in the areas and through the entrances and exits reasonably designated by Landlord.  Tenant shall not make deliveries to or from the Premises in a manner that might interfere with the use by any other tenant of its premises or of the Common Areas, any pedestrian use, or any use which is inconsistent with good business practice.

 

23.                                The work of cleaning personnel shall not be hindered by Tenant after 5:30 P.M., and cleaning work may be done at any time when the offices are vacant. Windows, doors and fixtures may be cleaned at any time. Tenant shall provide adequate waste and rubbish receptacles to prevent unreasonable hardship to the cleaning service.

 

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EXHIBIT G

 

PARKING AGREEMENT

 

This Exhibit (the “ Parking Agreement ”) is attached to and made a part of the Lease by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.

 

1.                                       During the initial Term, Tenant agrees to lease from Landlord and Landlord agrees to lease to Tenant a total of 33 non-reserved parking spaces and 0 reserved parking spaces in the parking facility servicing the Building (“ Parking Facility ”).  During the initial Term, Tenant shall pay in advance, concurrent with Tenants payment of monthly Base Rent, the prevailing monthly charges established from time to time for parking in the Parking Facility. Such charges shall be payable to Landlord or such other entity as designated by Landlord, and shall be sent to the address Landlord designates from time to time.  The initial charge for such parking spaces is $65.00 per non-reserved parking pass, per month.  Except as otherwise set forth herein below, no deductions from the monthly charge shall be made for days on which the Parking Facility is not used by Tenant.  Tenant may, from time to time request additional parking spaces, and if Landlord shall provide the same, such parking spaces shall be provided and used on a month-to-month basis, and otherwise on the following terms and provisions, and at such prevailing monthly parking charges as shall be established from time to time.

 

2.                                       Tenant shall at all times comply with all applicable ordinances, rules, regulations, codes, laws, statutes and requirements of all federal, state, county and municipal governmental bodies or their subdivisions respecting the use of the Parking Facility. Landlord reserves the right to adopt, modify and enforce reasonable rules (“Rules”) governing the use of the Parking Facility from time to time including any key-card, sticker or other identification or entrance system and hours of operation. Landlord may refuse to permit any person who violates such Rules to park in the Parking Facility, and any violation of the Rules shall subject the car to removal from the Parking Facility.  Tenant shall comply with and cause its employees to comply with all the Rules as well as all reasonable additions and amendments thereto.

 

3.                                       Unless specified to the contrary above, the parking spaces hereunder shall be provided on a non-designated “first-come, first-served” basis.  Subject to Tenant’s rights to the reserved spaces set forth above, if any, Landlord reserves the right to assign other specific parking spaces, and to reserve other parking spaces for visitors, small cars, handicapped persons and for other tenants, guests of tenants or other parties, which assignment and reservation or spaces may be relocated as determined by Landlord from time to time, and Tenant and persons designated by Tenant hereunder shall not park in any such location designated for such assigned or reserved parking spaces. Tenant acknowledges that the Parking Facility may be closed entirely or in part in order to make repairs or perform maintenance services, or to alter, modify, re-stripe or renovate the Parking Facility, or if required by casualty, strike, condemnation, act of God, governmental law or requirement or other reason beyond the operator’s reasonable control; and in such events, Landlord shall refund any prepaid parking fee hereunder, prorated on a per diem basis.

 

4.                                       Tenant shall not store or permit its employees to store any automobiles in the Parking Facility without the prior written consent of the operator.  Except for emergency repairs, Tenant and its employees shall not perform any work on any automobiles while located in the Parking Facility, or on the Property. if it is necessary for Tenant or its employees to leave an automobile in the Parking Facility overnight, Tenant shall provide the operator with prior notice thereof designating the license plate number and model of such automobile.

 

5.                                       LANDLORD SHALL NOT BE LIABLE FOR ANY LOSS, INJURY OR DAMAGE TO PERSONS USING THE PARKING FACILITY OR AUTOMOBILES OR OTHER PROPERTY THEREIN, IT BEING AGREED THAT, TO THE FULLEST EXTENT PERMITTED BY LAW, THE USE OF THE SPACES SHALL BE AT THE SOLE RISK OF TENANT AND ITS EMPLOYEES. WITHOUT LIMITING THE FOREGOING, TENANT HEREBY VOLUNTARILY RELEASES, DISCHARGES, WAIVES AND RELINQUISHES ANY AND ALL ACTIONS OR CAUSES OF ACTION FOR PERSONAL INJURY OR PROPERTY DAMAGE OCCURRING TO TENANT ARISING AS A RESULT OF

 

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PARKING IN THE PARKING FACILITY, OR ANY ACTIVITIES INCIDENTAL THERETO, WHEREVER OR HOWEVER THE SAME MAY OCCUR, AND FURTHER AGREES THAT TENANT WILL NOT PROSECUTE ANY CLAIM FOR PERSONAL INJURY OR PROPERTY DAMAGE AGAINST LANDLORD OR ANY OF THE LANDLORD RELATED PARTIES FOR ANY SAID CAUSES OF ACTION. IN ALL EVENTS, TENANT AGREES TO LOOK FIRST TO ITS INSURANCE CARRIER AND TO REQUIRE THAT TENANTS EMPLOYEES LOOK FIRST TO THEIR RESPECTIVE INSURANCE CARRIERS FOR PAYMENT OF ANY LOSSES SUSTAINED IN CONNECTION WITH ANY USE OF THE PARKING FACILITY. TENANT HEREBY WAIVES ON BEHALF OF ITS INSURANCE CARRIERS ALL RIGHTS OF SUBROGATION AGAINST LANDLORD OR LANDLORD RELATED PARTIES. Notwithstanding the foregoing, but except as provided in Section 15 of the Lease (Subrogation) and Section 20 of the Lease (Limitation of Liability) to the contrary, Tenant shall not be required to waive any claims against Landlord (other than for loss or damage to Tenants business) where such loss or damage is due to the negligence or willful misconduct of Landlord or any Landlord Related Parties.

 

6.                                       Tenant shall not assign its rights under this Parking Agreement or sublease any of the parking spaces without the consent of Landlord, except that Tenant shall have the right to assign its rights under this Parking Agreement or sublease any of the parking spaces without Landlord consent in connection with any Business Transfer under the terms of the Lease.  Landlord shall have the right to terminate this Parking Agreement with respect to any parking spaces that Tenant desires to sublet or assign its rights thereto.

 

7.                                       Landlord hereby reserves the right to enter into a management agreement or lease with another entity for the operation of the Parking Facility (“ Operator ”). In such event, Tenant, upon request of Landlord, shall enter into a parking agreement upon substantially the same terms hereunder with the Operator and pay the Operator the monthly charge established hereunder, and Landlord shall have no liability for claims arising through acts or omissions of the Operator.  It is understood and agreed that the identity of the Operator may change from time to time during the Term.  In connection therewith, any parking lease or agreement entered into between Tenant and any Operator shall be freely assignable by such Operator or any successors thereto.

 

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EXHIBIT F

 

ADDITIONAL PROVISIONS

 

This Exhibit is attached to and made a part of the Lease by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I.

 

1.                                       Asbestos Notification .   Tenant acknowledges that Tenant has received the asbestos notification letter attached to this Lease as Exhibit H hereto, disclosing the existence of asbestos in the Building.  As part of Tenant’s obligations under this Lease, Tenant agrees to comply with the California ‘Connelly Act” and other applicable Laws, including providing copies of Landlord’s asbestos notification letter to all of Tenant’s “employees’ and “owners’, as those terms are defined in the Connelly Act and other applicable Laws.

 

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EXHIBIT H

 

ASBESTOS NOTIFICATION

 

This Exhibit (the “ Exhibit ”) is attached to and made a part of the Lease by and between CA-EMERYVILLE PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”) and NEUROMOLECULAR PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”) for space in the Building located at 1900 Powell Street, Emeryville, California, commonly known as Emeryville Tower I (the “ Building ”).

 

Asbestos-containing materials (“ ACMs ”) were historically commonly used in the construction of commercial buildings across the country.  ACMs were commonly used because of their beneficial qualities; ACMs are fire-resistant and provide good noise and temperature insulation.

 

Some common types of ACMs include surfacing materials (such as spray-on fireproofing, stucco, plaster and textured paint), flooring materials (such as vinyl floor tile and vinyl floor sheeting) and their associated mastics, carpet mastic, thermal system insulation (such as pipe or duct wrap, boiler wrap and cooling tower insulation), roofing materials, drywall, drywall joint tape and drywall joint compound, acoustic ceiling tiles, transite board, base cove and associated mastic, caulking, window glazing and fire doors.  These materials are not required under law to be removed from any building (except prior to demolition and certain renovation projects).  Moreover, ACMs generally are not thought to present a threat to human health unless they cause a release of asbestos fibers into the air, which does not typically occur unless (1) the ACMs are in a deteriorated condition, or (2) the ACMs have been significantly disturbed (such as through abrasive cleaning, or maintenance or renovation activities).

 

It is possible that some of the various types of ACMs noted above (or other types) are present at various locations in the Building.  Anyone who finds any such materials in the Building should assume them to contain asbestos unless those materials are properly tested and found to be otherwise.  In addition, under applicable law, certain of these materials are required to be presumed to contain asbestos in the Building because the Building was built prior to 1981 (these materials are typically referred to as “ Presumed Asbestos Containing Materials ” or “ PACM ”). PACM consists of thermal system insulation and surfacing material found in buildings constructed prior to 1981, and asphalt or vinyl flooring installed prior to 1981.  If any thermal system insulation, asphalt or vinyl flooring or surfacing materials are found to be present in the Building, such materials must be considered PACM unless properly tested and found otherwise.  In addition, Landlord has identified the presence of certain ACMs in the Building.  For information about the specific types and locations of these identified ACMs, please contact the Building manager.  The Building Manager maintains records of the Building’s asbestos information including any Building asbestos surveys, sampling and abatement reports.  This information is maintained as part of Landlord’s asbestos Operations and Maintenance Plan (“ O&M Plan ”).

 

The O&M Plan is designed to minimize the potential of any harmful asbestos exposure to any person in the Building.  Because Landlord is not a physician, scientist or industrial hygienist, Landlord has no special knowledge of the health impact of exposure to asbestos.  Therefore, Landlord hired an independent environmental consulting firm to prepare the Building’s O&M Plan.  The O&M Plan includes a schedule of actions to be taken in order to (1) maintain any building ACMs in good condition, and (2) to prevent any significant disturbance of such ACMs.  Appropriate Landlord personnel receive regular periodic training on how to properly administer the O&M Plan.

 

The O&M Plan describes the risks associated with asbestos exposure and how to prevent such exposure. The O&M Plan describes those risks, in general, as follows: asbestos is not a significant health concern unless asbestos fibers are released and inhaled.  If inhaled, asbestos fibers can accumulate in the lungs and, as exposure increases, the risk of disease (such as asbestosis and cancer) increases.  However, measures taken to minimize exposure and consequently minimize the accumulation of fibers, can reduce the risk of adverse health effects.

 

The O&M Plan also describes a number of activities which should be avoided in order to prevent a release of asbestos fibers.  In particular, some of the activities which may present a health risk (because those activities may cause an airborne release of asbestos fibers) include moving, drilling, boring or otherwise disturbing ACMs. Consequently, such activities should not be attempted by any person not qualified to handle ACMs.  In other words, the approval of Building management must be obtained prior to engaging in any such activities.  Please contact the Building manager for more information in this regard.  A copy of the written O&M Plan for the Building is located in the Building Management Office and, upon your request, will be made available to tenants for you to review and copy during regular business hours.

 

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Because of the presence of ACM in the Building, we are also providing the following warning, which is commonly known as a California Proposition 65 warning: WARNING: This building contains asbestos, a chemical known to the State of California to cause cancer.

 

Please contact the Building manager with any questions regarding the contents of this Exhibit H.

 

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Exhibit 10.8

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE (this “First Amendment”) is entered into as of the twenty-ninth day of April, 2009, by and between NOP WATERGATE LLC, a Delaware limited liability company (“Landlord”), and ADAMAS PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”).

 

RECITALS

 

This First Amendment is entered into on the basis of the following facts, understandings and intentions of the parties:

 

A.            Landlord (as successor in interest to CA-Emeryville Properties Limited Partnership, a Delaware limited partnership) and Tenant (formerly known as Neuromolecular Pharmaceuticals, Inc., a Delaware corporation) are parties to that certain Lease Agreement dated as of October 25, 2006 (the “Lease”), pursuant to which Tenant leases certain space consisting of approximately Nine Thousand One Hundred Seventy-Two (9,172) rentable square feet (the “Existing Premises”) on the tenth (10th) Floor of the commercial office building located at 1900 Powell Street, Emeryville, California (the “Building”), all as more particularly described in the Lease.

 

B.            Tenant has requested that additional space containing approximately Three Thousand Three Hundred Seventy-Six (3,376) rentable square feet (the “Expansion Premises”) on the tenth (10th) Floor of the Building and shown on Exhibit A hereto be added to the Premises.

 

C.            The Term expired on November 30, 2008.

 

D.            Landlord and Tenant now desire to amend the Lease in order to: (i) retroactively extend the Term; (ii) revise the Premises by adding the Expansion Premises to the Premises; (iii) revise the Base Rent; and (iv) supplement and/or modify certain other provisions of the Lease.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises of Landlord and Tenant, Landlord and Tenant hereby agree as follows:

 

1.             Certain Definitions .  Capitalized terms used herein and not otherwise defined herein shall have the meaning or meanings given them in the Lease.

 

2.             Term .  The Term is hereby retroactively extended for a period of twenty-five (25) months (the “Extended Term”) commencing as of December 1, 2008 (the “Extension Date”) and continuing to and including December 31, 2010 (the “Extended Termination Date”), unless sooner terminated pursuant to the terms of the Lease.  On and effective as of the date of this First Amendment, all references to the (i) “Term” in the Lease shall be deemed to mean the period commencing as of the Commencement Date and continuing to and including the Extended Termination Date, unless earlier terminated pursuant to the terms of the Lease, and (ii) “Termination Date” in the Lease shall be deemed to mean the Extended Termination Date.

 

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3.             Premises .

 

(a)           Effective as of December 1, 2009 (the “Expansion Effective Date”), the Premises, as defined in the Lease, is increased from approximately Nine Thousand One Hundred Seventy-Two rentable square feet on the Tenth (10th) Floor of the Building to approximately Twelve Thousand Five Hundred Forty-Eight (12,548) rentable square feet on the Tenth (10th) Floor of the Building by the addition of the Expansion Premises.  From and after the Expansion Effective Date, all references to the Premises in the Lease shall mean, collectively, the Existing Premises and the Expansion Premises.  The Term for the Expansion Premises shall commence on the Expansion Effective Date and end on the Extended Termination Date, unless sooner terminated pursuant to the terms of the Lease.  The Expansion Premises is subject to all the terms and conditions of the Lease except as expressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to the Existing Premises unless such concessions are expressly provided for herein with respect to the Expansion Premises.

 

(b)           Notwithstanding anything to the contrary set forth in Paragraph 3(a) above, if Landlord fails to deliver Tenant possession of the Expansion Premises on or before the Expansion Effective Date for any reason, including without limitation, holdover by prior occupants, Landlord shall not be liable for any claims, damages or liabilities as a result thereof, but the Expansion Effective Date shall be delayed to be the date upon which Landlord delivers possession of the Expansion Premises to Tenant.  Should the Expansion Effective Date be a date other than the date set forth in Paragraph 3(a), either Landlord or Tenant, at the request of the other, shall execute a declaration specifying the Expansion Effective Date; provided, however, that failure to execute, or request execution of, such declaration shall not in any way alter the Expansion Effective Date.  If the Expansion Effective Date is delayed the Extended Termination Date shall not be similarly extended.

 

4.             Base Rent .

 

(a)           Existing Premises .  Retroactively effective as of the Extension Date, subject to Paragraph 4(b) below, Tenant shall pay Base Rent with respect to the Existing Premises upon the following schedule and otherwise in accordance with the terms of the Lease:

 

Period

 

Monthly Rate Per
Square Foot

 

Base Rent per Month

 

12/01/2008 - 4/30/2009

 

$

2.60

 

$

23,847.20

 

5/01/2009 - 4/30/2010

 

$

2.50

 

$

22,930.00

 

5/01/2010 - 12/31/2010

 

$

2.58

 

$

23,663.76

 

 

(b)           Provided no Default exists under the Lease (and no event or condition exists which could constitute a Default but for a requirement of notice or expiration of a period of grace) and subject to the provisions of this Paragraph 4(b), Tenant shall not be required to pay Base Rent with respect to the Existing Premises, commencing as of May 1, 2009 and continuing to and including July 31, 2009 (the “Base Rent Forgiveness Period”).  The other provisions of this Paragraph 4(b) to the contrary notwithstanding, Landlord and Tenant acknowledge that Base

 

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Rent for the Existing Premises for the Base Rent Forgiveness Period would be the sum of Twenty-Three Thousand Eight Hundred Forty-Seven and 20/100ths Dollars ($23,847.20) per month, in the absence of the forgiveness of the Base Rent for such period, and that such forgiveness is expressly conditioned on the absence of any Default existing under the Lease (and no event or condition existing which could constitute a Default but for a requirement of notice or expiration of a period of grace).  In the event of the occurrence either of any such Default hereunder or of an event or condition which could constitute a Default but for a requirement of notice or expiration of a period of grace, and without notice or demand by Landlord: (i) such forgiveness shall terminate; and (ii) the Base Rent for the Existing Premises shall immediately return to the sum of Twenty-Three Thousand Eight Hundred Forty-Seven and 20/100ths Dollars ($23,847.20) per month, from the date of the first occurrence of such event or condition.  Landlord and Tenant hereby acknowledge and agree that the requirement of the payment of such Base Rent does not constitute a penalty or forfeiture, but rather only the reinstatement of Base Rent otherwise due for the Existing Premises.

 

(c)           Expansion Premises .  Effective as of the Expansion Effective Date, Tenant shall pay Base Rent with respect to the Expansion Premises upon the following schedule and otherwise in accordance with the terms of the Lease:

 

Period

 

Monthly Rate Per
Square Foot

 

Base Rent per Month

 

12/01/2009 - 4/30/2010

 

$

2.50

 

$

8,440.00

 

5/01/2010 - 12/31/2010

 

$

2.58

 

$

8,710.08

 

 

5.             Expenses and Taxes .

 

(a)           Existing Premises .  For the period continuing through and including the Extended Termination Date Tenant shall continue to pay for Tenant’s Pro Rata Share of Expense Excess and Tax Excess for the Existing Premises pursuant to the terms of the Lease; provided, however, that with respect to the Extended Term, the Base Year for computation of Tenant’s Pro Rata Share of Expense Excess and Tax Excess with respect to the Existing Premises shall be the calendar year of 2009.

 

(b)           Expansion Premises .  For the period commencing on the Expansion Effective Date and continuing through and including the Extended Termination Date (i) Tenant’s Pro Rata Share applicable to the Expansion Premises shall be calculated based upon the rentable square footage attributable to the Expansion Premises, and (ii) Tenant shall pay Tenant’s Pro Rata Share of Expense Excess and Tax Excess applicable to the Expansion Premises pursuant to the terms of the Lease; provided, however, that the Base Year for computation of Tenant’s Pro Rata Share of Expense Excess and Tax Excess applicable to the Expansion Premises shall be the calendar year of 2009.

 

6.             Security Deposit .  Upon Tenant’s execution of this First Amendment, Tenant shall pay Landlord the sum of Three Thousand Eight Hundred Forty-Seven and 20/100ths Dollars ($3,847.20) which is added to and becomes part of the Security Deposit, if any, held by Landlord as provided under Sections 1.08 and 6 of the Lease as security for payment of Rent and

 

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the performance of the other terms and conditions of the Lease by Tenant.  Accordingly, simultaneously with the execution hereof, the Security Deposit is increased from Twenty Thousand Dollars ($20,000) to Twenty-Three Thousand Eight Hundred Forty-Seven and 20/100ths Dollars ($23,847.20).

 

7.             Condition of Existing Premises and Expansion Premises .

 

(a)           Tenant acknowledges that it is currently in possession of the Existing Premises and agrees to continue in possession thereof on an “AS-IS” basis without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements to the Existing Premises on account of the extension of the Term hereunder or for any other reason, purposes or cause, except the Refurbishment Work set forth in Paragraph 8 below.

 

(b)           Tenant has inspected the Expansion Premises and agrees to accept the same “AS IS” without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements to the Expansion Premises, except the Refurbishment Work set forth in Paragraph 8.  Landlord shall have no other obligation of any kind or character, express or implied, with respect to the design or condition of the Expansion Premises or the suitability thereof for Tenant’s purposes, and Tenant acknowledges that it has neither received nor relied upon any representation or warranty made by or on behalf of Landlord with respect to such matters.

 

8.             Refurbishment of the Existing Premises .

 

(a)           Description of Refurbishment Work .  Landlord shall steam clean the existing floor carpet within the Existing Premises, touch-up the paint on the existing interior walls within the Existing Premises, and perform the work described on the Space Plan attached hereto as Exhibit C in the Existing Premises and the Expansion Premises (collectively, the “Refurbishment Work”), upon the terms and conditions set forth in this Paragraph 8.  The Refurbishment Work shall be performed using Building standard methods, materials and finishes (as to quantity and quality).  Landlord shall have the right to enter into a direct contract for the Refurbishment Work with a general contractor selected by Landlord.  In addition, Landlord shall have the right to select and/or approve of any subcontractors or other service providers used in connection with the Refurbishment Work.

 

(b)           Performance of Refurbishment Work .  Tenant acknowledges that the Refurbishment Work may be performed by Landlord in the Existing Premises and the Expansion Premises during Landlord’s normal business hours, and while Tenant is in possession of the Existing Premises and/or the Expansion Premises.  Landlord and Tenant shall cooperate with each other in order to enable the Refurbishment Work to be performed in a timely manner with as little inconvenience to the operation of Tenant’s business within the Existing Premises and the Expansion Premises as is reasonably possible.  Notwithstanding anything to the contrary contained in the Lease, Landlord shall not be liable in any manner for any inconvenience, loss or interruption of business or business opportunities or other damage to person or property of Tenant or other persons, however caused, arising in connection with the performance of the Refurbishment Work, whether or not caused by or arising from the active or passive negligence

 

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of Landlord or its agents, contractors, suppliers, employees or representatives.  Landlord’s performance of the Refurbishment Work shall not be deemed to be a representation by Landlord that such Refurbishment Work complies with applicable insurance requirements, building codes, ordinances, laws or regulations or that the Refurbishment Work will be adequate for Tenant’s use.

 

(c)           Landlord’s Contribution .  The Refurbishment Work shall be performed at the sole cost and expense of Tenant, except for the amount of the Landlord’s Contribution.  Landlord shall provide a total of Ninety-One Thousand Seven Hundred Twenty Dollars ($91,720; based on $10.00 per square foot on 9,172 rentable square feet in the Existing Premises; “Landlord’s Contribution”), as provided in this Paragraph 8(c) in payment or partial payment for the costs of the performance of the Refurbishment Work (including, without limitation, design, permit, and construction costs).  Subject to the provisions of Paragraph 8(d) below, Landlord shall apply Landlord’s Contribution to the cost of performing (including, without limitation, design, permit and construction costs) the Refurbishment Work and for the other purposes specifically provided in this Paragraph 8.  If, following the substantial completion of the Refurbishment Work, any portion of the Landlord’s Contribution is unused and unapplied, following Tenant’s written request therefor, Landlord shall apply such unused and unapplied portion of the Landlord’s Contribution toward the installment of Base Rent next coming due under the Lease and subsequent installments of Base Rent, until such time as such unused and unapplied portion of the Landlord’s Contribution has been fully applied to Base Rent.  Notwithstanding anything to the contrary set forth herein: (a) the obligation of Landlord to make any one or more payments pursuant to the provisions of this Paragraph 8(c) or to proceed with the performance of the Refurbishment Work shall be suspended without further act of the parties during any such time as there exists a Default under the Lease or any event or condition which, with the passage of time or the giving of notice or both would constitute such a Default; and (b) the obligation of Landlord to pay any unexpended portion of Landlord’s Contribution shall terminate as of the first anniversary of the Extension Date.  Nothing in this Paragraph 8(c) shall affect the obligations of Tenant under the Lease with respect to any alterations, additions and improvements within the Premises, including, without limitation, any obligation to obtain the prior written consent of Landlord thereto.

 

(d)           Tenant Payments .  If Landlord estimates that the total cost of the Refurbishment Work (the “Estimated Total Cost”) will exceed the Landlord’s Contribution, Landlord shall notify Tenant in writing of Landlord’s good faith estimate of such excess (the “Estimated Excess Cost”).  Tenant shall pay to Landlord within five (5) business days of receipt of an invoice describing in reasonable detail the actual cost of the Refurbishment Work incurred in respect of the period for which such invoice is delivered (the “Periodic Invoice Cost”), its Percentage Share of such Periodic Invoice Cost.  As used herein, the term “Percentage Share” shall mean the percentage determined by: (i) dividing the Estimated Excess Cost by the Estimated Total Cost; and (ii) multiplying such number by one hundred (100).  The failure by Tenant to make such payment within such five (5) business day period shall constitute a Default under the Lease without the requirement of notice.  Such payments by Tenant shall be applied by Landlord towards such Period Invoice Cost.  Following substantial completion of the Refurbishment Work, if the total cost of the Refurbishment Work exceed the sum of Landlord’s Contribution actually disbursed or required to be disbursed by Landlord and the amounts previously paid by Tenant towards all such Periodic Invoice Costs, then Tenant shall pay to

 

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Landlord such excess within fifteen (15) days after billing by Landlord.  All other amounts payable by Tenant pursuant to the provisions of this Paragraph 8, if any, shall be paid by Tenant within fifteen (15) days after billing by Landlord.

 

9.             Right of First Opportunity .

 

(a)           Subject to the remaining provisions of this Paragraph 9, Tenant is hereby granted a one (1) time right to add to the Premises additional space located on the Tenth (10th) Floor of the Building consisting of approximately Two Thousand Four Hundred Ninety-Two (2,492) rentable square feet and more particularly shown on Exhibit B attached hereto (the “First Opportunity Space”), as and if such First Opportunity Space becomes available (the term “available” is used herein meaning (i) that Landlord has determined that a lease existing as of the date of this First Amendment has terminated, either by default, mutual agreement, or by expiration of the term of such lease and of any renewal options, rights of first refusal or options or agreements of expansion and that such First Opportunity Space has not been relet to such tenant or to a subtenant or assignee of such tenant immediately thereafter, the previous lease with respect to such First Opportunity Space renewed or an expansion right with respect to such First Opportunity Space exercised by another tenant, or (ii) if the First Opportunity Space is not under lease to a third-party as of the date of this First Amendment, Landlord has located a prospective tenant that may be interested in leasing such space), such right being referred to herein as the “Right of First Opportunity.”

 

(b)           The Right of First Opportunity shall be subject and subordinate to: (i) any renewal or extension of the term of any existing lease of First Opportunity Space; and (ii) any renewal option, extension option, expansion option, right of first refusal or right of first opportunity granted by Landlord to a third party prior to the date of this First Amendment.

 

(c)           Landlord shall notify Tenant in writing that any portion of the First Opportunity Space has become available and of the date upon which Landlord expects to be able to tender possession of such portion of the First Opportunity Space to Tenant.  The Right of First Opportunity must be exercised by Tenant as to such portion of the First Opportunity Space so identified by Landlord by written notice to Landlord within fifteen (15) days after the date of Landlord’s written notice.  Tenant’s failure to exercise the Right of First Opportunity within such time period shall cause such Right of First Opportunity to expire and be of no further force or effect for the remainder of the Term with respect to the portion of the First Opportunity Space so identified by Landlord.  Upon timely exercise of such Right of First Opportunity, such portion of the First Opportunity Space so accepted by Tenant (the “Accepted First Opportunity Space”) shall be included under the Lease and added to the Premises effective upon the date Landlord tenders possession of the Accepted First Opportunity Space to Tenant.  If Landlord fails to deliver Tenant possession of the Accepted First Opportunity Space on or before the scheduled delivery date for any reason, including without limitation, holdover by prior occupants, Landlord shall not be liable for any claims, damages or liabilities as a result thereof, but the Tenant’s lease of the Accepted First Opportunity Space shall commence upon the date upon which Landlord delivers possession of the Expansion Premises to Tenant.

 

(d)           The Base Rent applicable to the Accepted First Opportunity Space shall be at ninety-five percent (95%) of the Fair Market Rent of the Accepted First Opportunity Space as

 

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of the date the Accepted First Opportunity Space becomes part of the Premises.  At the time Landlord offers such portion of the First Opportunity Space to Tenant, Landlord shall notify Tenant of Landlord’s determination of the Base Rent for such portion of the First Opportunity Space.  Within fifteen (15) days after receipt of such notice from Landlord, Tenant shall have the right to: (i) elect to accept Landlord’s determination of the Base Rent for such portion of the First Opportunity Space; or, (ii) elect to require that Fair Market Rent for such portion of the First Opportunity Space be determined by arbitration pursuant to Paragraph 12 hereof.  Failure on the part of Tenant to require arbitration of Fair Market Rent for such portion of the First Opportunity Space within such fifteen (15) day period shall constitute an election by Tenant to accept Landlord’s determination of the Base Rent for such portion of the First Opportunity Space.

 

(e)           In the event that Tenant exercises the Right of First Opportunity pursuant to the terms hereof, Tenant shall take the Accepted First Opportunity Space in its “AS IS” condition and configuration without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements to the Accepted First Opportunity Space.

 

(f)            From and after the commencement date specified in Paragraph 9(e) above with respect to the Accepted First Opportunity Space, all of the terms and provisions of the Lease shall apply to such space (provided, however, Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to any other portion of the Premises), and rentable square footage contained in such space shall be added to the rentable square footage within the Premises for all calculations of Tenant’s Pro Rata Share of Expense Excess and Tax Excess and all other purposes hereunder (with Base Rent being determined as provided in Section 9(d)).

 

10.          Extension Option .  Tenant shall have the option to extend the Term (the “Extension Option”) for one (1) period of twenty-four (24) months (the “Second Extended Term”).  The Second Extended Term, if any, shall commence on the day following the last day of the Extended Term and shall continue for a period of twenty-four (24) months thereafter.  Tenant’s Extension Option shall be both: (i) upon condition (which may be waived by Landlord in its sole discretion) that no Default exists hereunder at the time of the giving by Tenant of its notice of exercise; and, (ii) upon further condition (which may be waived by Landlord in its sole discretion) that no Default exists hereunder at the time of the commencement of the Second Extended Term.  To exercise Tenant’s Extension Option, Tenant shall give Landlord written notice of its election at least three (3) months prior to expiration of the Extended Term.  Within thirty (30) days of receipt of Tenant’s election to extend, Landlord shall notify Tenant of the Base Rent for the Second Extended Term.  Within thirty (30) days after receipt of each such notice from Landlord, Tenant shall have the right to: (i) elect to accept Landlord’s statement of the Base Rent as the Base Rent for the Second Extended Term; or, (ii) elect to pay Base Rent for the Extended Term at ninety-five percent (95%) of the Fair Market Rent (defined below), with Fair Market Rent to be determined by arbitration pursuant to Paragraph 12 below.  Failure on the part of Tenant to elect in writing to require arbitration of Fair Market Rent within the thirty (30) day period shall constitute an election by Tenant to accept Landlord’s determination of the Base Rent for the Second Extended Term.  Tenant shall have no other option, right or obligation to extend the Term or otherwise remain in the Premises after the expiration of the Extended Term.  From and after commencement of any Second Extended Term, all of the other terms, covenants

 

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and conditions of the Lease shall apply, and references to the Term shall be deemed to include the Second Extended Term; provided, however, that Base Rent shall be revised as herein provided, and Tenant shall have no option or right to further extend the Term beyond the Second Extended Term.  If Tenant has elected to have the Fair Market Rent determined by arbitration and the Base Rent for the Second Extended Term has not been determined as of the commencement of the Second Extended Term, Tenant shall pay Base Rent for the Premises upon the terms and conditions in effect during the last month of the Extended Term until such time as the Base Rent for the Second Extended Term has been determined.  If the Base Rent for the Second Extended Term is determined to be less than the Base Rent for the last month of the Extended Term, Landlord shall provide Tenant with a credit against the next installment(s) of Rent in the amount of the overpayment by Tenant.  Likewise, if the Base Rent for the Second Extended Term is determined to be greater than the Base Rent for the last month of the Extended Term, Tenant shall pay Landlord the amount of such underpayment with the installment of Base Rent next due under the Lease.

 

11.          Definition of Fair Market Rent .  As used herein, “Fair Market Rent” shall mean the rate being charged by Landlord in the Building for comparable space and the rate being charged for comparable space in non-equity transactions in comparable buildings located in the City of Emeryville or downtown Oakland area, taking into consideration: location in the Building or other building, tenant improvements or allowances existing or to be provided, rental abatements, lease takeovers/assumptions, moving expenses and other forms of rental concessions, proposed term of lease, extent of service provided or to be provided, the ownership of the comparable space, whether or not the transaction is a sublease, the time the particular rate under consideration became or is to become effective and any other relevant terms or conditions.  Costs which are incurred by a landlord in connection with the negotiation and documentation of a lease transaction, and other costs incurred by a landlord which are not paid to or for the direct benefit of the tenant, shall not be considered.  Comparable transactions in which the rent for a renewal was discounted to a rate below the fair market rate, whether by the application of a percentage to the fair market rate or otherwise, shall be adjusted to reflect the fair market rate before the discount was applied.  Renewal transactions in which the rent was either established at a pre-determined amount by reason of the exercise by the tenant of an option to renew or extend at a fixed rental rate or was established due to the operation of a pre-determined minimum or maximum amount shall not be regarded as comparable transactions.

 

12.          Arbitration of Fair Market Rent .  If Tenant disputes the amount claimed by Landlord as Base Rent pursuant to Paragraph 9(d) or Paragraph 10, and such dispute cannot be resolved by mutual agreement, the dispute shall be submitted to arbitration.  The judgment or the award rendered in any such arbitration may be entered in any court having jurisdiction and shall be final and binding between the parties.  The arbitration shall be conducted and determined in the County of Alameda in accordance with the then prevailing rules of the American Arbitration Association or its successor for arbitration of commercial disputes except to the extent that the procedures mandated by said rules shall be modified as follows:

 

(a)           Tenant shall make demand for arbitration in writing within the time period required under Paragraph 9(d) or Paragraph 10, as applicable, above, specifying therein the name and address of the person to act as the arbitrator on its behalf.  The arbitrator shall be qualified as a real estate appraiser familiar with the Fair Market Rent of commercial office space in the

 

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County of Alameda who would qualify as an expert witness over objection to give testimony addressed to the issue in a court of competent jurisdiction.  Failure on the part of Tenant to make a timely and proper demand for such arbitration shall constitute a waiver of the right thereto.  Within ten (10) business days after the service of Tenant’s demand for arbitration, Landlord shall have the right to give notice in writing to Tenant of Landlord’s adjusted determination of Fair Market Rent.  Within ten (10) business days following Tenant’s receipt of such notice, if Tenant and Landlord have not agreed upon Fair Market Rent, Tenant shall notify Landlord in writing that Tenant desires to renew its demand for arbitration.  Failure on the part of Tenant to give such notice shall constitute a waiver of the right to such arbitration, and Tenant shall be deemed to have accepted Landlord’s adjusted determination of Fair Market Rent.  Within ten (10) business days after the receipt of such notice, Landlord shall give notice to Tenant, specifying the name and address of the person designated by Landlord to act as arbitrator on its behalf who shall be similarly qualified.  If Landlord fails to notify Tenant of the appointment of its arbitrator, within or by the time above specified, then the arbitrator appointed by Tenant shall be the arbitrator to determine the issue.

 

(b)           If two (2) arbitrators are chosen pursuant to Paragraph 12(a) above, the arbitrators so chosen shall meet within ten (10) business days after the second arbitrator is appointed and, if within ten (10) business days after such first meeting the two (2) arbitrators shall be unable to agree promptly upon a determination of Fair Market Rent, they shall appoint a third (3rd) arbitrator, who shall be a competent and impartial person with qualifications similar to those required of the first two (2) arbitrators pursuant to Paragraph 12(a) above.  If they are unable to agree upon such appointment within five (5) business days after expiration of said ten (10) day period, the third (3rd) arbitrator shall be selected by the parties themselves, if they can agree thereon, within a further period of ten (10) business days.  If the parties do not so agree, then either party, on behalf of both, may request appointment of such a qualified person by the then Chief Judge of the United States District Court having jurisdiction over the County of Alameda, acting in his private non-judicial capacity.  Request for appointment shall be made in writing with a copy given to the other party.  Each party agrees that said Judge shall have the power to make the appointment.  The three (3) arbitrators shall decide the dispute, if it has not previously been resolved, by following the procedure set forth in 12(c) below.

 

(c)           Where the issue cannot be resolved by agreement between the two (2) arbitrators selected by Landlord and Tenant or settlement between the parties during the course of arbitration, the issue shall be resolved by the three (3) arbitrators in accordance with the following procedure.  The arbitrators selected by each of the parties shall state in writing his determination of the Fair Market Rent, supported by the reasons therefor with counterpart copies to each party.  The arbitrators shall arrange for a simultaneous exchange of such proposed resolutions.  The role of the third (3rd) arbitrator shall be to select which of the two (2) proposed resolutions most closely approximates his determination of Fair Market Rent.  The third (3rd) arbitrator shall have no right to propose a middle ground or any modification of either of the two (2) proposed resolutions.  The resolution he chooses as most closely approximating his determination shall constitute the decision of the arbitrators and be final and binding upon the parties.

 

(d)           If any arbitrator fails, refuses or is unable to act, his successor shall be appointed by him, but in the case of the third (3rd) arbitrator, his successor shall be appointed in

 

9



 

the same manner as provided for appointment of the third (3rd) arbitrator.  The arbitrators shall attempt to decide the issue within ten (10) business days after the appointment of the third (3rd) arbitrator.  Any decision in which the arbitrator appointed by Landlord and the arbitrator appointed by Tenant concur shall be binding and conclusive upon the parties.  Each party shall pay the fees and costs of its own counsel.  The losing party shall pay the fees and costs of the arbitrators and of the expert witnesses (if any) of the prevailing party as well as those of its expert witnesses.  For purposes hereof, the losing party shall be that party whose selected arbitrator’s statement of Fair Market Rent was not selected by the third (3rd) arbitrator.

 

(e)           The arbitrators shall have the right to consult experts and competent authorities with factual information or evidence pertaining to a determination of Fair Market Rent, but any such consultation shall be made in the presence of both parties with full right on their part to cross-examine.  The arbitrators shall render their decision and award in writing with counterpart copies to each party.  The arbitrators shall have no power to modify the provisions of the Lease.

 

13.          Modifications .

 

(a)           Additional Insureds .  Effective as of the date of this First Amendment, and notwithstanding anything to the contrary contained in the Lease, Tenant shall promptly cause its commercial general liability policy or policies of insurance carried pursuant to the terms of the Lease to name, as additional insureds, Landlord, Hines Interests Limited Partnership and any lender with a deed of trust encumbering the Building or the Property, of whom Landlord has notified Tenant.  Notwithstanding anything to the contrary contained in the Lease, Tenant shall provide evidence of such coverage to Landlord within thirty (30) days following written request therefor by Landlord.

 

(b)           Late Charge .  Effective as of the date of this First Amendment, the seventh (7th) sentence of Section 4 of the Lease is hereby deleted in its entirety and is replaced with the following: “Tenant shall pay Landlord an administration fee equal to 5% of all past due Rent, provided that Tenant shall be entitled to a grace period of 5 days after Landlord’s written notice to Tenant of the same for the first late payment of Rent in any 12 month period.”

 

(c)           Alterations .  Effective as of the date of this First Amendment, the eighth (8th) sentence of Section 9.03 of the Lease is hereby deleted in its entirety.

 

(d)           Relocation .  Effective as of the date of this First Amendment, Section 21 of the Lease is hereby deleted in its entirety and shall be of no further force or effect.

 

(e)           Holding Over .  Effective as of the date of this First Amendment, the second sentence of Section 22 of the Lease is hereby modified by the deletion of the words “150% of the sum of the Base Rent and Additional Rent due” and the substitution therefor of the words “(i) 150% of the Base Rent, and (ii) the Additional Rent due”.

 

(f)            Parking .  Notwithstanding anything to the contrary set forth in Section 1 of Exhibit G to the Lease, during the Term, as extended, Tenant agrees to lease from Landlord and Landlord agrees to lease to Tenant a total of 33 non-reserved parking spaces and 0 reserved parking spaces in the Parking Facility; provided, however, effective as of any future expansion

 

10



 

effective date, the number of non-reserved parking spaces in the Parking Facility Landlord agrees to lease to Tenant hereunder shall increase by Three (3) non-reserved parking spaces for every One Thousand (1,000) rentable square feet in the such expansion premises, rounded down to the nearest whole number.  During the Term, as extended, Tenant shall pay in advance, concurrent with Tenant’s payment of Base Rent, the prevailing monthly charges established from time to time for parking in the Parking Facility.  Except as set expressly forth in this Paragraph 13(f), the lease of all parking spaces and use of the Parking Facility during the Extended Term shall be subject to all the terms and conditions of Exhibit G to the Lease.

 

(g)           Casualty .  Effective as of the date of this First Amendment, the following is hereby added following the ultimate sentence of the first (1st) grammatical paragraph of Section 16.01 of the Lease:

 

“Tenant shall have the right to terminate this Lease if: (a) any portion of the Premises or any portion of the Building necessary for Tenant’s use of the Premises has been damaged by Casualty; (b) there are less than Twelve (12) months of the Term remaining on the date of the Casualty; (c) the Casualty was not caused by the negligence or willful misconduct of Tenant or its agents, employees or contractors; and (d) Tenant provides Landlord with written notice of its intent to terminate within 30 days after the date of the Casualty.”

 

14.          Brokerage Commission .

 

(a)           Landlord hereby warrants and represents to Tenant that Landlord has not voluntarily incurred, on its behalf or on behalf of Tenant or on behalf of both Landlord and Tenant, any obligation to pay a commission or finder’s fee to any real estate broker or other person or entity in connection with this First Amendment.  Landlord hereby agrees to indemnify, defend and hold Tenant harmless from claims for any commission or finder’s fee charges by any real estate broker or other person or entity arising from an agreement, whether express or implied, between Landlord and such broker or other person or entity or otherwise arising from the conduct of Landlord.

 

(b)           Tenant hereby warrants and represents to Landlord that Tenant has not voluntarily incurred, on its behalf or on behalf of Landlord or on behalf of both Landlord and Tenant, any obligation to pay a commission or finder’s fee to any real estate broker or other person or entity in connection with this First Amendment.  Tenant hereby agrees to indemnify, defend and hold Landlord harmless from claims for any commission or finder’s fee charges by any real estate broker or other person or entity arising from an agreement, whether express or implied, between Tenant and such broker or other person or entity or otherwise arising from the conduct of Tenant.

 

15.          Miscellaneous .

 

(a)           Except as modified above, the terms of the Lease shall remain unchanged and in full force and effect.  Any inconsistency between the provisions of the Lease and this First Amendment shall be resolved in favor of the provisions of this First Amendment, which shall govern and control.  This First Amendment and any attached exhibit(s), which are hereby incorporated into and made an integral part of this First Amendment, set forth the entire

 

11



 

agreement between the parties with respect to the matters set forth herein and there have been no additional oral or written representations or agreement with respect to the same.

 

(b)           Submission of this First Amendment by Landlord is not an offer to enter into this First Amendment but rather is a solicitation for such an offer by Tenant.  Landlord shall not be bound by this First Amendment until Landlord has executed and delivered the same to Tenant.

 

(c)           This First Amendment may be executed in one (1) or more counterparts with the same effect as if the parties executing several counterparts had executed one (1) counterpart and all such executed counterparts shall together constitute one (1) and the same instrument.

 

[Remainder of page left intentionally blank]

 

12


 

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment as of the day and year first above written.

 

 

LANDLORD:

 

 

 

NOP WATERGATE LLC,

 

a Delaware limited liability company

 

 

 

By:

National Office Partners Limited Partnership,

 

 

a Delaware limited partnership,

 

 

its sole member

 

 

 

 

By:

Hines National Office Partners

 

 

 

Limited Partnership, a Texas

 

 

 

limited partnership, its general partner

 

 

 

 

 

 

By:

Hines Fund Management, L.L.C.,

 

 

 

a Delaware limited liability company,

 

 

 

its general partner

 

 

 

 

 

 

By:

Hines Interests Limited Partnership,

 

 

 

a Delaware limited partnership,

 

 

 

its sole member

 

 

 

 

 

By:

Hines Holdings, Inc.,

 

 

 

a Texas corporation,

 

 

 

its general partner

 

 

 

 

 

 

By:

/s/ James C. Buie, Jr.

 

 

Name:

James C. Buie, Jr.

 

 

Title:

Executive Vice President

 

 

 

TENANT:

 

 

 

ADAMAS PHARMACEUTICALS, INC.,

 

a Delaware corporation

 

 

 

 

By:

/s/ Peter Hadrovic

 

 

Name:

Peter Hadrovic

 

 

Title:

Chief Commercial Officer

 

 

13



 

Exhibit A

 

“Expansion Premises Description”

 

GRAPHIC

 

GRAPHIC

 

14



 

Exhibit B

 

“First Opportunity Space Description”

 

GRAPHIC

 

GRAPHIC

 

15



 

Exhibit C

 

“Space Plan”

 

See Attachment

 

16


 

 

17


 



Exhibit 10.9

 

SECOND AMENDMENT TO OFFICE LEASE AGREEMENT

 

This SECOND AMENDMENT TO OFFICE LEASE AGREEMENT (“Amendment”), dated for reference purposes as of this 18 day of January, 2011, is by and between EMERYVILLE OFFICE, L.L.C., a Delaware limited liability company (“Landlord”) (as successor-in-interest to NOP WATERGATE LLC, a Delaware limited liability company [“NOP”]), on the one hand, and ADAMAS PHARMACEUTICALS, INC., a Delaware corporation (formerly known as Neuromolecular Pharmaceuticals, Inc.) (“Tenant”), on the other hand, with respect to the following:

 

R   E   C   I   T   A   L   S :

 

A.                                     Landlord, as successor to NOP, and Tenant are parties to that certain Office Lease Agreement dated October 25, 2006 (the “Original Lease”) by and between CA-Emeryville Properties Limited Partnership, a Delaware limited partnership (as predecessor-in-interest to NOP), as landlord, and Tenant, as tenant, as amended by that certain First Amendment to Lease dated April 29, 2009 (the “First Amendment”.  The Original Lease, as amended by the First Amendment is hereafter, the “Lease”.  Pursuant to the Lease, Tenant leases from Landlord those certain premises described as Suite 1050 containing approximately 9,172 rentable square feet, and Suite 1070 containing approximately 3,376 rentable square feet (12,548 rentable square feet in the aggregate) (collectively, the “Original Premises”), within the building commonly known as 1900 Powell Street, Emeryville, California (the “Building”), which is part of that certain property commonly known as “Watergate Office Towers” (the “Property”), as more particularly described in the Lease.

 

B.                                     Capitalized terms not defined herein have the meanings given to such terms in the Lease.

 

C.                                     The Term of the Lease is scheduled to expire on December 31, 2010, and the parties desire to extend the Term, all on the terms and conditions hereinafter set forth.

 

D.                                     In conjunction with such extension, Tenant desires to surrender to Landlord that portion of the Premises known as Suite 1070 containing approximately 3,376 rentable square feet (the “Reduction Space”), and Landlord is willing to accept such surrender and modify the Lease accordingly upon and subject to the terms set forth below.

 

A   G   R   E   E   M   E   N   T :

 

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of such are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.                                       Reduction .  Effective as of January 1, 2011 (the “Reduction/Extension Date”), the Original Premises is decreased from 12,548 rentable square feet to 9,172 rentable square feet by

 



 

the elimination of the Reduction Space (the “Reduction”).  The portion of the Original Premises remaining following the surrender of the Reduction Space commonly known as Suite 1050 is hereafter referred to as the “Retained Premises.”  The Reduction Space and Retained Premises are depicted on Exhibit “A” attached hereto and incorporated herein by this reference.  On or before the Reduction/Extension Date, Tenant shall surrender the Reduction Space to Landlord as provided in the Lease, as amended hereby (the “Amended Lease”).  From and after the Reduction/Extension Date and Tenant’s proper surrender of the Reduction Space, the Lease shall be deemed terminated with respect to the Reduction Space, and the term “Premises”, as defined in the Lease, shall be deemed to mean the Retained Premises.  Tenant shall vacate the Reduction Space in accordance with the terms of the Lease on or before the Reduction/Extension Date and Tenant shall fully comply with all obligations under the Lease respecting the Reduction Space up to the Reduction/Extension Date; provided however, Tenant shall not be required to remove any improvements or alterations made by Tenant as of the date hereof to the Reduction Space.  Notwithstanding the foregoing, following the Reduction/Extension Date, Tenant shall be permitted to enter the Reduction Space for the sole purpose of accessing the server room (the “Server Room”) located therein; provided, however, Landlord may terminate Tenant’s right of entry into the Server Room at any time during the Extended Term upon thirty (30) days prior written notice to Tenant (the “Server Room Notice”), whereupon Tenant’s right of entry shall immediately terminate, and Tenant shall surrender the Server Room pursuant to the terms of the Amended Lease, including removal all furniture, fixtures, equipment and personal property from the Server Room on or before the Server Room Notice.  If Tenant shall holdover in the Reduction Space beyond the Reduction/Extension Date and/or the Server Room beyond the thirtieth (30 th ) after the date of the Server Room Notice, Tenant shall be liable for Base Rent, Additional Rent and other charges respecting the Reduction Space pursuant to the terms of the Lease, including Section 22 thereof, and consequential and other damages arising from Tenant’s holding over.

 

2.                                       Extended Term .  The Term is hereby extended for a period of six (6) months (the “Extended Term”) and shall expire on June 30, 2011 (“Extended Expiration Date”), unless sooner terminated in accordance with the terms of the Amended Lease.  No such extension shall operate to release Tenant from liability for any amounts owed or defaults which exist under the Lease prior to the Reduction/Extension Date.

 

3.                                       Base Rent .  As of the Reduction/Extension Date and continuing through the Extended Term, Tenant shall pay Base Rent to Landlord for the Reduction Space in the amount of Eight Thousand Seven Hundred Fifty and No/100ths Dollars ($8,750.00) per month.

 

4.                                       Tenant’s Pro Rata Share and Base Year .  Commencing as of the Reduction/Extension Date, Tenant’s Pro Rata Share shall be 4.2257% of the Building, and the Base Year for Taxes and Expenses shall be the calendar year 2011.  Accordingly, Tenant shall not pay any Expense Excess or Tax Excess during the Extended Term.

 

5.                                       Condition of Premises .  Tenant acknowledges that Landlord shall not be obligated to refurbish or improve, or to otherwise provide funds for the improvement of, the Retained Premises in any manner whatsoever in conjunction with the Extended Term, and Tenant hereby accepts the Retained Premises in its “AS-IS” condition.

 

2



 

6.                                       Termination Option .  Subject to the terms of this Section 6, and notwithstanding anything to the contrary contained in the Lease, Tenant will have the one-time option to terminate and cancel the Lease (“Termination Option”), upon thirty (30) days prior written notice to Landlord (the date which is 30 days after the Tenant’s notice of exercise of its Termination is hereafter, the “Termination Date”).  If Tenant properly and timely exercises its Termination Option and satisfies all other monetary and non-monetary obligations under the Amended Lease up to and including the Termination Date, including, without limitation, the provisions regarding surrender of the Retained Premises which must be accomplished on or before the Termination Date, then the Amended Lease will terminate as of midnight on the Termination Date.

 

7.                                       Right of First Offer .  Tenant shall have the one time right of first offer (the “Right of First Offer”) with respect to the 10,236 rentable square feet of space known as Suites 910, 930 and 950 (collectively, the “ROFO Space”) within the building located at 2000 Powell Street, Emeryville, California (the “ROFO Building”).  Tenant’s Right of First Offer shall be exercised as follows: at any time after Landlord has determined that the existing tenant in any ROFO Space will not extend or renew the term of its lease for such ROFO Space (but prior to leasing such ROFO Space to a party other than the existing tenant), Landlord shall deliver written notice to Tenant (the “ROFO Notice”) of the terms under which Landlord is prepared to lease the ROFO Space to Tenant, provided such terms shall be a minimum term of five (5) years commencing as of the day immediately following the Extended Expiration Date, and shall reflect the Prevailing Market (hereinafter defined) rate for such ROFO Space as reasonably determined by Landlord.  Tenant may lease such ROFO Space in its entirety only, under such terms, by delivering written notice of exercise to Landlord (the “Notice of Exercise”) within ten (10) days after the date of the ROFO Notice, except that Tenant shall have no such Right of First Offer and Landlord need not provide Tenant with a ROFO Notice, if Tenant is not permitted to exercise the same pursuant to Section 7.f. below, or if Tenant does not intend to use the ROFO Space for Tenant’s exclusive use during the Extended Term, or if the existing tenant in the ROFO Space is interested in extending or renewing its lease for the ROFO Space or entering into a new lease for such ROFO Space.

 

a.                                       Terms for ROFO Space .

 

i.                                           The term for the ROFO Space shall commence upon the commencement date stated in the ROFO Notice and thereupon such ROFO Space shall be considered a part of the “Premises”, provided that all of the terms stated in the ROFO Notice shall govern Tenant’s leasing of the ROFO Space and only to the extent that they do not conflict with the ROFO Notice, the terms and conditions of the Amended Lease shall apply to the ROFO Space.

 

ii.                                        Tenant shall pay Base Rent and Additional Rent for the ROFO Space in accordance with the terms and conditions of the ROFO Notice, which terms and conditions shall reflect the Prevailing Market rate for the ROFO Space as determined in Landlord’s reasonable judgment.

 

iii.                                     The ROFO Space (including improvements and personalty, if any) shall be accepted by Tenant in its condition and as-built configuration existing on the earlier of the date Tenant takes possession of the ROFO Space or as of the date the term for such ROFO

 

3



 

Space commences, unless the ROFO Notice specifies any work to be performed by Landlord in the ROFO Space, in which case Landlord shall perform such work in the ROFO Space.  If Landlord is delayed delivering possession of the ROFO Space due to the holdover or unlawful possession of such space by any party, Landlord shall use reasonable efforts to obtain possession of the space, and the commencement of the term for the ROFO Space shall be postponed until the date Landlord delivers possession of the ROFO Space to Tenant free from occupancy by any party.

 

b.                                       Termination of Right of First Offer .  The rights of Tenant hereunder with respect to the ROFO Space shall terminate on the earlier to occur of:  (i) July 1, 2011; (ii) Tenant’s failure to exercise its Right of First Offer within the 10-day period provided in Section 7a. above; and (iii) the date Landlord would have provided Tenant a ROFO Notice if Tenant had not been in violation of one or more of the conditions set forth in Section 7.f.

 

c.                                        ROFO Amendment .  If Tenant exercises its Right of First Offer, Landlord shall prepare an amendment (the “ROFO Amendment”) adding the ROFO Space to the Retained Premises on the terms set forth in the ROFO Notice and reflecting the changes in the Base Rent, rentable square footage of the Premises, Tenant’s Pro Rata Share and other appropriate terms.  A copy of the ROFO Amendment shall be sent to Tenant within a reasonable time after Landlord’s receipt of the Notice of Exercise executed by Tenant, and Tenant shall execute and return the ROFO Amendment to Landlord within fifteen (15) days thereafter, but an otherwise valid exercise of the Right of First Offer shall be fully effective whether or not the ROFO Amendment is executed.

 

d.                                       Definition of Prevailing Market .  For purposes of this Right of First Offer provision, “Prevailing Market” shall mean the annual rental rate per square foot for space comparable to the ROFO Space in the Property and other comparable office buildings within the vicinity of the Property under leases and renewal and expansion amendments being entered into at or about the time that Prevailing Market is being determined, giving appropriate consideration to tenant concessions, brokerage commissions, tenant improvement allowances, existing improvements in the space in question, and the method of allocating operating expenses and taxes.  Notwithstanding the foregoing, space leased under any of the following circumstances shall not be considered to be comparable for purposes hereof:  (i) the lease term is for less than the lease term of the ROFO Space, (ii) the space is encumbered by the option rights of another tenant, or (iii) the space has a lack of windows and/or an awkward or unusual shape or configuration.  The foregoing is not intended to be an exclusive list of space that will not be considered to be comparable.

 

e.                                        Subordination .  Notwithstanding anything herein to the contrary, Tenant’s Right of First Offer is subject and subordinate to the expansion rights (whether such rights are designated as a right of first offer, right of first refusal, expansion option or otherwise) of any tenant of the Building existing on the date hereof.

 

f.                                         Right of First Offer Conditions .  Tenant’s Right of First Offer is personal to the original Tenant executing the Amendment or a transferee pursuant to a permitted Business Transfer (“Business Transferee”) and may be exercised only by the original Tenant executing this Amendment or a Business Transferee while occupying and leasing the entire Retained

 

4



 

Premises and without having assigned the Amended Lease or sublet any portion of the Retained Premises (except pursuant to a Business Transfer), and/or without the intent of thereafter assigning the Amended Lease or subletting the Retained Premises, and may not be exercised or be assigned, voluntarily or involuntarily, by any person or entity other than the original Tenant executing this Amendment or a Business Transferee.  Tenant’s Right of First Offer is not assignable separate and apart from the Amended Lease, nor may the Right of First Offer be separated from the Amended Lease in any manner, either by reservation or otherwise.  Tenant will have no right to exercise the Right of First Offer, and Tenant’s exercise of the Right of First Offer may be nullified by Landlord and deemed of no further force or effect, if (i) Tenant is in default of any monetary obligation or material non-monetary obligation under the terms of the Amended Lease beyond any applicable notice and cure period as of Tenant’s exercise of the Right of First Offer, or (ii) Landlord has given Tenant two (2) or more notices of default, whether or not such defaults are subsequently cured, during any twelve (12) consecutive month period of the Amended Lease.

 

8.                                       Parking .  Effective as of the Reduction/Extension Date and for the duration of the Extended Term, Tenant shall rent up to a total of fifteen (15) unreserved parking spaces at the rate of Seventy-Five and No/100ths Dollars ($75.00) per unreserved parking space, with respect to the Retained Premises, pursuant to the terms of the Amended Lease.  All such unreserved parking spaces shall be available to all tenants on a non-exclusive, in common basis within the unreserved, non-visitor portions of the parking facilities serving the Building.

 

9.                                       Notices .  Landlord’s addresses for notices and payment of rent shall be and is hereby amended as follows:

 

Landlord’s Address:

 

EMERYVILLE OFFICE, L.L.C.
c/o LBA Realty

17901 Von Karman, Suite 950
Irvine, California 92614

Attn: SVP - Operations
Telephone: (949) 833-0400
Facsimile: (949) 955-9350

 

 

 

With copies to:

 

 

 

 

 

 

 

 

 

 

Attn:

 

 

Telephone:

 

 

Facsimile:

 

 

 

For Payment of Rent:

 

 

 

 

 

 

 

 

 

5



 

10.                                Authority .  Each signatory of this Amendment on behalf of Tenant represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

 

11.                                Broker .  Landlord and Tenant each represent and warrant to the other that it is not aware of any brokers or finders who may claim a fee or commission in connection with the consummation of the transactions contemplated by this Amendment other than LBA Realty, representing Landlord, and Cornish & Carey Commercial, representing Tenant.  If any claims for brokers’ or finders’ fees in connection with the transactions contemplated by this Amendment arise, then Tenant agrees to indemnify, protect, hold harmless and defend Landlord (with counsel reasonably satisfactory to Landlord) from and against any such claims if they shall be based upon any statement, representation or agreement made by Tenant, and Landlord agrees to indemnify, protect, hold harmless and defend Tenant (with counsel reasonably satisfactory to Tenant) if such claims are based upon any statement, representation or agreement made by Landlord.

 

12.                                No Other Modifications .  Sections 9, 10, 11 and 12 of the First Amendment with respect to the Right of First Opportunity and Extension Option, are hereby deleted in their entirety and are of no further force or effect.  Except as modified in this Amendment, all other terms and conditions of the Lease shall remain unchanged and in full force and effect.  To the extent of a conflict between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall prevail.  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same Amendment.

 

[NO FURTHER TEXT ON THIS PAGE; SIGNATURES ON FOLLOWING PAGE]

 

6



 

IN WITNESS WHEREOF, the parties have executed this Amendment.

 

TENANT:

 

 

 

ADAMAS PHARMACEUTICALS, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Peter Hadrovic

 

 

Print Name:

PETER HADROVIC

 

 

Print Title:

Sr Vice President

 

 

[SIGNATURE CONTINUED ON FOLLOWING PAGE]

 

7



 

LANDLORD:

 

 

EMERYVILLE OFFICE, L.L.C.,

a Delaware limited liability company

 

By:

EMERYVILLE OFFICE HOLDINGS, L.L.C,

 

a Delaware limited liability company,

 

its Sole Member and Manager

 

 

 

By:

LBA RIV-Company III, LLC,

 

 

a Delaware limited liability company,

 

 

its Operating Member

 

 

 

 

By:

LBA REIT IV, LLC,

 

 

a Delaware limited liability company

 

 

its sole Member and Manager

 

 

 

 

By:

LBA Realty Fund IV, L.P.,

 

 

a Delaware limited partnership,

 

 

its Sole Manager

 

 

 

 

By:

LBA Management Company IV, LLC,

 

 

a Delaware limited liability company,

 

 

its General Partner

 

 

 

 

By:

LBA Realty LLC,

 

 

a Delaware limited liability company,

 

 

its Manager

 

 

 

 

By:

LBA Inc.,

 

 

a California corporation,

 

 

its Managing Member

 

 

 

 

 

 

 

By:

/s/ Brad Neglia

 

Name:

Brad Neglia

 

Title:

Authorized Signatory

 

 

 

 

For LBA Office Use Only: Prepared & Reviewed by:

CF

 

8



 

EXHIBIT “A”

DEPICTION OF REDUCTION SPACE AND

RETAINED PREMISES

 




Exhibit 10.10

 

THIRD AMENDMENT TO LEASE

 

THIS THIRD AMENDMENT TO LEASE (“Amendment”), dated for reference purposes only as of the 17 day of June, 2011, is entered into by and between EMERYVILLE OFFICE, L.L.C., a Delaware limited liability company (“Landlord”), and ADAMAS PHARMACEUTICALS, INC., a Delaware corporation (formerly known as Neuromolecular Pharmaceuticals, Inc.) (“Tenant”).

 

R   E   C   I   T   A   L   S :

 

A.                                     Landlord (as successor to NOP Watergate, LLC, a Delaware limited liability company) and Tenant are parties to that certain Office Lease Agreement dated as of October 25, 2006 (the “Original Lease”), which Original Lease has been previously amended by that certain: (i) First Amendment to Lease dated April 29, 2009 (the “First Amendment”) and (ii) Second Amendment to Office Lease Agreement dated January 18, 2011 (the “Second Amendment”) (the Original Lease, as so amended, is referred to herein collectively as the “Lease”). Pursuant to the Lease, Tenant currently leases from Landlord those certain premises on the 10 th  floor of the building at 1900 Powell Street, Emeryville, California (the “1900 Building”) described as Suite 1050, containing approximately 9,172 rentable square feet (“RSF”) (the “Original Premises”).

 

B.                                     Capitalized terms which are used in this Amendment without definition have the meanings given to them in the Lease.

 

C.                                     The Term of the Lease is currently scheduled to expire on June 30, 2011. Landlord and Tenant desire to enter into this Amendment to extend the Term of the Lease.

 

D.                                     In addition, the parties desire to amend the Lease in order to, among other things, relocate Tenant from the Original Premises to that certain space (the “New Premises”) known as Suite 220 containing approximately 3,723 RSF on the second (2 nd ) floor of the building located at 2200 Powell Street, Emeryville, California (the “2200 Building”), and to further amend the terms of the Lease upon the terms and conditions set forth below.

 

A   G   R   E   E   M   E   N   T :

 

NOW, THEREFORE, in consideration of the foregoing the mutual covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.                                       New Premises . Tenant hereby agrees to lease from Landlord, and Landlord hereby agrees to lease to Tenant, the New Premises on the terms and conditions hereinafter set forth. As of the New Commencement Date (as defined in Section 3 below), (i)  Exhibit A attached hereto showing the New Premises is hereby incorporated into and made a part of the Lease, (ii) all references in the Lease to the defined term “Premises” shall mean and refer to the New Premises, and (iii) all references in the Lease to the defined term “Building” shall mean and refer to the 2200 Building. Tenant’s use and occupancy of the New Premises shall be in accordance with all of the terms and conditions of the Lease as amended by this Amendment (the “Amended Lease”).

 

 

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2.                                       Original Premises . Tenant shall continue to occupy the Original Premises in accordance with the terms and conditions of the Lease until no later than 12:00 midnight on that date which is fourteen (14) days after the New Commencement Date (the “Surrender Date”). Tenant agrees to surrender possession of the Original Premises to Landlord on the Surrender Date, broom clean and in good order, condition and repair, ordinary wear and tear excepted, and otherwise in compliance with the terms of the Lease regarding surrender. Upon such surrender, all rights of Tenant to possession and occupancy of the Original Premises will terminate except as to Tenant’s surviving obligations under the Lease, and all of Tenant’s rights under the Amended Lease shall relate solely to the New Premises.

 

3.                                       New Commencement Date and New Term . The Term as to the New Premises (“New Term”) shall commence on the “New Commencement Date”, being the earlier of (i) August 15, 2011 and (ii) the date that is two (2) weeks following substantial completion of Landlord’s Work (as defined in Section 5 below). The New Term shall expire on the last day of the twenty-seventh (27 th ) full month after the New Commencement Date (the “New Expiration Date”). Subject to Section 4 below, in no event shall the New Term operate to release Tenant from liability for any amounts owed or defaults that exist under the Lease for the Original Premises prior to the New Commencement Date.

 

4.                                       Monthly Base Rent . Until the later of (i) the New Commencement Date or (ii) the date on which Tenant vacates and surrenders the Original Premises (or Substitution Space, if applicable), Tenant shall continue to pay monthly installments of Base Rent for the Original Premises in the amount of Eight Thousand Seven Hundred Fifty and No/100ths Dollars ($8,750.00) per month. Notwithstanding anything in the Lease to the contrary, effective as of the New Commencement Date and continuing for the duration of the New Term, Tenant shall pay monthly installments of Base Rent for the New Premises to Landlord in accordance with the following schedule:

 

Months

 

Monthly Installments
of Base Rent

 

1 — 12*

 

$

 8,749.05

**

13 — 24

 

$

 9,009.66

 

25 — 27

 

$

 9,270.27

 

 


*Including any partial month at the beginning of the New Term.

 

**Notwithstanding the schedule above, provided Tenant is not in monetary or material non-monetary default under the Amended Lease beyond any applicable notice and cure period, Landlord hereby agrees to abate Tenant’s obligation to pay the monthly installments of Base Rent for the New Premises for the first three (3) months following the New Commencement Date (the “Abatement Period”) (the total amount of such abated Base Rent is hereafter referred to as the “Abated Amount”). During the Abatement Period, Tenant will still be responsible for the payment of all other monetary obligations under the Amended Lease with respect to the New Premises including, without limitation, any operating expenses, direct taxes, and parking charges for the New Premises.

 

All of such Base Rent shall be payable by Tenant pursuant to the terms of the Amended Lease.

 

5.                                       Condition of New Premises . Prior to the New Commencement Date, Landlord shall make improvements to the New Premises, on a turn-key basis at Landlord’s sole cost and expense, using the 2200 Building standard materials, finishes and specifications in accordance with the mutually agreed upon Space Plan attached hereto as Exhibit B (collectively, “Landlord’s Work”). Except as otherwise

 

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expressly set forth herein with respect to Landlord’s Work and except for Landlord’s repair and maintenance obligations set forth in the Lease, Tenant acknowledges that Landlord has no obligation to improve, or to otherwise fund any improvements to, any of the New Premises, and, subject to this Section 5, Tenant hereby accepts the New Premises in its present “AS-IS” condition. Tenant further acknowledges that except as expressly provided in this Amendment, neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of any of the New Premises, the improvements, refurbishments, or alterations therein, the 2200 Building or with respect to the functionality thereof or the suitability of any of the foregoing for the conduct of Tenant’s business and that all representations and warranties of Landlord, if any, are as set forth in this Amendment.

 

6.                                       Early Access to New Premises . Provided (i) Landlord has received from Tenant a copy of this Amendment fully executed by Tenant, (ii) Tenant is not in default under the Lease; and Tenant and its contractors and employees do not interfere with the completion of Landlord’s Work, Landlord shall use reasonable efforts to give Tenant’s designated contractors access to the New Premises commencing seven (7) days prior to the New Commencement Date (the “Early Access Period”) for purposes of installing Tenant’s furniture, fixtures and equipment. Tenant’s access to the New Premises during the Early Access Period shall be subject to all terms and conditions of the Amended Lease, except that Tenant shall not be obligated to pay Base Rent for the New Premises during the Early Access Period. Tenant agrees to provide Landlord with prior notice of any such intended early access and to cooperate with Landlord during the Early Access Period of an such early access so as not to interfere with Landlord in the completion of Landlord’s Work in or about the New Premises. Should Landlord determine such early access interferes with Landlord’s Work, Landlord may deny Tenant access to the New Premises until Landlord’s Work is substantially completed. In such case, Tenant shall promptly surrender any keys or other means of access to the New Premises and otherwise comply with such denial.

 

7.                                       Temporary Space . Notwithstanding any provision of the Amended Lease to the contrary, Tenant hereby acknowledges and agrees that prior to and continuing until the New Commencement Date, if Landlord executes a new lease for a third party to lease the Original Premises, Landlord shall have the right, in its sole and absolute discretion, to move Tenant to other space within the 1900 Building, 2200 Building or the building located at 2000 Powell Street, comparable to the Original Premises as determined by Landlord in its sole and absolute discretion (“Substitution Space”), for a period not to exceed two (2) weeks. If Landlord elects to move Tenant to Substitution Space, Landlord shall give Tenant at least twenty (20) days’ prior written notice and shall move Tenant’s effects to the Substitution Space at Landlord’s sole cost and expense at such time and in such manner as to inconvenience Tenant as little as reasonably practicable, and all terms of the Amended Lease shall apply to the Substitution Space with equal force.

 

8.                                       Tenant’s Pro Rata Share . Prior to the New Commencement Date, Tenant shall continue to pay for its Pro Rata Share of Expenses and Taxes in accordance with the terms of the Lease. As of the New Commencement Date and continuing for the duration of the New Term, Tenant’s Pro Rata Share of Expenses and Taxes allocable to the New Premise shall be 1.63%, based upon the New Premises containing 3,723 RSF and the 2200 Building containing 228,825 RSF. During the New Term, the Base Year for purposes of determining Tenant’s Pro Rata Share of Expenses and Taxes shall be the calendar year 2012.

 

9.                                       Parking . Prior to the New Commencement Date, Tenant shall continue to have the right to use fifteen (15) unreserved vehicle parking stalls in the parking lot or lots of the Project designated by Landlord for the use of tenants of the 1900 Building at the monthly rate of $75.00 per stall, subject to the terms of the Lease. As of the New Commencement Date, Tenant shall have the right to use eleven (11) unreserved vehicle parking stalls in the parking lot or lots of the Project designated by Landlord for the use of tenants of the 2200 Building at the monthly rate of $75.00 per stall or at the prevailing market rate

 

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for the Project as determined by Landlord in its commercially reasonable discretion from time to time, all subject to the terms of the Amended Lease.

 

10.                                Signage . On or before the New Commencement Date, Landlord shall, at Landlord’s sole cost, install suite identification signage outside of the Premises with respect to the New Premises. Tenant’s sign rights granted hereunder and in the Lease are personal to the original Tenant executing this Amendment and may not be assigned.

 

11.                                Security Deposit . Provided Tenant is not in default under the Amended Lease and has complied with all of the terms of this Amendment, within a reasonable period after the New Commencement Date, Landlord shall refund to Tenant the amount of $14,576.93 from the existing $23,847.20 of Security Deposit currently being held by Landlord under the Lease, such that Landlord shall retain the sum of $9,270.27 of the Security Deposit as the Security Deposit for the New Premises. Notwithstanding the foregoing or anything in the Lease to the contrary, Landlord shall be permitted to apply any portion of the Existing Security Deposit towards payment of any restoration required to be performed by Landlord as a result of Tenant’s failure to surrender the Original Premises in the condition required by the Amended Lease, and, as applicable, (i) Landlord shall offset the refund due Tenant by the cost of such restoration, and (ii) Tenant shall, within ten (10) days after Landlord’s demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to the amount of $9,270.27.

 

12.                                Notices . Landlord’s addresses for notices and payment of rent shall be and is hereby amended as follows:

 

Landlord’s Address

 

Emeryville Office, L.L.C.

 

 

c/o LBA Realty

 

 

17901 Von Karman, Suite 950

 

 

Irvine, California 92614

 

 

Attn: SVP - Operations

 

 

Telephone: (949) 833-0400

 

 

Facsimile: (949) 955-9350

 

 

 

With copies to:

 

Emeryville Office, L.L.C.

 

 

c/o Property Manager

 

 

Watergate Towers

 

 

2200 Powell Street, Suite 120

 

 

Emeryville, CA 94608

 

 

 

For Payment of Rent:

 

Emeryville Office, L.L.C.

 

 

P.O. Box 749671

 

 

Los Angeles, CA 90074-9671

 

From and after the New Commencement Date, Tenant’s addresses for notices shall be and is hereby amended as follows:

 

 

 

 

 

Adamas Pharmaceuticals, Inc.

 

 

2200 Powell Street, Suite 220

 

 

Emeryville, California 94608

 

13.                                Options . Landlord hereby grants to Tenant an Extension Option as further provided in Rider No. 1 and Rider No. 2 attached hereto and made a part hereof. Tenant acknowledges and agrees that except as otherwise expressly provided herein, Tenant has no options and/or rights to lease additional

 

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space, terminate the Lease early, or extend the Term. Accordingly, all such options previously granted to Tenant, including, without limitation, Tenant’s existing Right of First Offer and Termination Option as set forth in Sections 6 and 7 of the Second Amendment, are hereby deleted and rendered of no further force and effect.

 

14.                                Broker . Landlord and Tenant each represent and warrant to the other that it is not aware of any brokers or finders who may claim a fee or commission in connection with the consummation of the transactions contemplated by this Amendment other than Cornish & Carey Commercial/NKF representing Tenant. If any other claims for brokers’ or finders’ fees in connection with the transactions contemplated by this Amendment arise, then Tenant agrees to indemnify, protect, hold harmless and defend Landlord (with counsel reasonably satisfactory to Landlord) from and against any such claims if they shall be based upon any statement, representation or agreement made by Tenant, and Landlord agrees to indemnify, protect, hold harmless and defend Tenant (with counsel reasonably satisfactory to Tenant) if such claims are based upon any statement, representation or agreement made by Landlord.

 

15.                                No Other Modification . Landlord and Tenant agree that except as otherwise specifically modified in this Amendment, the Lease has not been modified, supplemented, amended, or otherwise changed in any way and the Lease remains in full force and effect between the parties hereto as modified by this Amendment. To the extent of any inconsistency between the terms and conditions of the Lease and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall apply and govern the parties, This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same Amendment.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURES FOLLOW]

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be executed the date first above written.

 

Tenant:

 

ADAMAS PHARMACEUTICALS, INC.,
a Delaware corporation

 

 

By:

/s/ Deborah Foy

 

Name:

Deborah Foy

 

Its:

Vice President, Finance & Administration

 

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

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EMERYVILLE OFFICE, L.L.C.,

a Delaware limited liability company

 

By:

EMERYVILLE OFFICE HOLDINGS, L.L.C,

 

a Delaware limited liability company,

 

its Sole Member and Manager

 

 

By:

LBA RIV-Company III, LLC,

 

a Delaware limited liability company,

 

its Operating Member

 

 

By:

LBA REIT IV, LLC,

 

a Delaware limited liability company

 

its sole Member and Manager

 

 

By:

LBA Realty Fund IV, L.P.,

 

a Delaware limited partnership,

 

its Sole Manager

 

 

By:

LBA Management Company IV, LLC,

 

a Delaware limited liability company,

 

its General Partner

 

 

By:

LBA Realty LLC,

 

a Delaware limited liability company,

 

its Manager

 

 

By:

LBA Inc.,

 

a California corporation,

 

its Managing Member

 

 

 

By:

/s/ Don Shaver

 

Name:

Don Shaver

 

Title:

Senior Vice President

 

For LBA Office Use Only: Prepared & Reviewed by:

/s/CF

 

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EXHIBIT “A”

 

DEPICTION OF NEW PREMISES

 

 

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EXHIBIT “B”

 

SPACE PLAN

 

 

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EXTENSION OPTION RIDER

RIDER NO. 1

 

This Rider No. 1 is made and entered into by and between EMERYVILLE OFFICE, L.L.C., a Delaware limited liability company (“Landlord”), and ADAMAS PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year of the Amendment between Landlord and Tenant to which this Rider is attached. All capitalized terms not defined in this Rider shall have the same meaning as set forth in the Amendment. Landlord and Tenant hereby agree that, notwithstanding anything contained in the Amended Lease to the contrary, the provisions set forth below shall be deemed to be part of the Amended Lease and shall supersede any inconsistent provisions of the Amended Lease. All references in the Amended Lease and in this Rider to the “Amended Lease” shall be construed to mean the Amended Lease (and all exhibits and Riders attached thereto), as amended and supplemented by this Rider.

 

1.                                       Landlord hereby grants to Tenant one (1) option (the “Extension Option”) to extend the New Term of the Amended Lease for an additional period of two (2) years (the “Option Term”), on the same terms, covenants and conditions as provided for in the Amended Lease during the New Term, except for the monthly Base Rent, which shall initially be equal to the “fair market rental rate” for the New Premises for the Option Term as defined and determined in accordance with the provisions of the Fair Market Rental Rate Rider attached as Rider No. 2, subject to fair market annual rent adjustments during the Option Term.

 

2.                                       The Extension Option must be exercised, if at all, by written notice (“Extension Notice”) delivered by Tenant to Landlord no sooner than that date which is twelve (12) months and no later than that date which is six (6) months prior to the expiration of the New Term. Provided Tenant has properly and timely exercised the Extension Option, the New Term shall be extended by the Option Term, and all terms, covenants and conditions of the Amended Lease shall remain unmodified and in full force and effect, except that the monthly Base Rent shall be as set forth above and in Rider No. 2, and except that there shall be no remaining Extension Options.

 

3.                                       The Extension Option is personal to the original Tenant executing this Amendment or an Affiliate via a Business Transfer and may he exercised only by such original Tenant or Affiliate while occupying and leasing the entire New Premises and without having assigned the Amended Lease other than to an Affiliate or sublet any portion of the New Premises, and/or without the intent of thereafter assigning the Amended Lease or subletting the New Premises, and may not be exercised or be assigned, voluntarily or involuntarily, by any person or entity other than the original Tenant executing this Amendment or Affiliate. The Extension Option is not assignable separate and apart from the Amended Lease, nor may said Extension Option be separated from the Amended Lease in any manner, either by reservation or otherwise. The Extension Option is subject to all expansion and extension rights and other rights to lease, as applicable, which Landlord has granted to other tenants prior to the date of the Amendment. Tenant will have no right to exercise the Extension Option, notwithstanding any provision of the grant of option to the contrary, and Tenant’s exercise of the Extension Option may be nullified by Landlord and deemed of no further force or effect, if (i) Tenant is in default of any monetary obligation or material non-monetary obligation under the terms of the Amended Lease (or if Tenant would be in such default under the Amended Lease but for the passage of time or the giving of notice, or both) as of Tenant’s exercise of the Extension Option or at any time after the exercise of the Extension Option and prior to the commencement of the Option Term, or (ii) Landlord has given Tenant two (2) or more notices of default, whether or not such defaults are subsequently cured, during any twelve (12) consecutive month period of the Amended Lease. The Extension Option is hereby deemed an economic term which Landlord, in its sole and absolute discretion, may or may not offer in conjunction with any future extensions of the New Term.

 

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FAIR MARKET RENTAL RATE RIDER

 

RIDER NO.2 TO LEASE

 

This Rider No. 2 is made and entered into by and between EMERYVILLE OFFICE, L.L.C., a Delaware limited liability company (“Landlord”), and ADAMAS PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year of the Amendment between Landlord and Tenant to which this Rider is attached. All capitalized terms not defined in this Rider shall have the same meaning as set forth in the Amendment. Landlord and Tenant hereby agree that, notwithstanding anything contained in the Lease to the contrary, the provisions set forth below shall be deemed to be part of the Amended Lease and shall supersede any inconsistent provisions of the Amended Lease. All references in the Amended Lease and in this Rider to the “Amended Lease” shall be construed to mean the Amended Lease (and all exhibits and Riders attached thereto), as amended and supplemented by this Rider.

 

1.                                       The term “fair market rental rate” as used in Rider No. 1 shall mean the annual amount per square foot, projected during the Option Term (including annual adjustments), that a willing, non-equity renewal tenant (excluding sublease and assignment transactions) would pay, and a willing, institutional landlord of a comparable quality office building located in the Emeryville, California area would accept, in an arm’s length transaction (what Landlord is accepting in then current transactions for the Building may be used for purposes of projecting rent for the Option Term), for space of comparable size, quality and floor height as the New Premises, taking into account the age, quality and layout of the existing improvements in the New Premises, and taking into account items that professional real estate brokers or professional real estate appraisers customarily consider, including, but not limited to, rental rates, space availability, tenant size, tenant improvement allowances, parking charges and any other lease considerations, if any, then being charged or granted by Landlord or the lessors of such similar office buildings. All economic terms other than monthly Base Rent, such as tenant improvement allowance amounts, if any, operating expense allowances, parking charges, etc., will be established by Landlord and will be factored into the determination of the fair market rental rate for the Option Term. Accordingly, the fair market rental rate will be an effective rate, not specifically including, but accounting for, the appropriate economic considerations described above

.

2.                                       In the event where a determination of fair market rental rate is required under the Amended Lease, Landlord shall provide written notice of Landlord’s determination of the fair market rental rate not later than ninety (90) days after the last day upon which Tenant may timely exercise the right giving rise to the necessity for such fair market rental rate determination. Tenant shall have ten (10) days (“Tenant’s Review Period”) after receipt of Landlord’s notice of the fair market rental rate within which to accept such fair market rental rate or to reasonably object thereto in writing. Failure of Tenant to so object to the fair market rental rate submitted by Landlord in writing within Tenant’s Review Period shall conclusively be deemed Tenant’s disapproval thereof. If within Tenant’s Review Period Tenant reasonably objects to or is deemed to have disapproved the fair market rental rate submitted by Landlord, Landlord and Tenant will meet together with their respective legal counsel to present and discuss their individual determinations of the fair market rental rate for the New Premises under the parameters set forth in Section 1 above and shall diligently and in good faith attempt to negotiate a rental rate on the basis of such individual determinations. Such meeting shall occur no later than ten (10) days after the expiration of Tenant’s Review Period. The parties shall each provide the other with such supporting information and documentation as they deem appropriate. At such meeting if Landlord and Tenant are unable to agree upon the fair market rental rate, they shall each submit to the other their respective best and final offer as to the fair market rental rate. If Landlord and Tenant fail to reach agreement on such fair market rental rate within five (5) business days following such a meeting (the “Outside Agreement  Date”), Tenant’s Extension Option will be deemed null and void unless Tenant demands appraisal within

 

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five (5) business days thereof, in which event each party’s determination shall be submitted to appraisal in accordance with the provisions of Section 3 below.

 

3.                                       (a) Landlord and Tenant shall each appoint one (1) independent appraiser who shall by profession be an M.A.I. certified real estate appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the leasing of commercial (including office) properties in the Emeryville, California area. The determination of the appraisers shall be limited solely to the issue of whether Landlord’s or Tenant’s last proposed (as of the Outside Agreement Date) best and final fair market rental rate for the New Premises is the closest to the actual fair market rental rate for the New Premises as determined by the appraisers, taking into account the requirements specified in Section 1 above. Each such appraiser shall be appointed within fifteen (15) days after the Outside Agreement Date.

 

(b)                                  The two (2) appraisers so appointed shall within fifteen (15) days of the date of the appointment of the last appointed appraiser agree upon and appoint a third appraiser who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) appraisers.

 

(c)                                   The three (3) appraisers shall within thirty (30) days of the appointment of the third appraiser reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted best and final fair market rental rate, and shall notify Landlord and Tenant thereof. During such thirty (30) day period, Landlord and Tenant may submit to the appraisers such information and documentation to support their respective positions as they shall deem reasonably relevant and Landlord and Tenant may each appear before the appraisers jointly to question and respond to questions from the appraisers.

 

(d)                                  The decision of the majority of the three (3) appraisers shall be binding upon Landlord and Tenant and neither party shall have the right to reject the decision or to undo the exercise of the applicable Option. If either Landlord or Tenant fails to appoint an appraiser within the time period specified in Section 3(a) hereinabove, the appraiser appointed by one of them shall within thirty (30) days following the date on which the party failing to appoint an appraiser could have last appointed such appraiser reach a decision based upon the same procedures as set forth above (i.e., by selecting either Landlord’s or Tenant’s submitted best and final fair market rental rate), and shall notify Landlord and Tenant thereof, and such appraiser’s decision shall be binding upon Landlord and Tenant and neither party shall have the right to reject the decision or to undo the exercise of the applicable Option.

 

(e)                                   If the two (2) appraisers fail to agree upon and appoint a third appraiser, either party, upon ten (10) days written notice to the other party, can apply to the Presiding Judge of the Superior Court of Alameda County to appoint a third appraiser meeting the qualifications set forth herein. The third appraiser, however, selected shall be a person who has not previously acted in any capacity for ether party.

 

(f)                                    The cost of each party’s appraiser shall be the responsibility of the party selecting such appraiser, and the cost of the third appraiser (or arbitration, if necessary) shall be shared equally by Landlord and Tenant.

(g)                                   If the process described hereinabove has not resulted in a selection of either Landlord’s or Tenant’s submitted best and final fair market rental rate by the commencement of the applicable lease term, then the fair market rental rate estimated by Landlord will be used until the appraiser(s) reach a decision, with an appropriate rental credit and other adjustments for any overpayments of monthly Base Rent or other amounts if the appraisers select Tenant’s submitted best and final estimate of the fair market rental rate. The parties shall enter into an amendment to the Lease confirming the terms of the decision.

 

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Exhibit 10.11

 

FOURTH AMENDMENT TO LEASE

 

THIS FOURTH AMENDMENT TO LEASE (“Amendment”), dated for reference purposes only as of the; 31 st  day of January, 2013, is entered into by and between EMERYVILLE OFFICE, L.L.C., a Delaware limited liability company (“ Landlord ”), and ADAMAS PHARMACEUTICALS, INC., a Delaware corporation (formerly known as Neuromolecular Pharmaceuticals, Inc.) (“ Tenant ”).

 

R   E   C   I   T   A   L   S :

 

A.                                     Landlord (as successor to NOP Watergate, LLC, a Delaware limited liability company) and Tenant are parties to that certain Office Lease Agreement dated October 25, 2006 (the “ Original Lease ”), which Original Lease has previously been amended by that certain: (i) First Amendment to Lease dated April 29, 2009 (the “ First Amendment ”), (ii) Second Amendment to Office Lease Agreement dated January 18, 2011 (the “ Second Amendment ”), and (iii) Third Amendment to Lease dated June 17, 2011 (the “ Third Amendment ”) (the Original Lease, as so amended, is referred to herein collectively as the “ Lease ”).  Pursuant to the Lease, Tenant currently leases from Landlord those certain premises on the second floor of the building at 2200 Powell Street, Emeryville, California, (the “ Building ”) described as Suite 220 containing approximately 3,723 rentable square feet (the “ Existing Premises ”).

 

B.                                     The parties desire to amend the Lease in order to provide, among other things, for Tenant to expand the Existing Premises, upon the terms and conditions set forth below.

 

C.                                     Capitalized terms which are used in this Amendment without definition have the meanings given to them in the Lease.

 

A   G   R   E   E   M   E   N   T :

 

NOW, THEREFORE, in consideration of the foregoing the mutual covenants and agreements contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.                                       Expansion of Premises .  Tenant hereby agrees to lease from Landlord, and Landlord hereby agrees to lease to Tenant, that certain premises consisting of approximately 3,929 rentable square feet (the “ Expansion Space ”), located contiguous to the Existing Premises, as illustrated in Exhibit A attached hereto, on the terms and conditions hereinafter set forth.  As of the ESCD (as defined in Section 2 below), Exhibit A attached hereto showing the Expansion Space is hereby incorporated into and made a part of the Lease, all references in the Lease to the defined term “Premises” and shall mean and refer to the Existing Premises plus the Expansion Space, and the Premises shall consist of 7,652 rentable square feet in the aggregate and shall collectively be commonly known as Suite 220.  Tenant’s use and occupancy of the Expansion Space shall be in accordance with all of the terms and conditions of the Lease as amended by this Amendment (the “ Amended Lease ”).

 

2.                                       Expansion Space Term .  The Term as to the Expansion Space (the “ Expansion Space Term ”) shall commence on March 1, 2013 (the “ Expansion Space Commencement

 

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Date ” or “ ESCD ”), and shall expire on February 29, 2016 (the “ Expansion Space Expiration Date ”).  In no event shall Tenant be released from liability for any amounts owed or defaults that exist under the Amended Lease for the Existing Premises relating to the period prior to the ESCD.

 

3.                                       Extension of Term for the Existing Premises .  The Term for Tenant’s lease of the Existing Premises is hereby extended so that it shall expire co-terminously with the Expansion Space Expiration Date on February 29, 2016.

 

4.                                       Monthly Base Rent .  Prior to the ESCD, Tenant shall continue to pay monthly installments of Base Rent for the Existing Premises pursuant to the terms of the Lease.  Notwithstanding anything in the Lease to the contrary, effective as of the ESCD and continuing for the duration of the Expansion Space Term, Tenant shall pay monthly installments of Base Rent to Landlord for both the Existing Premises and the Expansion Space in accordance with the following schedule:

 

Period

 

Combined Monthly Base Rent for the
 Expansion Space and the Existing Premises

 

3/1/2013 - 2/28/2014

 

$

18,517.84

 

3/1/2014 - 2/28/2015

 

$

19,073.38

 

3/1/2015 - 2/29/2016

 

$

19,645.58

 

 

5.                                       Condition of the Expansion Space .  Tenant acknowledges that Landlord has no obligation to improve, or to otherwise fund any improvements to the Expansion Space, and Tenant accepts the Expansion Space in its present “AS-IS” condition.  Tenant further acknowledges that except as expressly provided in this Amendment, neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Expansion Space, the improvements, refurbishments, or alterations therein, the Building or the Property, or with respect to the functionality thereof or the suitability of any of the foregoing for the conduct of Tenant’s business and that all representations and warranties of Landlord, if any, are as set forth in this Amendment.

 

6.                                       Condition of the Existing Premises .  Tenant acknowledges that it is presently in possession of the Existing Premises and is fully aware of the condition of the Existing Premises.  Tenant acknowledges that Landlord shall not be obligated to refurbish or improve the Existing Premises in any manner whatsoever or to otherwise provide funds for the improvement of the Existing Premises in conjunction with the Expansion Space Term.  Tenant further acknowledges that except as expressly provided in this Amendment, neither Landlord nor any agent of Landlord has made any representation or warranty regarding the condition of the Premises, the improvements, refurbishments, or alterations therein, the Building or the Property, or with respect to the functionality thereof or the suitability of any of the foregoing for the conduct of Tenant’s business and that all representations and warranties of Landlord, if any, are as set forth in this Amendment.  Except as otherwise expressly provided herein, the terms of Tenant’s leasing of the Existing Premises shall not be modified by this Amendment.

 

2



 

7.                                       Alterations .  To the extent Tenant desires to complete any Alterations in the Existing Premises and/or the Expansion Space, such Alterations shall be completed at Tenant’s sole cost and expense, and in accordance with the terms and conditions of Section 9.03 of the Original Lease, including without limitation the requirement that Tenant first obtain the written consent of Landlord.  Notwithstanding the foregoing, Landlord hereby agrees that it shall not charge, and Tenant shall not be obligated to pay, ten percent (10%) of the cost of non-Cosmetic Alterations (as defined in Section 9.03 of the Lease) made during the first (1 st ) year of the Expansion Space Term.

 

8.                                       Early Access to Expansion Space .  Provided (i) Landlord has received from Tenant a copy of this Amendment fully executed by Tenant, and (ii) Tenant is not in default under the Lease, Landlord shall use reasonable efforts to give Tenant access to the Expansion Space upon the mutual execution of this Amendment (the “ Early Access Period ”) for purposes of installing Tenant’s furniture, fixtures and equipment and to operate the Expansion Space for the Permitted Use.  Tenant’s access to the Expansion Space during the Early Access Period shall be subject to all terms and conditions of the Amended Lease, except that Tenant shall not be obligated to pay Base Rent for the Expansion Space during the Early Access Period.

 

9.                                       Tenant’s Pro Rata Share .  Prior to the ESCD, Tenant shall continue to pay its Pro Rata Share of Expenses and Taxes in accordance with the terms of the Lease.  As of the ESCD and continuing for the duration of the Expansion .Space Term, Tenant’s Pro Rata Share of Expenses and Taxes allocable to the Premises (i.e., both the Existing Premises and the Expansion Space) shall be 3.34% in the aggregate, based upon the Premises containing 7,652 rentable square feet in the aggregate, and the 2200 Building containing 228,825 rentable square feet.  Commencing as of the ESCD, the Base Year for purposes of determining Tenant’s Pro Rata Share of Expenses and Taxes shall be the calendar year 2013.

 

10.                                Parking .  Prior to the ESCD, Tenant shall continue to have the right to use eleven (11) unreserved vehicle parking stalls in the parking lot or lots of the Property designated by Landlord for the use of tenants of the 2200 Building, subject to the terms of the Lease.  As of the ESCD, Tenant shall have the right to use up to twenty-one (21) unreserved parking spaces for the Premises (i.e., both the Existing Premises and the Expansion Space) at the monthly rate of $75.00 per stall or at the prevailing market rate for the Property as determined by Landlord in its commercially reasonable discretion from time to time, all subject to the terms of the Amended Lease.  To the extent additional parking spaces are available at the Property, subject to Landlord’s parking space planning requirements for the Property, which Landlord shall establish in its sole discretion, Landlord shall make available to Tenant additional parking spaces at the Property on a month-to-month basis.

 

11.                                Building Service Hours .  “ Building Service Hours ,” as defined in Section 1.13 of the Basic Lease Information of the Original Lease, is hereby amended and revised to be 7:00 a.m.  to 6:00 p.m.  on Business Days.  Tenant shall have access to the Premises twenty-four (24) hours, seven (7) days per week, three hundred sixty-five (365) days per year.

 

12.                                Options .  Tenant acknowledges and agrees that except as otherwise expressly provided herein, Tenant has no options and/or rights to lease additional space or extend the Term.  Accordingly, all such options previously granted to Tenant, including, without limitation,

 

3



 

Tenant’s Extension Option as set forth in Section 13 of the Third Amendment, is hereby deleted and rendered of no further force and effect.

 

13.                                Conditional Option to Terminate .  If Tenant transfers, sells or assigns fifty percent (50%) or more (individually or in the aggregate) of any stock or other controlling ownership or voting interest in Tenant to a party other than an Affiliate (the “ Termination Condition ”), then Tenant shall have, commencing as of March 1, 2014, an option to terminate and cancel the Lease (the “ Termination Option ”), by delivering to Landlord no sooner than September 1, 2013 at least six (6) months prior written notice, which termination shall be effective as of the date (the “ Termination Date ”) of the expiration of such six (6) month period, but no sooner than March 1, 2014.  As a condition to the effectiveness of Tenant’s exercise of its Termination Option and in addition to Tenant’s obligation to satisfy all other monetary and non-monetary obligations arising under the Amended Lease through to the Termination Date, Tenant shall: (i) notify Landlord no less than thirty (30) days prior to the consummation of any transaction or event that establishes the Termination Condition, and (ii) remove any Alterations it completes in the Existing Premises and/or the Expansion Space after the date hereof (the “ Expansion Alterations ”), if any, and repair and restore the Existing Premises and/or the Expansion Space to their condition prior to the completion of such Expansion Alterations.  If Tenant properly and timely exercises its Termination Option, properly and timely delivers Landlord notice of any transaction or event that establishes the Termination Condition, and properly and timely removes the Expansion Alterations as set forth above, if applicable, including the restoration of the Existing Premises and/or the Expansion Space, and satisfies all other monetary and non-monetary obligations under the Amended Lease including, without limitation, the provisions regarding surrender of the Premises, all of which must be accomplished on or before the Termination Date, then the Amended Lease will terminate as of midnight on the Termination Date.  As a condition precedent to the effectiveness of the Termination Option, Tenant shall notify Landlord no later than thirty (30) days prior to the consummation of any event that establishes the Termination Condition.

 

14.                                Authority .  Each signatory of this Amendment on behalf of Landlord and Tenant represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

 

15.                                Broker .  Landlord and Tenant each represent and warrant to the other that it is not aware of any brokers or finders who may claim a fee or commission in connection with the consummation of the transactions contemplated by this Amendment.  If any other claims for brokers’ or finders’ fees in connection with the transactions contemplated by this Amendment arise, then Tenant agrees to indemnify, protect, hold harmless and defend Landlord (with counsel reasonably satisfactory to Landlord) from and against any such claims if they shall be based upon any statement, representation or agreement made by Tenant, and Landlord agrees to indemnify, protect, hold harmless and defend Tenant (with counsel reasonably satisfactory to Tenant) if such claims are based upon any statement, representation or agreement made by Landlord.

 

16.                                No Other Modification .  Landlord and Tenant agree that except as otherwise specifically modified in this Amendment, the Lease has not been modified, supplemented, amended, or otherwise changed in any way and the Lease remains in full force and effect

 

4



 

between the parties hereto as modified by this Amendment.  To the extent of any inconsistency between the terms and conditions of the Lease and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall apply and govern the parties.  This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument.

 

[NO FURTHER TEXT ON THIS PAGE; SIGNATURES ON FOLLOWING PAGE]

 

5



 

IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be executed the date first above written.

 

Tenant:

 

ADAMAS PHARMACEUTICALS, INC.,

 

a Delaware corporation

 

 

By:

/s/ Anthony M. Rimac

 

Name:

Anthony M. Rimac

Its:

Chief Financial Officer

 

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

 

6



 

Landlord:

 

EMERYVILLE OFFICE, L.L.C.,
a Delaware limited liability company

 

By:

EMERYVILLE OFFICE HOLDINGS, L.L.C,

 

a Delaware limited liability company,

 

its Sole Member and Manager

 

 

By:

LBA RIV-Company III, LLC,

 

a Delaware limited liability company,

 

its Operating Member

 

 

By:

LBA REIT IV, LLC,

 

a Delaware limited liability company

 

its sole Member and Manager

 

 

By:

LBA Realty Fund IV, L.P.,

 

a Delaware limited partnership,

 

its Sole Manager

 

 

By:

LBA Management Company IV, LLC,

 

a Delaware limited liability company,

 

its General Partner

 

 

By:

LBA Realty LLC,

 

a Delaware limited liability company,

 

its Manager

 

 

By:

LBA Inc.,

 

a California corporation,

 

its Managing Member

 

 

By:

/s/ Don Shaver

 

Name:

Don Shaver

 

Title:

Principal

 

For LBA Office Use Only: Prepared & Reviewed by:

CF

 

7



 

EXHIBIT “A”

 

DEPICTION OF EXISTING PREMISES AND EXPANSION SPACE

 

 

Exhibit A - 1


 



Exhibit 10.12

 

GRAPHIC

 

March 8, 2006

 

Gregory Went

 

Dear Greg,

 

We are quite excited to have you continue to be involved in NeuroMolecular Pharmaceuticals, Inc. (“NPI” or “the Company”). In this letter, I would like to summarize the proposed terms and conditions of your continued employment relationship with NPI.

 

I am pleased to offer you the full-time position of President and CEO working at our offices in Emeryville . Your position with the Company pursuant to the terms and conditions of this letter and accompanying Incentive Stock Option Agreement and Confidential Information and Invention Assignment Agreement. While employed by the Company, you will report to the BOD and have such duties and responsibilities consistent with your role. You agree to perform your duties faithfully and to the best of your abilities and to devote your full business efforts and time to the Company. Furthermore, while employed by the Company, you agree to not actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without prior approval of the Company.

 

While employed by the Company, you will receive as compensation for your services an initial base salary of $250,000 on an annualized basis. Your salary will be paid periodically in accordance with normal Company payroll practices and be subject to the usual, required withholdings. In addition to this salary, in accordance with the terms of the accompanying Incentive Stock Option Agreement, at the next meeting of NPI’s Board of Directors you will be granted an option to purchase 375,000 shares of NPI Common Stock, par value $.001 per share, at an exercise price equal to the then-current fair market value. Such options will be granted in accordance with the terms of NPI’s 2002 Employee, Director and Consultant Stock Plan and shall vest as follows: (i) 20% on the first anniversary of the date of grant and (ii) 1/48 of the remaining shares per month thereafter. Your vesting shall accelerate in the event the Company is sold, merged or otherwise acquired (an “Acquisition”) according to the following schedule:

 

·                   20% if an Acquisition occurs within the first 12 months of the date of grant, and

 

1900 Powell St., Suite 210                                    Emeryville, CA 94608
Office: 510.450.3508                                               Fax 510.428.0519

 



 

GRAPHIC

 

·                   if an Acquisition occurs during the period beginning on the first anniversary of the date of grant and ending on the fourth anniversary of the date of grant, all of the unvested shares shall vest, except for 1/2 of the then unvested shares which shall vest ratably for 12 months after the closing of the Acquisition;

 

In addition to this grant, assuming you are still employed by the Company, the BOD agrees that it will approve an additional option grant of 150,000 shares on or before the last day of the first fiscal year in which commercial sales of NPI products exceed $5 Million USD. Such option grant shall have an exercise price per share equal to the fair market value per share of the Company’s common stock as of the date of grant and shall vest in full on the last day of the Company’s fiscal quarter in which the Company has received an aggregate of $50 Million USD in gross revenue for that fiscal year. If the Company has not received $50 Million USD in gross revenue for any fiscal year prior to January 1, 2011, the option shall terminate. These shares shall not be subject to the acceleration provision outlined in the above mentioned Option Agreement.

 

During your employment with the Company, you will be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other employees of the Company. Where a particular benefit is subject to a formal plan (for example, medical insurance or life insurance), eligibility to participate in and receive any particular benefit is governed solely by the applicable plan document. As part of these benefits, you will be entitled to four (4) weeks paid vacation per year, which will accrue at the rate of 1.25 days per month. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time, and the provision of benefits to you in no way changes or impacts your status as an “at-will” employee.

 

The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely important. Consequently, as a condition of this offer of employment, you are required to sign the Confidential Information and Invention Assignment Agreement enclosed with this letter.

 

You should understand that your employment with the Company is “at-will,” and may be terminated by you or the Company at any time and for any reason. No provision of this offer letter or the accompanying Incentive Stock Option Agreement and Confidential Information and Invention Assignment Agreement shall be construed to create an express or implied employment contract, or a promise of employment for any specific period of time. This offer letter and the accompanying Incentive Stock Option Agreement and Confidential Information and Invention Assignment Agreement represent the entire agreement and understanding between you and the Company concerning your employment relationship with the Company, and supersede in their entirety any and all prior agreements and understandings concerning your employment relationship with the Company, whether written or oral.

 

1900 Powell St., Suite 210                                     Emeryville, CA 94608
Office: 510.450.3508                                                Fax 510.428.0519

 



 

GRAPHIC

 

The terms and conditions set forth in this offer letter will inure to the benefit of any successor of the Company. In the event any of the terms and conditions set forth in this offer letter become, or are determined to be, illegal, unenforceable or void, all other terms and conditions will continue in full force and effect.

 

This letter will be governed by the laws of the state of California, with the exception of its conflict of laws provisions.

 

Please call me at (510) 903-3402 if you have any questions. I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success. Please sign below to indicate your acceptance and agreement to the terms set forth in this offer letter and return the signed offer letter to me.

 

Best regards,

 

 

 

/s/ William W. Ericson

 

 

William Ericson

BOD Member

Neuromolecular Pharmaceuticals

 

Agreed and Accepted:

 

I, Gregory T. Went, have read, understand, and accept employment on the terms and conditions outlined in this letter. I am not relying on any representations made to me by anyone other than as set forth above.

 

/s/ Gregory T. Went

 

Print Name

 

 

 

3.27.06

 

Date

 

 

1900 Powell St., Suite 210                                     Emeryville, CA 94608
Office: 510.450.3508                                                Fax 510.428.0519

 




Exhibit 10.13

 

June 8, 2011

 

Mr. Tony Rimac

 

Dear Tony,

 

We are quite excited to have you involved in Adamas Pharmaceuticals, Inc, (“the Company”).  In this letter, I would like to summarize the proposed terms and conditions of your employment relationship with the Company.

 

Title and Responsibilities.  I am pleased to offer you the full-time position of Chief Financial Officer working at our offices in Emeryville, CA.  Your position with the Company, pursuant to the terms and conditions of this letter and accompanying Confidential Information and Invention Assignment Agreement, will commence on July 25, 2011.  While employed by the Company, you will report to the CEO and your duties and responsibilities consistent with your title will include the following functions: accounting, financial planning and analysis, contract management, human resources, information technology, with additional responsibilities consistent with your role added over time.

 

Salary and Bonus.  While employed by the Company, you will receive as compensation for your services an initial annual base salary of $275,000, with $25,000 deferred until the close of the next qualified financing after the Sereis AA in excess of $2,000,000.  Your salary will be paid periodically in accordance with normal Company payroll practices and be subject to the usual, required withholdings.  You will be subject to additional stock and cash bonuses based upon the achievement of certain milestones.

 

Stock Options.  In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, it will be recommended that you be granted an option to purchase 100,000 shares of Company Common Stock.  The exercise price per share will be determined by the Board of Directors or Compensation Committee when the option is granted.  Such option will be subject to the terms and conditions applicable to options granted under the Company’s 2007 Stock Plan (the “Plan”) as described in the Plan and the applicable Stock Option Agreement.  Provided you remain in continuous service to the Company on each date, you will vest in 20% of the option shares on the 12 month anniversary of your employment commencement date and the balance will vest in equal monthly installments on the first clay of each of the next 48 months, as described in the applicable Stock Option Agreement.

 

 

1



 

Benefit Plans.  During your employment with the Company, you will be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other employees of the Company.  Where a particular benefit is subject to a formal plan (for example, medical insurance or life insurance), eligibility to participate in and receive any particular benefit from the plan is governed solely by the applicable plan document.

 

Paid Time Off.  As part of these benefits, you will be entitled to paid time off (“PTO”) in accordance with the Company’s PTO policy as in effect from time to time.  Currently, the Company offers full-time employees 21 days of PTO per calendar year.  The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time in accordance with applicable law, and the provision of benefits to you in no way changes or impacts your status as an “at-will” employee.

 

Confidential Information.  The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely important.  Consequently, as a condition of this offer of employment, you are required to sign the Confidential Information and Invention Assignment Agreement enclosed with this letter.

 

Conflicting Outside Employment.  While employed by the Company, you may not work as an employee or consultant of any other organization or engage in any other activities which conflict or interfere with your employment obligations to the Company, including working for a competitive organization, or undertaking any activities that could create a conflict of interest, without prior approval.  Approved outside activities are attached on Exhibit A.

 

At-Will Employment.  You should understand that your employment with the Company is “at-will,” and may be terminated by you or the Company at any time and for any reason.  No provision of this offer letter or the accompanying Confidential Information and Invention Assignment Agreement shall be construed to create an express or implied employment contract, or a promise of employment for any specific period of time.  This offer letter and the accompanying Confidential Information and Invention Assignment Agreement supersede in their entirety any and all prior agreements and understandings concerning your employment relationship with the Company, whether written or oral.

 

Introductory Period.  The first ninety days of your employment with the Company will be an introductory period and at the end of that period the Company will conduct a review of your performance.  Completion of this introductory period does not change in any way your status as an “at-will” employee and therefore, you and the Company have the right to end your employment for any reason at any time during or after the introductory period.

 

Authorization to Work.  This offer is conditioned upon the following:  (1) you presenting evidence of your authorization to work in the United States and your identity sufficient to allow the Company to complete the Form 1-9 required by law; (2) satisfactory completion of a background and reference check; (3) passing the required pre-employment drug test; and (4) your signature on the Confidential Information and Invention Agreement.

 

Modification and Governing Law.  This agreement may not be modified except in a writing signed by an officer of the Company and you.  The unenforceability of any provision of

 

2



 

this agreement will not affect the validity or enforceability of any other provision of the agreement.  This letter will be governed by the laws of the state of California.

 

Please call me at (510) 450-3502 if you have any questions.  I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.  Please sign below to indicate your acceptance and agreement to the terms set forth in this offer letter and return the signed offer letter to me.

 

Best regards,

 

 

 

 

 

/s/ Gregory T. Went, Ph.D.

 

 

Gregory T. Went, Ph.D.

CEO and Chairman

Adamas Pharmaceuticals, Inc.

 

ACCEPTANCE OF EMPLOYMENT OFFER

 

I, ANTHONY RIMAC, have read, understand, and accept employment on the terms and conditions outlined in this letter.  I am not relying on any representations made to me by anyone other than as set forth above.

 

/s/ Tony Rimac

 

Tony Rimac

 

 

 

10/JUNE/11

 

Date

 

 

3



 

Appendix A

 

The following will be considered approved “Outside Activities”

 

·                   Participation as a Board and/or Committee Member of a Private and/or Public Company that is not competitive with Adamas.

 

·                   Participation as a Board and/or Committee Member of a Non-profit Organization

 

·                   Consulting Advice to CEO and Board/Investors of Aerovance, Inc. through anticipated corporate transaction, however, in no case to exceed beyond 12/31/11

 

·                   Consulting Advice to CEO and Board/Investors of SentreHEART, Inc. through anticipated corporate transaction and/or financing as the case may be, however, in no case to exceed beyond 12/31/11

 

4




Exhibit 10.14

 

December 17, 2009

 

Natalie McClure, Ph.D.

 

Dear Natalie,

 

We are quite excited to have you involved in Adamas Pharmaceuticals, Inc. (“the Company”).  In this letter, I would like to summarize the proposed terms and conditions of your employment relationship with the Company.

 

Title and Responsibilities.  I am pleased to offer you the position of Vice President, Regulatory Affairs working at our offices in Emeryville, CA , initially on a part-time basis as set forth below.  Your part-time position with the Company, pursuant to the terms and conditions of this letter and accompanying Confidential Information and Invention Assignment Agreement, will commence on January 4, 2010 .  While employed by the Company, you will report to the Chief Executive Officer, and your duties and responsibilities consistent are described in the attached job description.

 

The position will initially be a part-time position and require a minimum of three (3) days of employment service per week, equaling a 60% work schedule, equaling a minimum of twenty-four (24) hours per week.  During the period of your part-time employment with the Company, you may provide services (for any or no form of compensation) to any other person or business entity, provided that the business or proposed business of such person or entity is not competitive with the business or proposed business of the Company.  During part-time employment, you agree to notify the Company in writing of any and all consulting or employment engagements.

 

Salary.  While employed by the Company, you will receive as compensation for your services an initial annual base salary of $200,000 , based on a 60% work schedule, which equals a minimum of twenty-four (24) hours per week.  Your salary will be paid periodically in accordance with normal Company payroll practices and be subject to the usual, required withholdings.

 

Stock Options.  In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, it will be recommended that you be granted an option to purchase 70,000 shares of Company Common Stock.  The exercise price per share will be determined by the Board of Directors or Compensation Committee when the option is granted. 

 

 

1



 

Such option will be subject to the terms and conditions applicable to options granted under the Company’s 2007 Stock Plan (the “Plan”) as described in the Plan and the applicable Stock Option Agreement.  Provided you remain in continuous service to the Company on each date, you will vest in 20% of the option shares on the 12 month anniversary of your employment commencement date and the balance will vest in equal monthly installments on the first day of each of the next 48 months, as described in the applicable Stock Option Agreement.

 

Benefit Plans.  During your employment with the Company, you will be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other employees of the Company.  Where a particular benefit is subject to a formal plan (for example, medical insurance or life insurance), eligibility to participate in and receive any particular benefit from the plan is governed solely by the applicable plan document.

 

Paid Time Off.  As part of your benefits, you will be entitled to paid time off (“PTO”) in accordance with the Company’s PTO policy as in effect from time to time.  Currently, the Company offers full-time employees 21 days of PTO per calendar year.  You will be eligible for 12.6 days of PTO per calendar year, provided that you work a minimum of twenty-four (24) hours per week (60% work schedule; pro-rated based on the duration of your part-time employment).  The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time in accordance with applicable law, and the provision of benefits to you in no way changes or impacts your status as an “at-will” employee.

 

Confidential Information.  The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely important.  Consequently, as a condition of this offer of employment, you are required to sign the Confidential Information and Invention Assignment Agreement enclosed with this letter.

 

Conflicting Outside Employment.  While employed by the Company, you may not work as an employee or consultant of any other organization or engage in any other activities which conflict or interfere with your employment obligations to the Company, including working for a competitive organization, or undertaking any activities that could create a conflict of interest.

 

At-Will Employment.  You should understand that your employment with the Company is “at-will,” and may be terminated by you or the Company at any time and for any reason.  No provision of this offer letter or the accompanying Confidential Information and Invention Assignment Agreement shall be construed to create an express or implied employment contract, or a promise of employment for any specific period of time.  This offer letter and the accompanying Confidential Information and Invention Assignment Agreement supersede in their entirety any and all prior agreements and understandings concerning your employment relationship with the Company, whether written or oral.

 

Introductory Period.  The first ninety (90) days of your employment with the Company will be an introductory period and at the end of that period the Company will conduct a review of your performance.  Completion of this introductory period does not change in any way your status as an “at-will” employee and therefore, you and the Company have the right to end your employment for any reason at any time during or after the introductory period.

 

2



 

Authorization to Work.  This offer is conditioned upon the following:  (1) you presenting evidence of your authorization to work in the United States and your identity sufficient to allow the Company to complete the Form 1-9 required by law; (2) satisfactory completion of a background and reference check; (3) passing the required pre-employment drug test; and (4) your signature on the Confidential Information and Invention Agreement.

 

Modification and Governing Law.  This agreement may not be modified except in a writing signed by an officer of the Company and you.  The unenforceability of any provision of this agreement will not affect the validity or enforceability of any other provision of the agreement.  This letter will be governed by the laws of the state of California.

 

Please call me at (510) 450-3502 if you have any questions.  I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.  Please sign below to indicate your acceptance and agreement to the terms set forth in this offer letter and return the signed offer letter to me.  This offer will expire on December 17, 2009 unless accepted by you in writing prior to such date.

 

Best regards,

 

 

 

/s/ Gregory Went

 

 

Gregory T. Went, Ph.D.

CEO and Chairman

Adamas Pharmaceuticals, Inc.

 

ACCEPTANCE OF EMPLOYMENT OFFER

 

I, Natalie L. McClure, have read, understand, and accept employment on the terms and conditions outlined in this letter.  I am not relying on any representations made to me by anyone other than as set forth above.

 

/s/ Natalie L. McClure

 

Natalie McClure, Ph.D.

 

 

 

17 Dec 2009

 

Date

 

 

December 17, 2009

 

Natalie McClure, Ph.D.

 

3


 

 

February 18, 2011

 

Natalie McClure

 

Subject: Interoffice Memo from HR: Change of Work Hours

 

On or about January 15, 2011 we met to discuss your change in work hours from part time status (3 days per week) to full time status (5 days per week) beginning February 1, 2011. This change is due to the increased activities surrounding the AM201 Parkinson’s clinical trial scheduled to begin in Q2 2011. As a result, your part time salary of $200,000 for 3 days work will be increased to $325,000 for full time work. Additionally, PTO will increase from 12.6 days per year to 22 days per year. All other employment terms and benefits remain the same as outlined in your offer letter dated December 17, 2009.

 

Best Regards,

 

 

 

/s/ Greg Went

 

 

Greg Went

CEO

 

Cc:HR

 

1900 Powell St., Suite 1050                           Emeryville, CA 94608
Tel 510.450.3508                                               Fax 510.428.0519
www.adamspharma.com

 




Exhibit 10.15

 

November 27, 2013

 

Michael D. Coffee

 

Dear Mike,

 

We are quite excited to have you involved in Adamas Pharmaceuticals, Inc. (“the Company”).  In this letter, I would like to summarize the proposed terms and conditions of your employment relationship with the Company.

 

Title and Responsibilities.   I am pleased to offer you the full-time position of Senior Vice President, Strategy and Planning working at our offices in Emeryville, CA .  Your position with the Company, pursuant to the terms and conditions of this letter and accompanying Confidential Information and Invention Assignment Agreement, will commence on a date mutually agreed to between you are your direct supervisor.  While employed by the Company, you will report to the Chief Executive Officer and your duties and responsibilities will include:

 

·                   Strategy and Planning

 

·                   Oversee the in depth screening process used to identify, prioritize and evaluate key programs that Adamas Pharmaceuticals should develop for its future product portfolio.  Working with Adamas Pharmaceuticals’ executive team, select those programs most relevant to Adamas Pharmaceuticals’ product and business objectives.

 

·                   Lead market landscaping, product opportunity assessment, product profiling, commercial assessment, financial evaluation and other needs throughout the product evaluation and development process

 

·                   Identify and evaluate new markets for existing products in development

 

·                   Business Opportunity Assessment

 

·                   Identify and evaluate specific business opportunities that enhance existing products

 

·                   Manage directly or in cooperation with appropriate Adamas Pharmaceuticals’ team members alliances, partnerships and related collaborations.

 

·                   Corporate Communications

 

·                   Lead corporate communications with the CEO and coordinate external PR firm

 

·                   Identify specific conference opportunities that enhance public awareness and image of the Company

 

2200 Powell St. Suite 220      Everyville, CA 94608

Tel | 510.450.3500          Fax | 510.428.0519

www.adamaspharma.com

 



 

 

·                   Mentoring and Teaching

 

·                   Be a ‘guru’ type senior statesman across the company, and for key department personnel in Finance, Product Development, Business Development and IP.

 

Salary.   While employed by the Company, you will receive as compensation for your services an initial annual base salary of $265,000.   Your salary will be paid periodically in accordance with normal Company payroll practices and be subject to the usual, required withholdings.  In addition, you will also be eligible to participate in the Company’s Bonus Plan, which may be amended from time to time by the Board of Directors.  Your initial target bonus will be 25% of your annual base salary and will be determined on the basis of achieving certain corporate goals as personal goals.  The corporate goals are established annually by the Board of Directors and your personal goals will be established between you and your direct supervisor.

 

Stock Options.   In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, it will be recommended that you be granted an option to purchase 55,000 shares of Company Common Stock.  The exercise price per share will be determined by the Board of Directors or Compensation Committee when the option is granted.  Such option will be subject to the terms and conditions applicable to options granted under the Company’s 2007 Stock Plan (the “Plan”) as described in the Plan and the applicable Stock Option Agreement.  Provided you remain in continuous service to the Company on each date, you will vest in 20% of the option shares on the 12 month anniversary of your employment commencement date and the balance will vest in equal monthly installments on the first day of each of the next 48 months, as described in the applicable Stock Option Agreement.

 

Benefit Plans.   During your employment with the Company, you will be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other employees of the Company.  Where a particular benefit is subject to a formal plan (for example, medical insurance or life insurance), eligibility to participate in and receive any particular benefit from the plan is governed solely by the applicable plan document.

 

Paid Time Off.   As part of these benefits, you will be entitled to paid time off (“PTO”) in accordance with the Company’s PTO policy as in effect from time to time.  Currently, the Company offers full-time employees 21 days of PTO per calendar year.  The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time in accordance with applicable law, and the provision of benefits to you in no way changes or impacts your status as an “at-will” employee.

 

Confidential Information.   The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely important.  Consequently, as a condition of this offer of employment, you are required to sign the Confidential Information and Invention Assignment Agreement enclosed with this letter.

 

2200 Powell St. Suite 220      Everyville, CA 94608

Tel | 510.450.3500          Fax | 510.428.0519

www.adamaspharma.com

 



 

 

Conflicting Outside Employment.   While employed by the Company, you may not work as an employee or consultant of any other organization or engage in any other activities which conflict or interfere with your employment obligations to the Company, including working for a competitive organization, or undertaking any activities that could create a conflict of interest.

 

At-Will Employment.   You should understand that your employment with the Company is “at-will,” and may be terminated by you or the Company at any time and for any reason.  No provision of this offer letter or the accompanying Confidential Information and Invention Assignment Agreement shall be construed to create an express or implied employment contract, or a promise of employment for any specific period of time.  This offer letter and the accompanying Confidential Information and Invention Assignment Agreement supersede in their entirety any and all prior agreements and understandings concerning your employment relationship with the Company, whether written or oral.

 

Introductory Period.   The first ninety days of your employment with the Company will be an introductory period and at the end of that period the Company will conduct a review of your performance.  Completion of this introductory period does not change in any way your status as an “at-will” employee and therefore, you and the Company have the right to end your employment for any reason at any time during or after the introductory period.

 

Authorization to Work.   This offer is conditioned upon the following: (1) you presenting evidence of your authorization to work in the United States and your identity sufficient to allow the Company to complete the Form I-9 required by law; (2) satisfactory completion of a background and reference check; (3) passing the required pre-employment drug test; and (4) your signature on the Confidential Information and Invention Agreement.

 

Modification and Governing Law.   This agreement may not be modified except in a writing signed by an officer of the Company and you.  The unenforceability of any provision of this agreement will not affect the validity or enforceability of any other provision of the agreement.  This letter will be governed by the laws of the state of California..

 

2200 Powell St. Suite 220      Everyville, CA 94608

Tel | 510.450.3500          Fax | 510.428.0519

www.adamaspharma.com

 



 

 

Please call me at (510) 450-3502 if you have any questions.  I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.  Please sign below to indicate your acceptance and agreement to the terms set forth in this offer letter and return the signed offer letter to me.  This offer will expire on December 5, 2013 unless accepted by you in writing prior to such date.

 

Best regards,

 

 

 

 

 

/s/ Gregory T. Went

 

Gregory T. Went, Ph.D

 

CEO and Chairman

 

Adamas Pharmaceuticals, Inc.

 

 

ACCEPTANCE OF EMPLOYMENT OFFER

 

I, Michael Coffee, have read, understand, and accept employment on the terms and conditions outlined in this letter.  I am not relying on any representations made to me by anyone other than as set forth above.

 

/s/ Michael Coffee

 

Michael Coffee

 

 

 

    11/27/13

 

Date

 

 

2200 Powell St. Suite 220      Everyville, CA 94608

Tel | 510.450.3500          Fax | 510.428.0519

www.adamaspharma.com

 




Exhibit 10.16

 

 

February 24, 2014

 

Jeffrey H. Knapp

277 Delphi Circle

Los Altos, CA 94022

 

Dear Jeffrey,

 

We are quite excited to have you involved in Adamas Pharmaceuticals, Inc. (“the Company”).  In this letter, I would like to summarize the proposed terms and conditions of your employment relationship with the Company.

 

Title and Responsibilities.   I am pleased to offer you the full-time position of Chief Commercial Officer working at our offices in Emeryville, CA.  Your position with the Company, pursuant to the terms and conditions of this letter and accompanying Confidential Information and Invention Assignment Agreement, will commence on February 27, 2014. While employed by the Company, you will report to the Chief Executive Officer.

 

Cash Compensation.   While employed by the Company, you will receive as compensation for your services an initial annual base salary of $340,000 Your salary will be paid periodically in accordance with normal Company payroll practices and be subject to the usual, required withholdings.  In addition, you will be eligible to participate in the Company’s bonus plan.  Your initial target bonus will be 30% of your base salary.

 

Stock Options. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, it will be recommended that you be granted an option to purchase 130,000 shares of Company Common Stock.  The exercise price per share will be determined by the Board of Directors or Compensation Committee when the option is granted.  Such option will be subject to the terms and conditions applicable to options granted under the Company’s 2007 Stock Plan (the “Plan”) as described in the Plan and the applicable Stock Option Agreement.  Provided you remain in continuous service to the Company on each date, you will vest in 20% of the option shares on the 12 month anniversary of your employment commencement date and the balance will vest in equal monthly installments on the first day of each of the next 48 months, as described in the applicable Stock Option Agreement.

 

Benefit Plans.   During your employment with the Company, you will be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other employees of the Company.  Where a particular benefit is subject to a formal plan (for example, medical insurance or life insurance), eligibility to participate in and receive any particular benefit from the plan is governed solely by the applicable plan document.

 

2200 Powell St. Suite 220  Emeryville, CA 94608

Tel|510.450.3500  Fax|510.428.0519

www.adamaspharma.com

 



 

Paid Time Off.  As part of these benefits, you will be entitled to paid time off (“PTO”) in accordance with the Company’s PTO policy as in effect from time to time.  Currently, the Company offers full-time employees 21 days of PTO per calendar year.  The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time in accordance with applicable law, and the provision of benefits to you in no way changes or impacts your status as an “at-will” employee.

 

Severance Policy.  As we discussed, the Company’s Board of Directors recently approved the terms of a Severance and Change of Control Policy (the “Policy”) which will provide certain severance benefits to members of the Company’s executive team in connection with an executive’s involuntary termination of employment.  The compensation committee of the Board has been tasked with determining certain key details of the Policy.  As a member of the Company’s executive team, you will be eligible to receive benefits under the Policy.  We will provide a copy of the Policy to you as soon as the final terms are determined.

 

Confidential Information.  The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely important.  Consequently, as a condition of this offer of employment, you are required to sign the Confidential Information and Invention Assignment Agreement enclosed with this letter.

 

Conflicting Outside Employment.   While employed by the Company, you may not work as an employee or consultant of any other organization or engage in any other activities which conflict or interfere with your employment obligations to the Company, including working for a competitive organization, or undertaking any activities that could create a conflict of interest.

 

At-Will Employment.   You should understand that your employment with the Company is “at-will,” and may be terminated by you or the Company at any time and for any reason.  No provision of this offer letter or the accompanying Confidential Information and Invention Assignment Agreement shall be construed to create an express or implied employment contract, or a promise of employment for any specific period of time.  This offer letter and the accompanying Confidential Information and Invention Assignment Agreement supersede in their entirety any and all prior agreements and understandings concerning your employment relationship with the Company, whether written or oral.

 

Introductory Period.   The first ninety days of your employment with the Company will be an introductory period and at the end of that period the Company will conduct a review of your performance.  Completion of this introductory period does not change in any way your status as an “at-will” employee and therefore, you and the Company have the right to end your employment for any reason at any time during or after the introductory period.

 

Authorization to Work.   This offer is conditioned upon the following:  (1) you presenting evidence of your authorization to work in the United States and your identity sufficient to allow the Company to complete the Form I-9 required by law; (2) satisfactory completion of a background and reference check; (3) passing the required pre-employment drug test; and (4) your signature on the Confidential Information and Invention Agreement.

 



 

Modification and Governing Law.   This agreement may not be modified except in a writing signed by an officer of the Company and you.  The unenforceability of any provision of this agreement will not affect the validity or enforceability of any other provision of the agreement.  This letter will be governed by the laws of the state of California..

 

Please call me at (510) 450-3502 if you have any questions.  I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.  Please sign below to indicate your acceptance and agreement to the terms set forth in this offer letter and return the signed offer letter to me.  This offer will expire on February 26, 2014 unless accepted by you in writing prior to such date.

 

Best regards,

 

Gregory T. Went, Ph.D

CEO and Chairman

Adamas Pharmaceuticals, Inc.

 

ACCEPTANCE OF EMPLOYMENT OFFER

 

I, Jeffrey H. Knapp, have read, understand, and accept employment on the terms and conditions outlined in this letter.  I am not relying on any representations made to me by anyone other than as set forth above.

 

 

/s/ Jeffrey H. Knapp

 

Jeffrey H. Knapp

 

 

 

 

 

2 - 26 - 14

 

Date

 

 

 

Firmwide:90718958.1 062996.1001

 

 




Exhibit 10.17

 

ADAMAS PHARMACEUTICALS, INC.

INDEMNITY AGREEMENT

 

THIS AGREEMENT is made and entered into this               , 2014 by and between ADAMAS PHARMACEUTICALS, INC. , a Delaware corporation (the Corporation ”), and                                              (“ Agent ”).

 

RECITALS

 

A.                Agent performs a valuable service to the Corporation in the capacity as a director, officer, employee or agent of the Corporation.

 

B.                 The stockholders of the Corporation have adopted bylaws (the “ Bylaws ”) and the Amended and Restated Certificate of Incorporation of the Corporation (the “ Certificate ”) providing for the indemnification of the directors, officers, employees and other agents of the Corporation, including persons serving at the request of the Corporation in such capacities with other corporations or enterprises, as authorized by the Delaware General Corporation Law, as amended (the “ Code ”).

 

C.                 The Bylaws, the Certificate and the Code, by their non-exclusive nature, permit contracts between the Corporation and its directors, officers, employees and other agents with respect to indemnification of such persons.

 

D.                 The Corporation and Agent intend that this Agreement would replace any existing agreement between the Corporation and Agent with respect to the subject matter of this Agreement.

 

D.                 In order to induce Agent to serve or to continue to serve as a director, officer, or employee of the Corporation, the Corporation has determined and agreed to enter into this Agreement with Agent.

 

In consideration of Agent’s continued service as a director, officer, employee or agent of the Corporation, the parties hereto agree as follows:

 

AGREEMENT

 

1.                  DEFINITIONS .

 

(a)            Expenses .  For purposes of this Agreement, the term “ Expenses ” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Agent in connection with the investigation, defense or appeal of a Proceeding, participation in a Proceeding as a witness or establishing or enforcing a right to indemnification under this Agreement, the Code or otherwise, and amounts paid in settlement by or on behalf of Agent, but shall not include any judgments, fines or penalties actually levied against Agent for such individual’s violations of law.

 

(b)            Change in Control .  For purposes of this Agreement, a “ Change in Control ” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “ Act ”)), other than a trustee or other fiduciary holding securities

 



 

under an employee benefit plan of the Corporation or a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Corporation representing more than 20% of the total voting power represented by the Corporation’s then outstanding Voting Securities; or (ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Corporation if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Corporation immediately prior thereto do not own, directly or indirectly, either (A) outstanding Voting Securities representing more than 50% of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction.

 

(c)            Independent Legal Counsel .  For purposes of this Agreement, “ Independent Legal Counsel ” shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 5 hereof, who shall not have otherwise performed services for the Corporation (or for any entity that as of the time of selection of the attorney or firm of attorneys is controlled by, controlling or under common control with the Corporation) or Agent within the last three years (other than with respect to matters concerning the rights of Agent under this Agreement, or of other indemnitees under similar indemnity agreements).

 

(d)            Proceeding .  For purposes of this Agreement, the term “ Proceeding ” shall mean and shall include, without limitation, any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing, whether brought in the right of or by the Corporation or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Agent was, is or will be involved as a party or otherwise by reason of the fact that:  (i) Agent is or was a director, officer, employee or agent of the Corporation; (ii) Agent took an action while acting as director, officer, employee or agent of the Corporation; or (iii) Agent is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any Expense is incurred for which indemnification, reimbursement, or advancement of Expenses may be provided under this Agreement.  For the avoidance of doubt, an action by Agent to enforce Agent’s rights to indemnification under this Agreement shall be a “Proceeding” for purposes of this Agreement.

 

(e)            Voting Securities .  For purposes of this Agreement, “ Voting Securities ” shall mean any securities of the Corporation that vote generally in the election of directors.

 

2.                 SERVICES TO THE CORPORATION . Agent will serve, at the will of the Corporation or under separate contract, if any such contract exists, as a director, officer, or employee of the Corporation or as a director, officer or other fiduciary of an affiliate of the Corporation (including, but not limited to, any employee benefit plan of the Corporation) faithfully and to the best of Agent’s ability so long as Agent (a) if an officer or director of the Corporation or an affiliate of the Corporation, is duly elected and qualified in accordance with the provisions of the Bylaws or other applicable charter documents of the Corporation or such affiliate and (b) if an employee of the Corporation or an affiliate of the Corporation, remains employed by the Corporation or such affiliate, as applicable; provided, however, that Agent may at any time and for any reason resign from such position (subject to any contractual

 

2



 

obligation that Agent may be subject to apart from this Agreement) and that the Corporation or any affiliate of the Corporation shall have no obligation under this Agreement to continue Agent in any such position.

 

3.                  INDEMNITY OF AGENT .  The Corporation hereby agrees to hold harmless and indemnify Agent to the fullest extent authorized or permitted by the provisions of the Bylaws, the Certificate and the Code, as the same may be amended from time to time (but, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the Bylaws, the Certificate or the Code permitted prior to adoption of such amendment).  These obligations and the other obligations of the Corporation in this Agreement apply regardless of whether the conduct giving rise to the obligations occurred before or occur after the date this Agreement is executed.

 

4.                 PARTIAL INDEMNIFICATION .  Agent shall be entitled under this Agreement to indemnification by the Corporation for a portion of the Expenses that Agent becomes legally obligated to pay in connection with any Proceeding even if not entitled hereunder to indemnification for the total amount thereof, and the Corporation shall indemnify Agent for the portion thereof to which Agent is entitled.

 

5.                 CHANGE IN CONTROL .  The Corporation agrees that if there is a Change in Control of the Corporation then, with respect to all matters thereafter arising concerning the rights of Agent to indemnification (including, but not limited to, any right to advancement of Expenses) under this Agreement, any other agreement with the Corporation providing for indemnification, the Certificate, Bylaws and applicable law (collectively, the “ Indemnification Provisions ”) as now or hereafter in effect, Independent Legal Counsel (as defined in Section 1 hereof) shall be selected by Agent and approved by the Corporation (which approval shall not be unreasonably withheld).  Such Independent Legal Counsel shall render its written opinion to the Corporation and Agent as to whether and to what extent Agent would be permitted to be indemnified under the Indemnification Provisions prior to and after the consummation of such Change in Control and such opinion shall be binding upon Agent and the Corporation.  The Corporation agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all Expenses arising out of or relating to this Agreement or its engagement pursuant hereto.

 

6.                 NOTIFICATION AND DEFENSE OF CLAIM.   Not later than thirty (30) days after receipt by Agent of notice of the commencement of any Proceeding, Agent will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof; but the failure so to notify the Corporation will not relieve the Corporation from any liability which it may have to Agent under this Agreement or otherwise. With respect to any such Proceeding as to which Agent notifies the Corporation of the commencement thereof:

 

(a)                the Corporation will be entitled to participate therein at its own expense;

 

(b)                except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Agent. After notice from the Corporation to Agent of its election to assume the defense thereof, the Corporation will not be liable to Agent under this Agreement for any Expenses subsequently incurred by Agent in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Agent shall have the right to employ separate counsel in such Proceeding but the Expenses of such counsel incurred after notice from

 

3



 

the Corporation of its assumption of the defense thereof shall be at the expense of Agent; provided, however, that the Expenses of Agent’s separate counsel shall be borne by the Corporation if (i) the employment of separate counsel by Agent has been authorized by the Corporation and the Corporation has agreed in writing to bear such Expenses, (ii) Agent reasonably shall have concluded that there may be a conflict of interest between the Corporation and Agent in the conduct of the defense of such Proceeding, or (iii) the Corporation in fact shall not have employed counsel to assume the defense of such Proceeding or shall at any time have ceased to actively pursue the defense thereof. The Corporation shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Corporation or as to which Agent shall have made the conclusion provided for in clause (ii) above; and

 

(c)                the Corporation shall not be liable to indemnify Agent under this Agreement for any amounts paid in settlement of any Proceeding effected without its written consent, which shall not be unreasonably withheld or delayed.  The Corporation shall be permitted to settle any Proceeding except that it shall not settle any Proceeding in any manner that would impose any penalty or limitation on Agent without Agent’s written consent, which may be given or withheld in Agent’s sole discretion.

 

7.                 EXPENSES.   Promptly following request by Agent for the advancement of Expenses, the Corporation shall advance, prior to the final disposition of any Proceeding, all Expenses incurred by Agent in connection with such Proceeding (through the final disposition of any such Proceeding from which all rights of appeal have either been exhausted or have lapsed) upon receipt of an undertaking by or on behalf of Agent to repay such amounts if it shall ultimately be determined by a final judicial decision from which there is no further right of appeal that Agent is not entitled to be indemnified.

 

8.                 ENFORCEMENT.  Any right to indemnification or advances granted by this Agreement to Agent shall be enforceable by or on behalf of Agent in any court of competent jurisdiction if (a) the claim for indemnification or advances is denied, in whole or in part, or (b) no disposition of such claim is made within ninety (90) days of request therefor.  Agent, in such enforcement action, if successful in whole or in part, also shall be entitled to be paid the Expense of prosecuting Agent’s claim. Neither the failure of the Corporation (including its Board of Directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Agent is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Agent is not entitled to indemnification under this Agreement or otherwise.

 

9.                 INSURANCE.    [ Note to draft: This provision should be removed for non-officer employees ]

 

(a)           Unless otherwise approved by the Board of Directors prior to a Change in Control, the Corporation shall obtain and maintain during the term of this Agreement directors’ and officers’ liability insurance (“ D&O Insurance ”) with respect to which Agent shall be named as an insured.  Notwithstanding any other provision of this Agreement, the Corporation shall not be obligated to indemnify the Agent for Expenses that have been previously paid directly to the Agent by D&O Insurance.  If the Corporation has D&O Insurance in effect at the time the Corporation receives from Agent any notice of the commencement of a Proceeding, the Corporation shall give prompt notice of the commencement of such Proceeding to the insurers in accordance with the procedures set forth in the policy.  The Corporation shall thereafter take all reasonably necessary action to cause such insurers to

 

4



 

pay, on behalf of the Agent, all amounts payable as a result of such Proceeding in accordance with the terms of such policy.

 

(b)            In the event that (i) the D&O Insurance policy is renewed but the renewed policy does not provide for prior act’s coverage, or (ii) the Corporation obtains a new D&O Insurance policy for any period following the termination of the prior D&O Insurance, and such new D&O Insurance policy does not provide for prior act’s coverage, or (iii) the Corporation does not renew the D&O Insurance policy or obtain a new D&O Insurance policy following the termination of a D&O Insurance policy, then unless otherwise determined by the Board of Directors, the Corporation shall add to the D&O Insurance policy or the applicable successor D&O Insurance policy a run-off endorsement (the “ Endorsement ”) on the existing D&O Insurance policy (and in the case of (iii) above, do so prior to the termination of the existing D&O Insurance policy if necessary) or the applicable successor D&O Insurance policy subject to the same terms and conditions in all material respects.  Unless otherwise approved by the Board of Directors prior to the date on which the Endorsement is obtained, the Endorsement shall be non-cancelable and shall provide for at least a six-year extended coverage period for any and all claims covered under the D&O Insurance policy.  The Corporation shall pay all premiums, commissions and other costs or charges incurred in obtaining the Endorsement and shall promptly deliver to Agent a Certificate of Confirmation of Insurance with respect to such Endorsement.

 

(c)            [For Fund Representatives on the Board only:] [The Corporation hereby acknowledges that Agent has certain rights to indemnification, advancement of expenses and/or insurance provided by [Name of Fund/Sponsor] and certain of its affiliates (collectively, the “ Fund Indemnitors ”).  The Corporation hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Agent are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Agent are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Agent 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 Certificate of Incorporation or Bylaws of the Corporation (or any other agreement between the Corporation and Agent), without regard to any rights Agent 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 Corporation further agrees that no advancement or payment by the Fund Indemnitors on behalf of Agent with respect to any claim for which Agent has sought indemnification from the Corporation 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 Agent against the Corporation.  The Corporation and Agent agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 9(c).]

 

10.               SUBROGATION .  In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Agent, who shall execute all documents required and shall do all acts that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.

 

11.               CONTRIBUTION .  To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Agent, the Corporation, in lieu of indemnifying Agent, shall contribute to the Agent’s Expenses in connection with any claim relating to any Proceeding, in such proportion as is deemed fair and reasonable in light of all of the circumstances of

 

5



 

such proceeding in order to reflect (a) the relative benefits received by the Corporation and Agent as a result of the events and transactions giving rise to such Proceeding; and (b) the relative fault of Agent and the Corporation (and its other directors, officers, employees and agents) in connection with the circumstances, events or transactions that gave rise to the Proceeding.

 

12.               NON-EXCLUSIVITY AND SURVIVAL OF RIGHTS .

 

(a)                All agreements and obligations of the Corporation contained herein shall continue during the period Agent is a director, officer, employee or other agent of the Corporation (or is or was serving at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue thereafter so long as Agent shall be subject to any possible Proceeding.  The benefits hereunder shall inure to the benefit of the heirs, executors and administrators and assigns of Agent. The rights conferred on Agent by this Agreement shall not be exclusive of any other right Agent may have or hereafter acquire under any statute, provision of the Certificate or Bylaws, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in Agent’s official capacity and as to action in another capacity while holding office.

 

(b)                The obligations and duties of the Corporation to Agent under this Agreement shall be binding on the Corporation and its successors and assigns until terminated in accordance with its terms.  The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Corporation or to all or substantially all of the business or assets of the Corporation, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

 

(c)                No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Agent under this Agreement in respect of any action taken or omitted by such Agent prior to such amendment, alteration or repeal.  To the extent that a change in the Code, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Certificate, Bylaws and this Agreement, it is the intent of the parties hereto that Agent 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, by Agent shall not prevent the concurrent assertion or employment of any other right or remedy by Agent.

 

13.               SEVERABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity contained herein or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Corporation nevertheless shall indemnify Agent to the fullest extent provided by the Certificate, Bylaws, the Code or any other applicable law.

 

14.               GOVERNING LAW. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

 

6



 

15.               AMENDMENT, MODIFICATION, WAIVER AND TERMINATION. No amendment, modification, termination or cancellation of this Agreement shall be effective unless signed in writing by both parties hereto, provided, however, that the Corporation shall have the right to amend, modify, terminate or replace this Agreement if: (i) there is a change in the Code or any other applicable law; or (ii) the Corporation amends, modifies, terminates or replaces its form of Indemnification Agreement for directors, officers, employees and other agents of the Corporation; provided, that such amended or modified agreement or such new agreement does not diminish in any material respect the rights of Agent hereunder.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

16.               ENTIRE AGREEMENT .  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate, Bylaws, the Code and any other applicable law, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Agent thereunder.

 

17.               INTERPRETATION OF AGREEMENT .  It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Agent to the fullest extent now or hereafter permitted by law.

 

18.               IDENTICAL COUNTERPARTS.   This Agreement may be executed in one or more counterparts, each of which shall be deemed for all purposes to be an original but all of which together shall constitute this Agreement.

 

19.               HEADINGS.   The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

 

20.               NOTICES .  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid:

 

(a)                                              If to Agent, at the address indicated on the signature page hereof.

 

(b)                                              If to the Corporation, to

 

Attn:  Gregory Went, Chief Executive Officer and Chairman

Adamas Pharmaceuticals, Inc.

2200 Powell Street, Suite 220

Emeryville, CA 94608

 

or to such other address as may have been furnished to Agent by the Corporation, or to such other address as Agent may direct in writing the Corporation to use.

 

7



 

The parties hereto have executed this Agreement on and as of the day and year first above written.

 

ADAMAS PHARMACEUTICALS, INC.

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

AGENT

 

 

 

 

 

 

 

(Signature)

 

 

 

Print Name:

 

 

 

 

 

 

Address for Agent:

c/o Adamas Pharmaceuticals, Inc.

2200 Powell Street, Suite 220

Emeryville, CA 94608

 

8




Exhibit 10.18

 

ADAMAS PHARMACEUTICALS, INC.
TRANSACTION BONUS PLAN

 

Purpose

 

The purpose of the Adamas Pharmaceuticals, Inc. Transaction Bonus Plan (the “ Plan ”) is to induce key contributors to remain with Adamas Pharmaceuticals, Inc. (the “ Company ”), and to enhance the Company’s value, by providing incentive bonuses in the event that the Company receives certain license payments.

 

 

 

Triggering Event (the “ Covered Transaction ”)

 

Benefits under the Plan are payable in connection with certain payments made to the Company pursuant to that certain License Agreement (the “ Agreement ”) by and between Forest Laboratories Holdings Limited and the Company dated as of November 14, 2012 (the “ Covered Transaction ”).

 

 

 

 

 

Non-cash consideration will be valued in good faith by the Company’s Board of Directors.

 

 

 

Size of Pool (the “ Pool ”)

 

The Pool is an amount equal to 1% of the Specified Transaction Consideration, up to a maximum aggregate amount of $1,600,000.

 

 

 

 

 

Specified Transaction Consideration ” means the Initial License Payment (as defined in the Agreement) and the Milestone Payments (as defined in the Agreement) payable in connection with the Covered Transaction, but excluding any royalties and other payments under Section 6.4 of the Agreement.

 

 

 

Selection of Participants

 

The Company’s Board of Directors may select the participants in the Plan at any time (the “ Participants ”), based upon the recommendation of the Company’s Chief Executive Officer.

 

 

 

Allocation of Pool

 

The Company’s Board of Directors will allocate some or all of the Pool among the Participants at any time. The amount allocated to each Participant (such Participant’s “ Bonus Amount ”) shall represent the maximum aggregate amount to which each he/she may become entitled hereunder and shall be expressed as either a fixed dollar or percentage of the total Pool amount.

 



 

Prerequisites for Payment

 

A Participant earns the right to be paid his/her Bonus Amount by continuing to be employed by the Company through any date pursuant to which payments are made in connection with the Covered Transaction. Such payments will be paid to the Participants within the 60th day following the date such payment was scheduled to be paid in connection with the Covered Transaction.

 

 

 

 

 

At the discretion of the Board of Directors, no benefits will be paid to a Participant unless the Participant executes a general release of all claims (in a form prescribed by the Company) he or she may have against the Company or persons affiliated with the Company through the date of the release. The release must be executed and returned to the Company on or before the date specified by the Company in the prescribed form, which will in no event be later than 45 days after a payment is payable in connection with a Covered Transaction (the “ Release Deadline ”). If a Participant has not executed a general release of claims by the Release Deadline as requested by the Company or revokes such release, the Participant will not be entitled to the applicable payments or benefits under the Plan.

 

 

 

 

 

To the extent that a Participant’s benefit is forfeited because the Participant failed to satisfy one or more of the prerequisites to payment specified in this section, the Company shall have no further obligation to the Participant (or anyone who may claim through the Participant) with respect to such forfeited amount and the aggregate Pool will be allocated pro rata to the remaining Participants.

 

 

 

Form of Payment

 

Bonuses will be paid in cash.

 

 

 

Withholding Taxes

 

All payments under the Plan will be reduced as necessary to pay withholding and payroll taxes and other deductions required by law.

 

 

 

 

 

At the discretion of the Board of Directors, payments under the Plan may also be reduced by the amount necessary to pay the employer portion of applicable taxes ( e.g. , FICA and Medicare), in which case the aggregate Pool will be reduced by the amount of such employer taxes.

 

2



 

Section 409A

 

It is intended that each installment of the payments provided under this Plan is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).

 

 

 

 

 

It is intended that payments under the Plan satisfy, to the greatest extent possible, the exemption from the application of Section 409A of the Internal Revenue Code (the “ Code ”) (and any state law of similar effect) provided under Treasury Regulation Section 1.409A-1(b)(4) (as a “short-term deferral”).

 

 

 

 

 

Notwithstanding the foregoing, in no event will the Company or any successor be responsible for or have any obligation to reimburse a Participant for any taxes that may be imposed on a Participant under Section 409A of the Code.

 

 

 

Source of Payments

 

The Company or its successor will make all payments under the Plan from its general assets. The Company’s obligations under the Plan are unfunded and unsecured, and Participants have no rights other than those of general creditors.

 

 

 

No Assignment of Benefits

 

Benefits under the Plan are not assignable or transferable by Participants before they are paid. Benefits will be paid only to the Participants who are entitled to receive them under the Plan.

 

3



 

Parachute Tax Penalties and Stockholder Approval

 

·                   The excise tax on excess parachute payments, determined under Sections 280G and 4999 of the Code, generally applies if all of a Participant’s parachute payments together equal or exceed 300% of his/her average annual compensation from the Company reported on Form W-2 Box 1. It generally does not apply, however, if the bonus is (a) subject to approval by more than 75% of the Company’s stockholders (excluding from both the numerator and denominator, individuals receiving parachute payments subject to stockholder approval), and (b) is so approved at the time of a Covered Transaction.

 

 

 

 

 

·                   All benefits payable under the Plan are subject to approval by more than 75% of the Company’s disinterested stockholders, if the Company’s Board of Directors reasonably determines that such approval is or may be required to avoid application of the excise tax on, and the loss of a Company deduction resulting from, excess parachute payments. If the Board of Directors reasonably determines that approval is or may be required and a benefit is not approved by more than 75% of the stockholders, then that benefit shall not be paid.

 

 

 

 

 

·                   A Participant’s bonus will be reduced to the extent that, as a result of the excise tax on excess parachute payments, the Participant’s after-tax proceeds would be greater after the reduction than before the reduction.

 

 

 

Employment at Will

 

Employment with the Company is for no specific period of time. Participation in the Plan does not confer any right to continued employment, and a Participant’s employment with the Company is “at will.” Therefore, either the Participant or the Company may terminate the Participant’s employment at any time and for any reason, with or without cause.

 

 

 

Administration

 

The Plan will be interpreted and administered by the Company’s Board of Directors or a duly authorized committee of the Board of Directors. Any reference to the Board of Directors in this Plan will be construed as a reference to the committee of the Board of Directors (if any) to whom the Board of Directors has assigned a particular function. The determinations of the Board of Directors with regard to the Plan will be final, binding, and conclusive on all Participants.

 

4



 

Amendment and Termination

 

Prior to the closing of a Covered Transaction, the Plan may be amended or terminated by the Company’s Board of Directors, including any amendments deemed advisable by the Board of Directors in order to avoid adverse tax consequences for one or more Participants imposed by Section 409A(a)(1) of the Code (or similar taxes imposed by state law). Thereafter, the Plan may not be amended or terminated without the consent of each adversely affected Participant.

 

5




Exhibit 10.19

 

Adamas Pharmaceuticals, Inc.

Executive Severance Plan

 

1. Purpose and Eligibility . This Executive Severance Plan (the “Plan”) is intended to provide severance benefits to employees of Adamas Pharmaceuticals, Inc. (the “Company”) who hold the title of Vice President or above.  This Plan is effective for terminations occurring on and after the effective date of the Company’s Initial Public Offering.

 

2. Severance Benefits (Not in Connection with a Change in Control) .  In the event of a Qualifying Termination, a Participant will be eligible for severance benefits consisting of (a) a cash severance payment, and (b) continuation of health benefits for certain periods, as follows:

 

(a)  Cash Severance : The cash severance payment shall be calculated as a multiple of the Participant’s monthly base salary as in effect immediately before termination of employment, and shall be paid in the form of salary continuation.

 

· For a Participant who holds the title of Chief Executive Officer (or who held such title within 90 days before termination), the multiple shall be 12; and

 

· For a Participant who holds the title of Vice President or above (or who held such title within 90 days before termination), the multiple shall be the lesser of (i) nine, and (ii) one-half of the number of full months of service the Participant completed prior to termination.

 

(b)  Health Benefits: The health benefits shall consist of the payment or reimbursement of premiums for continued medical coverage (“COBRA”) for a Participant and his or her eligible dependents for the period during which salary continuation payments are provided in subsection (a) above, or until the Participant and his or her dependents are eligible for other employer-provided medical coverage, if earlier.  The amount of payment or reimbursement shall equal the amount, if any, by which such premiums exceed the amount payable by active employees in the same plan. The Participant must timely enroll for COBRA coverage and must otherwise remain eligible for such coverage under the medical plan(s) then-offered by the Company.

 

3.  Severance Benefits in Connection with a Change in Control . In the event of a CIC Termination, a Participant will be eligible for severance benefits consisting of (a) a cash severance payment, (b) a pro-rata annual bonus payment, (c) full acceleration of all equity awards outstanding at the time of the CIC, with up to one year after termination to exercise stock options, and (d) continuation of health benefits for certain periods, as follow:

 

(a)  Cash Severance : The cash severance payment, payable in the form of a lump sum, shall be calculated as a multiple of the sum of (i) the Participant’s annual base salary as in effect immediately before termination of employment plus (ii) the Participant’s annual target bonus.

 

· For a Participant who holds the title of Chief Executive Officer (or who held such title within 90 days before termination), the multiple shall be 1.5; and

 

· For a Participant who holds the title of Vice President or above (or who held such title within 90 days before termination), the multiple shall be one.

 

(b)  Pro-Rata Annual Bonus : The pro-rata annual bonus payment shall be calculated as a pro-rata portion of the current fiscal year annual (short-term) bonus based on the number of full months

 



 

worked in the fiscal year in which the CIC Termination occurs through the date of the CIC Termination, and assuming performance at target for all metrics.

 

(c)  Equity Awards .  All time-based equity awards outstanding at the time of a CIC of the Company shall receive full acceleration on vesting and full release of any restrictions, effective following expiration of the revocation period applicable to the Release of Claims, so long as no revocation occurred during that period (the “Release Effective Date”).  All performance-based equity awards shall also be fully vested, with performance metrics determined assuming the higher of actual or target-level achievement on all performance metrics, with such accelerated vesting to occur as of the Release Effective Date.

 

(d)  Health Benefits: Health benefits shall consist of the payment or reimbursement of premiums for COBRA coverage for a Participant and his or her eligible dependents for a period of 18 months in the case of the CEO, and 12 months for all other Participants, or such earlier time as the Participant is eligible for other employer-provided medical coverage.  The amount of payment or reimbursement shall equal the amount, if any, by which such premiums exceed the amount payable by active employees in the same plan.  The Participant must timely enroll for such COBRA coverage and otherwise remain eligible under the medical plan(s) then-offered by the Company.

 

4. Release Required; Form and Time of Payment . The receipt of any severance or other benefits under this Plan will be subject to the Participant signing and not revoking a Release of Claims, in a form acceptable to the Company.  For this purpose, the Release of Claims must be signed by the Participant and returned to the Company no later than 60 days after the date of the Participant’s termination of employment.  No severance or other benefits will be paid or provided until the Release of Claims becomes effective and non-revocable.  In the case of salary continuation payments to be made pursuant to Section 3(a), all payments that otherwise would have been made prior to the Release Effective Date shall be made in the next administratively practicable payroll period following the Release Effective Date.  In the case of the lump sum cash payment to be made pursuant to Section 3(b), such lump sum shall be paid in the next available payroll cycle, but in no event later than 20 days after the Release Effective Date.

 

All payments under this Plan shall be subject to, and made net of, applicable deductions and withholdings. Any payments under this Plan shall be reduced by any severance benefit payable to the Participant under any other Company plan, program or agreement.

 

All payments are subject to the Participant’s continuing compliance with the Company’s form of agreement regarding the protection of confidential information and proprietary developments (as reflected in the Release of Claims), and to the Company’s policies on recoupment, as in effect from time to time.

 

5. Compliance with Section 409A .  Any amounts payable solely on account of an involuntary separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) shall be, to the maximum extent possible, excludible from the requirements of Section 409A, either as involuntary separation pay or as short-term deferral amounts. For purposes of Section 409A, each payment of compensation under the Plan shall be treated as a separate payment of compensation.

 

Any reimbursements or in-kind benefits provided under the Plan shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (a) any reimbursement is for expenses incurred during the period of time specified in the agreement, (b) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may

 



 

not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (c) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (d) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

If payment of any amount of nonqualified deferred compensation is triggered by a separation from service that occurs while the Participant is a “specified employee” (as such terms are defined in Section 409A), and if such amount is scheduled to be paid within six months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days after the appointment of the personal representative or executor of the Participant’s estate following the Participant’s death.

 

If the maximum period within which the Participant must sign and not revoke the Release of Claims would begin in one calendar year and expire in the following calendar year, then any payments contingent on such Release of Claims shall be made in such following calendar year (regardless of the year of execution of such release) if payment in such following calendar year is required in order to comply with Section 409A.

 

Notwithstanding the foregoing, the Company does not make any guarantees or other assurances of any kind with respect to the tax consequences or treatment of any amounts paid or payable to him under this Plan.

 

6. Effect on Other Benefits/At-Will Status . Payments under this Plan shall not be considered compensation for purposes of any other compensation or benefit plan, program, or agreement of the Company or its affiliates. All other compensation and benefit plans and programs shall be governed by the applicable Company plan or agreement. This Plan does not create an employment relationship for any fixed term.

 

7. Administration of Plan; Amendment and Termination . The Committee may take such action as is necessary to implement and administer this Plan consistent with the intent of the Board. The Plan may be amended or terminated at any time by the Committee or the Board, in their discretion.

 

8. Definitions .  For purposes of this Plan, the following terms have the following meanings:

 

(a)  Cause .  (i) The Participant’s c ommission of or indictment for a felony, or for a misdemeanor involving fraud or moral turpitude; (ii) an act by the Participant which constitutes gross negligence, willful misconduct or insubordination in the course of employment; or (iii) the continued failure of the Participant to perform the essential duties and responsibilities of his or her position, after having received notice of the deficiencies and having had 30 days to cure such defects in performance.

 

(b)  CIC or Change in Control .  A Change in Control of the Company shall have the same meaning for purposes of this Plan as defined in the Company’s 2014 Equity Incentive Plan.

 

(c) CIC Termination.   The voluntarily termination by a Participant for Good Reason, or the involuntarily termination of a Participant other than for Cause, upon or within 12 months after a Change in Control of the Company

 

(d)  Good Reason .  Without the Participant’s consent, (i) a decrease in a Participant’s base salary or target bonus by more than 10%, (ii) a material decrease in a Participant’s duties or responsibilities (but excluding a change in title or reporting relationship), (iii) a relocation of the

 



 

Participant’s primary work location by more than 50 miles, or (iv) the Company’s failure to obtain an agreement from a successor to continue this Severance Plan.  In the case of items (ii) and (iii), the Participant must provide the Company (or its successor) with notice within 30 days of the triggering event, and the Company (or its successor) shall have 30 days thereafter to remedy the defect.

 

(e)  Qualifying Termination .  The involuntary termination of a Participant, not for Cause.

 




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 Adamas Pharmaceuticals, Inc. of our report dated March 5, 2014 relating to the consolidated financial statements of Adamas Pharmaceuticals, Inc., which appears in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

San Jose, California
March 5, 2014